MR P PARRY v SECRETARY OF STATE FOR TRADE & INDUSTRY [1999] UKEAT 1301_98_2309

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [1999] UKEAT 1301_98_2309Case No Appeal No. EAT/1301/98Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
MR P PARRYAPPELLANTSECRETARY OF STATE FOR TRADE & INDUSTRYRESPONDENT
Before
His Honour Judge Peter Clark Mrs J M Matthias Mr A D TuffinDate 23 September 1999
[1]APPEARANCES For the Appellant THE APPELLANT IN PERSON For the Respondent MR R HILL (of Counsel) Instructed by: Mr J Maskell Legal Adviser Legal Services Directorate - B Secretary of State for Trade & Industry Room 216 10-18 Victoria Street London SW1H 0NN JUDGE PETER CLARK : This is an appeal by Mr Parry, the applicant before the Reading Employment Tribunal sitting on 5th August 1998, against that tribunal's decision, promulgated with extended reasons on 3rd September 1998, dismissing his claim for a payment out of the National Insurance Fund ["the Fund"] brought against the Secretary of State for Trade & Industry. Background The appellant was employed as a sales representative by AM Office Contracts (Reading) Ltd ["the Company"] from 19th June until 12th December 1987 when he was summarily dismissed.[2]He did not then receive his full entitlement to wages, commission and expenses from the Company and eventually on 1st September 1992 he obtained judgment against the Company in the Kingston County Court in the sum of £1,000.72. By then the Company's name had been changed to Premier Base Ltd. Nothing turns on that change of name.[3]He discovered that the Company had ceased to trade and had not filed any accounts at Companies House for several years.[4]Accordingly, in 1993 he made application to the Redundancy Payments Office for payment out of the Fund. That was refused, as was a later claim made by Mr Parry in 1997.[5]On 16th March 1998 he presented an Originating Application to the Employment Tribunal claiming a payment out of the Fund against the Secretary of State relying on s.188 of the Employment Rights Act 1996 ["the 1996 Act"]. A point arose before the Employment Tribunal as to whether that complaint was time-barred. That issue was resolved in favour of the appellant. There is no cross-appeal against that finding.[6]The claim was resisted on the basis that the Company was not insolvent within the meaning of s.183(3)(b) of the 1996 Act. The Law[7]The following provisions of the 1996 Act are material: S.182 gives an employee whose employment has been terminated the right to payment of certain debts defined in s.184 out of the Fund where the employer has become insolvent.[8]Insolvency for the purposes of s.182 is tightly defined in s.183. By s.183(1)(b), where as here the employer is a company, the company is insolvent if but only if subsection (3) is satisfied.[9]The relevant provision for present purposes appears in s.183(3)(b) as follows:
"if a receiver … of the company's undertaking has been duly appointed, or (in England and Wales only) possession has been taken by or on behalf of the holders of any debentures secured by a floating charge, of any properly of the company comprised in or subject to the charge."
[10]The meaning and effect of s.183(3)(b) was carefully considered by Waterhouse J in the judgment which he delivered on behalf of the EAT in Secretary of State for Employment v Stone [1994] ICR 761 , a case cited to the Employment Tribunal below.[11]That was a claim by the applicant for arrears of pay due to him from the company which employed him out of the Fund. The claim was resisted on the basis that the company was not insolvent within the meaning of the predecessor to s.183(3)(b), namely s.127(1)(c) of the Employment Protection (Consolidation) Act 1978 . S.127(1)(c) included the words of s.183(3)(b) of the 1996 Act.[12]An Industrial Tribunal held, on the facts, that the company was insolvent. Those facts were that the company entered into a debenture with Barclays Bank on 29th August 1989 and that receivers had been appointed in relation to that debenture on 20th September 1991. The appointment of the joint receivers was restricted to the charge on book debts and other debts forming part of the first fixed charge within the terms of the debenture and were not appointed in respect of property which, according to the debenture, was the subject otherwise of the first fixed charge or of a floating charge.[13]The Industrial Tribunal found that notwithstanding the terms of appointment, the receivers' powers extended to the property that was the subject of the floating charge and that accordingly the company was insolvent.[14]The appeal against that finding by the Secretary of State succeeded. The EAT treated the two limbs contained in what is now s.183(3)(b) disjunctively. Either the appointment of the receivers must extend to the company's undertaking; a limited appointment will not satisfy the subsection, or possession must be taken by or on behalf of the debenture holders of any property of the company subject to a floating charge other than in pursuance of an appointment.[15]The Industrial Tribunal's error of law was to look at incidental possession by the receivers, rather than the precise terms of their appointment. The tribunal's findings[16]We begin with the documentary evidence which was before and accepted by the Employment Tribunal.[17]The document signed by the joint receivers, Bryn Williams and Philip Andrew Edwards of DTZ Debenham Thorpe, accepting their appointment and dated 28th April 1993 is headed "Written Acceptance of Appointment As Law of Property Act 1925 Receiver."[18]It states that Messrs Williams and Edwards:
"… hereby accept appointment as Law of Property Act 1925 Receivers and Managers of the fixed charge over freehold property known as 110 Henley Road, Caversham, Reading, in pursuance of the statutory powers and the powers contained in the Legal Charge dated 21 February 1989, between AM Office Contracts (Reading) Limited (now known as Premierbase Limited) and UCB Bank Plc."
[19]On 7th May 1993 a representative of UCB Bank, Mr T Malik, lodged a Notice of Appointment of receivers in Form 405 with Companies House. That Form identifies the company as Premierbase and states that UCB give notice that the joint receivers were appointed on 28th April 1993 under the powers contained in a legal charge dated 21st February 1989 which contains a fixed charge over the premises known as:
"110 Henley Road, Caversham, Reading, Berkshire ["the premises"] and a floating charge over all moveable plant machinery implements utensils furniture goods and equipment now or from time to time placed on or used about the premises."
The Form 405 Notice is dated 5th May 1993.[20]The appellant having made a claim on the Fund in respect of his unsatisfied judgment obtained against Premierbase, the Department made certain enquiries through their Miss B D Roberts. She received responses in writing from both UCB and DTZ Debenham Thorpe, each dated 18th November 1997.[21]UCB's letter contained a copy of the Receivers Written Acceptance of Appointment as Law of Property Act 1925 Receivers; DTZ Debenham Thorpe's letter confirmed the nature of the appointment as Law of Property Act Receivers over the property, 110 Henley Road, Caversham. That letter concludes:
"At no point were they [ that is the joint receivers ] appointed over the company Premierbase Ltd."
[22]Having received that information Miss Roberts wrote to the appellant on 20th November 1997, passing on what she had been told, namely that the appointment of the joint receivers was a limited appointment under the Law of Property Act restricted the Company's premises at 110 Henley Road which was the subject of a fixed charge in favour of the bank. The letter goes on to express the Department's understanding of the effect of the Court's construction of s.183(3)(b) of the 1996 Act which we take to be a reference particularly to the case of Stone .[23]In addition to that documentary evidence the tribunal also received certain oral evidence. Mr Parry contended by reference to the Form 405, that there is mention in that document of a fixed charge over the premises at 110 Henley Road and a floating charge over all moveable plant, machinery etc form time to time placed on or used about the premises. He added that the receivers sold the desking and furniture being part of the Company's stock. That might suggest, said the tribunal, that the receivers had taken possession of property the subject of the floating charge in addition to the premises themselves, the subject of the fixed charge. The tribunal did not find that evidence to be satisfactory. They also heard hearsay evidence, admissible before an Employment Tribunal, from Mr Parr, the Department's representative before the tribunal, that his colleague Miss Phipps had spoken to a representative of the bank who said that they only offered mortgages over real property. That evidence was, it seems to us, not relied on to any great extent by the tribunal. In all the circumstances the tribunal was not satisfied as a matter of fact that the receivers had taken possession of any of the Company's goods at all, let alone as receivers appointed under the terms of the floating charge. In any event, they concluded by reference to the case of Stone , that they should confine their consideration to the terms of the appointment of the receivers. That, they found, was limited to a appointment as Law of Property Act Receivers over the premises only under the fixed charge. In these circumstances they held s.183(3)(b) was not satisfied. The Company was not insolvent within the meaning of the section. The claim against the Secretary of State therefore failed. The Appeal[24]The grounds of appeal advanced by the appellant in his Notice dated 23rd September 1998 were that the Employment Tribunal had not relied on the Form 405, but instead had relied on dubious telephone calls made by the Department to the receivers. In fact the second-hand evidence of Mr Parr was that Miss Phipps had spoken to a representative of the bank and not the receivers.[25]The appeal came on for an ex parte preliminary hearing before a division presided over by Morison J sitting on 24th February 1999. For the reasons given in the judgment of the President delivered on that day, the matter was allowed to proceed to a full hearing. That is the matter before us today.[26]This tribunal did not then have the advantage of seeing the documentary evidence which is before us today, nor did it receive representations on behalf of the Secretary of State, it being an ex parte hearing. Accordingly a direction was given that the appellant lodge an affidavit, stating what happened before the Employment Tribunal and exhibiting the documents which were before that tribunal. Such affidavit would then be copied to the respondent and the tribunal Chairman for their comments.[27]The appellant swore an affidavit on 15th March 1999 and duly lodged it with the EAT. In that affidavit, to which no documents were exhibited, the appellant asserted that the significance of the Form 405 was almost completely ignored by the Employment Tribunal. Instead the tribunal attached far greater importance to the vague third party telephone call between Miss Phipps and (correctly) a representative of the bank. He contended that his own evidence, in turn based on what he had understood from a local witness, and which he tells us was based on his having seen equipment in the premises after the receivers were appointed and then that it had all disappeared, as to what the receivers actually did was more factual.[28]In response to that affidavit the Chairman supplied his detailed comments in a letter to the Registrar dated 9th April 1999. He also enclosed copies of the documents which were in evidence before the Employment Tribunal and to which we have referred earlier in this judgment.[29]In support of his appeal today, Mr Parry submits that, by reference to the Form 405 submitted to Companies House by UCB, this was in truth an appointment of joint receivers of the Company's undertaking such as to satisfy the first limb of s.183(3)(b) of the 1996 Act. He further relies on the evidence which he gave as to the receivers' activities after their appointment in relation to certain furniture at the Henley Road premises. To this extent he relies upon the second limb of s.183(3)(b). In these circumstances he invites us to find that the tribunal took a wrong approach in law.[30]In response, Mr Hill has lodged a comprehensive skeleton argument in support of the tribunal's decision which we have taken into account. In addition he has assisted the tribunal in oral submission on particular matters which were raised from the bench. Conclusion[31]It seems to us that there are a number of insuperable difficulties facing the appellant in this case, namely:(1) Applying the approach in Stone the question under the first limb under s.183(3)(b) is, what were the terms of the appointment of the joint receivers? It is quite clear, from the written terms of their appointment, that the appointment was limited to appointment as Law of Property Act receivers of the premises only under the fixed charge. That is not, as the tribunal correctly found, an appointment in relation to the Company's undertaking such as to satisfy the statutory test.(2) The Form 405, on which Mr Parry particularly relies, is not, in our judgment, inconsistent with those terms of appointment. A careful reading of the document shows that the precise terms of the receiver's appointment is not there set out. What is contained in the document is the fact of their appointment on 28th April 1993 and a description of both the fixed charge and the floating charge contained in the legal charge dated 21st February 1989 under which they were appointed. We are reminded by Mr Hill of the precise terms of s.405 of the Companies Act 1985 which provides:
"(1). If a person obtains an order for the appointment of a receiver or manager of a company's property or appoints such a receiver or manager under powers contained in an instrument, he shall within seven days of the order or of the appointment under those powers give notice of the fact to the Registrar of Companies and the Registrar shall enter the fact in the Registrar of Charges."
It follows that the information requested in Form 405 complies strictly with the requirements of s.405 of the Companies Act 1985. It is not a requirement of that statutory provision that the person giving notice should specify the precise terms of the appointment of the receiver or receivers. In these circumstances we cannot accept Mr Parry's submission that the terms of the legal charge to its full extent referred to in the Form 405 necessarily reflect the precise terms of appointment of the joint receivers in this case. (3) Applying the reasoning of Waterhouse J in Stone to be found at 768C, the second limb under s.183(3)(b) only arises in circumstances where no appointment of receivers has been made under the first limb. What his lordship there said was:
"… It is only in the situation in which possession is taken other than in pursuance of an appointment [ that is of receivers ] that a tribunal has to look at the factual position and to reach a conclusion as to whether (i) the possession was by or on behalf of the holders of a debenture secured by a floating charge and (ii) the possession embraced property comprised in or subject to that floating charge."
We pause to observe that those observations were, it seems to us, strictly obiter in the context of a case where, on the facts, the receiver had been appointed solely under the terms of a fixed charge, rather than a floating charge. If his Lordship were to be taken there to be indicating that the second limb of s.183(3)(b) does not arise where receivers have been appointed other than over the undertaking of the company, then without it being necessary to decide it in this case, we think it highly arguable that if on the facts of a particular case receivers are appointed under a floating charge and take possession of property comprised in or subject to that floating charge, then it may properly be said that the receivers act on behalf of the debenture holders in such circumstances so as to give rise to a finding of insolvency under the second limb of s.183(3)(b). We simply mention that for future reference without deciding the point, because on the facts of this case, it does not strictly arise. (4) Even if the apparent statement of law to which we have referred at (3) above is incorrect, and even if joint receivers were appointed under the floating charge referred to in Form 405 as Mr Parry submits, contrary to the finding of the Employment Tribunal which we have upheld, so that they acted on behalf of the debenture holders, UCB, the tribunal has not accepted the appellant's evidence based on his observations of the Company's premises, that the receivers removed desking and furniture from the premises, that equipment being the subject of the floating charge. Questions of fact are for the Employment Tribunal. We cannot and will not interfere with that finding on appeal. Accordingly the claim based on the second limb of s.183(3)(b) would fail on the facts.[32]Mr Parry has pursued this claim for some 12 years now. He has represented himself throughout. Our decision today may appear harsh to him. We have endeavoured to explain that this is no reflection on the merits of his case; plainly he ought to have been compensated by the Company. Further, it is clear that that company has no assets against which he can recover his debt. Nevertheless, the State underwrites the Fund against which this claim is brought. The terms on which payments are to be made are tightly circumscribed by s.183 of the 1996 Act. The Secretary of State as custodian of that Fund is bound to look carefully at all claims received. Where a claim is rejected we must look equally carefully at the Secretary of State's reasoning. If we think it is wrong, then we shall say so. Equally, we must apply the law as we understand it, and having done so, we must dismiss this appeal.