Day v Haine and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Wall |
| Judgment Date | 11 June 2008 |
| Neutral Citation | [2008] EWCA Civ 626 |
| Docket Number | Case No: A2/2007/2650/2635 |
| Court | Court of Appeal (Civil Division) |
| Date | 11 June 2008 |
[2008] EWCA Civ 626
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM Sir Donald Rattee
sitting as a judge of the Chancery Division
of the High Court of Justice on 17 October 2007
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Thomas
Lord Justice Jacob and
Lord Justice Wall
Case No: A2/2007/2650/2635
Arfan Khan (instructed by Thompsons Solicitors) for the 1st Appellant
Richard Ritchie (instructed by The Treasury Solicitor) for the 2nd Appellant
Alaric Watson (instructed by Darbys Solicitors) for the Respondent
Hearing date : 23rd April 2008
This is the judgment of the court, to which each of its members has contributed.
The appeal and the underlying facts giving rise to it
Mr Haine, as a representative of the former employees of a company in liquidation called Compound Sections Limited (the company), and the Secretary of State for Business Enterprise and Regulatory Reform (the Secretary of State) join forces to appeal against an order made by Sir Donald Rattee, sitting as a judge of the Chancery Division of the High Court of Justice on 15 October 2007. The respondent is the Liquidator of the company.
The appeal raises a pure point of law. The facts are not in dispute, and we can do no better than to take them from paragraphs 1 to 12 of Sir Donald's judgment, [2007] EWHC 2691 (Ch), in which, in addition to the facts, Sir Donald sets out most of the relevant statutory provisions With the exception of references to the Employment Rights Act ( ERA 1996) we will, moreover, throughout this judgment use Sir Donald's abbreviations of the various Statutes and Rules to which he refers -
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.
Sir Donald decided that the protective awards made pursuant to section 189(2) of the 1992 Act did not constitute debts provable in the liquidation of the company within the meaning of rules 12.3 and 13.12 of the Insolvency Rules 1986 (the Rules). He also decided that the awards were not expenses of the liquidation within the meaning of rule 4.218(1) of the Rules. It is against the first of these rulings that Mr. Haine and the Secretary of State appeal.
Sir Donald...
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