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Guvera Limited v Ms C Butler and Others EAT – 21 November 2017

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It is not uncommon for a  business to be acquired by a transferee over a prolonged period, or, in share sale scenario, for control of the business to be increased by a parent company over time such that the parent company is effectively the employer.  This is particularly important for time limit issues and also in cases of insolvency.   This case explores these issues in the context of a share acquisition.

The Facts

On 23 January 2015 BB  (a subsidiary of G) bought shares in Blinkbox from Tesco. Mr de V, director of G in the UK, arranged the purchase and became to sole director of Blinkbox. It was clear that despite attempts to turn the business around, insolvency was now a prospect. G considered its options and was interested in purchasing Blinkbox’s assets and acquiring approximately 20 employees.

Mr de V left the business on 12 May 2015 at which point G took over the day to day control of Blinkbox. This continued until Blinkbox went into administration on the 11 June 2015. On 15 May 2015 54 employees of Blinkbox were made redundant. On the 18 May 2015 G announced to the remaining Blinkbox staff that they were now a part of G as opposed to the subsidiary.

The ET Judgment

The ET held that transfer had taken place on the 12 May 2015. The events after the purchase of shares could be divided into three periods:

  1. From 23 January 2015 to the end of April 2015 the business remained with Blinkbox, under the directorship of Mr de V, who had been given 90 days to turn the business around.
  2. From the end of April 2015 to 11 May 2015, when Mr de V resigned as director of Blinkbox. Insolvency was now a prospect for Blinkbox. G in considering its options, was interested in acquiring Blinkbox’s assets and approximately 20 employees. The ET found that there was no transfer during this period as the business remained “under the control of Blinkbox, Mr de V as its director and its own senior management team”.
  3. The third period started on the 12 May 2015 when Mr Damien King, G’s Chief Technical Officer arrived at Blinkbox following Mr de V’s departure and took over day to day control. This period continued until Blinkbox went into administration on 11 June 2015.

The ET observed that:

  1. A sale of the share capital in a limited company does not, as such, amount to a transfer of undertaking.
  2. The fact that a company is wholly-owned subsidiary of another does not, of itself, mean that the parent controls the business of the subsidiary.
  3. However, those principles do not preclude a scenario in which at the same time, or following, a share sale, there is also a transfer of undertaking from the company which was the subject of the share sale to another company in the group which it has joined as a result of the share sale.
  4. It is a multi-factorial test and no single factor is decisive.

The ET held that there was a transfer at the start of the third period, when G assumed day to day control of Blinkbox in a way which went beyond the mere exercise of ordinary supervision and information gathering between parent and subsidiary. This crossed the legal line identified by the Court of Appeal in Millam. The announcement that took place on the 18 May 2015 was not announcing a change implemented on that day but rather making official what had already taken place.

G appealed on the ground that the ET misdirected itself on the law focussing on the degree of control said to be exercised by the G over the Blinkbox rather than focusing on the true question as to whether control had actually passed from the Blinkbox to the G. Further and in the alternative, a transfer based on ‘assuming control’ requires precise findings of fact as to the point of transfer and the degree of control that is exercised; the ET failed to identify with any precision the point of transfer and as a result erred as to the date the transfer took place.

The EAT Judgment

The EAT (Mr Justice Lavender) dismissed the appeal and upheld the ET’s reasons:

The ET had correctly recognised that the test for transfer was multi-factorial and had found that G assumed the rights or powers of an employer towards the employees. In addition, the EAT found the submission that there could be no transfer unless G also assumed the responsibilities of an employer unattractive and  inconsistent with the policy underlying the Regs and the Directive. The EAT held that none of the cases to which it was referred establish that it is a necessary condition of a transfer that the transferee has assumed the obligations of employer towards the employees of the undertaking

Link to EAT Judgment

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