Unite the Union v Nortel Networks UK Ltd ((in Administration))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Norris |
| Judgment Date | 22 April 2010 |
| Neutral Citation | [2010] EWHC 826 (Ch) |
| Docket Number | Case No: 536 of 2009 |
| Court | Chancery Division |
| Date | 22 April 2010 |
[2010] EWHC 826 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Before: Mr Justice Norris
Case No: 536 of 2009
In The Matter of Nortel Networks UK Ltd (in Administration)
And in the Matter of the Insolvency Act 1986
Arfan Khan (instructed by Thompsons) for the Applicants
David Allison (with Him Andrew TaggartSolicitor Advocate) (instructed by Herbert Smith LLP) For the Respondent
Hearing dates: 26 March 2010
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Mr Justice Norris…………………………………………………………………22 April 2010
Mr Justice Norris:
Nortel Networks UK Limited (“the Company”) entered administration by order of Mr Justice Blackburne dated 14 January 2009. On 12 January 2010 the court ordered that the administration of the Company (and its associated companies) should be extended for a period of 24 months.
The Company is part of the Nortel Group. The Nortel Group is headed by the Nortel Networks Corporation (the ultimate holding company). On 14 January 2009 that company (together with some of its Canadian subsidiaries) sought protection under the Canadian bankruptcy law in order to facilitate a reorganisation of the Nortel Group for the benefit of its creditors. On the same day Nortel Networks Inc. (a private company incorporated in the United States and the primary US operating company) and associated companies filed voluntary petitions in the Delaware Bankruptcy Court seeking the protection of Chapter 11 of the United States Bankruptcy Code. The Nortel Group is a global supplier of networking solutions, its business being based upon the development, licensing and maintenance of intellectual property, and upon the marketing of telecommunications, computer networks and software products and services based on that intellectual property. It operates on a highly integrated basis across multiple jurisdictions. It was for that reason that there were co-ordinated insolvency filings. The order of Mr Justice Blackburne extended not only to the Company but to eighteen associated companies operating in separate European jurisdictions (but who had their COMI within the jurisdiction of the English and Welsh courts).
The object of the administration is to rescue the business of the Company as a going concern. This requires participation in a series of co-ordinated asset sales involving a reorganisation of the various individual global business lines of the Nortel Group. This of itself involves the maintenance of the various businesses pending sale and the provision of transitional services following any sale. The administration of the Company is therefore a true trading administration. Many of the Company's employees were retained to maintain the current business, to participate in a reorganisation of the global business lines prior to sale, and to provide the requisite transitional services to purchasers of businesses. Although the jobs of many employees were thereby preserved, there had to be some redundancies.
On 30 March 2009 the Joint Administrators of the Company gave notice terminating the employment of some people employed at the Company's premises in Monkstown, Newtonabbey, Northern Ireland. 37 such employees wished to make claims arising out of the termination of their employment, and commenced proceedings in the Industrial Tribunal under the Employment Rights (Northern Ireland) Order 1996 (“the 1996 Order”). They, together with Unite the union, are the present applicants. (Other people employed at other of the Company's sites were also made redundant, and some of them have brought claims before the Employment Tribunals in England and Wales). Including the present applicants there is a total of approximately 240 employment related claims.
By paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 no legal proceedings may be instituted against a company in administration otherwise than with the consent of the administrator or with the permission of the Court. On 14 May 2009 solicitors for the Northern Irish claimants sought the consent of the Joint Administrators to the commencement of proceedings in the Industrial Tribunal: but this was refused. The various claimants then commenced their claims in the Industrial Tribunal without consent and without the permission of the Court. The Joint Administrators do not assert that the proceedings so instituted are a nullity. Unite (the union) and the 37 other claimants issued an application in England on 30 October 2009 seeking the permission of the Court to continue the proceedings before the Industrial Tribunal in Northern Ireland: that application is now before me for decision.
The claims to which the application relates may be divided into five categories:-
(a) Protective awards: Unite alleges (on behalf of those whom it represents) and two individual claimants also allege that the Company was in breach of its statutory duty to consult the union (or an employee representative) about the proposed redundancies under Article 216 of the 1996 Order. Under Article 217 of the 1996 Order if the Tribunal finds the complaint well founded then it is bound to make a declaration to that effect and “may also make a protective award”. A protective award is an order that the Company should pay remuneration to those employees in respect of whose dismissal it had failed to comply with the requirements of Article 216 for such period “as the Tribunal determines to be just and equitable in all the circumstances having regard to the seriousness of the employer's default”. It is punitive rather than compensatory. If the Tribunal exercises its discretion to make a protective award then the Northern Irish Department of Employment and Learning will guarantee some of the payment, making the payment direct to the employees, and acquiring the right to make a subrogated claim in the administration. I will refer to this claim as “the protective award”.
(b) Unfair Dismissal: the claimants say that although they were made redundant (which is a fair ground for dismissal) the Company failed to follow a fair procedure in taking the decision to dismiss them. If the Tribunal finds the dismissal to have been unfair then the dismissed employee may elect to seek an order for re-instatement or an order for re-engagement: but if he or she does not then “the Tribunal shall make an award of compensation for unfair dismissal” calculated in accordance with a formula set out in the 1996 Order. This is therefore a statutory claim that arises out of circumstances occurring after the date of the administration.
(c) Breach of Contract: the claimants say that the Company has, in the course of dismissing them by reason of redundancy, broken various agreements. Briefly these relate to an alleged agreement to grant enhanced redundancy pay over and above the statutory entitlement and an agreement (alleged to be implied into the contracts of employment by virtue of Article 118 of the 1996 Order) to pay compensation in lieu of notice. These contract claims overlap to a degree with statutory claims arising under the 1996 Order: but they go beyond the statutory limits or caps. These then are claims at common law in respect of contracts that were entered into before the administration but were only broken after the administration (when the contract was terminated without adequate notice).
(d) Expenses Claims: one claimant alleges that he has not been repaid work related expenses incurred in the course of his employment in July and August 2007. This claim for breach of contract is therefore a common law claim in respect of an agreement made before the administration, which was broken before the administration, and so in respect of which the cause of action had accrued before administration.
(e) Discrimination Claims: various claimants allege that in the process of selecting them for redundancy the Company directly or indirectly discriminated against them upon unlawful grounds (including age, disability, race, and political opinion). The various claimants will be seeking compensation for injury to feelings. These claims may therefore be described broadly as being claims in respect of a statutory cause of action where the duty was owed before the administration but the breach occurred after the date of the administration.
On 11 November 2009 (and so within a fortnight of the commencement of the present application) the Joint Administrators gave consent for the pursuit of the protective award. They took the same view in relation to the parallel claims before the Employment Tribunal in England. The reason for granting permission to continue these claims was that if the claims were successful (and they are being defended) then the claimants would be entitled to apply to the Government for immediate payment of the statutory element of any award (thereby enabling the employees to receive money relatively quickly but without recourse to assets in the administration). No consent was given in respect of the continuation of the other claims: and the application for permission from the Court has been pursued in relation to the unfair dismissal, breach of contract and discrimination claims. It has not been suggested in correspondence or before me that the rationale which underlay consent to the pursuit of the protective award applies to any of these remaining claims. But Mr Khan submits that I should grant permission because the claims have a real prospect of success and it would be inequitable not to allow them to proceed.
I do not agree that this the correct test. The claims with which...
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