Redundancy – Dismissal by reason of redundancy – Whether tribunal erring
SNR Denton UK LLP v Kirwan and another: Employment Appeal Tribunal (Mr Justice Langstaff): 10 July 2012
Paragraph 3(2) of the Insolvency Act 1986, Schedule B1, so far as material, provides: 'Subject to sub-paragraph (4), the administrator of a company must perform his functions in the interests of the company’s creditors as a whole.' Regulation 3(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 SI 2006/246, so far as material, provides: 'These Regulations apply to - (a) a transfer of an undertaking, business or part of an undertaking or business situated immediately before the transfer in the United Kingdom to another person where there is a transfer of an economic entity which retains its identity; (b) a service provision change, that is a situation in which - (i) activities cease to be carried out by a person ("a client") on his own behalf and are carried out instead by another person on the client’s behalf ("a contractor")... .'
The claimant, K, was a solicitor working in-house for a facilities management company. The company built under private finance initiative schemes, and then the special purpose vehicle that the company had arranged to do the building contracted with the company to provide for ongoing facilities management year by year of the completed building. The contract by which the company did so was a service contract with respect to the premises. When the company ran into financial difficulty, K's job was primarily concerned with disposing of the service contracts to outside purchasers.
In anticipation of appointment by creditors of administrators of the company, the defendant solicitors' firm (Dentons) agreed to act as solicitors for the administrators. Shortly afterwards, the administrators made K redundant. The disposal of the service contracts continued. K brought a claim before the employment tribunal, arguing that there had been a service provision change to which the Transfer of Undertakings (Protection of Employment) Regulations 2006, SI 2006/246 (TUPE) applied.
She claimed that she had been working for the company largely on the disposal of service contracts to purchasers and that the administrators, who were agents of the company for that purpose, had engaged Dentons to act as its solicitors; those solicitors had been engaged, inter alia, in the disposal of service contracts which had been ongoing. The tribunal upheld K's claim. Dentons appealed.
It was common ground before the tribunal that the instant proceedings came within the regulation. The issues which arose before the tribunal regarding service provision changes under regulation 3 of TUPE became the grounds of appeal before the Employment Appeal Tribunal. They were, first, whether, when administrators appointed in respect of a company appointed solicitors to advice and work for them as administrators, and those solicitors were used to dispose of assets of the company, their activities in doing so could properly be said to be carried out on behalf of the company in administration.
Secondly, whether the activities involved that were subject to a service provision change were to be determined by the nature of the activity or the purpose of the activity concerned. Thirdly, whether the requirement of regulation 3(3) of TUPE was such that it could be said that an administration which by statute was expected to be completed within a year, and a further six months only at the outside and if provided for by a court, was a specific single event or a task of short-term duration.
The tribunal ruled: (1) Regarding 'activities', the common use of the word was to describe what was being done. If there was a relevant distinction between the nature of activities and the purpose of them, it was to the nature of activities that the statute primarily looked. There could be cases in which the purpose of the activities was such that the whole nature of the activities was shaped by that purpose, such that activities with that purpose might be said to be distinct from similar activities with a very different purpose (see  of the judgment).
In the instant case, the tribunal's conclusion in respect of activities had been a conclusion of fact, within the scope of permissible findings of fact and degree, and there was nothing wrong in concluding that the activity of disposing of the contracts had been the same essentially whether performed by K in-house or by Denton outsourced (see  of the judgment). The first ground of appeal would fail (see  of the judgment). Kimberley Group Housing Ltd v Hambley; Angel Services (UK) Ltd v Hambley  All ER (D) 408 (Jun) considered; Churchill Dulwich Ltd (in liq) v Metropolitan Resources Ltd  All ER (D) 316 (Jul) considered; De'Antiquis v Key2Law (Surrey) LLP  All ER (D) 194 (Dec) considered; Enterprise Management Services Ltd v Connect-Up Ltd  All ER (D) 15 (Jan) considered.
(2) The wording of regulation 3(b)(i) of TUPE looked to activities 'that cease to be carried out by a client on his own behalf'. Those last four words indicated something of purpose or relationship. The client was clearly the same person as that expression was used throughout regulation 3. For solicitors engaged by retainer to act for the administrators to be held to be acting on behalf of the company because the administrators were in the exercise of many of their functions acting so as to bind the company could potentially bring those solicitors into a situation of conflict that militated against the proposition being correct.
Although for much of the time, and particularly if the first and primary purpose of administration was to be achieved, the administrator and the company would have a common purpose, the administrator owed his duty to the creditors of the company (see ,  of the judgment).
On the facts of the instant case, the tribunal had erred in concluding that, merely because the administrator could act as agent, and in exercise of its functions had acted as agent for the company, it meant that the solicitors retained by the administrator had themselves been acting on behalf of the company when they had acted in the administration. They might have been doing so, but it could not be assumed that they necessarily had (see ,  of the judgment). The second ground of appeal would succeed (see  of the judgment). McCarrick v Hunter  All ER (D) 86 (Feb) applied; Edenwest Ltd v CMS Cameron McKenna  All ER (D) 136 (May) applied.
(3) It was not necessary to determine the third issue in the light of the court's findings on the first two issues, but in the event that it became so, the meaning of 'short term' would inevitably vary from case to case. It was therefore a matter of fact and degree and, providing that the tribunal had regard to the words of the paragraph and the general context within which to place the particular facts of the case, a finding of fact and degree was unlikely to be wrong.
As to the wording of the Regulation, on the facts, the tribunal had erred in looking at activities that were not part of the service provision change, instead of the actual activities to be performed by the claimant. It appeared that if the tribunal had been persuaded that the activities would all, by and large, have been completed within the three months following April 2010, it would have been inclined to hold that that was a single specific event or task of short-term duration. Accordingly, in the absence of any clear statement as to what term the tribunal had in mind and why, the tribunal's judgment could not stand (see , ,  of the judgment).
It would be appropriate to substitute a decision that there had been no service provision change (see ,  of the judgment).
David Reade (instructed via Public Access) for Denton; Melvyn Harris (instructed by Backhouse Solicitors, Essex) for K; The second respondents did not appear and were not represented.