Irwell Insurance Company Ltd v Watson & Ors

For the purposes of section 2(6) of the Third Parties (Rights against Insurers) Act 2010, an employment tribunal is “the court”. It may therefore determine an insolvent employer’s insurer’s potential liability in the same proceedings as the underlying employment claims.

The Act’s purpose is to provide a single forum and avoid separate proceedings against the insured and insurer. An arbitration clause is generally transferred with the insured’s rights. However, it must yield where arbitration would exclude or limit claims falling within the employment tribunal’s exclusive jurisdiction, such as unfair dismissal or discrimination claims.

Neil Watson brought unfair dismissal and disability discrimination claims against his employer and its former managing director. After the employer entered liquidation, Watson sought to join its insurer under the Third Parties (Rights against Insurers) Act 2010.

The Employment Tribunal stayed the proceedings pending determination by the ordinary courts of the insurer’s liability under the policy. The Employment Appeal Tribunal allowed Watson’s appeal in UKEAT/0007/19/JOJ. The insurer appealed to the Court of Appeal. The principal issues were whether an employment tribunal was “the court” for section 2(6) of the Act and whether the insurer could rely on an arbitration clause.

1. Appeal dismissed. The Employment Appeal Tribunal had correctly held that the Employment Tribunal had jurisdiction to determine Watson’s claim against the insurer. Its order lifting the stay therefore stood.
2. The meaning of “the court” in section 2(6) of the Third Parties (Rights against Insurers) Act 2010 depended on statutory context and purpose. The Act was intended to provide a single forum for claims against an insurer of an insolvent insured, including preliminary coverage issues. Excluding employment tribunals would defeat that purpose by forcing claimants with employment claims to issue separate proceedings.
3. An employment tribunal had the relevant characteristics of a court. It was independent, exercised judicial functions, determined rights and liabilities, sat in public, administered oaths, controlled proceedings, compelled witnesses, awarded remedies and gave decisions subject to appeal. Its lack of inherent jurisdiction, general declaratory power, enforcement machinery or specialist insurance jurisdiction did not produce a different result. The reasoning in Peach Grey v Sommers [1995] ICR 549 was of general application. Brennan v Sunderland City Council [2012] ICR 1183 concerned a different question of jurisdiction rather than forum and did not govern this case.
4. As a general rule, a statutory assignee is bound by an arbitration clause in the insurance contract, and section 2(7) permits the third party to seek a declaration about the insured’s liability in the arbitration. The position differs where the underlying claims fall within the Employment Tribunal’s exclusive jurisdiction. Requiring arbitration would either deny access to the Employment Tribunal or require separate proceedings. Sections 203 of the Employment Rights Act 1996 and 144(1) of the Equality Act 2010 reinforced that conclusion. The arbitration clause was therefore inoperative to the extent that the insurer sought to use it as a defence or procedural block to the Employment Tribunal claim.
5. Lord Justice Flaux and Lord Justice Males agreed with Lord Justice Bean. The insurer was ordered to pay Watson’s costs of the appeal.

1. Court of Appeal (Civil Division): In [2021] EWCA Civ 67, the appeal was dismissed and the Employment Appeal Tribunal’s order allowing the claim to proceed was upheld.
2. Employment Appeal Tribunal: In UKEAT/0007/19/JOJ (16 December 2019), Watson’s appeal was allowed. The EAT held that the Employment Tribunal had jurisdiction to determine the dispute under the Third Parties (Rights against Insurers) Act 2010.
3. Leicester Employment Tribunal: By reserved judgment and reasons dated 4 September 2018, the proceedings were stayed pending determination by the ordinary courts of whether the insurer was liable under the Act.