Mohammed Shazan Chaudhry v Paperchase Products Limited & Anor

Under Part XII of the Employment Rights Act 1996, recovery from the Secretary of State of a basic award for unfair dismissal requires an employment tribunal to have made that award. The appropriate date cannot be identified until insolvency, termination and the making of the award have all occurred. The statutory scheme therefore treats a basic award differently from ordinary arrears of pay.

Domestic legislation implementing the Insolvency Directive must, so far as possible, be interpreted consistently with retained EU law. That duty does not permit an interpretation contrary to the plain words and structure of the legislation. The Employment Appeal Tribunal could not disapply the domestic provisions. It dismissed the appeal, notwithstanding a strong argument that the requirement for an award may make the Directive right excessively difficult to exercise and create unjustified differential treatment.

The claimant was dismissed by Paperchase in October 2018 and presented a timely unfair dismissal claim in 2019. Paperchase denied that the dismissal was unfair. After it entered administration, that claim was stayed and no tribunal adjudicated it or made an award.

The claimant submitted a proof of debt and later sought payment from the Secretary of State from the National Insurance Fund. He brought a further claim seeking a declaration under section 188(3) of the Employment Rights Act 1996 that the Secretary of State should pay a basic award. Employment Judge Quill dismissed that claim.

The appeal concerned whether an employee may recover a basic award under Part XII without first obtaining an employment tribunal judgment that the dismissal was unfair and making the award.

1. Appeal dismissed. The Employment Judge correctly held that the Secretary of State was not obliged to make a Part XII payment in respect of a basic award where no employment tribunal had adjudicated the unfair dismissal claim or made such an award.

2. The ordinary meaning and statutory context of an award required a decision that a specified sum was payable. For a basic award, section 185(b) makes the appropriate date the latest of insolvency, termination and the date on which the award was made. Until all three events occur, the condition in section 182(c) is not met. The tribunal must also calculate the award under the applicable provisions of Part X; its amount cannot be assumed to be the statutory maximum.

3. The different treatment of arrears of pay did not assist the claimant. The statutory provisions governing arrears, including the equality-clause issue considered in Graysons Restaurants Ltd v Jones [2019] ICR 1342, do not require an award. Nor did the fact that an unfair dismissal claim may be a provable insolvency debt remove the separate Part XII requirement for an award.

4. The Tribunal accepted that the Marleasing principle, effectiveness and non-discrimination applied to retained EU law. It considered there to be a strong argument that the statutory requirement may be difficult to reconcile with the Insolvency Directive, because it may make recovery excessively difficult and differentiate without justification between categories of employee debt. However, the proposed interpretation would contradict the plain statutory language and go against the grain of the scheme. Following Brexit legislation, the Tribunal had no power to disapply the provisions.

5. The Employment Judge's EU-law reasoning was inadequately brief, but that deficiency could not affect the outcome. As a practical postscript, an office-holder should carefully consider consenting to a limited unfair dismissal claim pursued solely to obtain a basic award recoverable from the Secretary of State, where no insolvent assets will be spent defending it.

• Employment Appeal Tribunal: dismissed the appeal and upheld the refusal of a declaration under section 188(3) of the Employment Rights Act 1996.
• Employment Tribunal, Watford: Employment Judge Quill dismissed the claim against the Secretary of State and struck out the duplicate, out-of-time 2022 unfair dismissal claim against Paperchase. Reasons were dated 16 April 2023 and sent on 23 May 2023.