British Telecommunications Plc v Royal Mail Group Ltd

A statutory transfer of an undertaking must be read with any schedule expressly made part of the transfer scheme. Where the schedule provides that rights and liabilities under an employment contract transfer only if the employee was working in the transferred part immediately before transfer, that condition also governs liabilities connected with employment that had already ended. Such liabilities remain with the transferor. Contractual and tortious duties owed by an employer to an employee are coextensive, so possible claims in both forms do not justify departing from clear statutory language. Inconvenience, analogous legislation, uncertain pension arrangements and the scale of financial consequences cannot displace the enacted words.

British Telecommunications Plc sought an indemnity from Royal Mail Group Limited for liability arising from an asbestos-related illness suffered by Gordon Hilton, who had been employed by the Post Office between 1961 and 1970. The Post Office’s telecommunications functions transferred to BT on 1 October 1981 under the Telecommunications Act 1981.

Edwards-Stuart J, in the decision reported at [2010] EWHC 8 QB, held that section 10(2) transferred liabilities concerning former employees and that paragraph 3 of Schedule 2 principally regulated transfers of existing employees. The appeal concerned whether liability under the former employment contract remained with the Post Office, now represented by RMG.

Appeal allowed. The Court of Appeal unanimously allowed BT’s appeal and granted a declaration that liability for Mr Hilton’s illness had not transferred to BT.

1. Statutory construction. Section 10(2) of the Telecommunications Act 1981 was expressly subject to the later provisions of section 10, including subsection (7), which applied Schedule 2 to the transfer. The Schedule was therefore part of the operative qualification to the general transfer, not an inferior aid to construction.
2. Employment liabilities. Paragraph 3 of Schedule 2 was not confined to subsisting employment contracts or to peripheral existing employees. Paragraph 3(2) provided that rights and liabilities under an employment contract transferred only if, immediately before the transfer date, the employee was employed in the transferred part of the undertaking. The logical consequence was that the incidents of a former employee’s ended contract remained with the transferor. Mr Hilton’s employment had ended before 1 October 1981, so the relevant liability remained with the Post Office and RMG.
3. Contract and tort. The court rejected the suggested inconvenience that BT might face a tort claim while RMG faced a contractual claim for the same injury. An employer’s duty to take reasonable care for an employee’s safety, whether contractual or tortious, arises only where a contract of employment exists, and the duties are coextensive. The court did not follow the cautious approach expressed in [2001] ICR 197.
4. Other considerations. The Transport Act 1968 could not determine the meaning of the later Act merely because it was similarly framed. Section 33 concerning pensions was an uncertain and remote aid, given the limited evidence and the distinct subject matter. Section 4 concerned a separate power to make transfer schemes. Neither consideration displaced the plain statutory meaning, and the scale of the financial consequences was irrelevant.

• Court of Appeal (Civil Division): In [2010] EWCA Civ 974, the appeal was allowed and BT was granted a declaration that the liability had not transferred to it.
• Queen’s Bench Division: Edwards-Stuart J, in [2010] EWHC 8 QB, held that section 10(2) transferred liabilities concerning former employees and that paragraph 3 of Schedule 2 did not restrict the general transfer in the way BT contended.