Two important TUPE cases handed down in December were Hunter v McCarrick UKEAT/0617/10/DA and Spaceright Europe Limited v Baillavoine & Anor [2011] EWCA Civ 1565.
Hunter v McCarrick
In a complicated factual case, the supplier of property management services (A) who employed the Claimant (Mr McCarrick), transferred him to another supplier (B) after the owner of the properties (W) was sold to B’s parent company (M). On the same day of the sale, W became the subject of insolvency proceedings and the sale transaction was subjected to a review by the Courts.
B continued to supply property services to the Administrator. However W’s lender (Aviva) took control of the properties and appointed their own property consultants. It was at that point that the B would have dismissed the Claimant, but for reasons that I will not expand on, Mr Hunter, the Managing Director of B, continued to pay them.
The Claimant argued that he had transferred by way of a Service Provision Change (SPC) under TUPE along the chain from A to B and then to Mr Hunter.
Under regulation 3(b)(ii) an SPC is one where “activities cease to be carried out by a contractor on a client’s behalf…and are carried out instead by another person on the client’s behalf”.
The EAT found that reference to “client’s” in regulation 3(b)(ii) had to be read to mean the same client. Therefore the ET had erred in finding that there was a SPC in circumstances where the client to whom services were provided had changed.
Spaceright v Baillavoine
Spaceright were the unfortunate buyers of a business out of administration called Ultralon. Prior to that acquisition the Administrator had dismissed the employees of Ultralon. Mr Baillavoine, who was the ex CEO, claimed that his dismissal was unfair pursuant to Regulation 7(1) of TUPE.
Regulation 7(1) provides that a dismissal is unfair if it is for “a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce”.
The EAT had handed down conflicting caselaw on what this meant in terms of dismissals by the Administrator. On the one hand the case of Ibex Trading v Walton stated that in order for a dismissal to be connected to the transfer, there has to be at the date of dismissal a particular transfer in mind. On the other, the case of Harrison Bowden v Bowden is authority for the proposition that no particular transfer has to be in existence or in contemplation at the time of dismissal.
The Court of Appeal found that Harrison was to be preferred as that decision is more consistent with the ordinary meaning of the words of Regulation 7(1) and the general purpose of the TUPE regulations to protect employment.
The implications for purchasers of businesses in administration is that they will have to pay much more attention to their due diligence in future and in particular to the actions of an Administrator prior to their involvement.
