British Telecommunications Plc v Royal Mail Group Ltd

Liabilities arising from injuries suffered by former employees before a statutory transfer may transfer under a provision vesting all liabilities comprised in the transferred undertaking. A schedule dealing with the transfer of existing employment contracts does not limit the wider statutory transfer of liabilities. The court should read the provisions together and, where appropriate, purposively. A liability connected with employment may fall within rights and liabilities under a contract of employment where it arises from a fundamental employment obligation, such as the duty to take reasonable care for an employee’s safety. The absence of a subsisting employment contract does not, by itself, prevent transfer of an accrued or contingent liability.

The claimant telecommunications company and the defendant Royal Mail group disputed responsibility for liabilities arising from asbestos exposure suffered by former Post Office employees before 1 October 1981. The British Telecommunications Act 1981 transferred the telecommunications undertaking of the Post Office to British Telecommunications. The parties had shared liability for claims pending determination of whether those liabilities transferred to BT.

The court also determined whether former Post Office employees had worked under contracts of employment and considered the interaction between section 10(2) and Schedule 2 to the Act. The central issue was whether the statutory transfer extended to liabilities concerning employees whose employment had ended before the transfer date.

1. Employment status. The employees of the Postmaster General, including apprentices, were employed under legally binding contracts of employment. The use of the term appointment and the Civil Service code did not exclude an intention to create legal relations. The reasoning in R v Lord Chancellor, ex parte Nangle [1991] ICR 743 was preferred to that in R v Civil Service Appeal Board, Ex parte Bruce [1988] ICR 649.
2. Scope of section 10(2). Section 10(2) of the British Telecommunications Act 1981, read naturally and purposively, transferred all liabilities comprised in the telecommunications part of the Post Office undertaking. It did not exclude liabilities relating to former employees whose employment had ended before 30 September 1981.
3. Schedule 2. Paragraphs 1 to 3 of Schedule 2 had to be read together. Paragraph 3 principally provided a default mechanism for allocating existing employees to the undertaking in which they worked immediately before the transfer. It did not limit the words “all the liabilities” in section 10(2), nor did it “trump” their natural meaning.
4. Former contractual liabilities. Section 33(2) strongly confirmed that pension liabilities concerning former employees could transfer. The language of section 10(2) was also apt to include liabilities arising from contracts that had ended. If necessary, the court would have held that fundamental employment obligations, including the duty to take reasonable care for an employee’s safety, were rights under the contract of employment within Schedule 2.
5. On the assumed facts, liabilities of the Post Office to employees exposed to asbestos while working in the telecommunications undertaking transferred to BT under section 10(2). BT’s application for the declaration sought failed. Further relief and costs were reserved.