Appeal No. UKEAT/0296/10/SM

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 19 November 2010

Before
HIS HONOUR JUDGE PETER CLARK
DR B V FITZGERALD MBE LLD FRSA
MR P SMITH

(1) MR E PAGE 
(2) MR E FAWDINGTON	APPELLANTS

(1) LAKESIDE COLLECTION LTD T/A LAVENDER HOTELS 
(2) PRIME RESORTS LTD	RESPONDENTS

Transcript of Proceedings

JUDGMENT

	APPEARANCES

For the Appellants	MR JAMES BOYD
(of Counsel)
Instructed by:
Employee Management Ltd
Suite 8
Stone Cross Place
Stone Cross Lane North
Lowton
Warrington
WA3 2SH	
For the First Respondent	MISS JOANNE WOODWARD
(of Counsel)
Instructed by:
HBJ Gateley Wareing (Manchester) LLP
Ship Canal House
98 King Street
Manchester
M2 4WU	
For the Second Respondent	No appearance or representation by or on behalf of the Second Respondent	

SUMMARY
TRANSFER OF UNDERTAKINGS – Transfer

Whether relevant transfer from company in administration to new company and whether Claimant directors/employees transferred to the new company or whether they were dismissed (unfairly) by the administrators.  Employment Tribunal finding that Claimants’ employment was not transferred permissible conclusion on the facts as found.

HIS HONOUR JUDGE PETER CLARK 
Introduction
1.	This appeal concerns a TUPE transfer point.  The parties before the Manchester Employment Tribunal, as we shall describe them, were Messrs Page and Fawdington (Claimants) and (1) Lakeside Collection Ltd T/A as Lavender Hotels (Lakeside) and (2) Prime Resorts Limited in administrative receivership (PRL), Respondents.  

2.	This is an appeal by the Claimants against the reserved judgment of a Tribunal chaired by Employment Judge Sherratt, promulgated with Reasons on 28 January 2010 which held that the Claimants were unfairly dismissed by PRL but that their employment had not transferred to Lakeside so that no liability attached to the First Respondent.

The Facts
3.	PRL operated the Camelot Theme Park (the park) and the adjacent Park Hall Hotel (the hotel).  The Claimants were directors and employees of PRL assigned to the hotel business which suffered in the economic downturn so that in September 2008 its bankers, Bank of Scotland (BoS), engaged Grant Thornton to conduct a review of the business.  The ensuing recommendation was that the business be sold and in November Grant Thornton was instructed to sell it as a going concern.  

4.	Lakeside operated a group of six hotels.  Its Managing Director was Mr Stefan Sikorski.  Mr Sikorski was approached by Grant Thornton in late November on the basis that he was thought to be looking to add a further hotel to his company’s holding.  He was interested.  He initially offered £3 million for the hotel.  He then withdrew that offer and replaced it by an offer of £2 million after Christmas 2008.  

5.	At that time Mr Leslie Ross, an insolvency practitioner with Grant Thornton, was handling the proposed sale.  He contacted Mr Sikorski during the week commencing 19 January 2009 indicating that a quick deal was required preferably by 30 January, and that BoS were prepared to offer funding for the purchase.  He was interested and instructed his solicitor, Martin Byrom, to act on behalf of Lakeside.

6.	BoS required a charge over the assets of Lakeside.  Mr Sikorski preferred to set up an LLP to acquire the hotel.  Meanwhile, interest in both the park and the hotel were shown by another potential buyer, Realty Estates, but that came to nothing and attempts were also made to put together a management buyout by the directors of PRL including the two Claimants.

7.	On 27 and 28 January 2009, solicitors acting for the vendors PRL, Dundas & Wilson, sent draft compromise agreements in respect of the directors of PRL to Mr Byrom.  Copies of those unsigned draft agreements were not put before the Tribunal; they were apparently not available.  The relevant directors were the two Claimants and Mr Mark Leader.  The Tribunal inferred (paragraph 2.16 of their Reasons) that the object of the draft agreements was to remove those three directors from the business, then potentially being transferred to Lakeside.  

8.	Following a flurry of activity the sale was halted at 4.45pm on 30 January when BoS withdrew funding much to the annoyance, understandably, of Mr Sikorski.  Following a meeting between Mr Sikorski and the Claimants on 27 January, he was left with the impression that neither Claimant would be transferred to Lakeside.  What would happen was not discussed.  He believed they would purchase the park and/or the hotel and run them under a new company.   

9.	The sale to Mr Sikorski having fallen through, the directors of PRL asked Mr Ross to appoint administrative receivers.  He duly arranged for the appointment of himself and a partner in Grant Thornton as joint receivers.  That appointment was effective on 3 February.  On the afternoon of 2 February, Mr Ross spoke to both the Claimants.  An issue arose as to whether the Claimants were purportedly dismissed by Mr Ross there and then as they contended, or whether he told them that their dismissal would take place the following day, to be confirmed in writing following his appointment as joint receiver, as Mr Ross had it.

10.	The Tribunal preferred Mr Ross’ account.  They found that both Claimants were dismissed orally by Mr Ross with effect from 3 February.  Those dismissals were confirmed by letters dated 3 February, albeit they were received by the Claimants some time later.  We pause to observe that no point is taken in this appeal on the finding that the effective date of termination of the Claimants’ contracts of employment was 3 February.  

11.	Thereafter, Grant Thornton continued to market the business.  On 13 February Lakeside offered £2,050,000 to purchase the hotel.  Ultimately, a sale to Lakeside was completed on 10 March 2009.  

The Tribunal Decision

12.	(1) As we have indicated the Tribunal found that the Claimants were dismissed by Mr Ross effective on 3 February.  (2) The reason for dismissal was not the ultimate transfer to Lakeside but an economic, technical or organisational reason entailing changes in the workforce.  The suggestion that Mr Ross and Mr Sikorski conspired to have the Claimants dismissed in order to prevent liability passing to Lakeside was rejected by the Tribunal.  The Claimants were redundant because fewer managerial staff were required during the period of the administration.  We note that only Mr Leader as Operations Director was retained during the administration (paragraph 2.37).  (3) The dismissals of the Claimants by the joint administrator were automatically unfair under section 98(A)1 of the Employment Rights Act 1996.  

The Appeal
13.	In advancing the Claimants’ appeal Mr Boyd has helpfully refined their grounds of appeal to two submissions.  First, he contends that whilst prefacing paragraph 5.7 of the Tribunal’s reasons in saying that part of their answer to the question what was Mr Ross’ reason or principal reason for the Claimant’s dismissal was a finding that there was no collusion between Mr Sikorski and Mr Ross leading to their dismissal, on a proper reading of paragraphs 5.7 to 5.9, that was the only reason for the Tribunal to conclude that the dismissal was not automatically unfair under regulation 7(1) of the Transfer of Undertakings (Protection of Employment) Regulations 2006.

14.	Ms Woodward accepts that if that analysis is correct then the Tribunal fell into error.  However, she submits that the reasons read as a whole reveal that the non-collusion finding was in truth only part of the answer to the reason for dismissal question.  The other part is to be found at paragraph 5.10 where the Tribunal hold that the reason for dismissal was redundancy, that is, a diminution in the requirement for senior managers to carry the business forward in administration.  We agree with Ms Woodward’s analysis and we note that that conclusion is supported by Mr Ross’ evidence recorded at paragraph 2.37, and plainly accepted by the Tribunal, that following the collapse of the initial Lakeside sale on 30 January he decided to retain Mr Leader whose knowledge would assist the receivers in trading the hotel until it could be sold, but that the Claimants were unnecessary for that purpose and were therefore dismissed as part of his reorganisation of the business.

15.	Secondly, Mr Boyd takes a perversity point recognising, of course, the high hurdle which he faces (see Yeboah v Crofton [2002] IRLR 634).  He submits that having found at paragraph 2.15 that draft compromise agreements for all three directors, the Claimants and Mr Leader, were prepared by Dundas & Wilson and forwarded to Mr Byrom acting for Mr Sikorski, their later finding at paragraph 2.23 that Mr Sikorski did not know what was happening to the Claimants’ employment when he made his further offer of just over £2 million on 13 February and was then happy to buy the business with or without the Claimants, was logically inconsistent with the earlier finding at paragraph 2.15.  

16.	We cannot accept that proposition.  First, Mr Sikorski gave evidence to that effect and it was a matter for the fact finding Tribunal to accept or reject his evidence.  They accepted it.  Secondly, whilst there was talk of compromise agreements, terminating the employment of all three directors prior to 30 January, that deal fell through.  On the Tribunal’s findings, considered earlier, Mr Ross then decided to retain Mr Leader and dispense with the service of the Claimants regardless of their professed willingness to be flexible over their terms and conditions of employment.  

17.	In any event, Mr Leader’s employment was transferred to Lakeside on 10 March.  By then and, indeed, by 5 March, the date of Mr Byrom’s email to Dundas & Wilson to which Mr Boyd refers (bundle pages 75 to 76), the Claimants had been dismissed by Mr Ross and not, the Tribunal found, at Mr Sikorski’s behest.  He told the Tribunal that he was getting a good deal with or without liability for the termination of the Claimants’ employment, assessed at a potential cost of £260,000.  The Tribunal accepted that evidence.

18.	In these circumstances we are not persuaded that the Tribunal reached a legally perverse finding at paragraph 2.23.  Finally, and for the avoidance of doubt, we found the Tribunal’s reasoning to be clear and adequate to explain to the parties and this Appeal Tribunal why each party won or lost.  The reasons were Meek-compliant and satisfied Employment Tribunal rule 30(6).  Accordingly, this appeal fails and is dismissed.