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Success in EAT in case concerning the scope of statutory moratorium for legal proceedings against a company in administration

Ince Gordon Dadds LLP and Ors v Mrs J Tunstall And Ors (UKEAT/0141/19/JOJ, UKEAT/0143/19/JOJ, UKEAT/0144/19/JOJ)

Related Member(s):
Mark Greaves
Related Practice Area(s):
Employment Law
Court:

The Employment Appeal Tribunal has today decided an issue which has never previously been determined, regarding the scope of the statutory moratorium which applies to legal proceedings against a company in administration.

Background

Insolvency Act 1986, Paragraph 43(6), Schedule B1 imposes a statutory moratorium on legal proceedings against a company in administration. It provides that no legal process may be continued against such a company except with the consent of the administrator, or with the permission of the Companies Court.

In this case, the Claimant, had brought claims not only against her former employer, which had gone into administration after the proceedings had been instituted, but also against its employees/agents/partners personally, and the company said to be a relevant transferee of the employer’s business under TUPE. All of the claims were initially stayed. The Claimant accepted that the stay should remain in place for the claims against the employer but applied for the stay be lifted in respect of the other Respondents.

The Employment Tribunal’s decision

The Employment Tribunal accepted that should the employer subsequently become an active participant in the proceedings, the doctrine of res judicata would mean it would be bound by any findings made in the claims against the other Respondents. However, the Tribunal did not consider this to undermine the statutory moratorium and lifted the stay of the claims against the other Respondents. A number of the Respondents appealed, arguing (among other things) that the Tribunal did not have jurisdiction to lift the stay: the employer was entitled to a stay but the fact it would be bound meant it had no choice but to engage with the claims against the other Respondents.

The EAT’s decision

The EAT rejected the appeal and held that the decision to lift the stay fell within the Tribunal’s case management discretion. The Tribunal’s decision did not continue the proceedings against the employer. To suggest that the Tribunal had no jurisdiction would be to fail to recognise that the Claimant’s claims against the other Respondents were stand-alone causes of action that could be brought without also bring a claim against the employer. It was correct that the employer might be vicariously liable for the actions of some of the other Respondents and would be bound by the findings of fact made in the claims against the other Respondents. However, these were relevant matters to consider as part of the Tribunal’s case management discretion, not a basis for an automatic stay. On the facts, the decision to lift the stay was a permissible exercise of that discretion.

Mark Greaves was involved in this case.