The Background
The Claimant was employed by Drummonds Kirkwood LLP (‘DK’), solicitors. On 21 July 2008 DK dismissed her and several other employees on the grounds of redundancy. On 25 July 2008 it entered administration. On 28 July 2008, DK, acting by its joint administrators, entered into a management contract with Key2Law. Ms De’Antiquis brought a claim in the ET alleging that Key2Law was liable to her under Reg 4 and Reg 7 of TUPE.
The Issue
The issue in whether a corporate entity or a limited liability partnership which is in administration is the
“subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor …”
within Reg 8(7) . If it was then Regs 4 and Reg 7 do not apply with the effect would be that its employees would not transfer to any entity acquiring the business.
The argument for Key2Law was that although the Administration Procedure in Schedule B1 of the Insolvency Act 1986 provides that the primary objective of the Administrator is to rescue the Company as a going concern, in many cases this will not be achievable and will be known not to be achievable prior to the administration. The purpose is more often than not that of achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration).
The issue in this case first came before the EAT in Oakland v Wellswood (Yorkshire) Limited [2009] IRLR 250. HHJ Clark held that a fact based assessment should take place in each case to determine whether or not on the particular facts the administration has been instituted with a view to the liquidation of the assets of the transferor.
Judgment
The Court of Appeal eschewed the fact based approach. They held that in no case could administration proceedings fall within Reg 8(7) for the following reasons:
(1) It would be unsatisfactory in principle if an assessment of whether an administration order was made “with a view to” the liquidation of the transferor’s assets depended on the evidence leading up to the appointment of administrators, as that could well produce an uncertain picture of the predominant objective to be achieved.
(2) Further, it would be wrong in principle to identify the purpose of an appointment of administrators by reference to pre-appointment considerations as to the particular objectives that it was foreseen that an appointment was reasonably likely to achieve. An appointment made with the intention, hope or expectation of achieving a particular objective might not do so.
(3) The focus should be on the purpose of the procedure that was triggered by the making of a particular order, not on the reasons that led to its being made. The purpose of an administration order was explained in Sch.B1 para.3 of the 1986 Act and the administrator’s duties arose only upon, and not before, the making of the order. The administrator’s overriding legal obligation was to perform his functions with the objective of rescuing the company concerned.
Comment
The decision has the benefit of certainty. Whenever there is an administration TUPE will apply. Indeed the Government has indicated in its consultation on amendments to the Regulation that it considers the issue to have been clarified. However, it has to be recognised that in many cases, albeit that the purpose of the administration procedure is to rescue the company as a going concern, that is never likely to be an option and adminstration is merely a temporary staging post on the road to the intended liquidation.