Day v Haine and Another
| Jurisdiction | England & Wales |
| Judge | SIR DONALD RATTEE |
| Judgment Date | 19 October 2007 |
| Neutral Citation | [2007] EWHC 2691 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: 511 of 2007 |
| Date | 19 October 2007 |
[2007] EWHC 2691 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand. London. WC2A 2LL
Sir Donald Rattee
Case No: 511 of 2007
Mr. Alaric Watson (instructed by Messrs. Darbys) for the Applicant.
Mr. Arfan Khan (instructed by Messrs. Thompsons) for the 1st Respondent.
Mr. Richard Ritchie (instructed by The Treasury Solicitors) for the 2nd Respondent.
HTML VERSION OF JUDGMENT
1. This is an application by the liquidator of Compound Sections Limited (“the company”) for directions pursuant to section 112 of the Insolvency Act 1986 (“the 1986 Act”). The directions sought concern proofs of debt submitted by a number of former employees of the company in respect of protective awards made in their favour by an Employment Tribunal pursuant to section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“the 1992 Act”).
2. The awards were made on 31st August 2006. The employees, in whose favour the awards were made, are represented on this application by one of their number, Mr. Robert Haine, the first respondent. The second respondent is the Secretary of State for Business Enterprise and Regulatory Reform who was added as a party to the proceedings at the Secretary of State's own request because the Secretary of State has an interest in the directions sought. For as under section 182 of the Employment Rights Act 1996 the Secretary of State is under an obligation in part to indemnify the employees in respect of any inability on their part to recover the protective awards from the company in liquidation.
3. The material facts, as to which there is no dispute, are as follows. On 10th February 2006 the company, which was by then irretrievably insolvent, terminated the employment of 40 of its employees. The company went into administration and on 16th February 2006 the liquidator was appointed as administrator pursuant to paragraph 29 of schedule Bl to the 1986 Act. After only a short time the administration was converted into a liquidation and the liquidator was appointed liquidator pursuant to paragraph 83 of schedule Bl to the 1986 Act with effect from 13th April 2006.
4. By virtue of section 188 of the 1992 Act before the company terminated the employment of 40 of its employees on 10th February 2006, it was under an obligation to consult about the proposed dismissals appropriate representatives of the employees concerned as defined in the 1992 Act. The company did not carry out any sufficient consultation to comply with section 188. Section 188(8) of the 1992 Act provides that:
“This section” —i.e. section 188 —“does not confer any rights on a trade union, a representative or an employee except as provided by sections 189–192 below”.
5. Section 189 provides by subsection (1) that, where an employer has failed to comply with a requirement of section 188, a complaint may be made to an Employment Tribunal by the affected employees or their representatives. Section 189(2) provides:
“If the tribunal finds that the complaint is well-founded it shall make a declaration to that effect and may also make a protective award.”
6. The following subsections of section 189 define the protective award as, in effect, an order that the employer pay remuneration to the dismissed employees for a protected period beginning with the date of the dismissal of the first of them and being of such length as the tribunal determines is just and equitable in all the circumstances, but not exceeding 90 days.
7. Section 190(1) provides that, where a tribunal has made a protective award every employee of a description to which the award relates is entitled, subject to other provisions of the Act not material for present purposes, to be paid remuneration by his employer for the protected period.
8. Section 192 of the 1992 Act provides that an employee may present a complaint to an Employment Tribunal, that the employer has failed to pay the remuneration due under a protective award and that the tribunal shall, if it finds such a complaint well-founded, order the employer to pay the complainant the amount due. Section 192(4) of the Act provides that:
“The remedy of an employee for infringement of his right to remuneration under a protective award is by way of complaint under this section and not otherwise”.
9. On 9th May 2006 AMICUS, a trade union recognised by the company, brought proceedings in the Employment Tribunal in Bedford on behalf of a number of employees who had been dismissed by the company. Proceedings were brought under section 189 of the 1992 Act and alleged that the company had failed to perform its consultation obligation under section 188 of the Act.
10. On 31st August 2006 the Employment Tribunal upheld the complaint and made a declaration to that effect under section 189(2) of the 1992 Act. The tribunal also, as it had power to do under section 189(2), made protective awards against the company in favour of each employee dismissed by the company in the series of dismissals to which the proceedings related for the maximum period allowable by section 189(4).
11. By the present proceedings the liquidator seeks directions as to whether the employees' entitlements to remuneration under those protective awards are provable in the liquidation. If they are so provable, then at least in part they will constitute preferential debts by virtue of paragraph 9 of schedule 6 to the 1986 Act. Whether such entitlements are provable in the liquidation depends on the application of rule 12.3 of the Insolvency Rules 1986. Rule 12.3(1) provides that:
“ What is provable Subject as follows, in administration, winding up and bankruptcy, all claims by creditors are provable as debts against the company or, as the case may be, the bankrupt, whether they are present or future, certain or contingent, ascertained or sounding only in damages.”
Rule 12.3(2) provides that certain claims are not provable. It is of no materiality to the present case.
Rule 12.3(3) provides as follows:
“ Effect of Rule Nothing in this Rule prejudices any enactment or rule of law under which a particular kind of debt is not provable, whether on grounds of public policy or otherwise.”
12. Rule 13.12 defines debt and liability for the purposes of Rule 12.3. Rule 13.12(1) provides:
“ Definition ‘Debt’, in relation to the winding up of a company, means (subject to the next paragraph) any of the following:
(a) any debt or liability to which the company is subject at the date on which it goes into liquidation;
(b) any debt or liability to which the company may become subject after that date by reason of any obligation incurred before that date; and
(c) any interest provable as mentioned in Rule 4.93(1).”
Rule 13.12(3) provides:
“ Debt or liability For the purposes of references in any provisions of the Act or the Rules about winding up to a debt or liability, it is immaterial whether the debt or liability is present or future, whether it is certain or contingent, or whether its amount is fixed or liquidated, or is capable of being ascertained by fixed rules or as a matter of opinion; and references in any such provision to owing a debt are to be read accordingly.”
Rule 13.12(4) provides:
“‘Liability’ In any provision of the Act or Rules about winding up, except in so far as the context otherwise requires, ‘liability’ means (subject to paragraph (3) above) a liability to pay money or money's worth, including any liability under an enactment, any liability for breach of trust, any liability in contract, tort or bailment, and any liability arising out of an obligation to make restitution.”
13. The liquidator has understandably felt some doubt as to whether the employees' entitlement under the protective awards are provable in the liquidation of the company by virtue of the provisions to which I have referred and has properly sought the directions of the court. He has by counsel very helpfully put forward the reason why he considers the claims may not be provable, having regard to the provisions of the 1992 Act, which make clear that the making of a protective award by an Employment Tribunal is a matter of discretion on the part of the tribunal, which in this case was not exercised until after the commencement of the liquidation. Although the liquidator has, of course, no personal interest in the question whether the employees' claims are provable debts, his counsel rightly made submissions as to why they may not be.
14. The respondents made submissions to the contrary, namely that the claims are provable debts of the company. It is rightly common ground that to be provable in the liquidation as debts of the company the claims have to be claims by creditors of the company, though the claims may be present or future, certain or contingent, ascertained or sounding only in damages (see rule 12.3(1) of the Insolvency Rules 1986). This provision has to be applied in the case of liquidation of a company having regard to the provisions which I have quoted in rule 13.12 of the 1986 Rules. By virtue of rule 13.12(1) a claim by a creditor, i.e. the debt, to be provable in the liquidation has to be
(a) a debt or liability to which the company was subject at the date on which it went into liquidation; or
(b) a...
To continue reading
Request your trial
- Day v Haine and Another
-
(1) Alan Robert Bloom (2) Alan Michael Hudson (3) Christopher John Wilkinson Hill (4) Stephen John Harris (5) David Martin Hughes v (1) The Pensions Regulator and Others
...that, at the commencement of the bankruptcy, a contingent liability could exist. May LJ agreed with both judgments. 64 In Haine v Day [2008] EWCA Civ 626, [2008] BCC 845, both these cases were considered in order to decide whether protective awards payable by a company to its employees dis......
-
Casson v The Law Society for England & Wales
...State for Work and Pensions [2007] 1 All E R 73; and Day v Haine and The Secretary of State for Business Enterprise and Regulatory Reform [2008] ICR 452. I will refer to these three cases as “Glenister”, “Steele” and “Haine” respectively. Glenister and Steele were decisions of the Court of ......