Key2Law (Surrey) LLP v De' Antiquis

Administration under Schedule B1 to the Insolvency Act 1986 is not an insolvency procedure instituted with a view to liquidating the transferor’s assets. Regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006 therefore does not disapply the protections governing transferred employment contracts and transfer-related dismissals.

The classification depends on the legal purpose of administration as a procedure, rather than the intentions behind a particular appointment or its anticipated outcome. Schedule B1 establishes a single statutory purpose, pursued through a hierarchy of objectives beginning with rescue of the company. Although liquidation of assets may occur in practice, the administrator must consider the statutory options after appointment. This absolute approach provides legal certainty and avoids a complex factual inquiry into pre-appointment intentions.

A solicitor was dismissed for redundancy shortly before her employer, a limited liability partnership, entered administration. The administrators subsequently made a management agreement with another firm concerning two offices. The Employment Tribunal found that the agreement effected a relevant transfer and a service provision change under the Transfer of Undertakings (Protection of Employment) Regulations 2006.

The Tribunal held, following Oakland v Wellswood (Yorkshire) Ltd [2009] IRLR 250, that the application of regulation 8(7) depended on the facts surrounding the particular administration. It found that the administration had not been instituted with a view to liquidating the transferor’s assets.

The Employment Appeal Tribunal rejected that fact-based approach. It held that administration under Schedule B1 to the Insolvency Act 1986 could never fall within regulation 8(7) and dismissed the employer’s appeal. The central issue before the Court of Appeal was whether that absolute approach was correct.

1. Appeal dismissed. The Employment Appeal Tribunal correctly held that administration proceedings under Schedule B1 to the Insolvency Act 1986 do not fall within regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006. Regulations 4 and 7 were therefore not disapplied merely because the transferor was in administration.

2. Regulation 8(7) was intended to give domestic effect to article 5(1) of Council Directive 2001/23/EC. Its language had to be construed purposively in light of the Court of Justice authorities from Abels onwards. Those authorities focus upon the purpose of the insolvency procedure in question.

3. The classification of administration depends upon the legal purpose of the procedure triggered by the appointment. It does not depend upon the applicants’ pre-appointment intentions, the objective which they expected the administrator to pursue, or the result anticipated in the particular case. A fact-based inquiry could produce uncertainty because an administrator may have to change strategy after appointment.

4. Schedule B1 establishes one purpose of administration and a statutory hierarchy of objectives. Rescue of the company as a going concern is the starting or prima facie objective. The administrator may pursue a better result for creditors as a whole, or in the prescribed circumstances realise property for secured or preferential creditors. The appointment keeps those statutory options open. It therefore cannot rationally be characterised as having been instituted with a view to liquidation of the transferor’s assets, even where liquidation was foreseeable from the outset or occurred in practice.

5. Rimer LJ delivered the leading judgment. Warren J and Longmore LJ agreed. Warren J added that the corresponding treatment of administration outside the definition of winding-up proceedings in the insolvency regulation supported the conclusion. The absolute approach also secured legal certainty by allowing employees, transferees and others to know their position when the appointment was made.

1. Court of Appeal (Civil Division): The court dismissed the appeal and affirmed the Employment Appeal Tribunal’s conclusion that Schedule B1 administration cannot fall within regulation 8(7) of the Transfer of Undertakings (Protection of Employment) Regulations 2006.

2. Employment Appeal Tribunal: A panel chaired by Underhill J dismissed appeal UKEAT/0444/09/RN. It rejected the Employment Tribunal’s fact-based approach but upheld the result on the basis that no administration under Schedule B1 can constitute proceedings instituted with a view to liquidation for regulation 8(7).

3. Employment Tribunal: Employment Judge Freer found a relevant transfer and service provision change. Applying Oakland v Wellswood (Yorkshire) Ltd [2009] IRLR 250, he undertook a factual inquiry and held that regulation 8(7) did not apply. He directed that the employment claims proceed to a merits hearing.