MccArtney & Ors v Unite The Union & Anor

Permission to continue monetary proceedings against a company in administration is exceptional. The court must apply the statutory purpose of the administration and ask whether continuation would hinder the administration, rather than merely whether the claim has a real prospect of success or whether refusal would be inequitable.

The moratorium restricts enforcement, but does not extinguish the underlying claims. Claims remain capable of being submitted in the administration where they are debts or liabilities existing at the date of administration, or arising later from obligations incurred before that date. A claim does not require a judgment to become provable merely because it is disputed or depends on factual and legal adjudication.

Nortel Networks UK Ltd entered administration in January 2009 as part of a cross-border restructuring. Employees dismissed after the commencement of the administration, together with their union, brought proceedings in the Northern Ireland Industrial Tribunal concerning unfair dismissal, breach of contract and discrimination. They sought permission under paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 to continue those proceedings.

The administrators had consented to protective-award proceedings because any award could attract immediate government payment without recourse to the administration’s assets. They opposed continuation of the remaining monetary claims. The central issues were whether the claims were provable in the administration and whether their continuation was sufficiently exceptional to justify lifting the moratorium.

1. Application refused. The claims were monetary claims against a company in administration. The applicable question was whether their continuation was exceptional so as to justify overriding the statutory machinery, applying AES Barry Ltd v TXU Europe Energy [2004] EWHC 1757 (Ch); [2005] 2 BCLC 22. A seriously arguable case and general inequity were not sufficient. The approach in Re Atlantic Computers [1992] Ch 505 concerned proprietary rights and did not govern ordinary monetary claims.
2. Paragraph 43(6) of Schedule B1 to the Insolvency Act 1986 regulated enforcement. It did not extinguish claims. The suspended rights were replaced by the right to submit claims to the administrators under the Insolvency Rules.
3. The expenses claim was an accrued debt. The contractual notice claim was a contingent liability arising from an obligation incurred before administration. The unfair-dismissal and discrimination claims were likewise liabilities arising from pre-existing contractual or statutory obligations, although the relevant breaches occurred after administration.
4. The cases concerning liabilities dependent on a prior discretionary decision, including Glenister v Rowe [2000] Ch 76, Steele v Birmingham City Council [2005] EWCA Civ 1824; [2006] 1 WLR 2380, and Casson v Law Society [2009] EWHC 1943 (Admin); [2010] BPIR 49, were distinguishable. They concerned liabilities created only when a prior discretion to impose an obligation had been exercised. Judicial adjudication of disputed facts and law was not the same as the exercise of such a discretion. The analysis was consistent with Day v Haine [2008] EWCA Civ 626; [2008] IRLR 642, Re Toshoku Finance UK [2002] UKHL 6; [2002] 1 WLR 671, SSTI v Frid [2004] UKHL 24; [2004] 2 AC 506, and Re Huddersfield Fine Worsteds Ltd [2005] EWCA Civ 1072; [2006] 2 BCLC 160.
5. Although the proceedings would divert time and increase administration expenses, those consequences did not establish an exceptional case. The claims were capable of being dealt with through the administration process and litigation would have little real legal consequence given the likely administration exit. The applications were therefore refused.
6. The applicants were ordered to pay 80% of the administrators’ costs from 21 November 2009.

First-instance application for permission to continue employment proceedings during an administration. The judgment describes the underlying Industrial Tribunal claims but states no appellate history.