The claimant was a doorman at a bar. The bar was then bought by the appellant in this appeal and the claimant was dismissed because the security of the bar was being taken over by someone else. The claimant claimed unfair and wrongful dismissal and a claim under TUPE. At the hearing, the ET upheld the claimant's claims against the appellant, having refused to allow the appellant to take the point that the claimant had not been an employee of the previous owner of the bar but had in fact been self employed. The Tribunal ruled that permission was needed to amend the ET3 and refused to grant permission. The respondent appealed.

The EAT upheld the appeal. They agreed with the respondent that they did not need permission to amend their ET3 because they had explicitly made no admission in their ET3 to the relevant averment in the claimant's ET1. Also no proper decision on the question of the claimant's employment status had been made by the Employment Judge.
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Appeal No. UKEAT/0459/12/RN

EMPLOYMENT APPEAL TRIBUNAL

FLEETBANK HOUSE, 2-6 SALISBURY SQUARE, LONDON EC4Y 8JX

At the Tribunal

On 31 October 2012

Before

THE HONOURABLE MR JUSTICE UNDERHILL; MR M CLANCY; MR G LEWIS

BIG CITY LEISURE LTD (APPELLANT)

McCARTHY (RESPONDENT)

Transcript of Proceedings

JUDGMENT

**APPEARANCES**

For the Appellant
MR ROBERT BRIERLEY (Representative)

For the Respondent
No appearance or representation by or on behalf of the Respondent

**SUMMARY**

PRACTICE AND PROCEDURE - Amendment

The Employment Tribunal held that the Appellant company, the transferee following a service provision change, needed permission to amend its ET3 in order to challenge whether Claimant was an employee (as opposed to being self-employed) prior to the transfer, and refused permission - Held that no such permission was required - Issue of Claimant's employment status remitted to the Tribunal for determination.

**THE HONOURABLE MR JUSTICE UNDERHILL**

1. The Claimant in these proceedings was the head doorman at the Tribeca bar in Sackville Street in Manchester from February 2000. The bar at that stage was owned by a business called Danelli Ltd, but security was contracted out to a business called National Security Network ("NSN"). The legal identity of the owner of NSN appears to have changed over the years, but it appears from the material before us that it was most recently a company called Castlebay Ltd. On 16 August 2010 Danelli sold the Tribeca bar to Big City Leisure Ltd, who are the Appellants before us. The Claimant was told by one of the directors of Big City that his services were not required after 18 August and that security was being taken over by a Mr Rodgers. He worked on 17 and 18 August but not thereafter.

1. On 11 November 2010 the Claimant commenced proceedings in the Manchester Employment Tribunal for unfair dismissal, breach of contract (that is, wrongful dismissal) and failure to comply with the consultation obligations in regulation 13 of the Transfer of Undertakings Protection of Employment Regulations 2006 ("TUPE"). He made it clear in his ET1 that he was not sure whether the correct Respondents were NSN, Danelli or Big City, but all three were named as Respondents on an alternative basis.

1. Big City lodged their ET3 out of time. When it was rejected, they sought a review on the basis that the Claimant had given their address inaccurately in the ET1 and it had not been timeously served. The Tribunal ordered a PHR to determine that question but also, on the application of NSN, the question of who was the proper Respondent. That PHR took place before Employment Judge Sherratt on 8 February 2011. Big City did not appear at that hearing, apparently again because the notice had not been sent to the right address. In those circumstances their application to be allowed to lodge an ET3 out of time was refused. As to the question of the correct Respondent, the Judge, after no doubt hearing argument from the parties who were present, reached a decision which was recorded in paragraph 2 of his Judgment as follows:

"The claimant's claims against the first and second respondents [that is NSN and Danelli] are dismissed on the basis that the third respondent [that is Big City] is determined to be the correct respondent following a service provision change where activities ceased to be carried on by the first respondent for the second respondent when the third respondent started to carry them out on its own behalf acquiring the business of the second respondent."

1. The reference to service provision change is, of course, to regulation 3(1)(b) of TUPE. To spell it out, the Employment Judge's analysis was that the activities of NSN in providing a door service for the bar had ceased and that the same services were at the material time being performed by Big City for itself and that that situation accordingly fell within the terms of regulation 3(1)(b)(iii). That is confirmed by reasons which he has recently supplied (none having been sought at the time), but it is anyway sufficiently apparent from the order which we have quoted. (In fact, that analysis may be wrong in the light of McCarrick v Hunter

1. Big City applied for a review of that decision also and at the same time indicated that responsibility for security at the bar had passed not to them but to Mr Rodgers, whom the Tribunal accordingly joined as a further Respondent. Following a further PHR on 22 July 2011, at which finally the Claimant and all four potential Respondents were present, Judge Sherratt made the following order;

"1. The Third Respondent's response on form ET3 shall be accepted out of time.

2. The Claimant's claims will proceed against the third and fourth respondents [that is, Big City and Mr Rodgers] to a hearing before a full tribunal … on 15th September 2011."

1. The hearing directed by Employment Judge Sherratt eventually proceeded, though not on the date originally fixed, before a Tribunal chaired by Employment Judge Franey, on 9 March 2012. Judgment was promulgated on 16 March, with written reasons being sent to the parties on 29 March. We wish to say at this stage that the written reasons are clear, full and careful. The Claimant's claims for unfair dismissal, breach of contract and failure to consult were all upheld as against Big City. The claims against Mr Rodgers were dismissed.

1. At the hearing before the Franey Tribunal Big City sought among other things to take the point that the Claimant had not been an employee of NSN but had been self-employed. The Tribunal took the view that permission to amend the ET3 was required if that point was to be taken, and after consideration it refused to grant such permission. Big City also sought to argue that there had been no service provision change, or that, even if there had been, the Claimant had not been assigned to the relevant "organised grouping of resources", so that his employment had never transferred to Big City. But the Tribunal held that that point had already been definitively decided by Employment Judge Sherratt.

1. Big City have appealed against the decision of the Franey Tribunal. Their grounds, which are set out in the Notice of Appeal under four headings, have been clarified before us. Putting it broadly they are:

a) that they should have been allowed to argue whether the Claimant was assigned to that part of the business affected by the service provision change, which they do not dispute occurred; and

b) that they should have been permitted to argue that the Claimant was self-employed and not an employee.

We should say that the significance of that second point is that TUPE has no application except to employees in the strict sense - and indeed if the Claimant was self-employed he could not bring a claim for unfair dismissal or (in the Employment Tribunal) for wrongful dismissal.

1. On the sift HHJ McMullen QC ordered an expedited full hearing. He also directed that Employment Judge Sherratt should give reasons for his decisions of 8 February and 27 July 2011. Those were helpfully produced to the Tribunal by letter dated 25 October. Judge McMullen made it clear that the only parties to the appeal were the Claimant and Big City.

1. Big City have at no stage been represented by solicitors. The matter has been handled by Mr Montgomery and by Mr Brierly, one of whom is a director of Big City and the other an ex-director. It is Mr Brierly who, as we understand it, has taken the lead in the drafting of the various formal documents required and who has addressed us today. If we may so, we have been highly impressed by the way in which he has grappled with questions which are complicated both as a matter both of substance and of procedure.

1. Solicitors instructed by the Claimant, Nexus Solicitors, have lodged a Respondent's Answer, but on 23 October – that is to say, last week – they emailed the Tribunal saying that the Claimant would not be attending and would not be represented at this hearing. On the same day they also wrote saying that they understood from conversations with Big City that the only point now being pursued on the appeal was the point about the Claimant's employment status which we have referred to as (b) above. More precisely, they said that the issues as they understood them to be were whether the Tribunal had erred in law in

"… (a) determining that the employment status of Mr McCarthy had already been determined at a previous hearing, (b) determining that an application to amend the ET3 of Big City Leisure Ltd was necessary in order to raise the issue of the employment status of Mr McCarthy, and (c) refusing an application to amend the ET3 of Big City Leisure Ltd."

They continued:

"Should the … ET agree that the issues above are the only issues to be determined at the appeal hearing on 31st October 2012, then we write to advise that our client has instructed us to voluntarily withdraw his response to the Appellant's appeal."

They made it clear that they understood that the consequence of the appeal being allowed on that basis was that the issue of the Claimant's employment status would be remitted for determination by the Employment Tribunal. They continued:

"Our client maintains as set out in his response to the EAT that he was an employee of the first Respondent to the Employment Tribunal proceedings and that he produced satisfactory evidence to support this point.

Our client therefore contends that it was not perverse of the Employment Tribunal to determine employment status based upon the facts, but as set out above will not seek to actively respond to the Appellant's appeal that they were not permitted the opportunity to properly contest this issue.

It therefore seems appropriate that the matter of employment status be determined at a fresh hearing in the Employment Tribunal."

1. Mr Brierly has confirmed that the grounds which Big City was now intending to pursue on this appeal were indeed limited to those identified by Nexus in their letter. In other words, they are not now challenging the decision that there was a service provision change; that Big City was the relevant transferee in connection with that change; or that if the Claimant was an employee of the original contractor his employment transferred to Big City.

1. In practice, therefore, we have a situation in which both parties to the appeal are inviting us to allow it, at least in the surviving respects, by consent. This Tribunal does not automatically accede to such applications: there has to be reason to believe that the original decision of the Employment Tribunal was wrong. However, we think it right to do so in the present case. We need not go into great detail, but it is essentially Big City's case (a) that they did not need permission to amend the ET3 in order to take a point on the Claimant's employment status, because they had explicitly made no admission in their ET3 to the relevant averment in his ET1; and (b) that no proper decision on the question of the Claimant's employment status had been made by Employment Judge Sherratt. Having considered the terms of the ET3 and Judge Sherratt's judgment, both those points seems to us to be prima facie correct. There might possibly be counter-arguments, but if the Claimant does not wish to run those counter-arguments before us, we should not be astute to find difficulties.

1. In those circumstances we will allow the appeal. We will remit to the Tribunal the issue whether at the point that the service provision change took place, on 16 August 2010, the Claimant was an employee of the original contractor under a contract of service. If that issue is determined in the Claimant's favour, the decision of the Tribunal on the remaining issues, which are not now otherwise challenged, will stand. If it is decided in Big City's favour, those decisions will necessarily fall because, as we have said, TUPE only takes effect in relation to employees. In those circumstances, the Claimant would have to look for any remedy to NSN, as the party with whom he had been contracting at the moment of the transfer. There might well be serious difficulties for him in seeking now to revive any claim in the Employment Tribunal against them; on the other hand, if he was not an employee it is unclear what claim he would have which was within the jurisdiction of the Tribunal. In any event, these are matters which will no doubt have been considered by him with his advisers before they wrote their letter of 23 October.

1. We have used the formulation "the original contractor" out of abundance of caution, because there may be some lack of clarity about the legal entity behind NSN. However, on the material that we have seen, it seems that the original contractor through whom the Claimant provided his services was Castlebay Ltd, and we dare say that that will not in practice be in issue.

1. Mr Brierly said in his submissions before us that, for the purpose of at least of his claim of unfair dismissal, the Claimant would have to prove not only that he was an employee but that he had continuity of employment over the relevant one-year qualification period (and the issue would also arise in connection with any basic award). That seems to be right, but strictly speaking we do not think it would be right for us definitively to direct that that be determined as an issue, because it was not raised as such in the Notice of Appeal or responded to in Nexus's letter. Much as we would like to limit as far as possible any areas of future dispute, we do not think that we should formally identify this as an issue in circumstances where Nexus have not accepted that it should be. However, we hope and expect that there would in practice be no difficulty on that point either.

1. We have considered whether the case should be remitted to the Franey Tribunal. It seems to us that there would be some advantage in that, since they will be very familiar with the background. We do not, however, say that it is essential, and if there are difficulties there would of course be liberty to the Regional Employment Judge to direct that it be heard by a different Tribunal. For the avoidance of doubt, we make it clear that we do not think there would be any difficulty in the Franey Tribunal dealing dispassionately with this point: all that they decided first time round was whether there should be permission to amend. Even if the Tribunal feels that the appeal should not have been allowed, they will of course appreciate that that is in substance because the Claimant chose not to run any counter-arguments, and in those circumstances they need not, and we are sure will not, feel any to their amour propre. We are happy to repeat what we said about the high quality of the reasons.

1. Mr Brierly asked us to make a number of directions of a case management character for the purpose of the remitted hearing. We do not feel that it would be right for us to do so; indeed arguably we do not have jurisdiction to do so. However, we are happy to record what the request was and to indicate that it seems in each respect sensible. We would hope that in the light of that indication, the Claimant would comply with the directions without the need for an order of the Tribunal; but if an order of the Tribunal is needed, no doubt it will take into account our expression of view while being in no way bound by it. The directions were that the Claimant should:

"… produce evidence of either a) an offer of employment made by Castlebay Ltd or b) the transfer of his employment to Castlebay Ltd under the TUPE regulations from a previous company trading as National Security Network and should provide the following:

i) P60s for the years 2008/2009, 2009/2010, 2010/2011 and;

ii) evidence of a contract of employment between the Claimant and Castlebay Ltd and;

iii) evidence that deductions for class 1 National Insurance contributions were made by Castlebay Ltd from the Claimant's pay and;

iv) all payslips from the Castlebay and;

v) all other appropriate material evidence demonstrating that the Claimant was an employee of Castle Bay Ltd."