Watson v Hemingway Design Ltd (Irwell Insurance Co Ltd v Watson)

An employment tribunal is capable of being “the court” for the purposes of section 2(6) of the Third Parties (Rights Against Insurers) Act 2010. It may therefore determine the insured employer’s liability and the insurer’s liability in the same proceedings.

The statutory purpose of the 2010 Act is to facilitate a single-forum remedy where an insured becomes insolvent. The tribunal’s statutory jurisdiction is not confined to employment contracts or to powers expressly conferred by the Employment Tribunals Extension of Jurisdiction Order 1994.

Obiter, an insurance arbitration clause requiring the claimant to arbitrate disputes which would otherwise be determined in employment proceedings would be void under section 203 of the Employment Rights Act 1996 and section 144 of the Equality Act 2010.

Mr Watson brought claims for constructive unfair dismissal and disability discrimination against Hemingway Design Ltd and its managing director. Hemingway later entered liquidation and held insurance with Irwell Insurance Co Ltd covering potential liabilities arising from the claims.

Irwell was joined as a respondent under the Third Parties (Rights Against Insurers) Act 2010. Employment Judge Ahmed dismissed Irwell’s strike-out application but held that the employment tribunal lacked jurisdiction to determine the insurance dispute and stayed the claim against Irwell pending proceedings in an ordinary court or arbitration.

The appeal concerned whether the tribunal was “the court” under section 2(6) of the 2010 Act and, potentially, whether an arbitration clause in the insurance policy could be enforced.

1. Appeal allowed. The stay of the claim against Irwell was set aside and lifted.
2. The central issue was whether an employment tribunal fell within “the court” in section 2(6) of the Third Parties (Rights Against Insurers) Act 2010. If it did, section 2 conferred jurisdiction to make declarations concerning the insured’s liability and the insurer’s liability, and section 2 of the Employment Tribunals Act 1996 required that jurisdiction to be exercised.
3. The employment judge had placed excessive weight on the absence of a direct employment contract or contractual nexus between the claimant and Irwell. The statutory transfer of Hemingway’s contractual rights created the relevant nexus, and the dispute arose indirectly from the employment relationship.
4. The 2010 Act was intended to remedy the need for separate proceedings under the former statutory regime. Its “single forum” purpose supported a purposive construction of “the court”. Authorities including Peach Grey & Co v Sommers and Vidler v UNISON showed that whether an employment tribunal is a court depends on statutory context. In this context, the tribunal exercised judicial functions, determined rights and liabilities, administered oaths, and awarded remedies. It was therefore included within section 2(6).
5. Brennan v Sunderland City Council was distinguished. That case concerned the absence of a substantive right to contribution, whereas the present dispute concerned only the appropriate forum for enforcing transferred insurance rights.
6. The discussion of the policy’s arbitration clause was obiter because neither party had invoked it. The better view was that a clause requiring the claimant to arbitrate the dispute with Irwell would limit the operation of the Employment Rights Act 1996 and the Equality Act 2010, by forcing separate or alternative proceedings, and would therefore be void under section 203 of the former Act and section 144 of the latter.

• Employment Appeal Tribunal: allowed the appeal from the employment judge’s reserved decision dated 4 September 2018. The stay of the claim against Irwell was set aside and lifted.
• Employment Tribunal: dismissed Irwell’s strike-out application but stayed the claims against Irwell pending determination of the insurance coverage dispute in the county court or High Court.