Union Of Textile Workers v F A Morris Ltd (In Liquidation) [1993] UKEAT 484_91_0903

EAT
Union Of Textile Workers v F A Morris Ltd (In Liquidation)
[1993] UKEAT 484_91_0903 · 1993-03-09
MR JUSTICE WOOD (PRESIDENT): By an Originating Application which was dated the 21st January 1991 the applicant trade union, the Union of Textile Workers, sought a protective award under Sections 99 and 101 of the Employment Protection Act 1975 now Sections 188 and 189 of the Trade Union and Labour Relations Consolidation Act 1992 in the following terms:
"A Mr Kachani was appointed liquidator for F A Morris Limited, the Respondents, on November 19th 1990, and proceeded to make a number of our members redundant without proper consultation under Section 99 of the 1975 Employment Act."
The Application was heard by an Industrial Tribunal sitting at Birmingham, under the Chairmanship of Mr Delgado, who on the 20th May 1991 dismissed the Application. The Trade Union appeal.The relevant dates as they appear from the documents are as follows. On the 19th November 1990 the liquidator was appointed. There had been one employee made redundant on the 6th November but it does not seem that this was a member of this Trade Union in the light of the wording of the Originating Application.The Company was a small company employing some 20 people, 12 of whom were members of the Trade Union. On the 22nd November one Trade Union member was made redundant, that was three days after the arrival of the liquidator. The liquidator set about his tasks and on the 27th November wrote a letter to the official of the Trade Union. It was done in that way because the question of whether the Trade Union was an independent Trade Union and was recognised were matters which were not clear to the liquidator. He wrote on the 27th November 1990, informing the Trade Union in effect that he had been appointed, it was a voluntary liquidation. Then he continues as follows:
"I intend to continue certain of the companies operations for the time being. Nevertheless, in view of the companies financial position, I anticipate that there will be redundancies among its employees. It is not yet possible to estimate with any accuracy when these will occur or there extent.
A purchaser will be sought for the companies business. Should a sale of the business be concluded, there will be a transfer of the business to a new owner because of the company's insolvency. I must emphasize that it may not be possible to arrange a sale of the business and it is, of course, too early to estimate when any such transfer might take place. It is not yet possible to say what measures relating to affected employees will be taken in the event of a transfer of the business by either the company or the purchaser.I am considering the transfer of the company's business to a subsidiary in order to facilitate its continuance and, hopefully, its eventual sale."and then he goes on to refer to the transfer undertakings and he ends:
"If you require any further information, please do not hesitate to contact the undersigned."
As far as is known there was no communication thereafter from the Trade Union to the liquidator.That letter was adjudged by the Industrial Tribunal to be perfectly genuine. That is emphasised from the findings of the Tribunal in more than one place in the decision, so that the fact remains that the Tribunal took the view that no decision had been made about redundancies when that letter was written, that it was giving notice that the problems existed and the Tribunal are somewhat surprised that there was no reaction from the Trade Union to that letter.The remainder of the Trade Union members were made redundant on the 4th or 5th December. We do not know whether the whole of the remaining staff were made redundant or not, but at some stage between the 27th November and the 4th or 5th December, the liquidator made a decision to make those members redundant. That date has not been found by the Industrial Tribunal. There was a subsequent letter of the 11th December 1990, which included the HR1, but, as was pointed out by everybody, by that stage all the Trade Union members in whom the Trade Union were interested had been dismissed.That being the position the Tribunal then had to approach the provisions of Section 99 or Section 188 and decide whether proper consultation had taken place after the proposal to dismiss as redundant those employees. It seems clear that in paragraph 15 of the decision, read together with paragraph 13, that there was considered to be a breach of the obligation to consult at some time between the 27th November and the 4th or 5th December, but that this was a special reason because of the insolvency and that the decision to make those members redundant had been made by the liquidator, not the employer, the Company itself.On the date when the decision was reached the Tribunal did not have the advantage of the case of In re Hartlebury Printers Ltd & Others Ltd (In Liquidation) [1992] ICR 559, that was a decision of Morritt J in a winding-up. It was made quite clear that the act of the liquidator is the act of the Company, as agent for the Company. In the older cases and in particular the case of Clerks of Hove Ltd v. Bakers Union [1978] ICR 1076, a decision of the Court of Appeal, insolvency as such is not a special reason, because the reasons to be "special" have to be special to the case and insolvency is of general application and not special to the case.It therefore seems to us, as Miss Eady has submitted, that the reasoning in paragraph 15, that there were special reasons can not be substantiate in law and that it is erroneous. It also follows that there was a breach of Section 188 at some time between the 27th November and the 4th or 5th December, but we do not know when that date was. Thus although she seeks a declaration from us, it seems to us that we can not make a declaration because the facts have not been sufficiently found for that declaration to be made. Nevertheless, it does seem to us that there was a breach for an unspecified period at that time.That being so the Industrial Tribunal then had to proceed to consider two matters. The first, whether or not to make a protective award and secondly, over what period of time to make that protective award. Sub-paragraph (2) of Section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992 reads:
"If the tribunal finds the complaint well-founded it shall make a declaration to that effect"
and we have indicated that in the present position we can not make a declaration.

"and may also make a protective award."

There is no obligation to do so. Then subsection (3) deals with a protective award and it defines it. Then subsection (4) says:
"the protected period - (a) begins with the date on which the first of the dismissals to which the complaint relates takes effect, or the date of the award, whichever is the earlier, and . . ."
and there it would be, presumably, the 22nd November.
"(b)is of such length as the Tribunal determines to be just and equitable in all the circumstances having regard to the seriousness of the employer's default in complying with any requirement of section 188;

but shall not exceed . . ."

then it gives the two periods. The Tribunal therefore having reached that stage in its deliberations had to decide whether it was appropriate to make a protective award and for what period it should be made. The period of time would seem to be for possibly, a few days, because it may be that the earliest of the redundancies was only a short time before the date on which consultation should have started. However in paragraph 17 the Tribunal continue as follows:
"If however we are wrong and are obliged to find the respondent failed to consult in accordance with its obligation and therefore the complaint is well founded, we would have said in all the circumstances and taking into account the nature and circumstances of the employer's default, it would not be appropriate to make an award for any period of time. We do not think there has been a flagrant or deliberate breach as has been suggested but more a breach of a technical nature. Bearing in mind this fact and payments we understand that were later made to employees for which they must give credit, any loss by them would be minimal. We take the view it would not be just and equitable to have made anything other than a nil award. However, for the reasons given we dismiss the application."
That passage has been severely criticised by Miss Eady. She said that because the Tribunal erred earlier in its reasoning it could not properly have reached the decision which it did in that paragraph. We are unable to accept that. It seems to us that the view taken by the Tribunal was that there was no error, there was no culpable activity by the liquidator when he sent the letter of the 27th November 1990. There was no question then of proposed redundancies. It was an appropriate letter, a letter that might well have indicated to the Trade Union that they should come and discuss the matter, and indeed the last paragraph of that letter invites them so to do. They did nothing, that matter is criticised in part of the reasoning and indeed, those with industrial experience sitting with me agree that the Trade Union officials seem to have been very lax in looking to the interests of their members and seeking consultation at that stage. The period between that time and the launching of the Originating Application, is also a considerable period of time. However, the Industrial Tribunal thought that there was no culpable behaviour by the liquidator. There came a time when he made a decision, whether it was before the 4th or the 5th, whether it was on the 4th or 5th is not clear, but the Tribunal seem to take the view that he had not erred prior to making that decision when some consultation should have taken place. It might very well have been hopeless, but as Miss Eady says, the Trade Union was entitled in law to be consulted for that short period of time. The Tribunal took that into account, they took into account the wording of the Act namely, the seriousness of the employer's default. They also looked at the question of payments and there must have been some payments, probably damages in lieu of notice, for which credit should have been given. Then they take the broad view on the just and equitable basis.We find that the Tribunal erred in law in their finding that there were special reasons in this case. Even if there were special reasons they were perfectly entitled, as they indicated, in case they were wrong on those matters to take the view which they did and to make nil awards or no award under the provisions of Section 189. In view of the fact that we can not state specifically when the decision to make the redundancies occurred, we are unable to give a declaration as sought from us. In this case the Tribunal felt that there was no merit in this application. That was a view they were seemingly entitled to take and we will not disturb the decision. This appeal therefore will have to be dismissed.