THE INDUSTRIAL TRIBUNALS

CASE REF:    2742/10  

CLAIMANT:	Raymond Nicholl

RESPONDENTS:	1.	Department for Employment and Learning
	2.	PFC Transport Ltd

DECISION

(A)	The claimant’s holiday pay claim against PFC is well-founded.  Accordingly, PFC is ordered to pay to the claimant the sum of £990.

(B)	Mr Eamon Cassidy, t/a Cassidy Haulage (“Mr Cassidy”) was not liable to make a redundancy payment to the claimant.

(C)	The claimant’s redundancy payment claim against PFC Ltd (“PFC”) is not well-founded.  Accordingly, that claim is dismissed.

(D)	Part XIV of the Employment Rights (Northern Ireland) Order 1996 (“the 1996 Order”) is entitled “Insolvency of employers”.  Pursuant to that Part, the claimant made an application to the Department for Employment and Learning (“the Department”) for payment, in the Department’s role as the statutory guarantor in respect of certain debts.  The Department made no payment pursuant to that application.  The claimant appealed against that decision under Article 233 of the 1996 Order.  That appeal is dismissed.

Constitution of Tribunal:

Chairman  (sitting alone):	Mr P Buggy

Appearances:

The claimant was self-represented.

PFC was represented by Mr Patrick Moore.

The Department was represented by Mr Peter Curran, of the Department.

REASONS

1.	In these proceedings:-

	(1)	The claimant makes claims for a redundancy payment, and in respect of holiday pay, against PFC.

	(2)	He also appeals against the Department’s refusal (in the Department’s role as the statutory guarantor in respect of redundancy payments) to make him a payment in respect of a redundancy payment which was allegedly owed to him by Mr Eamon Cassidy.

	(3)	He also appeals against the Department’s refusal to make any payment to him in respect of holiday pay, in the Department’s role as statutory guarantor, pursuant to an application which he had made under Article 227 of the 1996 Order.

2.	Accordingly, in these proceedings, I am dealing with two separate matters.  First, I am dealing with the claimant’s money claim against PFC.  Secondly, I am dealing with the claimant’s administrative appeals against the Department’s decisions.  

3.	The Department was joined to these proceedings, as a respondent to the administrative appeals.  In addition, the Department has fully participated in the hearing of the claims against PFC, pursuant to entitlements which are conferred upon the Department by Rule 51 of the Industrial Tribunals Rules (“the Rules”).

4.	At all times which are material for the purposes of the present proceedings, the claimant has been employed as a lorry driver, engaged in haulage.

5.	Mr Eamon Cassidy (“Mr Cassidy”) was a sole trader, engaged in the haulage business.  He traded as “Cassidy Haulage”.  The claimant worked for Mr Cassidy, in that business, from 1 June 2006 until 22 July 2010.  Mr Cassidy purported to make the claimant redundant with effect from that date.  The claimant worked for PFC from 23 July 2010, for some weeks thereafter.  He then resigned from PFC, to take up other employment.

6.	Mr Cassidy was adjudged bankrupt by order dated 28 July 2010.  That adjudication occurred pursuant to a bankruptcy petition which had been presented (by a creditor of Mr Cassidy) on 25 February 2010.

7.	When these industrial tribunal proceedings were commenced, the only respondents were Mr Cassidy and the Department.  Subsequently, PFC was added as a respondent to the proceedings, and the proceedings against Mr Cassidy were withdrawn.  (The Cassidy proceedings could not have been continued without leave of the High Court.  In any event, it seemed unlikely that the claimant would have actually received any money pursuant to any award which might have been made against Mr Cassidy).

8.	The Department asserts that there was a relevant transfer, within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“the Regulations”), whereby PFC became the transferee of part of Cassidy Haulage.  PFC says there was no relevant transfer.

9.	It is agreed between the claimant, PFC and the Department, that, if there was a relevant transfer, that transfer occurred on 23 July 2010, and that the claimant was assigned to the transferred entity on that date.

10.	PFC and the Department also disagree on the question of whether or not Regulations 4 and 7 of the Regulations applied to any relevant transfer.

11.	
Regulation 4 of the Regulations makes provision in relation to the continuity of employment contracts, of assigned employees, in the context of a relevant transfer.  In very broad terms, the effect of Regulation 7 is that, as a general rule, an employer unfairly dismisses an employee if it does so because of a relevant transfer.

12.	At this point, it is convenient to set out the provisions of Regulation 8(7):-

		“(7)	Regulations 4 and 7 do not apply to any relevant transfer where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.”

13.	As all the parties (the claimant, PFC and the Department) recognised, no viable claim in respect of a redundancy payment can be mounted against PFC, for the following reasons:-

		(1)	If there was no relevant transfer, or if any relevant transfer was disapplied by Regulation 8(7), Mr Cassidy’s liabilities in respect of a redundancy payment never transferred to PFC.

		(2)	If there was a relevant transfer, and if that transfer was not disapplied by Regulation 8(7), then the claimant’s employment continued even after the purported dismissal by redundancy, and it only came to an end subsequently only because of the claimant’s resignation.

14.	Apart from the claim in respect of redundancy pay, the claimant’s only other employment debt claim is in relation to holiday pay.

15.	On the basis of the evidence in this case, I am satisfied that, by 23 July 2010, the claimant had accrued holiday pay entitlements of 11 days, at a rate of £90 net pay per day, and that accordingly, he was entitled to holiday pay of £990, which was never paid either by Mr Cassidy or by PFC.

16.	The parties agree that PFC only has a liability in respect of that unpaid holiday pay if there was a relevant transfer which was not disapplied by Regulation 8(7).

17.		The claimant’s Article 233 appeal (against the Department) in respect of the holiday pay must be dismissed if there was a relevant transfer which was not disapplied by Article 8(7).  (In its role as statutory guarantor, the Department only has power to make a payment in respect of holiday pay pursuant to an Article 227 application of the employer-debtor is formally “insolvent” within the meaning of the statutory guarantee legislation; PFC, as all parties agree, is not insolvent).

18.	Accordingly, what I have to do in this case is to decide the following:-

(1)	Was Mr Cassidy liable to the claimant in respect of redundancy pay?  (If so, the Department will have to make payment to the claimant in respect of that redundancy pay entitlement).

(2)	Is PFC liable in respect of the holiday pay debt of Mr Cassidy?  (If so, the Article 227 appeal must be dismissed).

19.	The Department only has an obligation to make a statutory guarantee payment in respect of redundancy pay if there has been no relevant transfer, or if the Regulation 4 liabilities flowing from such a transfer have been disapplied by Regulation 8(7).

20.	PFC is liable in respect of the holiday pay only if Regulation 4 imposes such a liability upon them, as the transferee of a relevant entity.  And the Department has a liability to make an Article 227 payment in respect of the holiday pay only if PFC has no Regulation 4 liabilities in respect of that holiday pay.

21.	Accordingly, the answers to the questions posed at paragraph 18 above are dependant upon my determinations in respect of each of the following issues:-

(1)	Was there a relevant transfer, of the part of the entity known as Cassidy Haulage in which the claimant worked from 23 July 2010 onwards?

(2)	If so, have any Regulation 4 and 7 liabilities, pursuant to that relevant transfer, been disapplied by Regulation 8(7) of the Regulations?

Was there a relevant transfer?

22.	Regulation 3(1) of the Regulations provides that they apply to a transfer of an entity (an undertaking, business or a part of an undertaking or a part of a business) to “another person” where there is “a transfer of an economic entity which retains its identity”.  

23.	The Regulations have to be construed in light of the requirements of the EU Acquired Rights Directive of 2001 (“the 2001 Directive”).  Article 1 of the Directive provides that it is to apply to any transfer of an entity “to another employer as a result of a legal transfer or merger”.  Article 1(b) provides (subject to certain exclusions which are irrelevant in the present context) that there will be a transfer within the meaning of the Directive if there is a transfer of an economic entity which retains its identity.

24.	Regulation 3(2) of the Regulations defines “an economic entity” as an organised grouping of resources which has the objective of pursuing an economic activity.  The same definition of an economic entity is to be found in Article 1 of the 2001 Directive.  That common definition (the definitions which are to be found both in the Regulations and in the Directive) reflects case law of the European Court of Justice which had developed during the period leading up to the enactment of the 2001 Directive.

25.	Regulation 3(6) of the Regulations makes clear that, for the purposes of the Regulations, a relevant transfer may take place even if no property was transferred within the context of that transfer.  However, the question as to whether or not any property has been transferred is nonetheless a matter which may be of relevance, as part of an overall assessment, in assessing whether or not there has been a relevant transfer.  So the question of whether or not there has been a transfer of property is, or (depending on the particular circumstances of the case) may possibly be, a significant issue in arriving that overall assessment.

26.	There will be a relevant transfer, for the purposes of the Regulations, if, but only if, there has been a transfer of an entity to another employer, as a result of a legal transfer or merger, within the meaning of Article 1 of the Directive.  The criteria for determining whether or not there has been a transfer within the meaning of Article 1 were set out in the judgment of the European Court of Justice in Spijkers  v  Gebroeders Benedik Abattoir CV [1986] ECR 1119. In that case, the Dutch Government submitted that, in the context of acquired rights law, the term ‘transfer’ implies ... “that the transferee actually carries on the activities of the transferor as part of the same business”.  At paragraph 11 of its judgment in that case, the Court endorsed that view, adding the following comments:-

		“It follows that the decisive criterion for establishing whether there is a transfer for the purposes of the Directive is whether the business in question retains its identity.”

	At paragraph 12 of the same judgment, the Court declared that the implication of that decisive criterion (the question of whether or not the business retained its identity) is that a transfer of an entity, within the meaning of the legislation, does not occur merely because the assets of a particular business are disposed of; instead, according to the Court, what really matters is whether or not the business was disposed of as a going concern.

27.	In the same paragraph of that judgment, the Court pointed out that one relevant indicator (one indicator that the business was disposed of as a going concern and has retained its identity) would be provided by the fact, if it indeed be the fact, that: 
	
	(1)  	the business’s operation was actually continued or resumed by the new employer; and 

	(2) 	it was continued or resumed with the same or similar activities.

28.	At paragraph 13 of Spijkers, the Court made the point that there had to be an overall assessment on the question of whether or not the business had been disposed of (to the putative transferee) as a going concern.  In that paragraph, the Court drew attention to certain factors which could properly be taken into account in arriving at that overall assessment, while making it clear that those factors were only appropriate for consideration as part of an overall assessment.  The factors listed by the Court were as follows:-

	(1)	the type of undertaking or business which is involved;

	(2)	whether the tangible assets of the business, such as buildings and moveable property, transferred to the transferee;

	(3)	the value of the intangible assets (such as goodwill) of the business at the time of the transfer;

	(4)	whether the majority of the employees of the business were taken on by the new employer;

	(5)	whether the customers of the old employer transferred to the new employer;

	(6)	the similarity, if any, between the activities carried on before and after the putative transfer; and

	(7)	whether those activities were suspended for any period.

29.	Having considered all of those factors in the context of the present case, I have no hesitation in coming to the conclusion that there was a relevant transfer of part of Cassidy Haulage to PFC.  In particular, I conclude that that part of Cassidy Haulage was disposed of to PFC as a going concern, and that the operation of that part of Cassidy Haulage was continued by PFC, with the same activities.

30.	I have arrived at those conclusions having had regard, in particular, to the following:

	(1)	The business of Cassidy Haulage was haulage.  That was also the business of PFC from 23 July 2010 onwards.

	(2)	One of the lorries which had been used by Cassidy Haulage continued to be used by PFC.

	(3)	All of the lorry drivers who were employed in Cassidy Haulage in July 2010 were taken on as employees by PFC.

	(4)	All of the customers of PFC had been customers of Cassidy Haulage.  All of the customers of PFC became such because they had been approached, in their respective capacities as customers of Cassidy Haulage, with a view to persuading them to become customers of PFC.

	(5)	There was no time-intermission between the cessation of the activities of Cassidy Haulage and the commencement of the activities of PFC.

	(6)	PFC was formed in April 2010 by Mrs Keira Cassidy, the wife of Mr Cassidy, when it became apparent that Mr Cassidy was in financial difficulties.  PFC is owned and controlled by Mrs Cassidy.

	Against that background, and for those reasons, I have decided that that part of the business in which the claimant was working in early July 2010 became the subject of a relevant transfer on 23 July of that year.  

Were Regulations 4 and 7 disapplied by Regulation 8(7)?

31.	It will be recalled that, on 23 July 2010 (the date of the relevant transfer), the position was as follows.  Bankruptcy proceedings had been commenced against Mr Cassidy on 25 February 2010, when a creditor presented a petition for his bankruptcy.

32.	On the basis of the evidence and contentions presented, I am satisfied as to the following.  Mr Cassidy engaged the firm of Moore Stevens, Insolvency Practitioners, to advise him in connection with the bankruptcy proceedings on 1 March 2010.  PFC was formed on 21 April 2010.  The main hearing of the bankruptcy petition was originally scheduled to take place on 7 May 2010.  However, this was postponed because the claimant was considering entering into an individual voluntary arrangement (“an IVA”).  An IVA meeting took place on 9 July.  

33.	No IVA was ever made.  The claimant was adjudged bankrupt by order of the High Court on 28 July 2010.

The arguments

34.	The claimant made no legal arguments on the question of whether or not the situation in the present case was within the scope of Regulation 8(7).  

35.	The Department asserted that Regulation 8(7) did have the effect of disapplying Regulations 4 and 7, for the following reasons:

	(1)	The claimant did not become “the subject of bankruptcy proceedings”, within the meaning of Regulation 8(7), until he had been adjudged bankrupt.

	(2)	On the date of the relevant transfer, any relevant proceedings were not “under the supervision of an insolvency practitioner” within the meaning of Regulation 8(7).

	In support of his arguments, Mr Curran drew my attention to the decision of the Employment Appeal Tribunal in Secretary of State for Trade and Industry v Slater and Others [2007] IRLR 928 and to the decision of an Edinburgh employment tribunal in Scammell  v  Secretary of State for BERR and Others (case number 106820/08, judgment delivered on 8 February 2010).

36.	For PFC, Mr Moore contended that Regulation 8(7) did apply in the circumstances of this case, mainly for two reasons.  First, the bankruptcy proceedings were pending against Mr Cassidy on the date of the relevant transfer, even though he was not adjudged bankrupt until later that month.  Secondly, Mr Cassidy had engaged the services of an insolvency practitioner from April onwards, therefore those pending proceedings were “under the supervision of an insolvency practitioner” from April onwards.  Thirdly, Regulation 8(7) reflected the intention of the European legislator, which was to support a “rescue culture”; recognising the claimant as being “the subject of bankruptcy proceedings” on 23 July 2010 would be in line with the promotion of that objective; the Regulations implemented European Law; and therefore they ought to be construed in a purposive manner.

The legislative context

37.	All of the Regulations apply throughout Great Britain.  Regulation 1 of the Regulations provides that the Regulations extend to Northern Ireland “except where otherwise provided”.  

38.	Regulation 2(3) provides that, in their application to Northern Ireland, the Regulations are to have effect as set out in Schedule 1 of the Regulations.  Paragraph 1 of that Schedule provides that the Regulations are to apply to Northern Ireland, subject to the modifications in the Schedule.  Paragraph 2 of the Schedule provides that sub-paragraph (1)(b) of Regulation 3, and any other provision of the Regulations insofar as it relates to that 
sub-paragraph, is not to apply to Northern Ireland.  There are no other provisions of the Schedule which provide that any provision of the Regulations is not to apply to Northern Ireland.

39.	Regulation 3 defines “relevant transfer” as consisting of either of the following:-

		(1)	a transfer which falls within the scope of Regulation 3(1)(a) and 

		(2)	a transfer which falls within the scope of Regulation 3(1)(b).

40.	Regulation 3(1)(b) was not enacted for the purpose of implementing any obligation imposed by the 2001 Directive; instead, it applies to “a service provision change” within the meaning of that sub-paragraph.

41.	The 2006 Regulations were made in exercise of powers conferred by Section 2(2) of the European Communities Act 1972 (which applies through the United Kingdom) and also in exercise of powers contained in Section 38 of the Employment Relations Act 1999 (which does not apply to Northern Ireland).

42.	Because the 1999 Act does not apply to Northern Ireland, it cannot be used as a basis for imposing Regulations which apply to Northern Ireland.

43.	In light of the foregoing, it is clear to me that all of the provisions of the Regulations which apply to Northern Ireland are provisions which have been enacted for the purpose of implementing the requirements of EU law which were imposed by the 2001 Directive.  Accordingly, all of the applicable provisions should be construed in light of the requirements of the Directive.

The key provisions of the Regulations and of the 2001 Directive

44.	In their application to Northern Ireland, the effect of Regulation 4 and 7 of the Regulations can be summarised as follows:-

	(1)	The effect of Regulation 4 is as follows.  A relevant transfer does not operate so as to terminate the contract of employment of any person employed by the transferor and assigned to the relevant entity.  Instead, any such contract is to have effect after the transfer as if it had originally been made between the relevant employee and the transferee.  Furthermore, on the completion of a relevant transfer, all of the transferor’s duties and liabilities, under or in connection with the relevant contract of employment, transfer, by virtue of Regulation 4, to the transferee.

	(2)	In very broad terms, the effect of Regulation 7 is as follows.  If, either before or after a relevant transfer, an employee is dismissed, that dismissal will usually be unfair if the reason for dismissal is the transfer itself or a reason connected with the transfer.

45.	However, as already noted above, Regulation 8(7) provides as follows:-

		“Regulations 4 and 7 do not apply to any relevant transfer where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of an insolvency practitioner.“

46.	Regulation 4 was clearly intended to implement Article 3 of the 2001 Directive which, in broad terms, provides that the transferor’s rights and obligations arising from a contract of employment will (by reason of a relevant transfer) be transferred to the transferee.  Regulation 7 was clearly enacted for the purpose of implementing the requirements of Article 4 of the 2001 Directive, which in broad terms, provide that a relevant transfer is not, in itself, to constitute adequate or lawful grounds for dismissal.

47.	However, Articles 3 and 4 must be read subject to paragraph 1 of Article 5, which is in the following terms:-

		“1.	Unless members states provide otherwise, Article 3 and 4 shall not apply to any transfer of an undertaking, business or part of an undertaking or business where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of a competent public authority (which may be an insolvency practitioner authorised by a competent public authority)”.

48.	There is nothing about the language, structure or context of the Regulations which would lead one to conclude that the United Kingdom has “provided otherwise”.  Therefore, Regulation 8(7) must be read as applying to all of the situations which fall within the scope of Article 5.1.

49.	So the real question is this:  What situations are within the scope of Article 5.1?

50.	In order to address that question, it is necessary to have regard to the preamble of the Directive.  In that preamble, recital (1) refers to the Acquired Rights Directive of 1977, and notes that the 1977 Directive had been substantially amended.  That recital then goes on to state that, in the interests of clarity and rationality, the 1977 Directive as amended, should therefore be codified.  Furthermore, recital (8) states the following:-

		“(8)	Considerations of legal security and transparency require that the legal concept of transfer be clarified in the light of the case-law of the Court of Justice.  Such clarification has not altered the scope of [the 1977 Directive] as interpreted by the Court of Justice.  [My emphasis]”.

51.	According, in my view, the position is as follows:  

	(1)	The scope of Regulation 8 (7) is as broad as the scope of Article 5.1 of the Directive.  

	(2)	And the scope of Article 5.1 is no narrower than the scope of the insolvency-disapplication principles which had been carved out by the case law of the European Court of Justice during the period from 1977 to 2001.

The Abels principles

52.	Those principles were mainly established in the leading case of Abels  v The Administrative Board of the BMEI [1985] ECR 469.  In that case, the claimant in the main proceedings was employed by a private enterprise which is referred to in the case as “Thole”.  By successive decisions of the local District Court:

	(1)	Thole was granted judicial leave to suspend payment of debts provisionally, on 2 September 1981;

	(2)	it was definitively granted judicial leave to suspend payment of debts, on 17 March 1982; and

	(3)	it was put into liquidation, on 9 June 1982.

53.	On 10 June 1982 (the day after Thole was put into liquidation) Thole’s business was transferred to another company, TTP.  That other company continued to operate the undertaking and it took over most of its workforce, including Mr Abels.

54.	But Mr Abels had not received his wages for the period from 1 to 9 June 1982, from either Thole or TTP, and he had not received any payment for his accrued holiday entitlement during the year in question, and he had not received a proportional part of his end-of-year allowance.  Accordingly, he brought legal proceedings against a particular public authority, with a view to recovering those sums from that authority.  The authority declined to pay him, on the basis that the dutch law which implemented the requirements of what is now Article 3 of the 2001 Directive imposed that duty (the duty to pay) upon TTP, in TPP’s capacity as the transferee of an undertaking.

55.	Mr Abels appealed against the authority’s decision.  The court to which he then appealed considered that its judgment would depend on the interpretation of certain provisions of the 1977 Directive.  Accordingly, it stayed the proceedings, and it referred the following questions to the European Court:-

		“(1)		Does the scope of [the Article of the 1977 Directive which determined the scope of a “relevant transfer”] extend to a situation in which the transferor of an undertaking is adjudged insolvent or is granted a “surseance van betaling” [judicial leave to suspend payment of debts]?

		(2)	If the answer to Question 1 is in the affirmative, must [the Article of the 1997 Directive which equated to Article 3 of the 2001 Directive] be interpreted as meaning that the transferor’s obligations which are assigned to the transferee by reason of the transfer of the undertaking also include the debts which arose from the contract of employment ... before the date of the transfer ...?”

56.	In arriving at its ultimate conclusions in relation to those questions, the Court noted (at paragraph 13 of the judgment), that the scope of the provisions at issue could not be appraised solely on the basis of a textual interpretation; and that, instead, their meaning had to be clarified in light of:

	(1)	the scheme of the Directive;

	(2)	the Directive’s place in the system of community law in relation to the rules on insolvency; and

	(3)	the purpose of the Directive.

57.	At paragraph 14 of its judgment, the Court, having noted various recitals in the preamble to the 1977 Directive, concluded that the Directive was intended to protect workers “in order to safeguard their rights when an undertaking is transferred”.

58.	However, as the Court then went on to note (at paragraph 15 of the judgment), insolvency law is characterised by special procedures which are intended to weigh up the various interests involved, in particular those of the various classes of creditors; and, therefore, in all the Member States, there were specific rules which might derogate, at least partially, from provisions of social law.

59.	The Court went on to note that the “specificity” of insolvency law, as encountered in all the legal systems of the Member States, was confirmed in Community Law.  The Court cited the example of the Directive on collective redundancies which, although it was adopted to attain the objectives of Article 117 of the Treaty, had expressly excluded from its protection those workers who were affected by the termination of an establishment’s activities “where that is the result of a judicial decision”.  The Court also cited, as another example, of the “specificity” of insolvency law, the instance of Directive 80/987, which related to the protection of employees in the event of the insolvency of their employer, and noted that the 1980 Directive had created a system, for ensuring the payment of outstanding claims relating to pay, which applied equally to undertakings which had been adjudged insolvent.

60.	Accordingly (at paragraph 17 of the judgment), the Court expressed the view that if the transfer of undertakings legislation had been intended to apply in the context of liquidation proceedings and analogous proceedings, an express provision would have been included, in the 1977 Directive, for that purpose.

61.	The Court also thought that, in the context of liquidation proceedings, the inapplicability of TUPE transfer rights followed necessarily from a consideration of the purpose of the Directive:  

(1)	According to the Court, the preamble to the Directive indicated that its purpose was to ensure that the restructuring of undertakings within the common market did not adversely affect the workers in the undertakings concerned.

(2)	The Court was of the view that there was no general consensus on the question of whether the imposition of transfer of undertakings obligations would be helpful or unhelpful, in the event of an employer’s insolvency, in the context of ensuring the best protection of the interests of workers.

	(3)	Against that background, the Court concluded that the 1977 Directive did not impose, on the Member States, any obligation to extend transfer of undertakings obligations so as to apply to transfer of undertakings which took place within the context of judicially-supervised “terminal” insolvency proceedings.  (See paragraph 23 of the judgment.)

62.	I regard the wording of paragraph 23 of the Abels judgment as being of considerable importance in defining the scope of the insolvency exception which was carved out by the Court of Justice in its case law.  Therefore, I quote it below in full.   Paragraph 23 is in the following terms:-

		“It is apparent from the foregoing considerations that a serious risk of general deterioration in working and living conditions of workers, contrary to the social objectives of the treaty, cannot be ruled out.  It cannot therefore be concluded that [the 1977 Directive] imposes on the member states the obligation to extend the rules laid down therein to transfers of undertakings, businesses or parts of business taking place in the context of insolvency proceedings instituted with a view to the liquidation of the assets of the transferor under the supervision of the competent judicial authority.”

63.	So, what the Court was saying in paragraph 23 of the judgment was that the 1977 Directive could not be regarded as imposing transfer of undertaking obligations in respect of transfers to which all of the following criteria applied:-

	(1)	they took place within the context of insolvency proceedings; and

	(2)	those proceedings were terminal in nature; and

	(3)	those proceedings were under the supervision of a judicial authority.

64.	The factual context of Abels was that the putative transfer had occurred after the liquidation had been ordered.  Accordingly, it was unnecessary for the Court to answer the first of the questions which had been referred to by the national Court.  It nevertheless did offer an answer in relation to that first question.  The first question had, in effect, asked whether the 1977 equivalent of Article 3 of the 2001 Directive (which imposes liability upon a transferee in relation to a transferor’s debts and other liabilities) applied also in situations in which there was a TUPE transfer which had taken place during a surseance [judicial leave to suspend payments of debts].  

65.	Some of the parties who made submissions in the Abels proceedings argued that the TUPE obligations should apply where the transferor had obtained leave to suspend payments of his debts, even if the 1977 Directive was not applicable to a transfer effected during the course of liquidation proceedings.  According to those parties, if TUPE obligations could be avoided by seeking leave to suspend payment of your debts, that situation might be abused, specifically with a view to a transfer, which would be to the detriment of the rights of workers.  The Court noted those observations, without commenting upon them, but ultimately concluded that proceedings such as “surseance van betaling” were materially different from liquidation proceedings in the following respects:

	(1)	The supervision exercised by the relevant national court over the commencement and course of surseance proceedings was more limited.

	(2)	The object of the surseance proceedings was primarily to safeguard the assets of the insolvent undertaking and, where possible, to continue the business, by means of a collective suspension of the payment of debts with a view to reaching a settlement which would ensure that the undertaking would be able to continue operating in future.  However, if no such settlement was reached, proceedings of that kind might lead to the debtors being put into liquidation.

	According to the Court (at paragraph 29 of the judgment), it followed that the reasons for not applying the Directive to transfers taking place within the context of liquidation proceedings were reasons which were not applicable in the context of “earlier” proceedings, because those earlier merely involved leave to suspend payments of debts.

My conclusions

66.	It seems to me that the situation of somebody who is facing a bankruptcy petition, at a time when he has not yet been adjudged bankrupt, is closer to the situation of a person who is the subject of a surseance (judicial leave to suspend payments of debts) than it is to the situation of a person who already been the subject of a liquidation order:

	(1)	Once a person has been adjudged bankrupt, all further transactions are subject to the close supervision of the Court or 
of a Court-appointed official.  Prior to any such adjudication, the level of official supervision, in relation to the activities of the person who is the subject of the bankruptcy partition, is much more limited.

	(2)	After a transferor has been adjudged to be bankrupt, the situation is much more analogous to the situation of Thole in the Abels case.  (Any such transfer is then occurring within the context of insolvency proceedings which are clearly terminal, and the transfer is then being done under the relatively close supervision of the competent judicial authority, or of that authority’s delegate.

67.	Furthermore, as Mr Curran pointed out during the course of argument, the fact that a bankruptcy petition has been presented is no guarantee that bankruptcy will result.  (For example, it is possible for a debtor to present a bankruptcy petition in relation to himself).  In that context, I note certain comments that were made by interested parties in the Abels case, which were recorded by the Court, but which were not repudiated by the Court, to the following effect.  Those comments were noted at paragraph 27 of the judgment in the following terms:

		“Otherwise, leave to suspend payment of debts might be applied first specifically with a view to a transfer, to the detriment of the rights of the workers.”

68.	Accordingly, in summary, I have decided that the situation in which Mr Cassidy found himself on 23 July 2010 does not fall within the scope of Regulation 8(7) of the Regulations, particularly in light of the following:

(1)	In my view, the scope of Regulation 8(7) is identical to the scope of Article 5.1 of the 2001 Directive.

	(2)	I am satisfied that the scope of Article 5.1 must be regarded as being identical to the scope of the insolvency exclusion which had carved out by the case law of the European Court of Justice, prior to the enactment of the 2001 Directive, notably in the Court’s judgment in Abels.
  
	(3)	I am satisfied that, according to the Abels principles, a relevant transfer for the purposes of the transfer of undertakings legislation would not occur if the transferor had already been adjudged bankrupt at the time of the transfer, but could occur if the transfer took place at a time when the transferor had not yet been adjudged bankrupt, even if, on the particular date, he was already the respondent to a bankruptcy petition.  

	Accordingly, I have concluded that, on 23 July 2010, Mr Cassidy was not “the subject of bankruptcy proceedings” within the meaning of Regulation 8(7).  Therefore, his situation was not then within the scope of Regulation 8(7).

The other arguments

69.	In the circumstances, I do not need to arrive at any definitive conclusion in relation to Mr Curran’s argument that bankruptcy proceedings are not “under the supervision of an insolvency practitioner” within the meaning of Regulation 8(7), at any time prior to the date on which a relevant debtor is adjudged bankrupt.

70.	Furthermore, in light of the conclusions which I have reached, as set out above, I do not need to decide whether or not I am persuaded that the reasoning in the Scammell case is correct.

71.	The factual context of Slater was that there was a creditors voluntary winding up.  That is a factual context which is significantly different from the factual context of the present case.  Accordingly, Slater does not provide much assistance in respect of the central questions which have arisen in the context of this case.

Interest

72.	This is a relevant decision for the purposes of the Industrial Tribunals (Interest) Order (Northern Ireland) 1990.

Chairman:

Date and place of hearing:     5 July 2011, Belfast.

Date decision recorded in register and issued to parties: