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Appeal No. UKEAT/0034/11/ZT
EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
At
the Tribunal
On
21 July 2011
Before
HIS
HONOUR JUDGE RICHARDSON
(SITTING ALONE)
THE
SECRETARY OF STATE FOR BUSINESS INNOVATION AND SKILLS APPELLANT
(1)
MISS C M COWARD
(2) LOCAL TAVERNS LTD (A
DISSOLVED COMPANY) RESPONDENTS
Transcript of Proceedings
JUDGMENT
APPEARANCES
|
For the Appellant
|
MR
J PURNELL
(of Counsel)
Instructed by:
The Treasury Solicitor
(Employment Law Team)
One Kemble Street
London
WC2B 4TS
|
|
For the First Respondent
For the Second Respondent
|
No appearance or representation by or on behalf of the First
Respondent
In liquidation
|
SUMMARY
RIGHTS ON INSOLVENCY
The Employment Judge erred in law in making an award of notice
pay under section 182 of the Employment Rights Act 1996 when the
employer company was not insolvent as defined in section 183(1) and (3). Secretary
of State for Trade and Industry v Walden [2000] IRLR 168 applied.
HIS HONOUR JUDGE RICHARDSON
1.
This is an appeal by the Secretary of
State for Business Innovation and Skills (“the Secretary of State”) against
part of a judgment of the Employment Tribunal sitting in Southampton
(Employment Judge Cowling sitting alone) dated 27 October 2010.
2.
Mrs Christine Coward was employed by Local Taverns Limited (“the
Company”) at the Dorset Knob public house in Poole. The Company ran into
financial difficulties. It ceased trading. On 10 May 2010 Mrs Coward’s
employment was terminated by reason of redundancy. The Tribunal hearing took
place on 17 September 2010. After the hearing at the Tribunal the Company was
dissolved.
3.
Two sums were due to Mrs Coward: a redundancy payment in the sum of
£5,481 and notice pay of £2,030. She brought proceedings against the Secretary
of State claiming these sums. The Tribunal awarded them.
4.
There is a distinction to be drawn between a redundancy payment and a
payment in respect of notice pay. The Secretary of State will meet an
outstanding redundancy payment if either the employer is insolvent or
the employee has taken all reasonable steps other than legal proceedings,
to recover the payment and the employer has failed to pay it: section 166(1) of
the Employment Rights Act 1996. In this case the Secretary of State is
satisfied that Mrs Coward has taken all reasonable steps to recover the
redundancy payment, so he will meet that payment.
5.
Different considerations apply, however, in respect of notice pay. Here
the conditions to be satisfied are those set out in section 182(1) of the 1996
Act. The Secretary of State’s liability only arises if the employer has become
insolvent: section 182(1)(a).
6.
The definition of “insolvency” is set out
in section 183. Where the employer is a company the employer has become insolvent
“if (but only if) section 183(3) is satisfied: see section 183(1)(b). Section
183(3) provides:
“(3) This subsection is satisfied in the case of an employer
which is a company –
(a) if a winding up order…has been
made, or a resolution for voluntary winding up has been passed, with respect to
the company,
[(aa) if the company is in
administration for the purposes of the Insolvency Act 1986]
(b) if a receiver or (in England and
Wales only) a manager of the company’s undertaking has been duly appointed, or
(in England or Wales only) possession has been taken, by or on behalf of the
holders of any debentures secured by a floating charge, of any property of the
company comprised in or subject to the charge, or
(c) if a voluntary arrangement
proposed in the case of the company for the purposes of Part I of the
Insolvency Act 1986 has been approved under that Part of that Act.”
7.
It is well established that the onus is
on the applicant seeking to make a claim against the Secretary of State to
adduce direct evidence of one these events. Evidence ought to be readily
available, since these events are recorded at Companies House (and are now part
of the information which is freely available upon a search against the name of
the company over the internet). See Secretary of State for Trade and
Industry v Walden [2000] IRLR 168 at paragraph 21.
8.
In this case the Secretary of State had searched at Companies House and
found no evidence that any of these events had occurred. He told the
Employment Tribunal so in written submissions which drew the Tribunal’s
attention to the provisions of section 183.
9.
Mrs Coward attended the hearing with the Company’s accountant. No
evidence that any of these events had occurred was adduced. The Employment
Judge found that the Company was insolvent by reference to evidence from the
Company’s accountant that it had unpaid debts in excess of £30,000 and had
ceased trading. He said that it was “insolvent and unable to pay its debts”.
10.
This was an error of law. As section 183(1) and (3) make clear, and as
the Appeal Tribunal held in Secretary of State for Trade and Industry v
Walden, there must be proof of the occurring of an event falling within
section 183(3). There was no such proof.
11.
Written submissions from Mrs Coward and from the Company’s accountant
provide no answer to this point. Mrs Coward raises the question whether the
Appeal Tribunal has any discretion in the matter; it is, however, the duty of
the Appeal Tribunal to decide cases in accordance with the law.
12.
I would add that a recent search of the open part of the register at
Companies House still does not indicate that there was any event falling within
section 183(3). It shows that the Company was dissolved on 28 September 2010.
Dissolution can of course occur for a variety of reasons, not necessarily
involving an event within section 183(3).
13.
It is therefore inevitable that the
appeal must be allowed and the judgment, in so far as it concerns the sum of
£2,030, must be set aside.
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