SECRETARY OF STATE FOR TRADE AND INDUSTRY v MR C CAMPBELL [2002] UKEAT 1480_01_0811

EMPLOYMENT APPEAL TRIBUNAL
BAILII case number: [2002] UKEAT 1480_01_0811Case No Appeal No. EAT/1480/01Venue 58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS
Between
SECRETARY OF STATE FOR TRADE AND INDUSTRYAPPELLANTMR C CAMPBELLRESPONDENT
Before
His Honour Judge J BurkeDate 8 November 2002
[1]APPEARANCES For the Appellant MS MARIE DEMETRIOU (of Counsel) Instructed By: The Treasury Solicitor Queen Anne's Chambers 28 Broadway London SW1H 9JS For the Respondent NO APPEARANCE OR REPRESENTATION BY OR ON BEHALF OF THE RESPONDENT JUDGE J BURKE QC : This is an appeal by the Secretary of State for Trade and Industry against orders made by the Employment Tribunal sitting at Nottingham, constituted by Mr Keevash as Chairman, sitting alone. The decision supported by extended reasons was sent to the parties on 24 October 2001. Mr Campbell, the Applicant before the Tribunal and the Respondent to this appeal, is not here today and is not represented before us. He has sent to this Appeal Tribunal a letter dated 27 August 2002 explaining that he is unemployed and that he cannot afford to be here and courteously expressing the hope that we will be able to deal with the appeal in his absence, as indeed we will. In his absence we have been careful both in questioning Ms Demetriou, Counsel on behalf of the Secretary of State, during the course of argument, and in our consideration of her submissions to look to discover any and every point which might be in Mr Campbell's favour.[2]The facts are very simple. Mr Campbell was a minority shareholder of a company called Trent Valley Restoration Limited. He had been involved in that business since 1979. Unfortunately in 2000 the company experienced financial difficulties; and on 4 December 2000 an administration order was made in the Nottingham County Court. On 15 December the administrator dismissed all the employees, including Mr Campbell, without notice. At that time there were arrears of pay, holiday pay and pension contributions owing to him; and nothing was offered or paid in lieu of notice. Thus Mr Campbell, claiming that he was an employee, made a claim to the Employment Tribunal in which he named the company as the Respondent; but the company was plainly unable to pay and, therefore, Mr Campbell's claim was re-directed against the Department of Trade and Industry, pursuant to the provisions of Part XII of the Employment Rights Act 1996 . The Tribunal ordered that the Secretary of State be substituted as Respondent to Mr Campbell's claim against the company.[3]The Secretary of State asserted in written submissions to the Tribunal that Mr Campbell was not an employee; and the Tribunal's decision was largely directed and, no doubt, the Tribunal's focus was largely devoted to the issue as to whether Mr Campbell was or was not an employee of the company in which he was a majority shareholder. The Tribunal resolved that issue in favour of Mr Campbell; and the Secretary of State does not seek to appeal against that aspect of the Tribunal's decision.[4]The Tribunal then proceeded, without any reference to the specific provisions of Part XII of the Employment Rights Act 1996 , or to the relevant provisions of Part VII of the Pensions Schemes Act 1993 , to which we will turn in a moment, to calculate what payments should be made to Mr Campbell, he having been found to have been an employee of the company. The Tribunal awarded him £6,555 by way of redundancy pay. There is no appeal against that part of the Tribunal's decision.[5]The Tribunal then awarded him £6,900 in respect of pay in lieu of notice. He was entitled to 12 weeks' statutory notice. His salary rate was £900 per week. His entitlement was therefore £10,800, the Tribunal found; but they deducted from that £3,900 which he had earned during the 12-week period, thus reaching the net figure of £6,900. The Tribunal found that Mr Campbell was entitled to two weeks' holiday pay and awarded him two weeks pay at £900 per week, making £1,800. They found that, at the time of his dismissal, he was owed one week's money in hand and in addition had not been paid for the week commencing 11 December. Therefore, they awarded him two weeks' arrears of pay at £900 per week, a further £1,800. Finally, they awarded him a sum of £3,000 in respect of pension contributions during the notice period and pension contributions outstanding before the dismissal.[6]Unfortunately, the Chairman seems not to have appreciated that the relevant statutory provisions did not permit him to make some, at least, of these orders at all and limited the amounts that he could award in respect of other payments. In order to demonstrate that, it is necessary to turn to the relevant legislation. Section 182 of the Employment Rights Act, being the first section in Part XII, which is headed "Insolvency of Employers", provides, insofar as material, as follows:
"If, on an application made to him in writing by an employee, the Secretary of State is satisfied that – (a) the employee's employer has become insolvent, (b) the employee's employment has been terminated, and (c) on the appropriate date the employee was entitled to be paid the whole or part of any debt to which this Part applies, the Secretary of State shall, subject to section 186, pay the employee out of the National Insurance Fund the amount to which, in the opinion of the Secretary of State, the employee is entitled in respect of the debt."
Section 183(1)(b) provides:
"An employer has become insolvent for the purposes of this Part [Part XII] – (b) where the employer is a company, if ... subsection (3) is satisfied."
And subsection (3) provides: "(3) This subsection is satisfied in the case of an employer which is a company – (a) if a winding up order or an administration order has been made. ..." [It is not necessary to read any more of that subsection].[7]Pursuant to that subsection, an administration order having been made, plainly the company in this case was a company which had become insolvent for the purposes of section 182(a). It was equally clear that Mr Campbell's employment had been terminated for the purpose of section 182(b).[8]Section 184 defines the debts to which Part XII of the Act applies. So far as material, it provides:
"(1) This Part applies to the following debts – (a) any arrears of pay in respect of one or more (but not more than eight) weeks, (b) any amount which the employer is liable to pay the employee for the period of notice required by section 86(1) or (2) or for any failure of the employer to give the period of notice required by section 86(1), (c) any holiday pay - (i) in respect of a period or periods of holiday not exceeding six weeks in all, and (ii) to which the employee became entitled during the twelve months ending with the appropriate date."
[9]The appropriate date is defined by section 185, for present purposes, as being the date on which the employer became insolvent, in this case the date of the administration order i.e. 4 December 2000.[10]Finally in relation to Part XII of the 1996 Act, section 186, to which it will be remembered section 182 is subject, sets out financial limits on the obligation on the Secretary of State to pay monies pursuant to section 182. Section 186(1) provided, at the relevant time:
"(1) the total amount payable to an employee in respect of any debt to which this Part applies, where the amount of debt is referable to a period of time, shall not exceed - (a) £230 in respect of any one week."
The sum involved has varied from time to time; it is varied by statutory instrument. At the relevant time it was, as Ms Demetriou submits correctly, £230 per week.[11]Part VII of the 1993 Act is also headed "Insolvency of Employers"; and Chapter II of Part VII is headed "Payment by Secretary of State of Unpaid Scheme Contributions".

(c) provides:

"(1) For the purposes of this Chapter, an employer shall be taken to be insolvent if, but only if, in England and Wales - (c) where the employer is a company – (i) ... an administration order is made."
Section 124(1) provides:
"(1) If, on an application made to him in writing by the persons competent to act in respect of an occupational pension scheme or a personal pension scheme, the Secretary of State is satisfied – (a) that an employer has become insolvent; and (b) that at the time he did so there remained unpaid relevant contributions falling to be paid by him to the scheme, then, subject to the provisions of this section and section 125, the Secretary of State shall pay into the resources of the scheme the sum which in his opinion is payable in respect of the unpaid relevant contributions."
[12]Persons competent to act in respect of an Occupational Pension Scheme may be the trustees, the scheme administrators, a management committee or somebody else permitted to act on their behalf; but the relevant words of section 124(1) plainly do not include a claimant such as Mr Campbell. He was not a person competent to act, and therefore he could not make an application to the Secretary of State under section 124. If the Secretary of State does not meet, or meet in full, a payment which he is obliged to make under section 124, then a person who is competent to act may, pursuant to section 126(1), make an application to the Tribunal; but, again, Mr Campbell was not in a position to make such an application.[13]With that description of the relevant statutory provisions, we can turn to deal with the way in which they affect Mr Campbell's various claims. As we have already said, they do not affect the award of redundancy pay, which is not the subject of appeal and which stands. They do, however, affect his claim for the award in respect of pay in lieu of notice. The Secretary of State accepts that Mr Campbell was entitled to 12 weeks' notice and is entitled to pay in lieu of notice of those 12 weeks but submits that the weekly sum is limited by the effect of sections 182, 184 and 186 of the 1996 Act to the figure of £230. It is, unfortunately for Mr Campbell, clear to us that that submission is correct and that the Tribunal should not have awarded a sum higher than that which is reached by multiplying 12 weeks x £230 per week, i.e. a total (if our arithmetic is correct) of £2,760. Ms Demetriou does not suggest that we should set off against that sum any of the sums earned by Mr Campbell during the notice period or that we should reduce it for tax and National Insurance. Accordingly, we must and will substitute for the Tribunal's award of £6,900 by way of notice pay an award of £2,760.[14]Next we come to holiday pay. There it is not in dispute that Mr Campbell was entitled to two weeks' holiday pay; but his claim to holiday pay was, in our judgment, clearly subject to the same statutory limit as that which applied to his notice pay. He was, therefore, not entitled to more than £460 i.e. two weeks at £230 each week and we therefore substitute an award of £460 for the award of £1,800 made by the Tribunal.[15]So far as arrears of pay are concerned, the position is slightly different. The Tribunal, as we have described, awarded to Mr Campbell two weeks at £900 each. One of those weeks was the week from 11 December onwards; the other appears to have been one week's money which was kept in hand. Ms Demetriou inferred, from the terms of the Tribunal's decision, that that week was the week from 4 December to 11 December. She submits that neither week could properly be the subject of any award at all, because section 182(c) limits the Secretary of State's liability for debt of this nature to a debt which was owed to the employee on the appropriate date which, for reasons we have explained, is defined as the date of the administration order, 4 December. That submission appears to us to be entirely correct insofar as the award, which was made, was an award in respect of unpaid salary from that date onwards; and it is clearly correct in relation to the week from 11 December therefore. No award in respect of that week should have been made. However, it is clear from the statutory provisions that, if money was outstanding by way of salary on 4 December, then that sum would fall within the definition of debt owing on the appropriate date and if, as the Tribunal appears to have found, Mr Campbell was working on the basis that there was always one week's money in hand, it is plain that there would have been one week's money in hand and one week's money owing to him on 4 December. It is entirely correct that the Tribunal do not expressly say that that was so; but it is a natural and, indeed, necessary implication from what the Tribunal do say. It would be fruitless and wholly disproportionate for us to remit to the Tribunal the question as to whether a week was indeed owing as a week in hand on 4 December. It appears to us, from what the Tribunal have decided, that we can say as a matter of confident certainty that it was.[16]Accordingly, we take the view that the Tribunal erred in awarding Mr Campbell two weeks' arrears of pay but that he ought to have been awarded one week's arrears of pay. Unfortunately, it is clear that that one week must be subject to the same limit as that which we have described in relation to holiday pay and notice pay; and, therefore, so far as arrears of pay is concerned, we substitute one week at £230 for the award of £1,800.[17]Finally, we come to the award in respect of pension contributions. Ms Demetriou's submission is that pension contributions do not constitute a debt for the purposes of Part XII of the 1996 Act and that arrears of pension contributions are dealt with by Chapter II, Part VII of the 1993 Act. They are to be recovered by persons competent to act in relation to the occupational pension scheme, or personal pension scheme, which is relevant under section 124 of the 1993 Act, who if full recovery is not obtained, may apply to the Tribunal under section 126.[18]Those submissions we accept. There appears to be a different regime for the recovery of pension contributions where a company as a corporate employer, or a non-corporate employer for that matter, has become insolvent from that which applies in relation to holiday pay, arrears of pay, notice pay and the like. Thus, the Tribunal was wrong in law to award any sums by way of arrears of pension contributions, either owing at the date of dismissal or in respect of the notice period; and to that extent too, the appeal must be allowed.[19]The effect of our decision, to put it in summary terms, appears to us, therefore, to be this. The amount which was ordered by the Tribunal in paragraph 5 of its Decision by way of notice pay and pension contributions of £9,150 has to be reduced to £2,760; and the amount ordered in paragraph 6 of the Tribunal's Decision of £4,350, in relation to holiday pay and arrears of pay, has to be reduced to £690. The appeal is allowed to that extent and subject to this. We have asked Ms Demetriou to check that our arithmetic is correct and that the orders which we have put forward as orders to be substituted for those made by the Tribunal reflect, in their financial terms, what we have said about the Tribunal's awards.