Key2Law (Surrey) LLP v De’Antiquis

Administration proceedings under Schedule B1 to the Insolvency Act 1986 cannot constitute insolvency proceedings instituted with a view to liquidation for the purposes of regulation 8(7) of TUPE. The character of the statutory procedure, rather than the administrator’s factual intention in an individual case, determines the issue.

Accordingly, regulations 4 and 7 ordinarily apply to a transfer by a company in administration, including a pre-pack sale. Regulation 8(1)–(6) may nevertheless operate to transfer specified liabilities to the Secretary of State’s guarantee scheme and relieve the transferee of corresponding liabilities.

Five appeals were heard together because they concerned transfers of businesses made by companies in administration under Schedule B1 to the Insolvency Act 1986. The employment tribunals had followed Oakland v Wellswood (Yorkshire) Ltd [2009] IRLR 250 and treated the application of regulation 8(7) of TUPE as a fact-based question.

The central issue was whether administration proceedings could fall within the exception for insolvency proceedings instituted with a view to liquidation, or whether that exception was unavailable to administrations as a class.

1. Primary issue. Administration proceedings under Schedule B1 are not capable of constituting liquidation proceedings within regulation 8(7) of TUPE. The statutory procedure has a defined legal character and its primary objective is rescue of the company as a going concern, subject to the hierarchy in paragraph 3 of Schedule B1.
2. The phrase in regulation 8(7), reflecting article 5.1 of Directive 2001/23/EC, concerns the object of the proceedings when instituted. At that stage the administrator must first consider the statutory rescue objective. The procedure does not require the administrator to declare at appointment which statutory objective will ultimately be pursued.
3. A fact-based approach would create uncertainty and disputes about liability, because affected employees could not reliably determine whether regulations 4 and 7 applied. The bright-line approach also better reflects the Directive’s primary purpose of protecting employees. The distinction between liquidation proceedings and other insolvency proceedings, derived from Abels v Bedrijfsvereniging voor de Metallindustrie en de Electrotechnische Industrie [1985] ECR 469, had to be respected.
4. Oakland was not followed. Its fact-based approach was wrong, although the individual outcomes in several appeals were preserved or reached on the correct legal basis. Regulations 8(1)–(6) implement the partial derogation permitted by article 5.2 and may affect liabilities for guaranteed debts where the employee’s dismissal occurred before or after the transfer.
5. The appeals were disposed of individually: the Key2Law appeal was dismissed; the Olds appeal was remitted; the OTG appeal was dismissed as to Mr Barke and allowed as to Mrs Luke, with a corresponding award against the Secretary of State; the Head Entertainment appeal failed; and the Coyne appeal was provisionally to stand dismissed unless written submissions showed cause otherwise.

Mr Smith agreed with the result and principal reasoning, but separately suggested that employee negotiations under regulation 9 might provide a purposive means of addressing the tension between employee protection and rescue culture. The President did not accept that regulation 9 could support such expanded rights.

• Employment Tribunal: held that the Epsom office had transferred, that regulation 8(7) did not apply, and that regulation 8(6) did apply, following the fact-based approach in Oakland v Wellswood (Yorkshire) Ltd [2009] IRLR 250.
• Employment Appeal Tribunal: dismissed the appeal. The tribunal had reached the correct result on regulation 8(7), although by the wrong route.