Key2Law (Surrey) LLP v De'Antiquis

The Court of Appeal held that administration proceedings under Schedule B1 to the Insolvency Act 1986 are not, as a class, "bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor" for the purpose of regulation 8(7) of TUPE (which implements article 5.1 of Council Directive 2001/23/EC). As a result regulation 8(7) does not automatically disapply regulations 4 and 7 of TUPE when the transferor is in administration.

The court preferred an "absolute" approach (focusing on the nature and purpose of the insolvency procedure rather than the particular intentions or factual matrix of a given administration application). It emphasised Schedule B1's statutory hierarchy of objectives (paragraph 3) which places rescuing the company as a going concern as the prima facie objective, and adopted the EAT's view that legal certainty and the purposive interpretation of article 5.1 point away from a fact-based enquiry into the administrators' pre-appointment aims. The decision applied and explained relevant EU case law (including Abels, D'Urso, Dethier and Europièces) and domestic authorities dealing with administration and pre-packs.

Background and parties: The appellant, Key2Law (Surrey) LLP, contracted to manage the Epsom and Ewell offices of Drummonds Kirkwood LLP (DK) after DK entered administration. The respondent, Gaynor De'Antiquis, was a former assistant solicitor dismissed by DK and claimed, inter alia, pay in lieu of notice, holiday pay, unfair dismissal and sex discrimination. She argued that Key2 was a transferee for TUPE purposes and therefore liable under regulations 4 and 7.

Procedural history: Employment Judge Freer (Employment Tribunal) found there was a relevant transfer and a service provision change and, applying a fact-based approach, concluded that regulation 8(7) did not disapply regulations 4 and 7 in the particular administration. Key2 appealed to the Employment Appeal Tribunal (EAT). The EAT applied an "absolute" approach and held that administration proceedings could not be "analogous insolvency proceedings … instituted with a view to the liquidation of the assets" within the meaning of article 5.1 and regulation 8(7); it dismissed Key2's appeal. Permission to appeal to the Court of Appeal was granted and the Secretary of State intervened by written submissions.

Nature of the claim / relief sought: The respondent sought statutory and contractual employment remedies against Key2 on the basis that her contract transferred under TUPE; Key2 sought to avoid that liability by invoking regulation 8(7) (disapplying regulations 4 and 7 where the transferor is subject to specified insolvency proceedings).

Issues framed:

• Whether administration proceedings under Schedule B1 can constitute "analogous insolvency proceedings … instituted with a view to the liquidation of the assets of the transferor" within article 5.1 of Directive 2001/23/EC and regulation 8(7) of TUPE;
• Whether the determination is a fact-based inquiry into the purpose of the particular administration appointment or an objective question about the nature of administration proceedings as a class;
• Whether, on the facts found by the Employment Tribunal, regulation 8(7) applied.

Court’s reasoning and conclusion: The Court of Appeal agreed with the EAT and endorsed an "absolute" approach: article 5.1/regulation 8(7) should be construed by reference to the nature and statutory purpose of the insolvency procedure invoked, not by an uncertain fact-based inquiry into why a particular administration was sought. The court analysed Schedule B1 (paragraphs 3 and 11), noting the hierarchy of objectives which treats rescuing the company as the prima facie aim, and concluded that administration is not, in essence, a procedure instituted with a view to liquidation of assets. The court reviewed the relevant CJEU case law (Abels, D'Urso, Dethier, Europièces) and domestic authorities, explaining that those authorities support focusing on the character of the procedure rather than the motives of the applicants. The court therefore dismissed Key2's appeal, upholding the EAT’s reasoning that administration proceedings do not, as such, fall within regulation 8(7).

Subsidiary findings: The Employment Tribunal had also found that the Epsom office transfer amounted to a relevant transfer and a service provision change under TUPE; these findings were not determinatively disturbed on appeal.

Appeal dismissed. The Court of Appeal agreed with the EAT that article 5.1 of Directive 2001/23/EC (implemented by regulation 8(7) of TUPE) should be applied by reference to the nature and purpose of the insolvency procedure as a class; administration under Schedule B1 is not, as such, "instituted with a view to the liquidation of the assets" and therefore does not automatically engage regulation 8(7). The court endorsed the EAT's "absolute" approach for reasons of legal certainty and purposive interpretation of the Directive and domestic law.

Employment Tribunal (ET) reserved judgment 20 August 2009 (Employment Judge Freer) — found a relevant transfer and applied a fact-based inquiry under regulation 8(7). Employment Appeal Tribunal (EAT) (Underhill J with Ezekiel and Smith) hearing 16 February 2011 — held administration cannot constitute the kind of proceedings in regulation 8(7) and applied an "absolute" approach; Key2 obtained permission to appeal to the Court of Appeal. Court of Appeal ([2011] EWCA Civ 1567) judgment delivered 20 December 2011 — dismissed the appeal and endorsed the EAT’s approach. Secretary of State intervened by written submissions.