Mann and Others v. Secretary of State for Employment

This appeal concerned the Secretary of State's payments as statutory guarantor under section 122 of the Employment Protection (Consolidation) Act 1978 for remuneration awarded by a tribunal under sections 188-190 of the Trade Union and Labour Relations (Consolidation) Act 1992 for failure to consult about collective redundancies. The central legal issues were whether the Secretary of State could apply the set-off in section 190(3) (which at an earlier date permitted set-off of protective award payments against contractual pay or damages), whether Community directives (in particular Council Directives 75/129 and 80/987) required a different result, whether Directive 80/987 applied to an administrative receivership, and whether the statutory weekly cap of £205 and the Secretary of State's chronological method of identifying the eight guaranteed weeks were lawful.

The House of Lords held that: (1) as a matter of domestic law the set-off in section 190(3) applied at the relevant date and therefore reduced the amount for which the Secretary of State was liable as guarantor under section 122; (2) Community law did not require the Secretary of State to pay more than domestic law required because Directive 80/987 did not apply to an administrative receivership and there was no Community obligation to guarantee in those circumstances; (3) the £205 weekly limit was not shown to be unreasonable in the circumstances and, while employees are entitled to choose which weeks fall within the eight-week limit, no relevant choice had been made by the appellants.

Background and parties. The appellants were former employees of Swan Hunter Shipbuilding & Engineering Group Ltd, which entered administrative receivership on 13 May 1993. The administrative receivers dismissed 408 employees on 28 May 1993 without consulting the recognised union. The union obtained a protective award from an industrial tribunal on 21 September 1993 for the maximum 90-day protected period. Swan Hunter was insolvent and unable to pay the award. The employees claimed payment from the Secretary of State under section 122 of the Employment Protection (Consolidation) Act 1978, which implements Council Directive 80/987, asserting that the Secretary of State should pay the full amount of the protective award.

Procedural history. The union obtained a protective award before an industrial tribunal. The employees applied to the Secretary of State for payment as guarantor. The Employment Appeal Tribunal held that applying the set-off in section 190(3) to reduce the Secretary of State's liability was contrary to Community law. The Court of Appeal reversed that decision. The appellants appealed to the House of Lords.

Relief sought. Payment by the Secretary of State as statutory guarantor of the protective award in full, without the deductions made by reference to section 190(3), and without application of the £205 weekly limit or the Secretary of State's chronological allocation of the eight guaranteed weeks.

Issues framed by the court.

• Whether the set-off in section 190(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 could be applied by the Secretary of State when calculating his liability under section 122 of the Employment Protection (Consolidation) Act 1978 as at the relevant date;
• Whether Community law (Directive 75/129 on collective redundancies and Directive 80/987 on insolvency guarantees) required a different result, in particular whether the Secretary of State could be treated as liable to guarantee what the employer should have paid had the Directive been properly implemented;
• Whether Directive 80/987 applied to administrative receiverships; and
• Whether the £205 weekly cap and the Secretary of State's chronological method of selecting the eight guaranteed weeks were compatible with domestic and Community law.

Court’s reasoning and disposition. The House of Lords concluded that, as a matter of domestic law and by reason of transitional provisions and the presumption against retrospectivity, section 190(3) was applicable at the relevant date and therefore the Secretary of State was only liable for what the employee was entitled to be paid by the employer. Because Directive 75/129 has no horizontal effect and Directive 80/987 did not apply to an administrative receivership (there was no state of insolvency within the Directive's definition), Community law could not impose a greater liability on the Secretary of State than domestic law required. The court furthermore held that the £205 limit was not shown to be unreasonable and that, while section 122 should be construed so as to allow an employee to choose the eight weeks most favourable to him, no employee had requested such an allocation and the Secretary of State's chronological method was not challenged on the facts. The appeal was dismissed.

Wider context. The Lords emphasised limits to the horizontal effect of Directives and the difficulty of national courts assessing the justifiability of derogations under Directive 80/987 without comparative information available to the Commission.

The appeal is dismissed. The House of Lords held that the Secretary of State correctly applied the domestic law set-off in section 190(3) as it was effective for the relevant dismissals, that Community law did not require the Secretary of State to pay more because Directive 80/987 did not apply to an administrative receivership, that the statutory £205 weekly limit was not shown to be unreasonable, and that employees are in principle entitled to choose which weeks fall within the eight-week guarantee though no such choice had been made here.

Industrial Tribunal (protective award made 21 September 1993) -> Employment Appeal Tribunal (held that set-off under section 190(3) was contrary to Community law) -> Court of Appeal (reversed the EAT) -> House of Lords [1999] UKHL 29 (appeal dismissed).