Alderson & Ors v Secretary of State for Trade and Industry

A domestic provision implementing the Council Directive 77/187/EEC must, so far as its language permits, be construed consistently with the Directive. The phrase in the nature of a commercial venture was sufficiently elastic to cover an undertaking operated without profit before transfer but for profit afterwards. Where the post-transfer undertaking is commercial and the pre-transfer undertaking retains all its characteristics apart from profit-making, it will normally fall within the phrase. Employees are not excluded merely because their former employer was a public body or the undertaking was not operated for profit.

This was an appeal by refuse collectors from Newman J’s judgment dated 21 February 2003. Liverpool City Council transferred its refuse collection service to Onyx UK Ltd, and the transfer was accepted to fall within Article 1 of the Council Directive 77/187/EEC. The claimants alleged that the exclusion in the pre-amendment Transfer of Undertakings (Protection of Employment) Regulations 1981 had wrongly failed to implement the Directive, giving rise to a damages claim against the Government. Newman J held that the service was in the nature of a commercial venture. The central issue was whether a service operated without profit before transfer, but for profit after transfer, fell within the statutory phrase.

Disposition

The Court of Appeal, Lord Phillips MR giving the judgment of the court, dismissed the appeal. The transfer of the refuse collection service as an economic entity retaining its identity was common ground. The issue was the meaning and application of the pre-1993 wording in the Transfer of Undertakings (Protection of Employment) Regulations 1981.

1. Purposive construction. The court held that domestic legislation must, so far as its language permits, be construed to accord with the Council Directive 77/187/EEC. If identical scope cannot be achieved, the court must go as far towards that result as the language legitimately allows. Litster v Forth Dry Dock and Engineering Co Ltd [1990] 1 AC 546 illustrated the permissible reach of that approach.
2. Scope of the phrase. The court considered that in the nature of a commercial venture was sufficiently imprecise and elastic to give the original regulations the same scope as the Directive. It expressly stated that it did not need to go so far to decide the appeal; that broader construction was therefore obiter.
3. Applicable test. Where the undertaking after transfer is a commercial venture, and the undertaking before transfer had all the characteristics of the post-transfer undertaking except that it was not operated for profit, the pre-transfer undertaking will normally be capable of being described as in the nature of a commercial venture. There was no principled reason to deny protection merely because the transfer was from a non-profit public employer to a profit-making contractor.
4. Application and order. The refuse collection service had the same essential characteristics before and after transfer, apart from the profit-making element. It therefore fell within the protection of TUPE and the damages claim failed. The court noted that its reasoning differed somewhat from Newman J’s but mirrored UK Waste Control v Wren [1995] ICR 974. The appellants were ordered to pay the respondent’s costs, subject to detailed assessment if not agreed.

• Queen’s Bench Division, Administrative Court: Newman J held that the transferred refuse collection service was an undertaking in the nature of a commercial venture and that the employees were protected by TUPE.
• Court of Appeal (Civil Division): On 8 December 2003, the court dismissed the appeal, reaching the same conclusion by a different route.