Transfer of undertaking - council transferring refuse collection service - undertaking operated for profit after transfer but not before - undertaking before transfer 'in the nature of a commercial venture'

Alderson and Others v Secretary of State for Trade and Industry: CA (Lord Phillips of Worth Matravers, Master of the Rolls, Lady Justice Arden and Lord Justice Dyson): 8 December 2003

A council, which employed the claimant in its refuse collection service, transferred the undertaking to a private company which intended to operate the service for profit.

The company employed the claimant on less favourable terms than those he had enjoyed with the council.

The claimant, and 121 other former council refuse service employees whom he represented, claimed damages against the secretary of state alleging that the council's refuse collection service was not an undertaking 'in the nature of a commercial venture' within regulation 2(1) of the Transfer of Undertakings (Protection of Employment) Regulations 1981 (SI 1981/1794) (TUPE), as unamended at the relevant time, since the undertaking did not operate for profit before transfer; that the council's refuse collection service employees were therefore not protected by TUPE, as they should have been had the government properly implemented Council Directive 77/187/EEC; and that the employees were therefore entitled to compensation from the government for the prejudice caused them by that admitted failure.

The judge dismissed the claim, holding that the council's refuse collection service was in the nature of a commercial venture; and that the employees were thus protected by TUPE.

The claimant appealed.

Nicholas Underhill QC and John Cavanagh QC (instructed by Thompsons, Newcastle upon Tyne) for the claimant; Nicholas Paines QC and Kassie Smith (instructed by the Treasury Solicitor) for the secretary of state.

Held, dismissing the appeal, that since the undertaking possessed the same characteristics before and after transfer save that after transfer it operated for profit, the undertaking before transfer was 'in the nature of a commercial venture' within reg 2(1) of TUPE; and that, accordingly, the council's employees affected by the transfer were protected by TUPE and were not entitled to compensation from the secretary of state.