Sidney Smith Castings Ltd v Hill

Factual and Procedural Background

Plaintiff commenced continuous employment with Company A as a coremaker in March 1990. On 15 January 1996, joint Administrative Receivers were appointed over Company A. On 15 May 1996, Plaintiff was dismissed by reason of redundancy along with 14 other staff, receiving redundancy payment and pay in lieu of notice. On 30 May 1996, Plaintiff presented a complaint of unfair dismissal to the Industrial Tribunal naming Company A as Respondent. The Receivers informed the Tribunal they would not defend the claim due to lack of funds, which was treated as a Notice of Appearance on behalf of Company A in Receivership.

On 17 July 1996, Plaintiff alleged that the business of Company A in receivership had been sold as a going concern to Company B and applied to join Company B as second Respondent relying on the Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE). Company B was joined but did not enter a Notice of Appearance nor appear at the hearing. Plaintiff appeared and gave evidence. The Tribunal found Plaintiff was unfairly dismissed on 15 May 1996 without prior warning or consultation.

The Tribunal noted uncertainty regarding whether there had been an effective transfer to Company B and whether dismissals were at the behest of the transferee, but to avoid frustrating compensation, made both Respondents jointly and severally liable. Compensation was assessed at £10,164. Company B appealed, contending the Tribunal failed to make findings on the transfer, connection of dismissal to transfer, economic, technical or organizational reasons, and joint liability. Affidavits and correspondence revealed the transfer took place on 19 July 1996, after Plaintiff’s dismissal, and explained Company B’s lack of participation in the Tribunal proceedings.

The Employment Appeal Tribunal (EAT) allowed the appeal to proceed to full hearing. Plaintiff later indicated he would not resist the appeal. The EAT considered whether to allow the appeal by consent and ultimately decided to allow it.

Legal Issues Presented

1. Whether there had been a relevant transfer of the business to Company B under TUPE.
2. Whether Plaintiff was employed in the undertaking transferred immediately before the transfer within the meaning of regulation 5(3) of TUPE.
3. Whether the reason for dismissal was connected with the transfer and whether it was for an economic, technical, or organizational reason.
4. Whether the Tribunal was entitled to impose joint and several liability on both Respondents.

Arguments of the Parties

Appellant's Arguments (Company B)

• The Tribunal failed to make necessary findings on the existence of a relevant transfer to Company B.
• The Tribunal did not determine whether dismissal was connected to the transfer or justified by economic, technical, or organizational reasons.
• The Tribunal erred in holding both Respondents jointly and severally liable, as liability under TUPE should attach to either transferor or transferee, not both.
• Plaintiff was not employed in the undertaking transferred immediately before the transfer, as dismissal occurred before the transfer date of 19 July 1996.
• Company B’s non-appearance at the Tribunal hearing was due to a misunderstanding that the Receivers were handling the proceedings.

Respondent's Arguments (Plaintiff)

• Initially resisted the appeal, supporting the Tribunal’s joint and several liability order.
• Later indicated no opposition to the appeal, consenting to set aside the order against Company B.

Table of Precedents Cited

Court's Reasoning and Analysis

The court first acknowledged that the Industrial Tribunal was not at fault for lacking material now before the Employment Appeal Tribunal. Company B provided a reasonable explanation for non-appearance, based on a misunderstanding about who was managing the claim. The Tribunal’s intention to ensure Plaintiff received compensation was noted, but this did not justify imposing joint and several liability contrary to TUPE’s provisions.

The court emphasized that under regulation 5(2) of TUPE, liability for unfair dismissal can only attach to either the transferor or the transferee, not both jointly. The critical factual issue was whether Plaintiff was employed in the undertaking transferred immediately before the transfer date. Since dismissal occurred on 15 May 1996 and the transfer was completed on 19 July 1996, Plaintiff was not employed immediately before the transfer.

In resolving conflicting case law, the court preferred the reasoning in Ibex Trading Co Ltd v Walton, which supports that dismissals prior to the transferee taking over do not engage TUPE protections. Accordingly, Plaintiff could not rely on TUPE to establish liability against Company B.

The appeal was therefore allowed, setting aside the Tribunal’s order against Company B.

Holding and Implications

Holding: The appeal by Company B is allowed; the Industrial Tribunal’s order imposing joint and several liability against Company B is set aside.

Implications: This decision confirms that under regulation 5(2) of TUPE, only one party—the transferor or the transferee—can be held liable for unfair dismissal, not both jointly. The timing of dismissal relative to the transfer is critical: dismissal before the transfer means TUPE protections do not apply to the transferee. The direct effect is that Company B is not liable for Plaintiff’s unfair dismissal, and there is no order as to costs. No new precedent beyond the application of existing principles was established.