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Urmston and others v John Hardman & Co

Employment – Continuity – Transfer of trade, business or undertaking – Transfer from company to firm operating on same premises – Employees dismissed before transfer – Employees complaining of unfair dismissal – Employment tribunal finding employees dismissed because of transfer – Whether reasoning adequate – Whether decision perverse – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794.

The appeal would be dismissed.

On the facts, the reasoning had been adequate. It was clear reading the judgment as a whole that the employer’s witness evidence had been rejected. The tribunal had been entitled so to find. It had not reached a perverse decision.

Mackie v Aberdeen City Council

Employment – Continuity – Transfer of trade, business or undertaking – Employment tribunal finding employee not subject of relevant transfer – Employment Appeal Tribunal upholding tribunal’s decision – Whether appeal tribunal erring.

The appeal would be dismissed.

On the facts, there was ample support for the tribunal’s decision. Since the tribunal considered the right questions and applied the right test, its conclusion could not be disturbed.

Astley and others v Celtec Ltd

Employment – Continuity – Disruption of continuity – Employee civil servants seconded to employer Training and Enterprise Councils – Employees then electing either to resign from civil service to take up employment with councils or to return to civil service – Whether those employees electing to resign having continuity of employment from civil service to councils – Council Directive (EEC) 77/187, art 3.

In 1989, the United Kingdom transferred part of its vocational training responsibilities to private bodies, Training and Enterprise Councils (TECs). Under that privatisation process, civil servants from the Department of Employment were invited to put themselves forward for temporary secondment to the newly created TECs. During their secondments, those concerned retained their status as civil servants. By November 1991, all the TECs had become operational. The employees who were civil servants, having entered the civil service in 1973, 1985 and 1986 respectively, were seconded to one of the TECs (the TEC), which had commenced operations on 17 September 1990. They took up permanent employment in 1993. In 1998, one of those employees was dismissed by the TEC, which refused to recognise continuity of employment since the date on which she had joined the civil service. The two other employees feared that they would be dismissed shortly, and all three therefore sought a determination by the employment tribunal as to the length of their period of continuous employment. They relied on Council Directive (EEC) 77/187 (on the approximation of laws of the member states relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of businesses). By art 3(1) of the Directive the transferor’s rights and obligations arising from a contract of employment existing on the date of a transfer were, by reason of the transfer, transferred to the transferee. After the date of transfer the transferor would continue to be liable in respect of obligations which arose from a contract of employment. The Directive was transposed into domestic law. The employment tribunal found that the employees had continuous employment from the start of their employment with the civil service. It found that there had been a transfer commencing in September 1990 and continuing until 1996 when the last of the secondments to TECs from the civil service came to an end. The Employment Appeal Tribunal subsequently allowed the TEC’s appeal against that decision (see [2001] IRLR 788, All ER (D) 66 (Oct)). They took the view that the transfer of the undertaking in question was completed in September 1990, long before the employees took up employment with the TEC. The Court of Appeal quashed that decision (see [2002] All ER (D) 287 (Jul)) being of the opinion that the Directive was sufficiently wide to embrace a transfer of a business which took place over a period of time. The TEC appealed against that judgment to the House of Lords, which stayed the proceedings and referred questions to the Court of Justice of the European Communities. That court ruled (see [2005] IRLR 647, [2005] All ER (D) 400 (May)) that art 3(1) of had to be interpreted as meaning that the date of a transfer within the meaning of that provision was the date on which responsibility as employer for carrying on the business of the unit transferred moved from the transferor to the transferee. It also held that for the purposes of applying that provision, contracts of employment or employment relationships existing on the date of the transfer were deemed to be handed over, on that date, from the transferor to the transferee, regardless of what had been agreed between the parties in that respect. The matter came back before their Lordships.

The TEC submitted that, in the light of the ECJ’s rulings as to the date of the transfer, the appeal should be allowed and that it be determined that the employees’ periods of continuous service began when, after resigning from the civil service, they took up direct employment with the TEC. The employees contended that the only issue that had to be determined was whether, in the light of the ECJ judgment, the employees’ continuity of employment was broken in 1993 when they resigned from the civil service and accepted an offer of employment with the TEC. They argued that, assuming that the date of the transfer was in September 1990 and not over a period as they had previously submitted, their accrued rights were protected by the Directive.

Issues arose as to whether (i) the employees should be permitted run their argument; and (ii) the employees were caught by the reservation that they were at liberty after the transfer, following a decision freely taken by them, not to continue the employment relationship with the transferee.

The appeal would be dismissed (Lord Mance dissenting)

(1) Having regard to European jurisprudence, rules of Community law had to be fully and uniformly applied in all the member states as from the date of their entry into force and for so long as they continued in force.

The effectiveness of the provision for the making of a reference to the ECJ for a preliminary ruling would be impaired if the national court were prevented from forthwith applying Community law in its entirety in accordance with the decision or the case law of the court. It followed that every national court had, in a case within its jurisdiction, to apply Community law in its entirety to protect the rights which the latter conferred on individuals.

Accordingly, it was the duty of the national court to give the employees the opportunity to put forward their additional argument.

Amministrazione delle Finanze dello Stato v Simmenthal SpA (No 2) (Case C-106/77) [1978] ECR 629, [1978] 3 CMLR 263 considered.

(2) (Lord Rodger dissenting) The extent of the reservation was that it was open to an employee, whose contract of employment would otherwise be transferred automatically from the transferor to the transferee, on the date of the transfer of his own free will to withdraw from that arrangement by declining to enter the employment of the transferee.

It was clear from Community jurisprudence that the general rule was that the contracts of employment of workers assigned to the undertaking transferred were automatically transferred from the transferor to the transferee on the date of transfer, and that it was not possible for that rule to be derogated from in a manner unfavourable to employees. The rights conferred on them by the Directive could not be made subject to the consent either of the transferor or transferee nor the consent of the employee’s representatives or the employees themselves. The employees had continuous employment with the TEC from the start of their employment with the civil service by virtue of the directive. On the other hand it was a fundamental right of the employee to be free to choose his employer. He could not be obliged to work for an employer whom he had not freely chosen.

In the instant case, the reservation did not apply. The employees were in a position on or after the date of the transfer to choose of their own free will not to work for the TEC. They did not make that choice, therefore their contracts of employment were transferred automatically to the TEC with continuity of employment on the date of transfer.

It was not necessary for the case to be remitted to the employment tribunal for further determination. Their decision would be affirmed, although on different grounds, that the employees had continuous employment with the TEC from the start of their employment with the civil service by virtue of the Directive.

Decision of Court of Appeal [2002] All ER (D) 287 (Jul) affirmed.

Re T&N Ltd and other companies

Company – Scheme of arrangement – Scheme of arrangement between company and creditors – Asbestos-related claims – Employers’ liability – Whether schemes compromises or arrangements between scheme companies and employers’ liability claimants – Circumstances in which contingent claimants constituting creditors – Circumstances in which present or future dependants creditors – Proper composition of classes – Companies Act 1985, s 425.

The administrators of T&N Ltd (T&N) and 57 associated companies applied for leave to convene meetings of certain creditors for those companies under s 425 of the Companies Act 1985 to consider schemes of arrangements between the companies and those creditors. The schemes of arrangement were proposed to be made with those employees and former employees of the companies who had or might in the future have claims for damages for personal injuries arising out of exposure to asbestos, with dependants or relatives of such employees who had or might in the future have claims under theFatal Accidents Act 1976 or equivalent legislation in other jurisdictions and with persons, principally other employers, who had or might in the future have contribution claims in respect of claims by employees or their dependants. In each case the claims were restricted to those covered by employers’ liability insurance in place between 1 October 1969 and 30 April 1995. Insurance cover for employers’ liability in the UK was provided to T&N and some of the other companies proposing schemes under employers’ liability policies (the EL policies) issued by Royal & Sun Alliance plc (RSA) and a Lloyd’s syndicate (the syndicate), together the EL insurers. Claims covered by the schemes fell into three broad categories, personal injury claims by employees or former employees for damages for asbestos-related diseases, claims under the 1976 Act by dependants or relatives of former employees whose deaths were caused by asbestos-related diseases and contribution and other claims made in respect of claims in the first two categories.

Issues arose (i) whether the scheme would be rendered ineffective by s 3 of the Third Parties (Rights Against Insurers) Act 1930, (ii) were the scheme compromises or arrangements between the scheme companies and their employers’ liability claimants (EL claimants) for the purposes of s 425 of the 1985 Act, (iii) the circumstances in which contingent contribution claimants constituted creditors for the purposes of s 425 of the 1985 Act, (iv) in what circumstances were present or future dependants with potential claims under the 1976 Act creditors for the purposes of s 425 of the 1985 Act, (v) issues as to the proper composition of classes of creditors and (vi) whether either the schemes or the proposed amendment to the EL policies would contravene the Employers’ Liability (Compulsory Insurance) Act 1969.

The court ruled:

(1) Section 3 of the 1930 Act did not apply to the scheme. The evident purpose of the section was to prevent arrangements between the original parties to the contract of insurance, or a unilateral act by the insured, prejudicing the persons to whom rights were transferred under s 1 of the 1930 Act. Even if the word ‘agreement’ could in the context of s 3 encompass a scheme of arrangement, the scheme was not made between the EL insurers and T&N. It was made with the EL claimants. The assignment and waiver of rights against the EL insurers was not made by T&N. They would be made by the EL claimants under a scheme which would be binding on them only if approved by at least the statutory majority at their meeting and sanctioned by the court. The parallel was not an assignment and waiver by T&N, but an assignment and waiver by the EL claimants. The scheme did no more than make the assignment and waiver binding on all the EL claimants where it was impossible or impracticable to obtain their individual assents.

(2) It was not a necessary element of an arrangement for the purposes of s 425 of the 1985 Act that it should alter the rights existing between the company and the creditors or members with whom it was made. Provided that the context and content of the scheme were such as properly to constitute an arrangement between the company and the members or creditors concerned, it would fall within s 425.

(3) An actual or potential claimant for contribution was a creditor for the purposes of s 425 of the 1985 Act, at the latest when it had an accrued right to claim contribution. The right to recover contribution accrued when the contribution claimant was held liable in respect of relevant damage by judgment or arbitration award or when he compromised the claim. There would be an obvious right to claim contribution, contingent on the employees being held liable in respect of the relevant damage, once the employee had accrued causes of action against the two employers. The potential contribution claimant in such circumstances was a creditor for the purposes of s 425. That assumed that the person with the principal claim had suffered the actionable damage. If that person had been exposed to asbestos by two potential defendants, but had not yet suffered any actionable damage, he would none the less be a creditor of those potential defendants for the purposes of s 425. As regards the status of possible contribution claimants who either had yet to expose the victim to asbestos or, still more remotely, had yet to employ him. The latter could not be creditors.

(4) Applying the court’s reasoning that future tort claimants were creditors for the purposes of s 425 of the 1985 Act, the current dependants of an employee who had developed an asbestos-related disease and an employee who was exposed to asbestos during his employment with T&N but had not as yet developed an asbestos-related disease were also creditors for those purposes. The employees had no power to compromise their future dependants’ claims against the EL insurers and such a scheme could not bind their future dependants. The statutory claims of dependants were personal to them, as were the rights in due course vested in them under the 1930 Act. The employees had no authority under the Act or at common law to compromise or waive those claims, either individually or through a scheme of arrangement.

(5) The basic issue facing all claimants was whether the litigation should be compromised on the proposed terms. The comparator in the absence of the scheme was not the claimants’ rights against the insurers but their disputed claims. They were not exchanging a clear right against insurers for their rights under the scheme. The prospect of different treatment in certain events should not mask that in other circumstances there would be identical treatment, that it could not be known whether such difference would arise regularly or rarely, and that there were counterbalancing benefits of some value under the scheme. The possibility of different rights under the scheme was not such as to require a separate meeting of the contribution claimants. Their right under the scheme, viewed as a whole, and their common interest in the litigation with the insurers enabled them to be part of a single class with the employees for the purpose of considering the scheme with a view to their common interest.

(6) The proposed amendment to the policies as part of, and on the terms of, an overall compromise of the EL insurers’ coverage and avoidance claims did not contravene the 1969 Act. There was nothing in the Act which precluded a genuine compromise of a genuine dispute, even if that involved an amendment of the policy as proposed in the instant case by the future dependants. Nor was T&N thereafter committing an offence by not having a replacement policy to provide against possible liability to future dependants. Still less could it be said that the EL insurers would be guilty of an offence as accessories by entering into a genuine compromise, having in good faith asserted a right to avoid the policies or to limit the coverage.

Fraser v HLMAD Ltd

Employment – Wrongful dismissal – Claims before employment tribunal and High Court – Whether doctrines of merger of causes of action, res judicata, estoppel and abuse of process applying to judgments of employment tribunal – Whether judgments of employment tribunal barring subsequent proceedings for wrongful dismissal in ordinary courts.

The employee presented a complaint to an employment tribunal, claiming unfair dismissal and wrongful dismissal. He stated in his form ET1 that in so far as his claim for damages for wrongful dismissal exceeded the statutory limit of £25,000 on awards for wrongful dismissal by an employment tribunal, he expressly reserved the right to pursue an action in the High Court. Subsequently, his legal advisers took the precaution of starting an action for wrongful dismissal in the High Court with a view to recovering the excess of any award he received in the employment tribunal. They did not, however, take the additional precaution of withdrawing his wrongful dismissal claim from the employment tribunal proceedings. The tribunal found that the employee had been unfairly and wrongfully dismissed. The tribunal determined his damages for breach of contract in the sum of £80,090.62, but limited its award to the capped amount of £25,000 damages in addition to the compensatory award of £16,034.88 for unfair dismissal, making a total of £41,034.88. On those figures the employee’s net shortfall was £55,090.62. The employer applied to strike out the High Court action as ‘res judicata and [an] abuse of the court’s process’, contending that the wrongful dismissal claim had already been litigated in the employment tribunal and that the employee could not litigate the matter further in the ordinary courts. The employee responded by a cross application for summary judgment under CPR 24 against the employer for £96,125.50 total net damages for loss of employment, or that its defence be struck out because liability and quantum in respect of wrongful dismissal had been adjudicated upon by the employment tribunal, and it was an abuse of process for the employer to defend the High Court proceedings. The master struck out the claim, and the employee appealed.

Although the employer’s strike out application had been made on the basis of res judicata and abuse of process, on the appeal it relied specifically on the common law doctrine of merger of causes of action, submitting that the employee’s cause of action for wrongful dismissal had been transmuted into the judgment of the employment tribunal and had thereafter ceased to exist independently of the judgment. The employee argued that it would be an unjust and improper use of the doctrine of estoppel and abuse of process in order to prevent him from recovering, by way of a claim limited to the excess over the statutory cap applicable in the tribunal, the sum already found to be due to him by the employment tribunal. The course adopted by his legal advisers had expressly put the tribunal and the employer on notice of the possibility of High Court proceedings. It was sensible to give priority to the proceedings in the employment tribunal, which had exclusive jurisdiction over unfair dismissal claims. The findings of the employment tribunal on the unfair dismissal claims between the parties within its jurisdiction would then create issue estoppels in the High Court proceedings for wrongful dismissal.

The appeal would be dismissed.

(1) Where an employee expressly reserved the right, in a claim before an employment tribunal for wrongful dismissal, to bring proceedings for wrongful dismissal arising from the same facts in the High Court, the findings of the employment tribunal constituted issue estoppel or res judicata in the High Court proceedings.

If the unfair dismissal claim was litigated first in the employment tribunal, it was neither necessary nor permissible to re-litigate in High Court proceedings for wrongful dismissal the factual issues common to both causes of action. If the employee lost on the unfair dismissal claim in the employment tribunal, he would not be allowed, on a wrongful dismissal claim in the High Court, to re-open issues of fact or law decided by the employment tribunal. If, however, he won his claim for unfair dismissal, the employer would not be entitled to re-litigate defences which had been rejected by employment tribunal.

Soteriou v Ultrachem Ltd [2004] IRLR 870 approved.

(2) The employee’s cause of action for wrongful dismissal had clearly merged in the final judgment of the tribunal on the claim for wrongful dismissal as between the same parties as in the High Court proceedings.

Merger was not prevented from taking place by the express statement in the form ET1 that the employee expressly reserved his rights to bring High Court proceedings for the excess. The merger arose from the fact that the cause of action had been the subject of a final judgment of the tribunal. Once it had merged the employee no longer had any cause of action which he could pursue in the High Court, even for the excess over £25,000. The claim for the excess was not a separate cause of action. The cause of action for wrongful dismissal could not be split into two causes of action, one for damages up to £25,000 and another for the balance. A claim in the High Court for the balance of the loss determined in the tribunal would have to be based on a single indivisible cause of action for wrongful dismissal.

Sajid v Sussex Muslim Society [2002] IRLR 113, Sivanandan v Enfield LBC [2005] All ER (D) 57 (Sep) distinguished.

Per curiam: In future claimants and their legal advisers would be well advised to confine claims in employment tribunal proceedings to unfair dismissal, unless they are sure that the claimant is willing to limit the total damages claimed for wrongful dismissal to £25,000 or less. If the claimant wishes to recover over £25,000, the wrongful dismissal claim should only be made in High Court proceedings. The findings of the employment tribunal in its judgment on the unfair dismissal claim will assist, as they will give rise to an issue estoppel in any subsequent High Court proceedings for wrongful dismissal, but there will be no merger of causes of action and the claimant will not be prevented by success in the employment tribunal claim for unfair dismissal from pursuing an action for wrongful dismissal. An application for summary judgment in the High Court for the wrongful dismissal claim will be appropriate in straightforward cases. It would also be advisable for the brochures and other material issued by the Tribunal Service from time to time to make it clear that wrongful dismissal claims in which the claimant expects to be awarded more than £25,000 should not be brought in the employment tribunal, but in the ordinary courts.

Anstey and others v G4S Justice Services (UK) Ltd

Employment – Continuity – Transfer of trade, business or undertaking – Employees dismissed before transfer – Employees having right to internal appeal – Appeal being exercised after transfer – Appeal heard by transferor employer – Appeal being allowed – Whether employment transferring to new employer – Transfer of Undertakings (Protection of Employment) Regulations 1981, SI 1981/1794.

The appeal would be dismissed.

The contractual obligation to hear and determine the appeals lay with the first employer, notwithstanding the transfer. Having determined those appeals in favour of reinstatement, the original dismissals were expunged and the employees fell to be treated as having been employed by the first employer up until the transfer date. Thereafter, the obligation on the first employer to reinstate the employees to the escort contract transferred to the second employer.

Having been summarily dismissed by the first employer, the employees had a contractual right to appeal that decision. Having succeeded, they would have been reinstated and had their employment transferred. It made no difference that their appeals had not been heard before the transfer date. They were not dismissed for reasons connected with the transfer, but rather for misconduct.

Belcher and others v Great Bear Distribution Ltd

Unfair dismissal – Compensation – Calculation of award – Basic award – Tribunal having regard to conduct after giving of notice – Whether tribunal in error – Employment Rights Act 1996, s 122.

The appeal would be allowed.

It was clear from s 122(2) that where notice of dismissal was given, that provision fastened upon conduct prior to the giving of notice. The tribunal had plainly taken into account the employees’ conduct after the giving of notice. That was not conduct which the tribunal had been entitled to take into account for the purposes of the basic award. In relation to the compensatory award, however, the tribunal had been entitled to conclude that it was not just and equitable to award compensation.

The matter would, accordingly, be remitted to the same tribunal to deal with the basic award point.