Spaceright Europe Ltd v Baillavoine & Anor

For dismissal before or after a relevant transfer to fall within regulation 7 of TUPE, the transfer need not have been specifically identified when dismissal occurred. The relevant question is whether the transfer, or a reason connected with it, was the sole or principal reason for dismissal.

An ETO reason must relate to the conduct of the business as a going concern and must entail an objective or planned change in the workforce. Dismissal merely to facilitate the sale of a business, where the employee’s role will be replaced, does not satisfy that requirement. A workforce may consist of one employee.

Mr Baillavoine was chief executive officer of Ultralon Holdings Ltd. The company and its subsidiaries entered administration, and the administrators dismissed him on the same day. About one month later, the businesses and assets were sold as a going concern to Spaceright Europe Ltd.

An Employment Tribunal found that the dismissal was connected with the transfer but was not for an economic, technical or organisational reason entailing changes in the workforce. Spaceright appealed, challenging both findings and the adequacy of the Tribunal’s reasoning. The central issues were whether a specific prospective transferee had to be identified and whether the administrator’s reason was an ETO reason under regulation 7.

1. Appeal dismissed. The Tribunal was entitled to find that the administrator’s principal reason for dismissal was connected with the transfer. A specific transferee need not have been identified at the date of dismissal. The relevant inquiry looks at the transfer that actually occurred, provided the transfer was more than a remote possibility and the dismissal was caused by it or a connected reason.
2. The Tribunal correctly preferred Harrison Bowden v Bowden [1994] ICR 186 to Ibex Trading v Walton [1994] ICR 907. The approach was supported by Morris v John Grose [1998] ICR 655 and CAB Automotive Ltd v Blake and anr [2007] UKEAT/0298/07. Collusion is not essential. An administrator may dismiss employees to ease the path to a transfer without collusion with the transferor’s owners or managers.
3. The Tribunal’s finding was not perverse or inadequately reasoned. It was entitled to start with the administrator’s stated reason, consider the surrounding circumstances, and infer that the dismissal was intended to enable the business to be transferred without the claimant continuing as chief executive. It was not required to make more precise findings about the likelihood of transfer or to determine the alleged collusion issue where the available evidence was limited.
4. The Tribunal was wrong to conclude that an ETO reason could not entail changes in the workforce because the transferor was a holding company or because the claimant was the only relevant employee. A workforce may consist of one person.
5. Nevertheless, the decision was correct. Under Berriman v Delabole Slate Ltd [1985] ICR 546 and Whitehouse v Chas A Blatchford & Sons Ltd [1999] IRLR 492, the reason must relate to the conduct of the business as a going concern, and the planned workforce change must be an objective of the reason rather than merely a consequence. The administrator’s reason related to the sale of the business, not its future conduct, and contemplated replacing rather than reducing the managing director function. It was therefore not an ETO reason entailing changes in the workforce.

• Employment Appeal Tribunal: dismissed Spaceright’s appeal from the Employment Tribunal’s judgment dated 30 March 2010.