United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellant	MR PAUL KILCOYNE (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


 


MR JUSTICE KIRKWOOD: This is an appeal by the Secretary of State for Trade & Industry against the decision of an Industrial Tribunal sitting at London (North) on 2nd October 1996. The tribunal's decision was communicated to the parties on 6th November 1996.

The case concerned a Mr Gentry who was employed by the Trades & Labour Social Club at Welling Garden City from October 1991 until 10th May 1995. He lost his job because in his understanding his employer had become insolvent. Indeed, he said that he was made redundant on evening of 10th May 1995 without prior information given. He was paid that evening from Sunday 7th May to Wednesday 10th May 1995, but he says he was still owed four weeks holiday pay, and a redundancy payment which he was entitled to for three years and seven months. He applied, as understand it, both to the Industrial Tribunal and, as statute allows, to the Secretary of State for the payments due to him. The documents do not tell us the precise sequence of those applications.

The application to the Industrial Tribunal was dated 18th August 1995 and received on 22nd August 1995. An appearance was entered by the employer respondent on 1st February 1996, and on 29th March 1996 the Department of Trade & Industry wrote to the Assistant Secretary of the Regional Office of Industrial Tribunals a long letter which it asked to be treated as the Secretary of State's Notice of Appearance, but which does not indicate when an approach was first made to it.

The tribunal decided that Mr Gentry was entitled to a redundancy payment of £292.50, and was entitled to four weeks holiday pay in a total of £338.24. The tribunal found as a fact that the Trades & Labour Club were insolvent within the meaning of s.106 of the Employment Protection (Consolidation) Act 1978, and they specifically found not only that the employer was insolvent but also the employee Mr Gentry had taken all reasonable steps other than legal proceedings to recover the payment from the employer, and that the employer had refused or failed to pay the said sums.

The scheme of the legislation provides by s.106 that in respect of redundancy payments the employee may apply to the Secretary of State for payment where the employer is liable to make the payment, and either the employee has taken all reasonable steps (other than legal proceedings) to recover the payment from the employer, and the employer has refused or failed to pay it; or the employer is insolvent and the whole or part of the payment remains unpaid. In that event there may be application to the Secretary of State, and if on that application the Secretary of State is satisfied of the employee's entitlement, and of the fulfilment of one or other of the conditions as to taking all reasonable steps or insolvency, the Secretary of State shall pay to the employee out of the National Insurance Fund a sum calculated in accordance with the legislation.

So far as holiday pay is concerned, the relevant provision for the purpose of this case was s.122 of the 1978 Act, and by that section an application can be made to the Secretary of State who shall make a payment if he is satisfied that the employer has become insolvent and that the money was due. S. 122 does not carry forward the alternative of all reasonable steps.

Now the Secretary of State appealed against the whole of the decision of the Industrial Tribunal on the basis that there was no evidence entitling the tribunal to reach its primary decisions of fact.

The Notice of Appeal was prepared on that basis. The skeleton argument for presentation to us was prepared on that basis. I use the word "prepared" in relation to the appeal because it has to be said that the bundle was not prepared with anything like the care or diligence that this appeal tribunal is entitled to expect. It did not include the Department's letter of 29th March 1996 which is a document of importance, nor did it include an important interlocutory decision of the tribunal made on 1st July 1996.

The letter of 29th March 1996 sets out on the redundancy point and says that this is not a case in which the Secretary of State would feel able to make a payment without the step being taken of an application to and finding by the Employment Appeal Tribunal. When we were shown that letter this morning and enquired upon it, it transpired that Mr Gentry having been to the Industrial Tribunal, having got his finding of entitlement, and having got his finding that he had taken all reasonable steps, has in fact been paid the redundancy payment sum of £292.50, so that that part of the appeal is not effective. And it is I think a legitimate matter of criticism for this appeal tribunal to make that those circumstances appeared nowhere in the bundle or in the Notice of Appeal or in the skeleton argument, and they should have done. They should have done because the consequence of failure is first of all that the members of this tribunal have been caused considerable wasted time in their preparatory work by looking into a ground of appeal and an area of appeal which had disappeared; and secondly, because the net result is that this appeal is about an amount of £338.24 holiday money, which cannot by any description be described as an amount of appreciable significance in the scheme of things, however important it is to Mr Gentry.

I consider therefore solely the s.122 holiday pay aspect of the case.

As I said the Secretary of State must be satisfied of amongst other things insolvency. Insolvency is defined for the purpose of the Act in the interpretation section, s.127 which reads in it relevancy in subsection (1):

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

(a) he has been adjudged bankrupt or has made ...

...

(c) where the employer is a company, a winding up order is made or a resolution for voluntary winding up is passed with respect of it, or a receiver or manager of its undertaking is duly appointed, or possession is 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 ..."

The status of the Club is not clear to us. It seems to be an unincorporated association of one kind or another. But the importance of the definition section of s.127 was illustrated by the now President, Morison J. in Secretary of State for Employment v Dines & Holland where he said at page 5 of that unreported decision:

"... that was not an insolvency as defined in the Act. The Industrial Tribunal appear to us to have confused the question whether a company is insolvent in the sense that it cannot pay its debts as and when they fall due, with whether a company is insolvent within the statutory definition contained in Section 127(1) of the Act, which requires some judicial or administrative act. Whist there are, or maybe cases where an inference could be drawn, that such a judicial or administrative act had occurred, this was not such a case."

The evidence before the Industrial Tribunal on the question of insolvency was very limited. It was very limited for this reason. When the case came on on 1st July 1996, neither the applicant, Mr Gentry, nor the respondent employer appeared. The Secretary of State did not appear but that was no surprise because he said he would not and he had asked that his letter of 29th March 1996 be treated as his Notice of Appearance and had asked in it that the tribunal take account of the representations contained in the letter.

The material that the tribunal had consisted of the applicant's originating application in form IT1, the respondent's Notice of Appearance in form IT3, and the Department's letter of 29th March 1996.

In his form IT1, Mr Gentry dealt first in box 1 with the type of complaint he wanted the tribunal to decide, and he said:

"Insolvency of employer. Right to be paid by the Secretary of State certain debts owed by the insolvent employer."

The form then continues with its various boxes filled in in a fashion which is not controversial for the purpose of this appeal. He describes his employment as:

"Full time doorperson for the Trades and Labour Social Club ..."

and then at box 12 when he gives details of his complaint, he says:

"I was made redundant on the evening of 10th May 95, without prior information given. I was paid that evening from Sun 7th May to Wed's May 10th May 95, but I am still owed 4 weeks holiday pay, redundancy payment, which I am entitled to for 3 years 7 months.

The reason for the redundancy was the Club premises was closed down as my employer was made insolvent."

The Notice of Appearance by the employer gave the reason for dismissal simply as:

"Club closed down."

The Department of Trade & Industry, on behalf of the Secretary of State, did not set out any denials of insolvency, but, in what is no doubt the usual way, said insolvency was not admitted.

In the representations that followed in that letter, the Department said:

"The applicant has not supplied the Department with any evidence which demonstrates that the employer is insolvent. The Department's own enquiries have not uncovered any such evidence. ..."

The letter seems there to be addressing the redundancy case, because it goes on to say that the claim has been treated as a claim under s.106(1)(a). The letter does not address s.122, as far as I can see, except in the last paragraph it says:

"In his IT1 the applicant has also made a claim for holiday pay, the Secretary of State wishes to advise the Chairman that as the applicant's employer is not insolvent as defined in section 127 of the Act that he is not empowered to make any such payment."

In the light of that very limited material, the Industrial Tribunal on 1st July 1996 unanimously decided to adjourn the application to enable the applicant to present evidence in support of his claim.

The summary reasons were in these words:

"1 The Applicant did not appear and no reason was given for non-attendance. The Second Respondent had put in written representations which were considered by the Tribunal along with the Applicant's Originating Application. In view of the necessity of the Applicant producing evidence to demonstrate that the First Respondent was insolvent or had been dissolved, the Tribunal decided to adjourn the hearing to give the Applicant an opportunity of attending and presenting that evidence to the Tribunal."

When the case came on again on 2nd October 1996, the applicant did not appear, nor did the respondent employer, nor again, for the reasons I have given, did the Secretary of State.

The question is whether was there evidence on which the tribunal could properly make a finding of fact that the employer was insolvent, as defined in s.106(5) as the extended reasons put it. And I should say that the provisions of that subsection accord with the provisions of s.127 to which I have already referred.

Plainly there was no evidence before the tribunal upon which it could find that the definition of insolvency was satisfied for the purposes of the Act in one particular way or another. It would not have been necessarily incumbent upon the tribunal to identify the way in which that definition was satisfied, but it must have been one of those ways.

The only evidence that the employer had been made insolvent by some administrative or judicial act was the assertion of Mr Gentry in the words "the Club premises was closed down as my employer was made insolvent." Had that stood alone we might have concluded that by the thinnest margin there was evidence upon which the tribunal could make the finding that it did. But it did not stand alone, because the Department had specifically put the question of insolvency, that is to say in accordance with the statutory definition relevant for the purposes, in issue. The Department had represented in writing that its enquiries had not uncovered any evidence of such insolvency; and the Department had indeed asserted that the employer was not insolvent as defined by the Act. Accordingly the question of solvency was at best in issue, and in issue for the reasons that I have indicated. The tribunal on 1st July 1996 referred to the necessity of the applicant producing evidence to demonstrate the insolvency; and whilst, it seems to us, that necessity is perhaps a little too strong a word, it does demonstrate the state of the case on the written representations, and the differently constituted tribunal that sat in October 1996 was in no better position. Bearing in mind that the IT1 does not purport to be a legally drawn document, that it contains the informal representation by Mr Gentry in the words "was made insolvent", it seems to us that the tribunal did not have evidence upon which it was entitled to find that the employer was insolvent within the meaning of the definition contained in the Act. Accordingly, to that extent, this appeal has to be allowed.

I shall hear from Mr Kilcoyne in a moment, what the consequence of allowing the appeal should be.

Before departing from this appeal, I wish to say one or two words of my own, not least for the benefit of those here to observe and to learn about the processes in Industrial Tribunals and in the Employment Appeal Tribunal. I stress they are words of my own with which my colleagues do not necessarily associate themselves.

It is absolutely essential that the documentation for the appeal tribunal be properly and thoroughly prepared and the issues clearly identified in them. I hope that that lesson has come across during the hearing. It is wholly unsatisfactory, for example, that Mr Kilcoyne should have apparently come to open this appeal ignorant of the information that half of it had already been disposed of by payment.

Secondly, I wish to be carried back to the Department this consideration which I stress is of my own. The Secretary of State rightly requires in many of these case that there should be a determination by the tribunal of liability and it is right that he does so, because he is the custodian of public funds. I do ask that consideration be given however to the sort of matters that would surely effect the mind of an employer in the private commercial world as to whether, for example, the expenditure of very considerable public funds as are involved in this appeal which I note, incidentally, has involved the attendance of six personnel including Counsel, is one that is a wise commercial decision in the economic sense.

[Now Mr Kilcoyne what are we to do with the case? Do we sent it back to the Industrial Tribunal? Or do we simply allow the appeal and set aside the decision in relation to the holiday pay? What do we do?]

[Well, I think that we are going to have to go and talk about this amongst ourselves. And I expect that our debate will consider first of all that we must see whether we have got the material to substitute a decision of our own rather than sending it back. And secondly, our obvious worry, in view of what I have said, that we are just going to be pouring more and more money down the drain in tying up a tribunal and the Treasury Solicitor and so on, on a further application.]

[Court rises]

[Court reconvenes]

MR JUSTICE KIRKWOOD: [Mr Kilcoyne is there is anything else you wish to say about this matter and what we should do with it?]

It is quite right to say that Mr Gentry was given an opportunity by the Industrial Tribunal to produce evidence of insolvency. It is also pertinent to add that in this Employment Appeal Tribunal he was written to twice, namely on 22nd January 1997 and 13th March 1997 by the tribunal with invitations to lodge an answer to the appeal by the dates set out in those letters. He has not done so.

We are, however, extremely concerned that Mr Gentry is a man who has apparently been protecting his own interests without, so far as we can tell, the benefit of advice or support, and we have a residual reluctance to close the door finally upon him in his absence from this appeal haring.

What we propose to order is that the finding that the employer was insolvent within the meaning of s.106(5) and of s.127(1) of the 1978 Act be set aside. We propose to remit the case to the Industrial Tribunal on the basis that no further steps be taken in the originating application unless within three months of today, (a) the applicant applies to the Industrial Tribunal for the originating application to be restored and (b) within that same time frame, submits written evidence to the Industrial Tribunal that the employer was insolvent within the meaning of s.106(5) and s.127(1) of the 1978 Act.

[That is what we propose to order. Mr Kilcoyne that gives him a final opportunity, though it seems quite improbable that he will take it up. So the matter will lie dormant for three months and then be at an end.]