Secretary Of State For Trade & Industry v Williamson & Ors [1997] UKEAT 628_96_2001

EAT

Secretary Of State For Trade & Industry v Williamson & Ors

[1997] UKEAT 628_96_2001 · 1997-01-20

JUDGE C SMITH QC :

This is an appeal by the Secretary of State against the decision of an Industrial Tribunal sitting at London South on 14 March 1996 whereby it was held that the various Respondents were entitled to various payments from the Secretary of State under sections 106 and 122 of the 1978 Act, resulting from the alleged insolvency of the limited company by whom they had been employed. Costs were awarded against the Secretary of State, as specified in the decision. The Secretary of State now appeals against the finding of entitlement, save with regard to redundancy payments, and against the costs order.

All the Applicants before the Industrial Tribunal had been employed by the first Respondent, Hawkins Direct Ltd, on the terms set out in the schedule to the decision of the Industrial Tribunal.

As is apparent from the decision of the Industrial Tribunal, a firm of accountants, Hacker Young and Partners, attended on 19 April 1995 at the first Respondent's offices to examine its accounts. It is apparent that they were acting on behalf of the debenture holder, Barclays Bank plc under the terms of the debenture entered into between the Bank and the first Respondents, dated 26 September 1990. In consequence of this intervention by the accountants, the Applicant employees, as they were before the Industrial Tribunal, were refused access to their place of work and the Industrial Tribunal concluded that they were all constructively dismissed by reason of redundancy on 20 April 1995.

The Industrial Tribunal found as a fact in paragraph 4 of its decision that neither the first Respondents, nor the accountants, nor the Bank, had made any payments to any of the Applicants in respect of unpaid wages, holiday payments, payments in lieu of notice or redundancy compensation and, accordingly, the Industrial Tribunal found that the Applicants were entitled to apply to the Secretary of State for payment of redundancy compensation under section 106(1)(a) of the Employment Protection (Consolidation) Act 1978.

With regard to the remaining debts owed to the Applicants, i.e., in respect of arrears of pay, payment in lieu of notice and holiday pay, it was necessary for the Industrial Tribunal to find that the Secretary of State had failed to make payments which he should have made, which depended upon whether the Secretary of State should have been satisfied that the first Respondents had become insolvent.

By s.127(1)(c)(i) of the 1978 Act:

"... an employer shall be taken to be insolvent if, but only if, in England and Wales, -

. ..

(c) where the employer is a company ... a receiver or manager of its undertaking is duly appointed, or possession is taken, by or on behalf of the holders of any debentures secured by a floating charge, of any property ... comprised in or subject to the charge ..."

In paragraphs 6 and 7 of its decision, the Industrial Tribunal held, having considered the content of a form 405(1) apparently submitted by Barclays Bank plc to Companies House, signed on behalf of the Bank, dated 27 April 1995, that it was beyond question that the appointment of Hacker Young and Partners, under the debenture, referred to in the form as the receivers and managers of part of the property secured by the debenture, namely, the book debts then and from time to time due and owing to the first Respondent, satisfied the definition of insolvency within s.127(1)(c) of the 1978 Act set out above.

By paragraph 8 of their decision, the Industrial Tribunal rejected the contention that because the first Respondents were not in liquidation nor had an administration receiver been appointed nor an administration order made nor had there been a voluntary arrangement approved by the Court, the company were not insolvent. The Industrial Tribunal held that the matter was to be decided by reference to the wording of the subsection, which we have cited above.

At the hearing before the Industrial Tribunal, the Secretary of State chose not to be represented and addressed no oral arguments to the Industrial Tribunal but relied instead upon written submissions. It follows, of course, that no evidence was placed before the Industrial Tribunal by the Secretary of State. By paragraph 9 of its decision, the Industrial Tribunal held that the Secretary of State had acted unreasonably in denying liability to make the payments ordered and ordered costs accordingly, as set out in the decision.

In his submissions to us during this appeal, Counsel for the Secretary of State submitted that on a proper construction of the evidence which was before the Industrial Tribunal as to the circumstances of the appointment of the accountants as receivers of the book debts under the Barclays Bank debenture dated 26 September 1990, the Industrial Tribunal should have held that the appointment was an appointment exclusively limited to debts the subject of a fixed charge and not under a floating charge, so that he submitted the appointment was not "by or on behalf of the holders of any debentures secured by a floating charge" within s.127(1)(c) of the 1978 Act.

He submitted that the Industrial Tribunal were not entitled to conclude that the appointment was, at least partially, under a floating charge. It is important to observe that all the Industrial Tribunal had in front of them was the letter from the accountants dated 30 May 1995 and the form 405(1) which is the statutory form required to be lodged at Companies House on the appointment of a receiver or manager. It is plain from the Industrial Tribunal's decision that it was upon the evidence of the latter document, namely, the statutory form, that the Industrial Tribunal relied in reaching its conclusion that the Company was insolvent within s.127(1)(c) of the 1978 Act. In particular, unlike the situation in the case of the Secretary of State for Employment v Stone

[1994] ICR 761

, the Industrial Tribunal did not have either the debenture itself or the terms of appointment of the receivers and managers before them, they simply had the form 405(1). It was Counsel's submission that it was a necessary inference from the wording of the appointment set out in the appropriate place in manuscript on that statutory form that the appointment was strictly limited:-(1) to the charge related to book debts existing and future and

(2) that the charge was a fixed and not a floating charge. Counsel submitted that if one looked at the wording describing the assets, the subject matter of the appointment, as shown on the statutory form, viz:

"... in respect of all book debts and other debts now and from time to time due or owing to the Company ..."

it follows that the charge in respect of such debts must be a fixed charge despite the fact that it is plain from the description of the debenture on the form 405(1) that the debenture contains powers over the company's assets both by way of fixed charge and also by way of floating security. In support of that rather startling submission, as we found it to be, Counsel for the Secretary for the State placed reliance upon the terms of paragraph 3 of the debenture dated 29 September 1989 made between Barclays Bank plc and the Company in the Stone case, as set out in the judgment of the Employment Appeal Tribunal in that case at page 766 D to E, and he submits from the fact that the same wording; viz:

"all book debts and other debts now and from time to time due or owing to the company"

appears both in that debenture and also by inference from the form 405(1) in the instant debenture - i.e. the one which the Industrial Tribunal were considering - it must follow that the charge over book debts in the instant debenture is, like the charge over book debts in the Stone case, a fixed charge.

Counsel for the Respondents submitted that it does not follow at all from the fact that the book debts in the debenture in the Stone case were secured by a fixed charge, that in the case of every other debenture issued by Barclays Bank plc at about the same time, including the instant debenture, book debts were always secured by a fixed charge. He submitted to us that, indeed, it is apparent from the passage in the judgment of Mr Justice Slade, as he then was, in the case of Siebe Gorman & Co Ltd v Barclays Bank Ltd [1979] 2 Lloyd's Rep. 142 cited by the Employment Appeal Tribunal in the Stone case, particularly at page 767 at F, that normally, in the case of book debts one would expect the floating charge form to be the form more usually employed.

Thus Counsel for the Respondents submitted that the Industrial Tribunal were entirely justified in concluding, on the evidence before them, that the appointment of the accountants here was an appointment over book debts secured by a floating charge rather than a fixed charge.

We entirely accept Counsel for the Respondents' submissions and reject those of Counsel for the Appellants on this point. In our judgment it is wholly impermissible from the mere common form description of the book debts in the two debentures to seek to draw the inference that they were the subject matter of a fixed charge in each case. In our judgment, the Industrial Tribunal were amply justified in finding on the best evidence before them that the appointment under the debenture was in respect of book debts secured by a floating charge. The debenture plainly encompassed both types of charge and the usual form of charge, absent any particular agreement to the contrary, for book debts, would be a floating charge and, accordingly, the Industrial Tribunal were fully justified in so holding.

The wording in the form 405(1) relied upon by Counsel for the Appellant, is silent as to the nature of the charge in fact contained in the instant debenture relating to book debts and we consider that it is, with respect to the argument, plainly fallacious to suggest that the Industrial Tribunal or, indeed, this Employment Appeal Tribunal, could draw an inference that the wording in one debenture in a given case throws any light whatsoever on the wording of a differently dated debenture in another case made between different parties. We dismiss the appeal on that ground.

With regard to costs, we have no hesitation in upholding the decision of the Industrial Tribunal. On the evidence before the Industrial Tribunal, in our judgment, only one result could follow. The Secretary of State did not choose to turn up at the hearing and, in effect, denied liability without saying why. In our judgment, the argument put forward based upon Stone is fallacious and did not raise any kind of reasonably triable issue as to the insolvency of the company on the plain wording of s.127(1)(c). We have taken into account the fact that the Secretary of State did not actually have the form 405(1) but chose to rely instead on the accountant's letter but in our judgment if the Secretary of State had looked into the matter properly he would have obtained the form 405(1) and appreciated that there was no defence to the claim. He failed so to act and gave no clear indication as to why he was denying liability. In our judgment the Secretary of State acted unreasonably within the relevant rule relating to costs in an industrial tribunal, so as to entitle the Industrial Tribunal to make an order for costs against the Secretary of State. Accordingly, the appeal is dismissed on both grounds.