Grady v HM Prison Service

An unfair dismissal claim is personal to the employee and does not vest in the employee’s trustee in bankruptcy. Its essential character differs from a proprietary claim for wrongful dismissal because the statutory scheme gives priority to reinstatement and re-engagement. Those remedies restore a working relationship dependent on the employee’s own skill and labour.

The possibility of compensation does not alter the claim’s character, although money eventually awarded may form part of the bankrupt estate. An appeal brought as of right is a continuation of the underlying claim and has the same character for insolvency purposes.

The appellant brought employment tribunal claims for unfair dismissal, wrongful dismissal and disability discrimination. All three claims were struck out for repeated non-compliance with procedural directions. She appealed to the Employment Appeal Tribunal but was adjudged bankrupt before that appeal was heard.

The Employment Appeal Tribunal held that her causes of action had vested in her trustee in bankruptcy and dismissed the appeal for want of jurisdiction. The appellant accepted that the wrongful dismissal and disability discrimination claims had vested in the trustee. The question before the Court of Appeal was whether her unfair dismissal claim, and the pending appeal concerning it, were personal rights which remained hers.

1. Appeal allowed and matter remitted. The court held unanimously, in a judgment delivered by Sedley LJ, that the appellant retained standing to pursue the unfair dismissal claim. The matter was remitted to the Employment Appeal Tribunal for determination on its merits.

2. The statutory references to property and things in action in the Insolvency Act 1986 must be read in accordance with the established distinction between transmissible assets and claims reflecting the bankrupt’s individuality. A claim belonging to the former class vests in the trustee. A claim belonging to the latter remains with the bankrupt, although proceeds later derived from it may accrue to the estate.

3. An unfair dismissal claim is personal rather than proprietary. Its statutory nature and remedies distinguish it from an ordinary claim for wrongful dismissal. Under the Employment Rights Act 1996, reinstatement is considered first, followed by re-engagement, with compensation awarded if neither order is made. That sequence recognises an employee’s vested interest in the lost job and seeks to restore a relationship in which the employee’s own skill and labour are essential.

4. The availability of compensation did not make the claim proprietary. A significant element of compensation is awarded in lieu of personal remedies. Although an eventual award may form part of the bankrupt estate, the trustee cannot perform the work or obtain restoration to employment in the employee’s place.

5. The unfair dismissal, wrongful dismissal and disability discrimination claims remained distinct despite appearing in one originating application and one notice of appeal. The admitted vesting of two claims did not turn the remaining claim into part of a single hybrid cause of action. An appeal brought as of right is a continuation of its underlying claim and has the same character for insolvency purposes.

6. The court declined to determine the substantive challenge to the employment tribunal’s strike-out decision. That issue depended heavily on the Employment Appeal Tribunal’s specialist experience of tribunal practice and procedure and should first receive its reasoned determination.

• Court of Appeal (Civil Division): Allowed the appeal on standing and remitted the substantive appeal to the Employment Appeal Tribunal.
• Employment Appeal Tribunal: Dismissed the appeal for want of jurisdiction after holding that the appellant’s causes of action had vested in her trustee in bankruptcy. It granted permission to appeal.
• Employment tribunal: Struck out the unfair dismissal, wrongful dismissal and disability discrimination claims for repeated non-compliance with procedural directions and ordered the claimant to pay costs.