Secretary of State for Trade and Industry v Slater and others

EAT: Elias J (President): 27 June 2007

On 25 July 2006 the directors of an insolvent company appointed a firm of accountants to assist the company with a voluntary liquidation. The next day the claimant employees were made redundant. On 27 July the business was sold as a going concern to the respondent company, and the claimants were re-engaged. In August, following a creditors' meeting, two members of the accountancy firm were appointed as liquidators. An employment tribunal dismissed claims by the claimants for arrears of pay from the company, on the ground that, because "at the time of" the transfer the transferor was subject to "insolvency proceedings", regulation 8 of the Transfer of Undertakings (Protection of Employment) Regulations 2006 applied to exclude a transfer of liability to the transferee under regulation 4, and the Secretary of State was liable for the debts pursuant to section 182 of the Employment Rights Act 1996.

The Secretary of State appealed, contending that, while there were "insolvency proceedings" within the meaning of either regulation 8(6) or (7), they were not extant "at the time of a relevant transfer" within the meaning of regulation 8(1).

Elias J (President) held:
In order to determine whether "insolvency proceedings" had commenced for the purposes of regulation 8 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, it was necessary to identify the particular proceedings and then determine, in accordance with the statutory provisions relating to those proceedings, whether they had commenced or not. The liquidation of the transferor occurred as a consequence of a creditors' voluntary liquidation, which, in accordance with the definition of insolvency in section 183(3)(a) of the Employment Rights Act 1996, did not commence until after the transfer. Accordingly, regulation 8 of the 2002 Regulations did not apply. Further, since it was plain from the definition of "insolvency practitioner" in section 388(1)(a) of the Insolvency Act 1986 that it was not until a person was appointed as a liquidator that he could be so described, at the time of transfer there were no insolvency proceedings "under the supervision of an insolvency practitioner" as required, for the application of regulation 8, by paragraphs (6) and (7).

The appeal was allowed.

Appearances: Sarah Moore (Treasury Solicitor, Litigation and Employment Group) for the Secretary of State; Paul Cadney (Langley Wellington, Gloucester) for the transferee; the claimants were not present or represented.