Simpson v. Wm A Merrick (Solicitors) (Practice And Procedure : Preliminary Issues)

An employer may bring a counterclaim under Article 4 of the Employment Tribunals (Extension of Jurisdiction) England and Wales Order 1994 where the employee has presented a qualifying monetary employment claim under Article 3 and section 3(2) of the Employment Tribunals Act 1996. The employee’s claim need not be ultimately valid or enforceable for this procedural gateway to be satisfied. A bankrupt claimant’s monetary claim is not necessarily a nullity; the usual approach is to stay it pending permission or assignment. Claims arising after bankruptcy are not bankruptcy debts merely because the underlying employment contract pre-dated the bankruptcy.

The claimant, a solicitor’s clerk, presented Employment Tribunal claims for unfair dismissal, redundancy pay, holiday pay and notice pay while an undischarged bankrupt. The respondent employer filed counterclaims concerning alleged misappropriation, loans and other matters under Article 4 of the Employment Tribunals (Extension of Jurisdiction) England and Wales Order 1994.

The Employment Judge struck out the claimant’s monetary claims for want of assignment by the trustee in bankruptcy, but permitted some counterclaims to proceed. The claimant appealed against the latter decision. The issues were whether the counterclaims were affected by bankruptcy and whether they were a nullity because the claimant’s monetary claims allegedly lacked the necessary permission or assignment.

1. Appeal dismissed in part. The counterclaims concerning post-bankruptcy incidents could proceed. The decisions allowing the counterclaim for £4,000 petty cash and repayment of the £585.58 loan were overturned because those liabilities were provable bankruptcy debts and were discharged when the claimant was discharged under section 281 of the Insolvency Act 1986.
2. Under section 382 of the Insolvency Act 1986, a liability arising after commencement of bankruptcy is not a bankruptcy debt merely because the relevant duty arose under an earlier employment contract. The debt arises when the alleged breach occurs. The post-bankruptcy allegations were therefore not provable debts and were not affected by the bankruptcy.
3. The Tribunal’s settled practice, reflected in Unite the Union v Fitzpatrick & Ors, UKEAT/0513/08/LA, is generally to stay claims brought without the trustee’s permission or an assignment, rather than treat them automatically as nullities.
4. In any event, even assuming that the claimant’s monetary claims were a nullity, Article 4 still gave the Tribunal jurisdiction to entertain an employer’s counterclaim. Following Patel v RCMS Limited [1999] IRLR 161, Article 4 requires only that the employee bring a claim apparently complying with Article 3 and section 3(2) of the Employment Tribunals Act 1996. Treating the counterclaim as invalid would unfairly expose employers to wasted expense and deprive them of the Tribunal forum.
5. The counterclaim for the balance allegedly withdrawn from the office account could be pursued.

• Employment Tribunal: Employment Judge Burgher struck out the claimant’s monetary claims on 20 May 2009, while permitting certain employer counterclaims to proceed.
• Employment Appeal Tribunal: The appeal was dismissed in relation to the post-bankruptcy counterclaims. The decisions allowing the petty-cash and loan counterclaims were overturned.