powered by Zehuti
Appeal against a ruling that the claimant had been unfairly dismissed after an assignation of a lease on a pub. Appeal allowed and claim dismissed.
The claimant worked in a pub which was leased by her parents. Her parents assigned the lease to the respondent, who then dismissed her. The ET found that her dismissal was unfair, agreeing with the claimant that, since the lease had transferred, there had been a 'classic' TUPE transfer. There were no other findings relevant for TUPE purposes. The Tribunal made no findings as to whether there was an identifiable economic entity before the assignation of the lease and if so, what it was. Nor did they make any findings as to whether there was a transfer of any such economic entity. The respondent appealed.
The EAT upheld the appeal. The Tribunal was held to have erred in law. Whilst TUPE can apply where there is an assignation of a lease, it requires to be shown that there was an economic entity (i.e. an organised grouping of persons and assets enabling or facilitating the exercise of an economic activity in pursuit of a specific objective) before the assignation which retained its identity afterwards. The only relevant fact found was that there was an assignation of a lease; that was insufficient to establish that TUPE applied.
Appeal No. UKEATS/0058/11/BI
EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF
At the Tribunal
On 11 May 2012
THE HONOURABLE LADY SMITH, MR P PAGLIARI, MR M SMITH OBE JP
LOM MANAGEMENT LTD (APPELLANT)
MISS JOANNE SWEENEY (RESPONDENT)
For the Appellant
Mr J O'Malley (Director)
LOM Management Ltd
14 Park Circus
For the Respondent
No appearance or representation by or on behalf of the Respondent
TRANSFER OF UNDERTAKINGS
TUPE. Employment Tribunal found that there had been an assignation of a lease of commercial premises from the Claimant's father (who employed her) to the Appellants. There were no other findings relevant for TUPE purposes. The Tribunal made no findings as to whether there was an identifiable economic entity before the assignation of the lease and if so, what it was. Nor did they make any findings as to whether there was a transfer of any such economic entity. The Claimant's case was, simply, that since the lease had transferred, there had been a 'classic' TUPE transfer and the Tribunal agreed with that proposition. On appeal, Tribunal held to have erred in law. Whilst TUPE can apply where there is an assignation of a lease, it requires to be shown that there was an economic entity (i.e. an organised grouping of persons and assets enabling or facilitating the exercise of an economic activity in pursuit of a specific objective) before the assignation which retained its identity afterwards. The only relevant fact found was that there was an assignation of a lease; that was insufficient to establish that TUPE applied.
THE HONOURABLE LADY SMITH
1. This is an appeal by the tenant of a public house in Glasgow from a judgment of the Employment Tribunal sitting in Glasgow, Employment Judge Muriel Robison, holding that the Claimant was unfairly dismissed and awarding compensation of £3,360.
2. We will, for convenience, continue to refer to parties as Claimant and Respondents.
3. The Claimant was represented by Mr A C Macmillan, solicitor, before the Tribunal but there was no appearance by or on her behalf, before us. The Respondents were neither present nor represented before the Tribunal but were represented by Mr O'Malley, director, before us.
4. The issue for the Tribunal was whether or not the Claimant had been dismissed by reason of a business transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 2006 ("TUPE") applied, so as to render the dismissal unfair.
5. The relevant facts, as found by the Tribunal were as follows. The Claimant's father became the tenant of premises in Hope Street, Glasgow in December 2005, from which he and his wife together traded as "MacConnell's Bar". The premises were and are owned by a brewery. The Claimant, who was a student, was an employee of her parents. Her role was that of Duty Manager, working 20 hours per week.
6. In mid December 2010, the lease of those premises was assigned to the Respondents. The Respondents were identified by the brewery as potential assignees of the lease and from that finding it can be inferred that the assignation was a valid one, with landlord's consent. At that time, the Claimant was away on holiday. She returned from holiday on 21 January 2011. On 29 January 2011, she discovered from the Respondents that she no longer had a job at the pub.
The Tribunal's Judgment and Reasons
7. The Tribunal records the submission for the Claimant, at paragraph 58:
"There was a transfer in this case between Mr Sweeney who was the outgoing lessor and the respondent. The relevance of the Brewery related simply to the requirement for their approval for the respondent to take on the lease. This was therefore a classic transfer of undertaking in terms of Regulation 3 of the Transfer of Undertakings Regulations. The respondent was the incoming lessee and was therefore responsible for the compensation due to the claimant…".
8. At paragraph 61, the Tribunal state:
"As was submitted by the claimant's solicitor, this was a classic transfer of undertakings situation."
and found that the reason for the Claimant's dismissal was the transfer. They found that she had, therefore, been unfairly dismissed.
9. The Tribunal do not refer to or consider the provisions of paragraph 3 of TUPE.
10. Paragraphs 3 and 7 of TUPE, insofar as relevant, provides:
"3. A relevant transfer
(1) 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;
In this regulation 'economic entity' means an organised grouping of resources which has the objective of pursuing an economic activity, whether or not that activity is central or ancillary.
7. Dismissal of employee because of relevant transfer
(1) Where either before or after a relevant transfer, any employee of the transferor or transferee is dismissed, that employee shall be treated for the purposes of Part X of the 1996 Act (unfair dismissal) as unfairly dismissed if the sole or principal reason for his dismissal is-
(a) the transfer itself; or
(b) a reason connected with the transfer that is not an economic, technical or organisational reason entailing changes in the workforce."
11. The onus of establishing that TUPE applies lies on the Claimant.
12. Accordingly, the first task for a Tribunal facing an issue such as arose in this case is to determine whether or not, prior to any transfer, there was an economic entity within the meaning of reg 3(2). The question is one of fact and its determination will depend on the particular circumstances of the individual case as disclosed in the evidence led. To establish that there was a relevant economic entity, the Claimant will require to show that there was "an organised grouping of persons and assets facilitating the exercise of an economic activity which pursues a specific objective" (Suzen v Zehnacker Gebaudereinigung GmbH Krankenhausservice  ICR 662; see also Fairhurst Ward Abbots Ltd v Botes Building Ltd and ors  ICR 919).
13. Whilst TUPE may apply where there has been an assignation of a lease of commercial property (see, for instance Landsorganisationen i Danmark v Ny Molle Kro  ICR 330) the Claimant requires to show not only that the lease transferred but that there was, on the facts, a business also transferred which was intrinsically linked to the property and satisfied the definition of economic entity.
14. Accordingly, it is, put shortly, not enough to show that one person assigned a commercial lease to another. That does not, of itself, establish that TUPE applied.
15. Mr O'Malley referred to the fact that he was not a lawyer. The Respondents had not been present or represented before the Tribunal due to a business commitment – the Tribunal had refused to postpone the hearing although they had sought one. We note that the Tribunal record, in their judgment, that that was indeed the case.
16. He submitted that although he was not a lawyer, it was his understanding, on the authority of Morris v London Iron and Steel Co Ltd  ICR 855 that the burden of proof had been on the Claimant. To his mind, she had not established that TUPE applied. She had not, he considered, provided any evidence which supported her claim that it did.
Discussion and Decision
17. This appeal is well founded. As we have explained in the 'Relevant Law' section above, the fact that a lease is assigned from one person to another does not, of itself, show that TUPE applies. That, however, was the approach of the Claimant before the Tribunal and the Tribunal accepted, wrongly, that that was a correct approach in law. They failed to have regard to the provisions of reg 3 of TUPE, failed to ask themselves whether, on the facts found, an 'economic entity' within the meaning of reg 3 had existed prior to assignation of the lease and failed to ask themselves whether, after the assignation of the lease, that economic entity had transferred in whole or in part to the Respondents. We would add that, on the facts found by them, which really amounted to no more than that the tenant and his wife were in business together, that they carried on that business from the premises prior to mid December 2010 and that the tenant transferred the lease at about that time, they could not have concluded that there was such an economic entity or that it transferred to the Respondents. There appears to have been no exploration of the arrangements, agreements and/or circumstances surrounding the tenant and his wife's business or those whereby the Respondents became tenants of the premises beyond establishing that the lease was transferred from the tenant to them. The onus was, as Mr O'Malley submitted, on the Claimant and she plainly failed to discharge it so as to show that TUPE applied.
18. In these circumstances, we will pronounce an order upholding the appeal, setting aside the judgment of the Employment Tribunal and dismissing the claim.