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Cite as: [1993] UKEAT 104_91_2601

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BAILII case number: [1993] UKEAT 104_91_2601

Appeal No. EAT/104/91

EMPOLYMENT APPEAL TRIBUNAL

58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

At the Tribunal

On 26 January 1993

Before

HIS HONOUR JUDGE J HICKS QC

MRS M L BOYLE

MR J C RAMSAY

SECRETARY OF STATE FOR EMPLOYMENT APPELLANT

MISS M REEVES, MISS A WINDELL, MR D G MIDDLETON RESPONDENTS

Transcript of Proceedings

JUDGMENT

Revised

APPEARANCES

For the Appellant MR M H KENT

(OF COUNSEL)

The Treasury Solicitor

Queen Anne's Chambers

28 Broadway

London SW1H 9JS

For the Respondents NO APPEARANCE BY OR

ON BEHALF OF THE RESPONDENTS

JUDGE J HICKS QC: The Respondents to this appeal, Miss Reeves, Miss Windell and Mr Middleton, were dismissed on 27 October 1989, and made redundancy claims. On 23 February 1990, the Industrial Tribunal reached a decision in Mr Middleton's case that he had been dismissed for redundancy, but made no monetary award. In the case of Misses Reeves and Windell there were consent orders on 7 June 1990 in their favour for specified sums by way of redundancy payments. Those payments were not satisfied, nor was anything paid to Mr Middleton because the employers are insolvent, and on 25 July 1990, all three made applications to the Secretary of State under section 106 of the Employment Protection (Consolidation) Act 1978.

The Secretary of State resisted those applications, first on the ground that he was not bound by Industrial Tribunal Decisions which were "by consent" and to which he was not a party, which was of course true but nothing to the point because he should have decided for himself whether the applications were well founded. Secondly, and this was his substantive objection, he took a point about whether there had been a transfer of undertaking or not from the employers to another concern.

That was a perfectly arguable point and we see no reason why the Secretary of State should be under any criticism for having taken it. The result was that the applications to him were referred to an Industrial Tribunal under section 108 of the Act, and on the 12 December 1990 the Industrial Tribunal decided that the applications were well founded and that payments should be made from the Redundancy Fund to all three Applicants. They also reached a decision that interest should be paid to them from specified dates. Apart from an acknowledged error of calculation in one of the sums, which has now been corrected, there is no challenge to the decision of the Industrial Tribunal so far as the principal sums are concerned.

However, the Secretary of State wishes to challenge the award of interest for reasons which will appear. The Secretary of State first applied for a Review by the Industrial Tribunal itself, but was refused by the Chairman on 8 February 1991, and the Secretary of State now appeals to this Appeal Tribunal.

The point of the appeal can be shortly stated, although to resolve it or indeed even to explain it requires a fairly substantial excursion through the relevant statutory provisions. The point itself is, simply, should the interest be calculated from by reference to dates of the decision in the proceedings against the employers, as the Industrial Tribunal decided, or by reference to the date of the decision in the proceedings between the Applicants and the Secretary of State, as the Secretary of State contends.

The relevant statutory provisions start with section 106 of the Act, where sub-section (1)(b) reads:

"(1) Where an employee claims that his employer is liable to pay to him an employer's payment and-

. . . . . .

(b)that the employer is insolvent and that the whole or part of the payment remains unpaid,

the employee may apply to the Secretary of State for a payment under this section."

then by sub-section (1A):

"(1A) In this Act "employer's payment", in relation to an employee, means-

(a)a redundancy payment which his employer is liable to pay to him under the foregoing provisions of this Part, or"

- the alternative does not apply in this case because head (a) does apply -"(2)If on an application under this section the Secretary of State is satisfied-

(a) that the employee is entitled to the employer's payment;

(b) that either of the conditions specified in subsection (1) is fulfilled;"

- and there is no dispute here that the second condition, that in (b), was fulfilled - and then there is a third matter as to which the Secretary of State has to be satisfied, which does not apply in the present case, and the subsection continues:

"the Secretary of State shall pay to the employee out of the fund a sum calculated in accordance with Schedule 7, reduced by so much (if any) of the employer's payment as has been paid."

"(3) Where the Secretary of State pays a sum to an employee in respect of an employer's payment-

. . . . . . .

(b)any decision of an industrial tribunal requiring the employer's payment to be paid to the employee shall have effect as if it required that payment, or, as the case may be, that part of it which the Secretary of State has paid, to be paid to the Secretary of State;

and any moneys recovered by the Secretary of State by virtue of this subsection shall be paid into the fund."

By section 108 (1):

"(1) Where on an application made to the Secretary of State for a payment under section 106 it is claimed that an employer is liable to pay an employer's payment, there shall be referred to an industrial tribunal-

(a)any question as to the liability of the employer to pay the employer's payment; and

(b)any question as to the amount of the rebate [sum] payable in accordance with

Schedule 7"

Schedule 7 provides by article 1(1):

"1.(1) Where the employer's payment is a redundancy payment, the sum referred to in section 106(2) is a sum equal to the amount of that payment."

We need go no further in schedule 7 because that covers the situation in the present case.

To discover what is a sum equal to the redundancy payment, one goes to section 81 of the Act, subsection (1) of which provides in general terms for the conditions under which redundancy payments are payable and ends with these words:

"....the employer shall be liable to pay to him [the employee] a sum (in this Act referred to as a "redundancy payment") ..."

- so that is the definition of those words -

".. calculated in accordance with Schedules 4, 13 and 14."

Schedule 4 does make provision for the calculation of sufficient payments and for present purposes it is not necessary to rehearse them all. What is sufficient for present purposes is that they are clearly provisions for the calculation of what one might call the principal sum payable; they have nothing to do with interest. Schedules 13 and 14 make supplementary provisions which have no relevance to the present case.

There is one other provision in the Employment Protection (Consolidation) Act to which I need refer and that is section 91, for a reason which will appear. Section 91 is the section which confers jurisdiction on Industrial Tribunals in relation generally to applications by employees for redundancy payment, and subsection (1) provides:

"(1) Any question arising under this Part as to the right of an employee to a redundancy payment, or as to the amount of a redundancy payment, shall be referred to and determined by an Industrial Tribunal."

- so much for the statute.

Under the statute there was no provision for the payment of interest but there was provision for the making, by the Secretary of State, of statutory instruments in sufficiently wide terms to enable the Secretary of State to make a statutory instrument which would deal with the matter of interest. The Secretary of State did so in the Industrial Tribunals' Interest Order 1990 SI 1990 No.479, which came into force on 1 April 1990. Article 2 of that Order is the "Interpretation" article and there are two relevant definitions in paragraph (1) of that article:

"2 (1)In this Order, except in so far as the context otherwise requires -

.... "the calculation day" in relation to a relevant decision means the day immediately following the expiry of the period of 42 days beginning with the relevant decision day;

"relevant decision" in relation to a tribunal means any award or other determination of the tribunal by virtue of which one party to proceedings before the tribunal is required to pay a sum of money, excluding a sum representing costs or expenses, to another party to those proceedings;"

In paragraph 2 of that article it is provided:

"2 (2) For the purposes of this Order a sum of money is required to be paid by one party to proceedings to another such party if, and only if, an amount of money required to be so paid is:-

(a) specified in an award or other determination of a tribunal or, as the case may be, in an order or decision of an appellate court; or

(b) otherwise ascertainable solely by reference to the terms of such an award or determination or, as the case may be, solely by reference to the terms of such an order or decision,"

- there is then a proviso which it is not necessary to read -

"2 (3) In this Order, except so far as the context otherwise requires, "decision day" means the day signified by the date recording the sending of the document which is sent to the parties recording an award or other determination of a tribunal and "relevant decision day", subject to Article 5, 6 and 7 below, means the day so signified in relation to a relevant decision."

On the basis of those interpretation provisions the substantive article is article 3(1), which reads:

"3(1) Subject to paragraphs (2) and (3) of this Article and to Article 11 below, where the whole or any part of a sum of money payable by virtue of a relevant decision of a tribunal remains unpaid on the calculation day the sum of money remaining unpaid on the calculation day shall carry interest at the stipulated rate of interest from the calculation day (including that day)."

The reasons given by the Industrial Tribunal for awarding interest as they did, from days which for present purposes can be assumed to start from the relevant decisions of the Industrial Tribunal in the applications brought by the employees against the employer plus the 42 days allowed for by the Order, are contained in paragraphs 11, 12 and 13 of their Reasons. Paragraph 11 simply recites the fact that there is a claim for interest, paragraph 12 refers to Section 106(3)(b) of the Act, which I have read, but mis-states it by the crucial substitution of "by" for "to" in the phrase at the very end of Section 106(3)(b), so as to make it read:

"any decision of an Industrial Tribunal requiring the employer's payment to be paid to the employee shall have effect as if it required that payment . . . . to be paid by the Secretary of State"

instead of, as the Section in fact reads, "to the Secretary of State". Paragraph 13 of the Industrial Tribunal's Reasons deals with Mr Middleton's case by saying that although -

"13 ... No order was made for a specific sum to be paid as a redundancy payment. Nevertheless, it was conceded by Mr Morgan [on behalf of the Secretary of State] that the redundancy payment was payable by the employer from that date [earlier specified] and that interest should be paid from [42 days thereafter]"

That ground was plainly mistaken for two reasons: first, because of the crucial mis-reading of section 106(3)(b), and secondly because, whatever concession may have been made, it is quite plain from the provisions of Article 2(2) of the 1990 Order that no time for the payment of interest can start to run until there has been a specification in an award or other determination of a sum of money or that sum of money is otherwise ascertainable solely by reference to the terms of such an award or determination.

On the application for Review the matter of the correct wording of section 106(3)(b) was pointed out and the Chairman, in refusing the Review, recognised that mistake but refused the application for a Review on the ground, to put it shortly, that the employer's payment, as defined in the relevant provision, which the Secretary of State was liable to pay, includes any accrued interest. That also, in our view, is plainly mistaken because the definition of employer's payment leads one to the definition of "redundancy payment" and the definition of "redundancy payment" leads one to Schedule 4 which, as I have said, is plainly concerned with the calculation of the principal sum alone and not with interest, and of course the provisions as to interest arose only under the 1990 Order.

There was, therefore, plainly an error of law both in the original decision of the Industrial Tribunal and in the Reasons given by the Chairman for refusing the Review, but the question remains, and it is a pure question of law so it if for us to answer and no question arises of any remitting of the matter to an Industrial Tribunal, as to what is the true meaning of the provisions in the Industrial Tribunals Interest Order 1990, and what date does one start with - what date is the beginning of the 42-day period provided for in arriving at the calculation day.

The argument before us, and in our view rightly so, turns essentially on the definition of "relevant decision" in Article 2(1), because it is by reference to "relevant decision" and the relevant decision day that one reaches the calculation day, and it is from the calculation day that interest is to run under Article 3(1).

It is inherent in the submissions made by Mr Kent on behalf of the Secretary of State that, first, the decision of the Industrial Tribunal in the proceedings between the employees and the Secretary of State was capable of being a "relevant decision". That turns on the words in the definition that there must be an "award or other determination ... by which one party to proceedings....is required to pay a sum of money". That leads to paragraph 2 of Article 2, the definition of when a sum of money is taken to be required to be paid by one party to proceedings to another and that is expressed to be "if, and only if, the amount of money to be so paid" (which imports an element of circularity into the definition) is, to put it shortly, either specified or ascertainable from the award. So what is meant by the phrase "required to be paid" is not further elucidated by paragraph 2 of Article 2.

It might be thought at first glance that the effect of the provision in section 108(1), which provides for questions to be referred to an Industrial Tribunal, and is supplementary to section 106, by which the decision as to whether to make a payment from the National Insurance Fund is one for the Secretary of State is that a decision by the Industrial Tribunal on such a reference is not an order requiring the Secretary of State to pay. It would certainly be a perfectly possible scheme to regard that reference as being, perhaps not merely advisory, but certainly one leading to an order which would be of a declaratory nature. However, it seems to us that that point is validly met by Mr Kent by his reference to section 91(1), which I have read, and which confers the primary jurisdiction on Industrial Tribunals in relation to applications by employees for redundancy payments against their employers in precisely the same terms - "shall be referred to" - as are used in section 108(1) about a question arising under that part of the Act.

So exactly the same phraseology - the "reference" of questions to the Industrial Tribunal, is used in relation both to claims against employers under section 91 and determination of matters in relation to applications to the Secretary of State under section 108. Since it can hardly be doubted that the Industrial Tribunals Interest Order is apt to deal with awards and determinations made in applications against employers, there is no reason to suppose that it does not apply in relation to orders under section 108. Moreover, to decide otherwise would not help the present applicants or any other applicants because it would simply lead to the conclusion that the Industrial Tribunals Interest Order does not apply to decisions made under section 108, and presumably (although this point was not argued before us) the Secretary of State has no liability to interest at all. Therefore we accept that the award or determination made by an Industrial Tribunal under section 108 in proceedings to which the Secretary of State is a party is capable of being a relevant decision for the purposes of the 1990 Order.

The next question, and the determinative question, is which is the relevant decision in circumstances such as the present. Is it, as the Industrial Tribunal decided, the decision in the proceedings brought by the employee against the employer, or is it that in the proceedings to which the Secretary of State was a party?

So far as Mr Middleton is concerned the situation is, in our view, that not only is the decision to which the Secretary of State refers a relevant decision but it is the only possible relevant decision, because there never was a decision in the claim brought by Mr Middleton against his employers which satisfied the requirements of Article 2(2) of the Order that there must be a specification or other determination of a Tribunal of the amount of money to be paid, or that amount must be ascertainable solely by reference to the terms of the award or determination.

In the cases of Miss Reeves and Miss Windell, however, there is of course another candidate; there were relevant decisions in their claims against their employers, the decisions of 7 June 1990. The problem in relation to Miss Reeves and Miss Windell is that when one turns to the definition of "relevant decision" for help, it is a definition which does not in fact address this point because what makes a decision "relevant" for present purposes, or indeed for any purposes, is not answered. Either the word "relevant" is left undefined or - and this would be, we think, the only argument which would help the absent Respondent - the definition must be read very literally so that the emphasis would lie on the word "any" and "any" award or other determination could be and would be a "relevant" decision.

Faced with that choice we were asked on the one hand by Mr Kent, for the Secretary of State, to take into account the general consideration that a determination in favour of the employees would mean that liability would be imposed on the Secretary of State from a date before he was even aware of any claim. On the other hand, although the Respondents were not present, it is not difficult to see general considerations which could be urged in the opposite direction, most obviously and perhaps powerfully that this problem arises when an Applicant who is (ex hypothesi) entitled to a redundancy payment has not been paid by the employer, and has suffered delay because of that fact, is deprived of interest for part of the period during which he/she has been out of that money.

If it were possible to decide this question by reference to such general considerations our sympathy would lie entirely with the latter, but we do not consider that it is possible to treat the matter as broadly as that; we do have to ask ourselves what was the "relevant decision" in this case, having regard to the definition in Article 2 (1). We are forced to the conclusion that to read it as meaning that any award or determination, between whatever parties and in whatever proceedings, as long as they involve a requirement to pay out a sum of money, is a "relevant decision", is not a sensible construction of the provision.

We think that the preferable construction, and the one which must be right, is that "relevant" is left as an undefined term and must be given its ordinary meaning as an ordinary English word. If one then asks, what decision among the potential candidates is relevant for the purposes of the Industrial Tribunals Interest Order it is not, in our view, possible to resist the conclusion that the relevant decision in relation to a provision which deals with the imposition of a liability for interest on a person who has been found liable to pay a principal sum means, unless there is something express or something very strong in the context to indicate otherwise, the decision which makes him liable for that principal sum.

We must remember that the definition of "relevant decision" is a general definition; it is not confined to the case where the paying party is the Secretary of State, indeed that is a comparatively exceptional situation. For the most part this is a definition which has to be applied in the ordinary case of an application by an employee against an employer. We also bear in mind that an interpretation which would enable the Applicants in the present case to recover interest from 42 days after original decisions by the Industrial Tribunal in their applications against their employer would mean that which is the relevant decision would not have a simple answer. In the case of applications against employers it would be the date of the decision against the employer; in the case of applications in which the Secretary of State was involved it would mean the decision in the proceedings against the Secretary of State where there had been no earlier relevant decision (as in the case of Mr Middleton here) but in other cases it would be the earlier decision of the Industrial Tribunal in other proceedings against the employer. It may well be, although we have not been given any examples and have not taken the time to think of any examples for ourselves, that the definitions of "employer's payment" and "redundancy payment", where they now lead to exactly the same sum, as in the present case, might in certain circumstances lead to different sums.

For all these reasons we are driven to the conclusion, not with any great enthusiasm so far as the merits of the case are concerned, that the "relevant decision" in the Industrial Tribunals Interest Order 1990 means, in the present case, the decision by the Industrial Tribunal on the application by the Applicants to which the Secretary of State for Employment was the Respondent and for that reason the Appeal must be allowed.

The financial result, we understand, is that there will be no interest order, because the payments from the relevant public funds were made before 42 days after what we have decided was the relevant decision date. Therefore the formal order will be that the Appeals are allowed to the extent of quashing the payment of interest in each case.