Appeal No. UKEAT/0469/07/ZT

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 31 October 2007 

Before
HIS HONOUR JUDGE SEROTA QC
(SITTING ALONE)

MR L COUTINHO	APPELLANT

(1) VISION INFORMATION SERVICES (UK) LTD	
(2) RANK NEMO (DMS) LTD 	 RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellant	MR L COUTINHO
(The Appellant in Person)	
For the Respondents	MR O SEGAL
(of Counsel)
Instructed by:
Goodman Derrick LLP
90 Fetter Lane
London
EC4A 1PT	

SUMMARY
Transfer of Undertakings - Transfer
C was employed by R1 but dismissed in contemplation of a transfer of its business to R2. He was awarded compensation for unfair dismissal and discrimination on the grounds of race in a claim against R1 and R2, R2 being liable by virtue of a TUPE transfer. C was never in the actual employment of R2.
During the course of a remedies hearing R1 offered to provide an open reference. A reference to C’s satisfaction was not supplied and C brought proceedings alleging, inter alia that this constituted victimisation by R1 and R2. The EAT upheld the decision of the ET striking out the claim against R2 because [1] he had never sought a reference from R2 and [2] in any event R2 could not be liable under TUPE for the failure of R1 to provide a reference because the transfer had occurred prior to the alleged act of victimisation and liability did not pass to R2 in respect of the alleged post transfer statutory tort of victimisation.

HIS HONOUR JUDGE SEROTA QC

Introduction

1.	This is an appeal by the Claimant from the decision of the Employment Tribunal at Watford.  The decision was taken by a Chairman, Mr Selwyn Bloch QC, and is dated 19 July 2007.  The Claimant’s claim against the second Respondent for failure to provide him with a reference in 2006 was struck out.  That claim was referred to a full hearing by HHJ McMullen QC on 11 September 2007.  Other claims raised in the Notice of Appeal were disposed of by HHJ McMullen QC under rule 3, including an allegation of bias; and a further application under rule 3(10) was rejected by HHJ Richardson on 10 October 2007.  I note that the EAT letter informing the Claimant of the decision of HHJ McMullen QC suggested that he should carefully consider the utility and proportionality of the appeal.

2.	The factual introduction I can deal with quite shortly.  The Claimant joined the first Respondent as a project leader in IT but was made redundant on 30 March 2004.  He commenced his proceedings on 30 June 2004, alleging that he had been unfairly dismissed and discriminated against on the grounds of his race.  It had been in the making for some time but a TUPE Transfer took place on 30 July 2004, whereby the business of the first Respondent was transferred to the second Respondent.  On 17 September 2004, the first Respondent’s ET3 suggested that he had been guilty of gross misconduct, and the first that the Claimant knew about this allegation was when he saw the ET3.  I have seen an email of 19 April 2005, at page 95 of the bundle, when the Claimant was seeking an open reference from the first Respondent.  He maintains that he had asked the second Respondent to act as the first Respondent’s agent in this regard, but it seems to me in substance this was in a request addressed to the first Respondent.  The second Respondent was joined by reason of the TUPE Transfer on 28 November 2005.

3.	On 27 June 2006, the Employment Tribunal upheld the Claimant’s claim that he had been unfairly dismissed and discriminated against.  The dismissal was held to be by reason of the transfer and accordingly, by virtue of TUPE, the second Respondent was liable.  The Employment Tribunal declined to reduce compensation by reason of the allegations made by the Respondent, and it went on to reject those allegations.  The Tribunal found that the Respondent was entitled to be suspicious.  A proper investigation would, however, have shown that the allegations made against the Claimant had no substance.  They were not made maliciously or oppressively, so aggravated damages were not awarded.  In the event, as will appear shortly, the Claimant received an award of something in excess of £72,000.  The Respondent and the Claimant both appealed to the Employment Appeal Tribunal, but those appeals were dismissed.

4.	I am told that at the hearing before the Employment Tribunal the Claimant had complained of the refusal by the first Respondent to provide an open reference, although no third party had sought a reference from the first Respondent.  I understand as well that on two occasions the Claimant sought to add allegations to his claim to include post‑employment victimisation, but the Employment Tribunal declined to allow these amendments.  It may be that the 2005 request for a reference was one of these, but I know not.  It is clear that during the course of the hearing before the Employment Tribunal which, as I have said, took place in July, the Chairman had invited the parties as a result of something said by the solicitor acting for both Respondents, a Mr Pasha, to agree a reference.  If one goes to the Decision of the Employment Tribunal in the remedies hearing, which is what I have, at paragraph 70 one finds this reference to the Respondents’ submissions:
“The First Respondent would provide the Claimant with a reference within seven days of the conclusion of the remedies Hearing.  The First Respondent had not considered that the request for a reference in April 2005 was uncontroversial as it coincided with the Claimant’s application to join the Second Respondent to the proceedings.”

5.	It is at about this time that there is some correspondence between the parties in relation to the reference.  On 27 July 2005, at page 96A in my bundle, I have a letter from Mr Pasha enclosing a draft form of reference; an open reference.  It is quite clear that this reference was provided by the first Respondent, as suggested in the passage I have read from the Decision of the Employment Tribunal.  Mr Pasha says that he is instructed by the first Respondent, and the signature he has provided is of a Brian Klemz, who was an employee of the first Respondent.  This document, for reasons with which I am not concerned today, was not acceptable to the Claimant, and there is further correspondence.  However, nowhere does he specifically ask that the second, as opposed to the first, Respondent should provide him with a reference.  I am referring, for example, to the emails which I have at page 96 of 2 August and thereafter, and also the email of 6 September 1997.  It is quite clear that, although the Claimant copied his correspondence to the second Respondents, the reference anticipated was that of the first Respondent, and the drafts and comments that were passing between the parties clearly envisaged a reference from the first Respondent.

6.	It is right that I should note that the first Respondent, at some point in time, had ceased trading.  I am not sure if the second Respondent is trading at present.  The Claimant has concerns as to the financial viability of both Respondents.  The first Respondent is wholly owned by a United States company.  It would appear that the second Respondent, when it acquired the business of the first Respondent, which was the subject of the TUPE Transfer, took on no managers, and that the persons to whom the Claimant had reported remained in the employment of the first Respondent.

7.	The decision of the Employment Tribunal on remedies was supplied to the parties on 5 October 2006.  The Claimant was awarded a total of £72,000.  I need to refer to the following passages in the Decision.  The Decision starts with this:

“Following a judgment with written reasons sent to the parties on 26th June 2006, the tribunal reconvened to consider issues of remedy on 18th and 19th July 2006.  On this occasion, Mr Pasha (Solicitor) represented both First and Second Respondents.  It was common ground between the parties and confirmed on behalf of the Second Respondent that liability to pay compensation to the Claimant rested with the Second Respondent.  No issue was taken as to whether the First Respondent had any continuing interest in the proceedings and Mr Pasha proceeded on the basis that he was representing both Respondents.  The Claimant did not seek reinstatement or re‑engagement.”

8.	Mr Coutinho has drawn my attention to passages at paragraphs 39 to 40 where, at the remedies hearing, the Employment Tribunal held that, but for his unfair dismissal by the first Respondent, the Claimant would have transferred to the second Respondent on his existing terms and conditions of employment and would, on the balance of probabilities, have been dismissed by reason of redundancy on the same date as a Miss Hoddell on 31 July 2005.  The Claimant would have continued to be employed at the same level as Miss Hoddell, and would have been entitled to compensation upon termination of his employment, calculated in the same manner as Miss Hoddell’s severance payment.  This would have amounted to six weeks’ pay, statutory redundancy and company redundancy pay, which in the Claimant’s case would have amounted to 19 weeks’ pay.  The first £30,000 would have been paid gross and the balance would have been subject to tax.  He would also have been given a good reference, which would have enabled him to find alternative work.  That last sentence is particularly relied upon by the Claimant.  At paragraph 58, one finds this:

“Following the conclusion of the remedies Hearing on 19th July 2006, the First Respondent provided the Claimant with a reference which the tribunal members have read.  With the benefit of that reference, subject to any amendments which are agreed, the tribunal concluded, taking into account the various chances in relation to future employment, that it would be just and equitable to assess compensation on the basis that the Claimant could resume his employment in the IT field in six months.  In view of his period of time out of the IT job market, the tribunal’s best estimate on the evidence provided is that his starting salary would be £50,000, rising to £60,000 after a year.”

The Respondent relies upon this particular passage as suggesting that the Employment Tribunal had no problems with the draft reference that was offered.  That, however, is a matter I do not propose to say anything further about, because it is an issue that will have to be determined by the Employment Tribunal in due course, in relation to the claim against the first Respondent, which continues.
9.	On 18 October 2006, the Claimant issued his second ET1, in which he claimed he had been victimised and had suffered further discrimination.  He alleged that the allegations brought against him for gross misconduct amounted to an aggressive mitigation of his claim, and he also complains about the failure to provide a reference in 2005, and the unsatisfactory nature of the open reference in 2006.  Certain of those claims were withdrawn at a hearing on 3 February, and the hearing took place on 3 July 2007.  On 19 July, one has the Decision in which the claims against the second Respondent were struck out.

10.	I now turn to the decision of Mr Bloch.  Apart from giving directions in relation to the remaining claim, Mr Bloch recorded that the Claimant accepted that his only complaint related to a failure by both Respondents to write a proper reference in 2006.  He said that this failure was because of victimisation by the Respondents by reason of his having done a protected act.  The issue that Mr Bloch had to decide was whether the claim lay only against the first Respondent, as the Respondents contended, or against both Respondents, as the Claimant asserted.  Mr Bloch drew attention to regulation 4 of the Transfer of Undertakings (Protection of Employment) Regulations 1981, which were then in effect.  The current regulations are in substantially the same form.  It is perhaps convenient for me to refer to regulation 4(2) at this stage:

“Effect of relevant transfer on contracts of employment
4. —(2) Without prejudice to paragraph (1), but subject to paragraph (6), and regulations 8 and 15(9), on the completion of a relevant transfer—
(a) all the transferor's rights, powers, duties and liabilities under or in connection with any such contract shall be transferred by virtue of this regulation to the transferee; and

(b) any act or omission before the transfer is completed, of or in relation to the transferor in respect of that contract or a person assigned to that organised grouping of resources or employees, shall be deemed to have been an act or omission of or in relation to the transferee”

11.	The Employment Tribunal recorded the Respondents’ submission that the alleged act of victimisation would not have transferred to the second Respondent.  Quite simply, the TUPE Transfer in the case occurred in July 2004, whereas the alleged act of victimisation relied on by the Claimant occurred in August 2006.  Regulation 4(2)(a) referred to the transferor’s rights, powers, duties and liability transferring on completion of a relevant transfer.  Likewise, regulation 4(2)(b) related to acts done before the transfer was completed.

12.	At paragraph 12, the Tribunal accepted the Respondents’ submissions:

12.	The Tribunal concludes that the submissions of Mr Siegel in this regard are correct;
a.	There was no liability of the First Respondent in July 2004 in respect of the alleged act of victimisation in respect of the reference. That liability could only have arisen when the allegedly defective reference was provided in August 2006;
b.	While in theory it is possible that a claim could be brought against a transferee for failure to provide a fair reference on the basis that there had been a transfer of a duty to provide a fair reference if one were provided at all. However, this does not appear to be the basis of the allegation made in the Originating Application. In reality it is plain that the request was one made of the First Respondent for a reference and that the First Respondent allegedly - as an act of victimization - provided an inadequate reference. It is impossible to see how this could be said to be a failure of duty on the part of the Second Respondent, after the TUPE transfer.

The purpose of the appeal
13.	For the moment, I put aside questions of the legal entitlement of the Claimant to raise his claim against the second Respondent.  It is clear and conceded that the second Respondent never actually employed the Claimant, neither did it employ any of his managers.  So it would be unable to give much of a reference from personal knowledge, although it may be that the reference that is required is far more limited and requires no more than a knowledge of the company at the time it was taken over, because the due diligence did involve the Claimant.  But I say no more about that.

14.	The Claimant, however, explains that he wishes to proceed against the second Respondent because the first Respondent has ceased trading and is insolvent, so he would receive an empty judgment.  He also told me that the judgment that he has obtained against the second Respondent has not been satisfied.  Mr Coutinho said that at the hearing in the Employment Appeal Tribunal before Underhill J, the Appeal Tribunal had been told that there was some indemnity in force between the first and second Respondents, but that the second Respondent was now saying that there was no indemnity in force and that it was insolvent.  Mr Coutinho now tells me that, although he was told that the company was insolvent, he was making an assumption when he said that there was no indemnity.  Mr Segal, who appeared on behalf of the Respondents, was unable to take instructions as to whether a judgment against the first Respondent would be honoured.  The company was not trading.  However, he told me that it had arranged to instruct Counsel and solicitors for the two-day hearing in the Employment Tribunal, fixed in November.  He was unaware of what the Claimant was saying about the judgments of the second Respondent not being satisfied.  The position is somewhat unhappy, because the Claimant now wishes to pursue the second Respondent, which he appears to suggest is without funds, rather than claim against the first Respondent, which he also now asserts is without funds.  The position is not at all satisfactory from Mr Coutinho’s point of view, or indeed from the point of view of the Employment Tribunal.  No doubt, Mr Coutinho will be writing to the Respondents’ solicitors and asking them specifically whether, if he succeeds in his claim against the first Respondent, his claim for compensation will be met; and whether the second Respondent is going to be in a position to pay up under the award already made in his favour, particularly as the Employment Appeal Tribunal has rejected an appeal by the second Respondent.  I mention these matters but they, in fact, play no part in the Decision to which I am about to come.

Notice of Appeal
15.	The Notice of Appeal raises a number of matters that are not before the Employment Appeal Tribunal today, and I will not deal with them.  I limit consideration to the question of the strike-out by Mr Bloch of the claim against the second Respondent.  Mr Coutinho has submitted that the Decision was wrong on the facts because there was a perverse finding when Mr Bloch found that the request for the reference had only been made to the first Respondent because it had also been sent to the second Respondent’s solicitors.  He also submitted that the learned Chairman was wrong in law.  He submits that the duty to provide a reference passed to the second Respondent as a result of the TUPE Transfer.  He drew my attention to the authority of the Employment Appeals Tribunal in a case called MRS Environmental Services v Dyke and McBride 1997 UKEAT 10 March 1997, a decision of the EAT presided over by HHJ Byrt on 3 October 1996.  He drew my attention to various passages in the judgment and, in particular, at page 8, to a passage quoting from the decision of the European Court of Justice in D’Urso & Others v Ercole Marelli Elettromeccanica Generale [1992] IRL 136, and I quote:

“The court had this to say specifically about article 3(1).
‘Article 3(1) must be interpreted as meaning that all contracts of employment existing at the date of transfer of an undertaking the transfer and the employers of the undertaking are transferred automatically to the transferee by reason of the transfer alone.’”

HHJ Byrt then it refers to an exception to that rule, which does not apply in this case.

16.	Of course, it is right to say that the Claimant’s contract of employment at the time of the TUPE Transfer had already been brought to an end.  Article 3(1) of the directive was drawn to my attention along with regulation 5.  These are referred to at page 9 of the MRS Decision.  The Employment Appeal Tribunal quoted from the decision of the European Court of Justice in Berg v Besselsen [1990] IC SR 396.

“Article 3(1) must be interpreted as meaning after the date of transfer and by virtue of the transfer alone.  The transferor is discharged from all obligations arising under the contract of employment, even if the workers employed in the undertaking did not consent, or if they object subject, however, to the power of member states to provide for joint liability of the transferor and the transferee after the date of transfer.”

And a reference to regulation 5:

“A relevant transfer shall not operate so as to terminate the contract of employment of any person employed by the transferor and the undertaking or part transferred, but any such contract that should otherwise have been terminated by the transfer shall have effect after the transfer, as if originally made between the persons so employed and the transferee.”

At page 10, one finds this passage:

“We do not believe we distort the meaning of that passage when, using the words used in D’Urso & Ors, we say that the mistaken belief or understanding of the parties are of no consequence, because upon the transfer of the undertaking the contract of employment of the person employed in that part transferred is automatically transferred to the transferee.”

Note is also made of the fact that joint liability on a transfer was not opted for by the United Kingdom and, therefore, transferor and transferee could not both be liable.

17.	Mr Coutinho submitted that it was irrelevant if he made a request to the first Respondent or not, because the responsibility now rested with the second Respondent.  Further, if he was in error in applying to the first Respondent as opposed to the second Respondent by reason of the passage that I have quoted earlier from MRS Environmental, that mistake counts for nothing.  He submitted that he did ask for a reference, and anything that he did by seeking to place responsibility on the first Respondent was void; the responsibility was that of the second Respondent.  He has still not received a reference, the tort continues; the second Respondent is aware of this and victimises him.  He told me he was unable to get a job as a head of IT without a reference and, in effect, the Respondents have ruined his career.

The Respondents’ Case
18.	The submissions for the Respondents made by Mr Segal in brief are these.  The obligation arises when a request is made, and if a request is made after the termination of employment it could not pass to the transferee.  What was taken over on the TUPE Transfer were existing liabilities.  Mr Segal submitted that there is no case in which an ex‑employee has complained that an obligation that arises post‑termination could be the responsibility of the transferee.  He pointed to regulation 4(2)(b), and submitted that it looked to past obligations.  He repeated that the duty to provide a reference and any tort arising from failure to do so or providing a defective reference arose only when the request was made.  There is an obligation, after determination of a contract of employment on the part of the original employer, not to victimise the former employee.  That is a duty that does not pass on, because the duty does not exist until the tort arises.  Mr Segal submitted it would place an impossible burden on the transferee, where as here an employee’s employment was not in fact transferred.  He pointed out that the second Respondent is not deemed to have employed the Claimant.  It is simply liable for his dismissal by the transferor in circumstances where the principal basis for the dismissal was the transfer.  The only allegation that is made in this case is that of victimisation.  There is no contractual claim or assertion of a contractual right for a reference.  He submits that the Claimant, who now does seek to say there was a contractual obligation, has provided no evidence of a contractual obligation.  That is not how the case was put.

Conclusion
19.	I now give my conclusions.  It is important to bear in mind that this is a case in which Mr Coutinho is asserting victimisation by the second Respondent for failing to give him a reference.  It is a statutory tort.  In my opinion, before that tort can arise in the circumstances of this case, it is necessary for a reference to be sought.  I am satisfied on the facts that the Chairman was correct to find that no request had been made of the second Respondent for a reference.  The fact that letters were copied to the second Respondent is insufficient.

20.	I also reject the suggestion that somehow, if Mr Coutinho was in error in believing that he could look to the first Respondent for a reference, that that is somehow to be regarded as being overlooked and treated as though he were actually seeking the reference from the second Respondent.  The fact is, he only sought a reference from the first Respondent; and the terms of the reference that he himself was considering were, again, for a reference provided by the first Respondent.

21.	In my opinion, that is sufficient to determine the appeal.  I do however, go on to consider the other submission as well, and that is whether, in the circumstances, a claim for victimisation against the second Respondent for failing to supply him with a reference or providing him with a defective reference lies at all.  As Mr Segal noted, there is no case of which he knows, or of which I know, or which has been cited to me, where a tort arising after the dismissal, such as victimisation in relation to a person who was never actually employed by the transferee, has been found to be the responsibility of the TUPE transferee simply by virtue of the transfer.

22.	Mr Coutinho is complaining of a statutory tort.  Victimisation occurs when the Claimant suffers the detriment.  What is taken over as a result of TUPE are existing liabilities, as the regulation made clear.  If victimisation occurs after that, it is not a transferred obligation that has been broken.  I leave open the question whether the second Respondent might be under an obligation to provide a reference.  That is not a matter that is before me.  However, the failure post transfer of the transferor to provide a reference as an act of victimisation, or the provision of a defective reference as an act of victimisation in respect of a person who was never in fact or in law the employee of the second Respondent cannot, in my opinion, amount to an act of victimisation by the second Respondent as transferee.  If the material duty arises after the transfer, the transferee cannot be liable by virtue of regulation 4(2).  I agree it would place an impossible burden on the transferee, where as here an employee has not actually transferred his employment and, for example, may require the transferor to provide a reference many years after his employment has come to an end.  It would be absurd if the transferee were to be liable in such a case.  In those circumstances, and for the reasons that I have given, this appeal must be dismissed.  

23.	I refuse permission to appeal.