Cunningham & Ors v Clydebank Engineering & Fabrication Ltd (Transfer of Undertakings : Transfer)

Where employees allege that their dismissals occurred by reason of a relevant transfer, the transferee may be liable under TUPE even though the dismissals were carried out by the transferor. Whether a relevant transfer occurred is a fact-sensitive question requiring consideration of the whole surrounding circumstances. It cannot ordinarily be determined without evidence where material facts are disputed.

A claim should be struck out for having no reasonable prospects of success only where it is bound to fail in law or on the facts pleaded. The test is demanding, and the burden lies on the party seeking strike-out. A tribunal must take particular care before denying a claimant access to a merits hearing.

Two employees were dismissed by the administrators of Clydeview Precision Engineering and Supplies Ltd. They alleged that Clydeview’s engineering business had transferred to Clydebank Engineering and Fabrication Ltd and that their dismissals were by reason of that transfer. They brought claims for unfair dismissal and age discrimination against Clydebank.

The Employment Tribunal struck out the claims under rule 18(7) of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004, reasoning that the claimants had been employed and dismissed by Clydeview. It refused a review. The central issues on appeal were whether liability could pass to a transferee under TUPE and whether the alleged transfer could be determined without hearing evidence.

1. Appeal allowed. The Employment Tribunal had made a fundamental error of law in treating the claims as necessarily confined to the company which issued the dismissals. Under regulation 4 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, where there is a relevant transfer, contracts and liabilities may pass to the transferee. Regulation 4(3) preserves protection for an employee dismissed in the circumstances described in regulation 7(1). The dismissal may therefore be treated as an act of the transferee.
2. Whether there was a relevant transfer under regulation 3 was a question of fact. The approach in Spijkers v Gebroeders Benedik Abbattoir [1986] 2 CMLR 296 required the tribunal to examine the whole surrounding circumstances, including tangible and intangible assets, the nature and continuity of the activities, and whether the operation continued or resumed. The competing factual accounts could not properly be resolved on submissions alone.
3. The Tribunal also erred procedurally by refusing an adjournment and proceeding without first determining whether evidence should be heard. The pleaded possibility that the transfer occurred before the dismissal letters meant that the identity of the dismissing employer itself remained factually open.
4. The statutory scheme reflected the principle in Litster v Forth Dry Dock and Engineering Co Ltd [1989] SC (HL) 96 and applied in Stirling District Council v Allen [1995] ICR 1082: the transferor may be the wrong respondent where liability has passed to the transferee.
5. Administration did not automatically disapply regulations 4 and 7. Applying OTG Ltd v Barke UKEAT/0320/09/1602, the relevant time for regulation 8(7) was when the insolvency proceedings were instituted, and administration proceedings were not, on the facts stated, proceedings analogous to bankruptcy instituted with a view to liquidation.
6. The strike-out test in Ezsias v North Glamorgan NHS Trust UKEAT/0705/05/SM and Reilly v Tayside Public Transport Company Ltd UKEATS/0065/BI required care. The claims were remitted to a freshly constituted Tribunal for a Pre-Hearing Review at which evidence could be led on whether a relevant transfer occurred, preceded by a case management discussion.

• Employment Appeal Tribunal: Allowed the appeal, set aside the strike-out decision and refusal of review, and remitted the claims to a freshly constituted Employment Tribunal.
• Employment Tribunal: Struck out the claims under rule 18(7) of the Employment Tribunal (Constitution and Rules of Procedure) Regulations 2004 and refused review.