Menu
Close
Search
Generic filters

"The barristers are reliable specialists in their field who provide high quality legal advice and representation. They also understand their clients."

Chambers & Partners
16/02/2011

Key 2 Law (Surrey) LLP v. (1) G D’Antiquis (2) Drummonds Kirkwood LLP (3) V Patel

Uncategorized

Employment Appeal Tribunal

Administration proceedings under the Insolvency Act 1986 Sch.B1 were not capable of constituting "bankruptcy … or … analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor" within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 reg.8(7).

In conjoined appeals, the Employment Appeal Tribunal was required to determine the correct approach to the application of the Transfer of Undertakings (Protection of Employment) Regulations 2006 reg.8(7) where there had been a relevant transfer made by a company in administration.

The 2006 Regulations (TUPE) gave effect to Directive 2001/23. Regulation 4 of TUPE provided that the contracts of employment of employees in a relevant transfer under reg.3 passed to the new employer. Regulation 8(7) disapplied reg.4 where the transferor was the subject of insolvency proceedings which had been instituted with a view to the liquidation of the assets of the transfer and were under the supervision of an insolvency practitioner. The primary issue was whether administration proceedings under the Insolvency Act 1986 Sch.B1 constituted, or could constitute, "insolvency proceedings … instituted with a view to the liquidation of the assets of the transferor" within the meaning of reg.8(7). The competing contentions were that administration proceedings could never fall within reg.8(7) (the absolute approach), or that they could where it was found as a fact that the administration was instituted with a view to liquidation of the transferor's assets (the fact-based approach).

HELD: The absolute approach was correct, Oakland v Wellswood (Yorkshire) Ltd [2009] I.R.L.R. 250 not followed and Abels v Administrative Board of the Bedrijfsvereniging Voor de Metaal-Industrie en de Electrotechnische Industrie (135/83) [1985] E.C.R. 469 applied. A distinction of the kind made in art.5 of the Directive between liquidation proceedings and other kinds of insolvency proceedings was more likely to be intended by the legislator to depend on the legal character of the relevant procedure, on the object of the procedure rather than the object of the individuals operating it. That was conducive to legal certainty; the object of a procedure should be apparent from its terms, whereas a person's intention was inherently less easy to ascertain or define. Article 5.1 was explicitly concerned with the object of the proceedings when instituted. Under Sch.B1 para.3 of the 1986 Act, it was the obligation of every administrator when appointed to consider whether the primary objective of rescuing the company as a going concern was overridden by either of the considerations identified under para.3(3). It might be immediately clear that it was so overridden but the question had to be answered. It could not therefore be said that at the institution of any administration proceedings their object was to liquidate the assets. There was also no requirement for an administrator to state at the beginning of an administration which of the objectives under para.3 he was pursuing. The first occasion when an administrator would have to declare which of the statutory objects he was pursuing would be when he filed his proposal, which meant that on the fact-based approach there was no authoritative way in which an employee affected by a transfer by an administrator could establish whether reg.8(7) applied, and therefore whether reg.4 and reg.7 applied. The position might be clear in the great majority of cases but it would not always be and it was important in principle that persons affected knew where they stood. The fact-based approach inevitably increased the likelihood of disputes as to who was liable for the transferor's obligations and such disputes generated cost, delay and uncertainty. Evidence would be required about the administrator's intentions and a bright-line rule had clear advantages. The avowed purpose of the Directive was to protect employees in the event of a transfer, and in particular to ensure that their rights were safeguarded. The absolute approach was plainly the preferable construction to achieve that purpose where a transfer had actually occurred, as it resulted in reg.4 and reg.7 taking effect, whereas the fact-based approach meant that in many cases employees would be left only with the lesser protection offered by the secretary of state's guarantee in respect of the obligations of insolvent employers. Although art.5.1 recognised that in some circumstances the safeguarding of the rights of individual employees had to be subordinated to the greater interests of facilitating the survival of the undertaking, that was a derogation from the primary purpose of the Directive, which had to prevail when there was doubt (see paras 21-23 of judgment).

Judgment accordingly.

[2011] IRLR 272

The ‘capable, efficient, and helpful’ clerks’ room provides ‘a service-orientated approach and goes above and beyond in trying to ensure you have the right barrister for the job ; you have the utmost confidence in the clerking.”

Legal 500

‘an extremely approachable set of chambers which puts a premium on service delivery.’

Chambers & Partners
0
Shortlist Updated

Out of hours

William Meade (Senior Clerk)

07970 649 755

or

Graham Smith (Deputy Senior Clerk)

07795 023 532