United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR R JAY (of Counsel) The Treasury Solicitor Queen Anne's Chambers 28 Broadway London SW1H 9JS
For the Respondents	NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENTS


 


JUDGE PETER CLARK: This is an appeal by the Secretary of State against part of a decision of the Hull Industrial Tribunal (Chairman: Mr J.M.Q. Hepworth) sitting on 29 February 1996. Extended Reasons for that decision are dated 11 April 1996 ("the reasons").

The factual background may be shortly stated. Miss Amess, who attended the Industrial Tribunal hearing and Mrs Garrod, who did not, were formerly employed in a hairdressing business then conducted by Mrs Sheila Warner (now deceased) trading as Hazel's Hair Boutique in Hull. Miss Amess commenced her employment in July 1988 and Mrs Garrod in September 1989.

On 3 April 1995 Mrs Warner died. The business then ceased trading. The two employees declined an opportunity to continue the business and it is common ground that both were dismissed by reason of redundancy one week later on 10 April 1995.

They understood that there was no money in the deceased's estate, and they turned to the Department of Trade and Industry Redundancy Payments Service for payment of their redundancy entitlement, together with pay in lieu of notice.

It is not disputed that they were entitled to redundancy payments out of the fund pursuant to section 106 of the Employment Protection (Consolidation) Act 1978, and that part of the Industrial Tribunal's Order is not challenged on appeal. However, the Tribunal's award of damages for breach of contract (pay in lieu of notice) in favour of both applicants is challenged.

Entitlement to a redundancy payment from the fund administered by the Secretary of State is not dependent, under section 106 of the 1978 Act, upon the applicant showing that, in this case, the estate is insolvent. It is enough that the employee is entitled to a redundancy payment from her employer, and that she has taken all reasonable steps (other than legal proceedings) to recover the payment from the employer and that the employer has refused or failed to pay the outstanding amount.

However, the statutory regime in relation to a permitted claim for breach of contract or other payment specified in section 122(3) of the 1978 Act is significantly different.

It is a pre-requisite to entitlement to a payment out of the fund under section 122 that the employer has become insolvent. Section 122(1)(a).

By section 127(1):

"(1) For the purposes of sections 122 to 126, an employer shall be taken to be insolvent if, but only if, in England and Wales, -

(b) he has died and his estate falls to be administered in accordance with an order under section 421 of the Insolvency Act 1986."

It is well settled law in this appeal tribunal that section 127(1) sets out a comprehensive code to define the expression "insolvent". The opening words of the section "if but only if" make that clear. See Secretary of State for Employment v (1) Dines (2) Holland (EAT/384/94 10 May 1995 Unreported) per Morison J. Transcript page 2F.

Section 421 of the Insolvency Act 1986 provides for the Secretary of State to make rules for the administration for insolvent estates by statutory instrument.

The relevant statutory instrument made under the powers contained in section 421 is the Administration of Insolvent Estates of Deceased Persons Order 1986 S.I. 1986 No.1999 (the 1986 Order).

Regulation 3(1) provides:

"The provisions of the Act specified in Parts II and III of Schedule 1 to this Order shall apply to the administration in bankruptcy of the insolvent estates of deceased persons dying before presentation of a bankruptcy petition ..."

Regulation 4(1) provides:

"Where the estate of a deceased person is insolvent and is being administered otherwise than in bankruptcy, ... the same provisions as may be in force for the time being under the law of bankruptcy with respect to the assets of individuals adjudged bankrupt shall apply to the administration of the estate .."

The effect is that either the personal representatives of the estate, or a creditor or creditors of the estate, may petition the Bankruptcy Court for an order for the administration of the insolvent estate. Usually a Trustee in Bankruptcy will be appointed in much the same way as where an individual is bankrupted in life.

We turn now to the Industrial Tribunal's reasons. At paragraph 7 they say this:

"7. The Tribunal took evidence from Miss Amess which indicated to it on the balance of probabilities that the first respondent [the deceased] was insolvent within the definition contained within Section 127 of the 1978 Act. No details were provided by the second respondent [the Secretary of State] in their written representations as to their enquiries which indicated to them that there was no evidence of formal insolvency. The Tribunal therefore concluded that the first respondent was insolvent and that consequently the two applicants were entitled to payments for damages of breach of contract as payments in lieu of notice from the second respondent within the terms of Section 122 of the 1978 Act."

In our judgment the Industrial Tribunal's finding does not provide sufficient reasons for its decision. See the Industrial Tribunals (Rules of Procedure) Regulations, rule 10(3) Meek v City of Birmingham District Council (1987) IRLR 250. There is no indication in the reasons as to what evidence Miss Amess gave to the Industrial Tribunal which led it to conclude that the deceased estate was insolvent within the meaning of section 127(1)(b) of the 1978 Act. Put another way, the sole question was whether or not an order had been made by the Bankruptcy Court pursuant to the 1986 Order. If it had, well and good. If not, the applications fail.

On the other hand the Secretary of State, who did not appear before the Industrial Tribunal, has not helped. The written representations referred to in paragraph 7 of the reasons, we are told by Mr Jay, consisted of a letter dated 5 October 1995 from the Redundancy Payments Service to the Industrial Tribunal in these terms:

"The Secretary of State intervenes in this matter pursuant to Rule 8(6) of the Industrial Tribunal (Constitution and Rules of Procedure) Regulations 1993 and wishes to resist the case on the following grounds:

1. It is not admitted that the Applicant's former employer, Mrs S Warner deceased, is insolvent within the meaning of sections 106 and 127 of the Employment Protection (Consolidation) Act 1978.

2 It is, accordingly not admitted that the Applicant is entitled to receive any payment under the provisions of section 122 of the Act and she is put to proof thereof."

The letter goes on to concede the redundancy payments.

We quite appreciate that it would be unnecessarily burdensome for the Department to appear and/or be represented at every Industrial Tribunal hearing in which it has an interest. However, we draw attention to the powers of Industrial Tribunals to receive written representations under Rule 8(5) of the 1993 Rules of Procedure. It would be the simplest thing in the world for an officer of the Department to submit a short statement to the Tribunal specifying the enquiries which have been made in order to establish whether or not an order of the Bankruptcy Court had been made in this case. That was not done.

In the circumstances we are left in this position. We simply do not know whether or not the necessary order of the Bankruptcy Court was before the Industrial Tribunal in evidence. Neither Respondent to the appeal has appeared today. We suspect that it was not but we cannot be sure. Accordingly, we must allow this appeal on the basis of the paucity of reasons given by the Industrial Tribunal.

However, we do not propose to reverse the breach of contract orders made by the Industrial Tribunal as Mr Jay invites us to do. We shall formally remit the case for rehearing before a different Tribunal, to apply the law as we have explained it and make all necessary findings. However, we direct that it is for the Respondents to this appeal to apply for a hearing date in relation to the remitted hearing. Such application must be accompanied by a copy of the relevant order of the Bankruptcy Court, if any exists. If no such application is made, it will be open to the Secretary of State to apply, or the Industrial Tribunal of its own motion, to strike out the complaint for want of prosecution under Rule 13(2)(f) of the Tribunals Rules of Procedure.