Key2Law (Surrey) LLP v Gaynor De'antiquis (secretary of State for Business, Innovation and Skills Intervening)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Rimer,Mr Justice Warren,Lord Justice Longmore |
| Judgment Date | 20 December 2011 |
| Neutral Citation | [2011] EWCA Civ 1567 |
| Docket Number | Case No: A2/2011/0614 |
| Court | Court of Appeal (Civil Division) |
| Date | 20 December 2011 |
[2011] EWCA Civ 1567
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
Mr Justice Underhill, Mr I. Ezekiel and Mr P. Smith
Appeal No: UKEAT/0444/09/RN
Royal Courts of Justice
Strand, London, WC2A 2LL
Lord Justice Longmore
Lord Justice Rimer
and
Mr Justice Warren
Case No: A2/2011/0614
Mr Kolarele Sonaike (instructed by Key2Law (Surrey) LLP) for the Appellant
Mr Keith Bryant (instructed by pdt solicitors) for the Respondent
Written submissions from Mr Ashley Serr on behalf of the Secretary of State for Business, Innovation and Skills
Hearing date: 17 October 2011
Introduction
The appellant is Key2Law (Surrey) LLP ('Key2'), a firm of solicitors. The respondent is Gaynor De'Antiquis, a solicitor. She was formerly employed as an assistant solicitor by Drummonds Kirkwood LLP ('DK'), solicitors, and worked at its Epsom office, one of its five offices. On 21 July 2008 DK dismissed her and several other employees on the grounds of redundancy. On 25 July 2008, on the application of the Commissioners for Her Majesty's Revenue and Customs ('HMRC'), Blackburne J made an order in the Chancery Division appointing Richard Hooper and Nimish Patel as joint administrators of DK.
On 28 July 2008, DK, acting by its joint administrators, entered into a management contract with Key2 in relation to DK's Epsom and Ewell offices. On 17 October 2008 Ms De'Antiquis brought a claim in the London South Employment Tribunal against various respondents, including KeyHer claims were under various heads, including for pay in lieu of notice and in respect of untaken holiday; and for compensation for unfair dismissal and sex discrimination. She claimed that, as a transferee of that part of DK's undertaking comprising the Epsom office, Key2 was liable to her under regulations 4 and 7 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 ('TUPE').
By a reserved judgment dated 20 August 2009 and sent, with written reasons, to the parties on 24 August, Employment Judge Freer (sitting alone) held that, for the purposes of TUPE, there was both a transfer to Key2 of part of DK's undertaking and a service provision change. Crucially, and contrary to Key2's submissions, he also held that regulations 4 and 7 of TUPE were not disapplied by regulation 8(7). Regulation 8(7), central to this appeal, provides:
'Regulations 4 and 7 do not apply to any relevant transfer where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.'
Key2's unsuccessful argument was that as DK was in administration, it was subject to 'analogous insolvency proceedings … instituted with a view to the liquidation of [its] assets …' within the meaning of regulation 8(7). Judge Freer, applying the guidance of the Employment Appeal Tribunal ('EAT') in Oakland v. Wellswood (Yorkshire) Ltd [2009] IRLR 250, held that the determination of whether DK was or was not so subject required a fact-based inquiry. The outcome of his inquiry was that he found that DK was not so subject. Key2 thus had to meet Ms De'Antiquis's case on the merits; and Judge Freer directed that it should be listed for a merits hearing.
Key2 appealed to the EAT. The appeal came before a panel comprising Underhill J (the President), Mr I. Ezekiel and Mr P. Smith. It was heard together with four other appeals raising a like issue, which Underhill J, in his judgment for the EAT delivered on 16 February 2011, described as being whether administration proceedings under Schedule B1 of the Insolvency Act 1986 constitute, or may constitute, 'insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor' within the meaning of regulation 8(7). The EAT held that administration proceedings cannot constitute such proceedings. It rejected as inappropriate the ET's 'fact-based' approach and applied what it called an 'absolute' approach. The EAT thus did not need to consider Key2's challenge to the ET's findings of fact, which was in the nature of a perversity challenge. It dismissed Key2's appeal.
Mummery LJ gave permission for an appeal by Key2 to this court on the basis that it would raise an important point under Council Directive 2001/23/EC, to which TUPE gave domestic effect. Key2 submitted to us (i) that the EAT was wrong to hold that administration proceedings cannot be 'analogous insolvency proceedings' within the meaning of regulation 8(7); (ii) that the ET had been right that the relevant question required a fact-based inquiry; but (iii) that it had been perversely wrong to make the factual finding that it did.
We had able arguments from Mr Sonaike, for Key2, and Mr Bryant, for Ms De'Antiquis. We also had representations on behalf of the Secretary of State for Business, Innovation and Skills, whom Jackson LJ had permitted to intervene by way of written submissions. They were prepared by Ashley Serr, who had appeared for the Secretary of State before the EAT.
The primary issue raised by the appeal turns therefore upon the application to administration of that provision of the 2001 Council Directive that was implemented domestically by regulation 8(7) of TUPE. We were not referred to any relevant decisions of the Court of Justice post-dating that Directive. We were, however, referred to several of its decisions preceding it, which Mr Bryant said illuminated the pathway to a conclusion that the EAT's 'absolute' approach was in line with the thinking of the Court of Justice.
In what follows I shall: (i) summarise the relevant Directives; (ii) set out the relevant provisions of TUPE; (iii) summarise, so far as relevant, the law relating to administration under Schedule B1 to the Insolvency Act 1986; (iv) summarise the facts relating to the administration order made in relation to DK; (v) refer to the decisions of the Court of Justice; (vi) refer to the domestic authorities; (vii) consider the reasons of the ET; (viii) consider the judgment of the EAT; and (ix) explain my conclusions.
(i) The Directives
Council Directive 77/187/EEC ('the 1977 Directive') was the original 'Acquired Rights Directive'. It was introduced with a view to approximating the laws of Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses. It was implemented domestically by the Transfer of Undertakings (Protection of Employment) Regulations 1981 ( SI 1981/1794). There is no need to refer in detail to either the 1977 Directive or the 1981 Regulations. I note merely that neither included any provision to the effect that the full impact of their respective provisions did not apply equally to relevant transfers made by transferors which or who were in insolvent liquidation or bankruptcy (in the latter case, I use that for shorthand to cover, in the domestic context, a transfer by a trustee in bankruptcy).
Council Directive 98/50/EC of 29 June 1998 amended the 1977 Directive so as to modify its application to relevant transfers made by a transferor who or which was the subject of bankruptcy proceedings or 'analogous insolvency proceedings' of a nature that, domestically, are now referred to in regulation 8(7) of TUPE. I must refer to the 1998 Directive more fully.
Recital (1) recited provisions of the Social Charter to the effect that the completion of the internal market:
'… must lead to an improvement in the living and working conditions of workers in the European Community. The improvement must cover, where necessary, the development of certain aspects of employment regulations such as procedures for collective redundancies and those regarding bankruptcies. ….'
Recital (3) recited that:
'Whereas the purpose of this Directive is to amend Directive 77/187/EEC in the light of the impact of the internal market, the legislative tendencies of the Member States with regard to the rescue of undertakings in economic difficulties, the case-law of the Court of Justice …, Council Directive 75/129/EEC … on the approximation of the laws of the Member States relating to collective redundancies and the legislation already in force in most Member States;'
Recital (7) recited that:
'Whereas, with a view to ensuring the survival of insolvent undertakings, Member States should be expressly allowed not to apply Articles 3 and 4 of Directive 77/187/EEC to transfers effected in the framework of liquidation proceedings, and certain derogations from that Directive's general provisions should be permitted in the case of transfers effected in the context of insolvency proceedings.'
Article 1.2 replaced articles 1 to 7 of the 1977 Directive with the provisions set out in Sections I to IV of Article 1. They were later incorporated in the codifying Council Directive 2001/23/EC, the Directive now in force ('the 2001 Directive'), and so there is no need to refer to the terms of the 1998 Directive itself. I need say only that the provisions of the 1998 Directive presently relevant were contained in the new article 4a that was part of the replacement provisions of the 1977 Directive; and that article 4a then became article 5 in the 2001 Directive.
I come to the 2001 Directive, the current Directive on the approximation of laws relating to the safeguarding of employees' rights in the event...
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