Mohammed Shazan Chaudhry v Paperchase Products Limited & Anor

This appeal is from a decision of Employment Judge Quill, sitting alone in Watford employment tribunal. He heard argument over a video link on 13 April 2023, with only the claimant (now the appellant) attending, represented by Mr Daniel Hallström of the Free Representation Unit (FRU). The judge gave reasons orally on the day, confirmed in a judgment with reasons dated 16 April 2023 and sent to the parties on 23 May 2023. We are as always grateful to the FRU for its help, just as we are very grateful to the claimant’s counsel in this appeal for giving their services pro bono.

The decision was to strike out an unfair dismissal claim as against the first respondent (Paperchase) because the claim was long out of time and duplicated an earlier claim that had been stayed due to Paperchase going into administration; and to dismiss a claim against the second respondent (the Secretary of State) for a declaration under section 188(3) of the Employment Rights Act 1996 (ERA) that he ought to pay the claimant £4,826 under section 182 of the ERA, corresponding to the claimant’s maximum basic award for unfair dismissal.

This appeal proceeds to a full hearing by an order of His Honour Judge Barklem made in August 2024, after a preliminary hearing. The appeal relates only to the refusal of a declaration under section 188(3) of the ERA. The point of law raised is described in the claimant’s skeleton thus:

“Can an employee make a claim against the National Insurance Fund for a basic award, without an Employment Tribunal judgment that they have been unfairly dismissed?”

The answer of the judge below was no. The Secretary of State is aware of this appeal but has not attended. He filed a respondent’s answer asking the appeal tribunal to uphold the decision for the reasons given below. Paperchase is no longer in administration. There is a stayed claim against it (3306647/2019) for unfair dismissal, presented in time in 2019, after the claimant’s dismissal by Paperchase on 4 October 2018. That claim could potentially be revived, but has not been. Paperchase filed an ET3 contesting the claim, saying the dismissal was for conduct and was fair.

It came to my attention a few days before the hearing of this appeal that Paperchase, after being dissolved, had been restored to the register of companies in October 2024 and that the claimant’s solicitors were made aware by the former administrators in December 2024 that it had been restored and was described in Companies House documents as active. The restoration order was sought by a creditor and made by consent on 14 October 2024, evidently for the purpose of obtaining a protective award against Paperchase in other employment tribunal proceedings.

I therefore considered whether to adjourn the appeal to enable the claimant to apply to lift the stay of the 2019 unfair dismissal claim and seek an adjudication of that claim which, if successful, would put beyond doubt his right to recover a basic award, if not against Paperchase should it again become insolvent, then against the Secretary of State. I was narrowly persuaded not to take that course but to entertain and decide this appeal, so that the parties would know whether or not – the claimant says not – he would need to win the 2019 claim to get his basic award at all.

The claimant was a site manager of Paperchase based at Brent Cross in north London from November 2010. He was dismissed in October 2018 and brought his unfair dismissal claim, in time, on 22 February 2019 (the 2019 claim). Paperchase filed an ET3 denying liability, saying the dismissal was for conduct and was fair. In March 2019 Paperchase entered into a voluntary arrangement with its creditors and on 26 January 2021 it went into administration.

On 14 July 2021 the claimant’s FRU representative, by then aware of the administration, informed the tribunal that Paperchase was unlikely to attend the final hearing fixed for 19 to 22 July. On 16 July 2021, that hearing was vacated. The 2019 claim was stayed because of the moratorium on legal proceedings against a party that becomes insolvent and goes into administration. The claimant then submitted a proof of debt with the administrator, seeking £35,880.40. This was the calculated full basic award and maximum compensatory award sought in the 2019 claim.

The administrator accepted the debt in full and, along with other similarly ranked creditors, paid the claimant 2.52 per cent of it. It is not clear whether there was any apportionment as between the basic and compensatory award elements of the debt. In the absence of evidence, I would suppose that the payment of 2.52 per cent probably represented 2.52 per cent of the basic award claimed and 2.52 per cent of the compensatory award element claimed. But I need make no determination of that point for present purposes.

In September 2021, the tribunal warned the claimant’s representative that the stayed 2019 claim might be struck out if it were not to be actively pursued. The administrator refused to give consent to the 2019 claim proceeding and the claimant did not make an application to the insolvency court (under the Insolvency Act 1986, Schedule B1, paragraph 43(6)(b)) for permission to proceed with the claim. On 21 March 2022, the claimant sent a claim to the Insolvency Service (i.e. the Secretary of State) seeking, among other things, payment of his basic award for unfair dismissal.

The Insolvency Service rejected that claim on 20 April 2022, on the ground that the Service had been “unable to verify your employment details with the Insolvency Practitioner” and that “we cannot calculate any payment without this information”. Then on 8 July 2022 the claimant brought his second claim (the 2022 claim), against Paperchase for unfair dismissal and against the Secretary of State for a declaration under section 188(3) of the ERA that the Secretary of State ought to pay the basic award. As against Paperchase, the 2022 claim is struck out and that decision is not appealed.

The Secretary of State filed an ET 3 on 31 August 2022 with short grounds of resistance, saying he did not intend to take an active part in the proceedings but that she did not admit liability for various reasons, including that he had been “unable to verify the claimant’s employment details with the Insolvency Practitioner” and because the claimant had not produced any employment tribunal judgment in his favour granting him a basic award for unfair dismissal.

In December 2022, the tribunal warned the claimant that an employment judge was looking at the 2019 claim and was considering striking it out, as it was not being actively pursued. In early January 2023, the claimant responded, objecting to the 2019 claim being struck out. It remained and still remains stayed. On 1 February 2023, the administration of Paperchase was terminated and the administrator ceased to act. The claimant did not apply to lift the stay of the 2019 claim.

In an email sent to the claimant’s FRU representative on 6 March 2023 (which I have not seen but it is referred to at paragraph 29 of the decision below) the Secretary of State asserted again that, in the absence of a tribunal judgment, the decision to decline to make any payment for basic award was correct and would not be changed. The claimant then made detailed written submissions to the tribunal for the video hearing fixed for 13 April 2023, before Employment Judge Quill. The claimant gave evidence and Mr Hallström of FRU made his submissions, the other parties not attending.

After giving his reasons orally on the day, the judge prepared a reserved judgment with reasons, dated 16 April 2023. By the time it was sent to the parties (on 22 May 2023) Paperchase had (on 1 May 2023, according to counsel’s chronology in this appeal) been dissolved. The former administrator has also confirmed that Paperchase was “dissolved” at some point after January 2023, though it has since been restored to the register, as explained above.

The judge noted that the 2019 claim was not before him and that nothing he said should influence or bind any judge dealing with that claim. He struck out the 2022 claim as against Paperchase on the ground of duplication and because it was out of time, as already explained. He set out the procedural history, as I have done. He rejected the claimant’s contention that he did not need a tribunal decision granting a basic award for unfair dismissal as a precondition of the Secretary of State’s liability under section 182 of the ERA to make a payment in respect of basic award.

In reaching that conclusion, the judge considered various provisions of the ERA including those relied on by the claimant. He held, in essence, that the words “any basic award of compensation for unfair dismissal” in section 184(1)(d) of the ERA meant that there must be a decision of an employment tribunal that the employee concerned is entitled to basic award of compensation for unfair dismissal. It was irrelevant that the administrator had accepted the claimant’s proof of debt.

The judge’s decision was based on consideration of the numerous interlocking statutory provisions in the ERA, to which I must come when considering the claimant’s submissions in this appeal. He also rejected the contention that retained EU law should impel an interpretation of the domestic provisions not requiring a tribunal decision. The claimant was arguing below, as he continues to argue in this appeal, that the EU law principles of effectiveness and non-discrimination required that a tribunal decision on basic award should not be required.

The judge rejected the claimant’s argument that if a tribunal decision making a basic award were needed, employees’ rights to receive state funded guarantee payments under Directive 2008/94 would be virtually impossible or excessively difficult in practice to exercise. The argument was developed in detail and supported by citation of various authorities in Mr Hallström’s written submissions. I set out in full the judge’s reasons for rejecting those arguments, since they are the subject of a separate challenge on the basis inadequate reasons in the second ground of appeal:

“60.

The arguments based on the Directive do not assist the Claimant. There is nothing inconsistent with the requirements of the Directive that the member state is only obliged to reimburse the employee for the debts of the insolvent employer (or former employer) in certain circumstances. Had the Claimant been dismissed by reason of redundancy, the entitlement to that severance payment can be assessed without a decision by the Tribunal (with decision by the Tribunal being available where necessary, in the event of dispute). Similarly, a decision about the (correct amount for) ‘arrears of pay’ can be assessed without a decision by the Tribunal (with decision by the Tribunal being available where necessary, in the event of dispute). However, unfair dismissal rights are exclusively a creation of statute, and exclusively within the jurisdiction of employment tribunal. See Johnson v Unisys Limited [2001] UKHL 13. There is no undermining of the protection for employees by the fact that entitlement to a basic award is something that can be exclusively determined by the Tribunal, in a claim against employer, in accordance with the provisions of Part X ERA.

61.

The Claimant was, of course, prevented from having a decision on the merits of the claim against the employer by the combined effects of (a) the statutory moratorium and (b) not having either the consent of the administrator or the permission of the insolvency court and (c) the stay. However, the legislation did provide him with the option of applying to the insolvency court (given that he tried, and failed, to persuade the administrator to give consent). I accept that the Claimant might have had good reasons for not pursuing that option (namely the costs of so doing), but the fact is that the option did exist. The UK has not implemented a complete ban on employees obtaining unfair dismissal awards against employers who are in administration; it has simply imposed conditions. In those circumstances, I am not persuaded that the UK has failed to implement the Directive and/or that I should read section 184(1)(d) as if it said ‘an amount equivalent to a basic award of compensation for unfair dismissal... .’”

After the decision of the judge below, this appeal proceeded and was listed for a full hearing, as I have explained. Paperchase has been restored to the register and, as far as I am aware, remains in being and not in administration or liquidation, though whether it has any assets I do not know. The 2019 claim remains stayed, for the time being at least. Paperchase has taken no part in this appeal. The Secretary of State supports the decision of the judge for the reasons he gave, but did not appear.

The claimant traced the legislative history back to Part VII of the Employment Protection (Consolidation) Act 1978 (the EPCA). There was a right to claim against the Secretary of State out of the National Insurance Fund for the debts to which Part VII applied. The right applied on “the relevant date”, defined in section 122(2) of the EPCA. In relation to a basic award for unfair dismissal, the definition of “the relevant date” was the same as what later became and is now the definition of “the appropriate date” in the ERA.

The concepts of a basic and compensatory award for unfair dismissal were the same under the EPCA as they now are under the ERA. Section 122(3)(d) of the EPCA provided that where a tribunal “makes an award of compensation for unfair dismissal the award shall consist of a basic award (calculated in accordance with section 73) and a compensatory award (calculated in accordance with section 74).” The method of calculation has changed slightly but the main ingredient of half a week’s pay, one week’s pay or one and a half week’s pay, depending on age, has been preserved.

In 1980, the EEC adopted the first of its insolvency directives. As explained in the claimant’s skeleton argument, Directive 80/987/EEC (the Insolvency Protection Directive) was made on 20 October 1980. Although the EPCA predated the Insolvency Protection Directive, it was treated as implementing it. So, later, was Part XII of the ERA. The Insolvency Protection Directive was superseded by Directive 2008/94/EC (the Insolvency Directive) from 8 October 2010. The United Kingdom intended (inter alia) the ERA to be treated as having implemented the Insolvency Directive.

The Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) made provision for handling collective redundancies, i.e. in situations where 20 or more people are made redundant at one establishment within a 90 day period. These provisions had their origin in a 1975 directive relating to collective redundancies, about which I need not say more. The requirements were set out in section 188 and (later, by amendment in 1999) section 188A of the TULRCA. I need not go into the detail of what the requirements were.

Sections 189 and 190 of TULRCA provide a right of complaint to an employment tribunal where the employer has failed to comply with the requirements. If the complaint is well founded, the tribunal must make a declaration to that effect and may make a “protective award” (section 189(2)), comprising “remuneration for the protected period” (section 189(3)). A protective award generates an entitlement to be paid remuneration for that period (section 190(1)). An employee may complain to a tribunal that the employer has failed to pay that remuneration (section 192(1)).

In 1996 the ERA replaced, among other legislation, the EPCA. The ERA now contains the regime for unfair dismissal (Part X), unauthorised deduction from wages (Part II) and redundancy payments (Part XI), among other things. The employer insolvency provisions were put into Part XII, updating the regime in the former EPCA but without much change to the provisions dealing with unfair dismissal claims. There have been many amendments to the ERA but I do not need to track them for present purposes. I refer to the provisions as amended, except where indicated otherwise.

Section 112(4) provides for “an award of compensation for unfair dismissal”. The award is “calculated in accordance with sections 118 to 126… .” Section 118 states that where the tribunal makes an “an award of compensation for unfair dismissal … the award shall consist of … a basic award … and … a compensatory award… .” The method of calculating the basic award is in section 119 and is similar to the method in the former EPCA, as noted above.

There are ancillary provisions which impact on how the tribunal must calculate the basic award: e.g. the “minimum in certain cases” provision (section 120); the “two weeks’ pay” provision (section 121); and the reductions provisions (section 122). The general definition section of the ERA, section 235(1), contains an alphabetical list of defined terms including the provision that:

“In this Act, except in so far as the context otherwise requires … ‘basic award of compensation for unfair dismissal’ shall be construed in accordance with section 118 … .”

Turning to the insolvency provisions in Part XII, which are in issue in this appeal, section 182 provides that if the Secretary of State is satisfied that three conditions are met, she must pay the employee out of the National Insurance Fund the amount to which in her opinion the employee is entitled, subject to a ceiling or cap set by section 186 (currently, £719 in respect of any one week, or pro rata in respect of a period of less than a week). The three conditions are:

“(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, … .”

There is an elaborate definition of insolvency in section 183, which I need not set out. Insolvency can take various forms in England, Wales or Scotland, where the employee must have “habitually worked” (section 183(4C)). More pertinently for present purposes, section 184 makes provision for the debts to which Part XII applies:

“(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,

(d)

any basic award of compensation for unfair dismissal [or so much of an award under a designated dismissal procedures agreement as does not exceed any basic award of compensation for unfair dismissal to which the employee would be entitled but for the agreement], and

(e)

any reasonable sum by way of reimbursement of the whole or part of any fee or premium paid by an apprentice or articled clerk.”

The words in square brackets in section 184(1)(d) relating to a “designated dismissal procedures agreement” were added by the Employment Rights (Dispute Resolution) Act 1998. Designation is done by the Secretary of State. Section 110 of the ERA (as amended by the same 1998 Act) makes detailed provision for such agreements. Where they are present, put simply their terms replace the right not to be unfairly dismissed under section 94 of the ERA.

I do not need to set out the detail of section 110, as amended, but I should mention that section 110(6) refers to an “award” under such an agreement, which in England and Wales may be enforced with leave of the county court in the manner of a county court judgment and “judgment may be entered in terms of the award”. Such an award is in the nature of an arbitration award made in accordance with the terms of the relevant designated dismissal procedures agreement.

I have already set out section 184(1) of the ERA but must also mention subsection (2), listing four types of remuneration that are treated as “arrears of pay”. They are (a) a guarantee payment (b) a payment for time off for carrying out trade union duties, etc (c) remuneration on suspension on medical or pregnancy grounds and, materially for present purposes, at (d) “remuneration under a protective award under section 189 of [TULRCA].”

Section 185 then defines “the appropriate date” for the purposes of Part XII. That is the phrase in section 186(c), stating the third of the three conditions of which the Secretary of State must be satisfied in order to generate entitlement to a payment from the National Insurance Fund, of the amount to which the Secretary of State considers the employee entitled. I set it out in full:

“185.

The appropriate date

In this Part “the appropriate date” —

(a)

in relation to arrears of pay (not being remuneration under a protective award made under section 189 of the Trade Union and Labour Relations (Consolidation) Act 1992) and to holiday pay, means the date on which the employer became insolvent,

(b)

in relation to a basic award of compensation for unfair dismissal and to remuneration under a protective award so made, means whichever is the latest of—

(i)

the date on which the employer became insolvent,

(ii)

the date of the termination of the employee's employment, and

(iii)

the date on which the award was made, and

(c)

in relation to any other debt to which this Part applies, means whichever is the later of—

(i)

the date on which the employer became insolvent, and

(ii)

the date of the termination of the employee's employment.”

Section 187(1) of the ERA prevents the making of a payment by the Secretary of State under section 182 until he has received from the “relevant officer” appointed in connection with the employer’s insolvency (i.e. a liquidator, administrator, trustee in bankruptcy, etc) “a statement … of the amount of that debt which appears to have been owed to the employee on the appropriate date and to remain unpaid.” The Secretary of State may dispense with the need for a statement (section 187(2)). The relevant officer is under a duty, if asked, to provide the statement (section 187(3)).

By section 188(1) an employee who has applied for a payment may complain to an employment tribunal that the Secretary of State has failed to pay some or all of what is due. By section 188(3), where the tribunal finds that the Secretary of State “ought to make a payment under section 182”, the tribunal must make a declaration to that effect and declare the amount due. Section 189 provides for certain subrogation rights, to which I need not refer further; and section 190 gives the Secretary of State a general power to obtain information and records from relevant persons.

Those are the main provisions in domestic law. In 2008, the Insolvency Protection Directive of 1980, mentioned above, was replaced and superseded by the Insolvency Directive. The claimant relies on the third and sixth recitals:

“Whereas:

…

(3)

It is necessary to provide for the protection of employees in the event of the insolvency of their employer and to ensure a minimum degree of protection, in particular in order to guarantee payment of their outstanding claims, while taking account of the need for balanced economic and social development in the Community. To this end, the Member States should establish a body which guarantees payment of the outstanding claims of the employees concerned.

….

(6)

In order to ensure legal certainty for employees in the event of insolvency of undertakings pursuing their activities in a number of Member States, and to strengthen employees’ rights in line with the established case-law of the Court of Justice of the European Communities, provisions should be laid down which expressly state which institution is responsible for meeting pay claims in these cases and establish as the aim of cooperation between the competent administrative authorities of the Member States the early settlement of employees’ outstanding claims. Furthermore it is necessary to ensure that the relevant arrangements are properly implemented by making provision for collaboration between the competent administrative authorities in the Member States.”

I also note recital (7):

“Member States may set limitations on the responsibility of the guarantee institutions. Those limitations must be compatible with the social objective of the Directive and may take into account the different levels of claims.”

Within Chapter II entitled Provisions Concerning Guarantee Institutions, the claimants relies on article 3 and I should also mention (as the judge below did) the first part of article 4:

“Article 3 

Member States shall take the measures necessary to ensure that guarantee institutions guarantee, subject to Article 4, payment of employees’ outstanding claims resulting from contracts of employment or employment relationships, including, where provided for by national law, severance pay on termination of employment relationships.

The claims taken over by the guarantee institution shall be the outstanding pay claims relating to a period prior to and/or, as applicable, after a given date determined by the Member States.

Article 4 

1.

Member States shall have the option to limit the liability of the guarantee institutions referred to in Article 3.

…. .”

The rest of article 4 deals with the permitted extent to which liability can be limited and the duty of member states to inform the Commission of methods used to set a ceiling. I need not set out the detailed provisions here. Article 4 does not contain any right to limit member state liability based on whether a judicial decision is in place or not. Article 12(a), among other things, permits member states to “take the measures necessary to avoid abuses”.

The Insolvency Directive is retained EU law. The EU case law interpreting it is assimilated case law, within the provisions of the European Union (Withdrawal) Act 2018. I accept that domestic statutory provisions intended to implement the Insolvency Directive and its predecessor are to be interpreted, as far as possible, in harmony with relevant EU law doctrines and case law, according to the Marleasing principle (see Marleasing SA v. La Comercial Internacional de Alimentación [1990] I-4135); including the principles of effectiveness and non-discrimination.

Following the repeal of the European Communities Act 1972 and the passing of the Brexit related legislation in 2018 and 2020, domestic courts may no longer make a reference to the Court of Justice of the European Union; nor disapply domestic statutory provisions on the ground that they are incompatible with directly effective EU law obligations. The claimant accepts this but says the domestic provisions are capable of the interpretation for which he contends and should be so interpreted to ensure consistency with the Insolvency Directive and EU case law.

The first ground of appeal is that the judge misinterpreted the legislation. Mr Jackson began by reminding me that the domestic provisions implement the obligation on the United Kingdom to guarantee severance payments on termination of employment. They should therefore be interpreted, he submitted, in a manner that does not lead to employees arbitrarily losing out on such payments where their former employer is insolvent. One such payment is the basic award for unfair dismissal.

In an unfair dismissal case, Mr Jackson submitted, the appropriate date under ERA section 185(b) is the latest of three dates: (i) the date of insolvency, (ii) the date of termination and (iii) the date of a tribunal award. Mr Jackson argued that it is difficult to understand why parliament would have intended a basic award for unfair dismissal to be available only if all three events have taken place. There is no verbatim definition of a basic award; by section 235(1), it is “construed in accordance with section 118”, unless “the context otherwise requires”.

Further, said Mr Jackson, section 184 includes, among the “debts” to which Part XII applies, a basic award of compensation for unfair dismissal alongside other “debts” such as arrears of pay, holiday pay and notice pay. If parliament had intended a basic award for unfair dismissal to be treated differently from those other debts, it would have said so. The other debts do not require a decision of a tribunal. Logically, an unfair dismissal basic award should not require one either: all the “debts” in section 184 should be treated the same way.

Therefore, said Mr Jackson, the judge was wrong to distinguish the decision in Graysons Restaurants Ltd v. Jones [2019] ICR 1342. The Court of Appeal held that “arrears of pay” payable on insolvency of the employer meant arrears of pay after adjustment by the operation of any equality clause under the Equal Pay Act 1970. The judge here should likewise have treated the right to a basic award for unfair dismissal as a “debt” in the administration; just as Norris J treated claims for unfair dismissal as debts in the administration in Unite the Union v. Nortel Networks UK Ltd (in administration)[2010] IRLR 1042, at [34], without the need for any adjudication.

The liability to pay the claimant a basic award arises, said Mr Jackson, not on the making of a tribunal decision but on the dismissal of the employee. The right to a basic award crystallises on the date of the dismissal. The right to a basic award is not the product of judicial discretion. It is not the same as, for example, an award of costs, where the right to the costs awarded does not exist until the making of the award. Under section 94 of the ERA, by contrast, the right not to be unfairly dismissed exists before any adjudication has taken place.

Turning to the EU law dimension, Mr Jackson and Ms Brown submitted that the Marleasing principle required the appeal tribunal to interpret Part XII in such a way as to give effect to the Insolvency Directive and this includes, as it was put in the claimant’s skeleton argument, “where necessary, reading words in (or out) of the legislation, provided that the interpretation does not go ‘against the grain’ of the ERA”.

The oral submissions on EU law were made mainly by Ms Brown. In the skeleton, the claimant submitted that the correct approach to interpreting the domestic provisions requires the court to ask itself the following three questions:

“(1)

On a simple consideration of the context, was the UK entitled to enact national law which prohibited access to severance payments in the absence of express resolution of a chose in action [i.e. an adjudication by a court or tribunal]? (2) If so has the means adopted by the UK, including requiring either consent of an insolvency practitioner or (in a costs bearing jurisdiction) the High Court, been done in such a way so as to deprive the Claimant of an effective remedy to vindicate that right? (3) Has the UK done so in such a way as to discriminate between EU and domestic law remedies, so that obtaining the EU law remedy is more difficult than obtaining an equivalent domestic one unless that difference is objectively justified?”

The principle of effectiveness, Ms Brown reminds me, states that national procedural rules, viewed as a whole, must not render virtually impossible or excessively difficult the exercise of rights conferred by EU law: see Joined Cases C-222/05-C-225/05 Van der Weerd and others v. Minister van Landbouw, Natuur en Voedselkwaliteit [2007] ECR I-4233, at [33]. This principle is infringed, she submitted, by the judge’s interpretation of the domestic provisions because an employee would have to seek either the consent of the administrator or the permission of the court.

The administrator’s consent could be refused for arbitrary or capricious reasons, the claimant submits. Consent was refused in this very case, Ms Brown points out. The court’s permission would rarely be granted because of the need for exceptional circumstances, as the Nortel Networks UK Ltd case shows. The jurisdiction of the insolvency court under the Insolvency Act 1986 on an application for permission to proceed is not normally cost free, unlike the jurisdiction of the employment tribunal.

As for the principle of non-discrimination, that similar situations should be treated alike unless the difference in treatment is objectively justified, Ms Brown referred me to Rodríguez Caballero v. Fondo de Garantía Salarial C-442/00[2003] IRLR 115 at [32]-[40], also cited to the judge below. Unfairly dismissed Spanish workers were entitled to salarios de tramitación (payments due from the employer from the date of dismissal to the date of a court decision declaring the dismissal unfair). But if the employer were insolvent, the defendant guarantee institution (Fogasa) only became liable to pay the salarios de tramitación if they had been declared due by a court or legal process.

Spain relied unsuccessfully on article 10 of the Insolvency Protection Directive, which provided that the directive “shall not affect the option of Member States … to take the measures necessary to avoid abuses.” A similar provision is now in article 12(a) of the Insolvency Directive. The Court of Justice found unjustified the difference of treatment between unfairly dismissed workers whose employer was solvent and unfairly dismissed workers whose employer was insolvent.

The former did not need a court decision; the employer’s obligation to pay required only that the dismissal was unfair. The employee could sue the solvent employer for the payment but it would often be paid voluntarily, in lieu of reinstatement, without a court decision. But where the employer was insolvent, Fogasa was liable to pay the salarios de tramitación only if a court judgment confirming the insolvent employer’s liability to pay them had been obtained. As the Court of Justice expressed the point, at [33]:

“… in the event of the employer’s insolvency, Article 33(1) of the Workers’ Statute treats dismissed workers differently to the extent that the right to payment by Fogasa of claims relating to ‘salarios de tramitación’ is acknowledged only in respect of those determined by judicial decision.”

The Court of Justice rejected Spain’s submission that the differential treatment was justified by article 10 of the Insolvency Protection Directive. At [38], the Court stated:

“… the fact that claims relating to ‘salarios de tramitación’ are paid by Fogasa only if that remuneration

was determined by judicial decision cannot be regarded as a measure necessary to avoid abuses for the purposes of Article 10 of the Directive.”

No other justification being advanced, the Court found the difference of treatment unjustified: the Spanish national court must set aside, i.e. disapply, the discriminatory provision without waiting for the national legislature to remove the difference of treatment. By similar reasoning, Ms Brown submitted, the judge’s interpretation would also fall foul of the principle of non-discrimination. While the appeal tribunal cannot disapply the relevant provisions in Part XII of the ERA, it can, adopting the Marleasing approach, interpret them consistently with the non-discrimination principle.

Ms Brown gave examples of, as the claimant submits, the malign impacts of the judge’s interpretation. A group of employees dismissed by collective redundancy without consultation would receive a protective award under section 184(2)(d) of the ERA; yet the same group subjected to a “sham” misconduct dismissal would not. Unfairly dismissed employees in a region where claims are determined quickly would get their basic award from the tribunal and thus on insolvency from the Secretary of State, while those in busy regions with a backlog may not get a decision in time.

Further, Ms Brown pointed out, the judge’s interpretation means that employees owed other forms of “debt” listed in section 184(1) of the ERA would not require a judgment – as in Graysons Restaurants Ltd v. Jones – while those whose guaranteed debt arises from an unfair dismissal would require a judgment. There is no justification for this difference of treatment, Ms Brown submitted. It can be avoided by treating the basic award as a kind of debt which crystallises on the date of the dismissal and not the date of any later judgment.

The second ground of appeal is that the reasoning of the judge below was insufficient in relation to the EU law contentions. I have already set out the relevant paragraphs of the decision below. The claimant says the judge did not properly address Mr Hallström’s submissions on the principles of effectiveness and non-discrimination. It was not enough to say that “[t]he arguments based on the Directive do not assist the Claimant”.

In respect of the EU law arguments, the judge “tells the Claimant that he has lost, but not why he has lost”, it is said in the skeleton. He stated that the United Kingdom had imposed “conditions”, not a “complete ban” on employees obtaining unfair dismissal awards from the Secretary of State where the employer is insolvent. The judge did not, it is objected, examine why those conditions were justified or whether they needed to be justified, as the claimant was submitting below.

I accept that the EPCA was intended to implement (ahead of schedule) the Insolvency Protection Directive and that the ERA was, later, treated as having implemented the Insolvency Directive. It follows that the ERA should be interpreted consistently, if and to the extent possible, with the Insolvency Directive. But it only can be if the interpretation contended for is linguistically possible; if so, the issue becomes whether the claimant’s interpretation is necessary to give effect to employees’ rights under the Directive and the principles of effectiveness and non-discrimination.

The concept of an “award”, as a matter of language and in context, suggests the making of a decision that a payment should be made. The word “award” in this context does not mean the giving of a prize, such as an Oscar or a knighthood. It means a decision that the person in whose favour it is made is entitled to a certain amount of money. The word “award” appears in the domestic legislation in three instances: a basic award for unfair dismissal; a protective award for failure to consult on collective redundancies; and an arbitral award under a dismissal procedures agreement.

The word “award” does not appear in the English text of the Insolvency Directive. Article 3 enacts the obligation to guarantee “payment of employees’ outstanding claims resulting from contracts of employment relationships, including, where provided for by national law, severance pay on termination of employment relationships”. This language says nothing about any judicial decision or “award” in the sense of the word as used in the ERA. It is implicit that national laws must provide the means of enforcing the right to “payment of … outstanding claims” but it is not stated in the Insolvency Directive that any such decision is a precondition of the right to the relevant payment.

Next, in the unfair dismissal context (see section 112ff the ERA) the award is in two parts: basic, and compensatory. Section 118(1) so provides, but does not deal with how the basic award is calculated. It provides for the methods of calculation to be as set out in sections 119 to 122 and 126. In my judgment, that is why the definition of a basic award in section 235(1) refers to the basic award being “construed in accordance with section 118”, rather than bearing the meaning set out in section 118. You cannot define a basic award except by unhelpfully stating the obvious, that it is one of the two kinds of award of compensation for unfair dismissal and calculated as provided for in the ERA.

I come next to the domestic law insolvency provisions in Part XII of the ERA. The right to recovery is dependent on both insolvency (section 182(a)) and termination of employment (section 182(b)) and applies to certain kinds of “debt” to which (in whole or in part) employee must be entitled “on the appropriate date” (section 182(c)). The debts to which Part XII applies are those listed in section 184(1)(a) to (e). The first category is “arrears of pay” at (a).

That category is then broken down into four sub-categories of “arrears of pay” in section 184(2) at (a) to (d). The sub-categories include at (d) “remuneration under a protective award under section 189 of [TULRCA].” So, remuneration payable under a protective award is a debt to which the right of recovery applies, also being “arrears of pay”. Returning to section 184(1), at (d) the right of recovery also applies to a “debt” in the form of a basic award for unfair dismissal or an arbitral award under a dismissal procedures agreement.

I now return to section 186, setting the three conditions triggering the Secretary of State’s obligation to pay. Apart from insolvency (the first condition) and termination of employment (the second), the third, at (c) is that “on the appropriate date the employee was entitled to be paid” the debt in whole or in part. The appropriate date is then defined in section 185(a) and (b), but in relation to “arrears of pay” at (a), protective awards are carved out as an exception; in the case of all arrears of pay except protective awards, the appropriate date is the date the employer became insolvent.

In the case of protective awards and a basic award of compensation for unfair dismissal, the regime is different. The appropriate date at (b) is not simply the date of insolvency; it is the latest of three dates, of which the date of insolvency is only one. The appropriate date (for ascertaining whether the Secretary of State’s third condition is met) may be the date of termination of employment if that occurs last in the series of events, or it may be the date of the “award” (basic or protective) if that occurs last. The words are clear; I cannot read the words “appropriate date” in any other way.

Basic awards in unfair dismissal cases and protective awards in collective redundancy cases are both awards made by an employment tribunal. An arbitral award under a dismissal procedures agreement is not; it is made by an arbitrator under the terms of the agreement. I think (though I do not need to decide) the basic award element of such an arbitral award (Footnote: ¹) would for “appropriate date” purposes fall within section 185(c): “any other debt to which this Part applies”. I mention that point for completeness, but it does not affect my analysis.

I conclude that the natural and ordinary meaning of the domestic provisions is as the judge below found it to be: all three of the relevant events must have occurred before the “appropriate date” is known. Until all three have occurred, the Secretary of State cannot know what the appropriate date is and therefore cannot be obliged to make a payment because the third condition in section 186(c) (entitlement to be paid on the appropriate date) is not met.

The Secretary of State, furthermore, cannot know how much his liability to pay is until the tribunal has told him by calculating the basic award. The basic award, when made, must be calculated by the tribunal applying not just section 119 but also any of sections 120, 121, 122 and 126 that are applicable. I will not set out fully the effects of those provisions but all have a potential bearing on the quantum of the basic award. If no award is made, the employee cannot say he must necessarily be entitled to the maximum allowable basic award, when the tribunal might have decided otherwise.

I therefore reject the submission that parliament intended all debts to be treated in the same way. It may be logical that an unfair dismissal basic award or a protective award should be treated in the same way as other debts, but the words of the statutory provisions do not lead to that conclusion. Arrears of pay in the context of an equality clause (as considered in the Graysons Restaurants Ltd case) are a different matter because the statutory provisions do not require any tribunal award.

The claimant is likewise not assisted by the proposition that an unfair dismissal claim crystallises on dismissal, not on the date of the tribunal award, and may be submitted as a “debt” on the employer’s insolvency (according to the reasoning of Norris J in the Nortel Networks UK Ltd case). The claimant’s arguments on the domestic law provisions are ultimately defeated by the language used, i.e. by the word “award” which means a decision; and by the temporal sequence involving the happening of three events, not two, for the obligation to pay to be triggered.

I come next to the arguments based on EU law. I accept the claimant’s account of the Marleasing principle and the principles of effectiveness and non-discrimination. I accept also that the Rodriguez Caballero case is strong authority that requiring a judicial decision as a precondition of recovery of guarantee payments covered by the Insolvency Directive is likely to amount to unjustified differential treatment as between the employees of an insolvent employer and the employees of a solvent one.

The difference in treatment here is as between different categories of employees of an insolvent employer which is not the same difference of treatment, but any justification argument would probably fare no better than did Spain’s in Rodriguez Caballero. The Secretary of State has not sought to justify the difference of treatment as between unfairly dismissed employees of an insolvent employer and those made redundant or dismissed with outstanding wages owing. She has instead supported the decision below in which the judge concluded, without much analysis, that the United Kingdom was not in breach of its obligations under the Insolvency Directive.

The judge observed at paragraph 61 that the employee can apply to the insolvency court for permission to proceed and that while cost was a likely deterrent, “[t]he UK has not implemented a complete ban on employees obtaining unfair dismissal awards against employers who are in administration; it has simply imposed conditions”. That reasoning does not, as the claimant rightly submits in the second ground of appeal, address whether those conditions make exercise of the right to recovery from the Secretary of State excessively difficult and whether they are justified.

I am not as sanguine as the judge was that the provisions in Part XII of the ERA can be so easily exonerated. I think there is a strong argument that they are difficult to reconcile with employees’ rights under the Insolvency Directive, make exercise of those rights excessively difficult, and treat different categories of employee debt (and therefore different categories of employee) differentially, without justification. It is telling that the Secretary of State has not sought to make any positive case to the contrary, relying instead only on the sparse reasoning in the decision below.

Applying the Marleasing approach, I would therefore, if I could, interpret the provisions in the manner contended for by the claimant. However, I cannot do so because the words are plain and to do so would go against the grain of the legislation. I have already given my reasons for reaching that conclusion. I cannot disapply the relevant provisions because of the impact of the Brexit legislation. I am bound to apply them even though they are prejudicial to the claimant and put him at a disadvantage relative to other categories of employee whose employer becomes insolvent.

I agree with the contention advanced in the second ground of appeal that the reasoning of the judge is very thin and in need of amplification. However, the success of that contention cannot assist the claimant in this appeal because the failure of the first ground of appeal – that the judge below misinterpreted the domestic legislation – means that the criticisms of his reasoning under the second ground have no traction and cannot affect the result, which is that the appeal must be dismissed.

I would add the following as a postscript. An administrator or liquidator of an insolvent employer who is faced with a request for permission to proceed with a claim, coupled with an undertaking that the employee wishes to do so for the purpose only of obtaining a basic award of compensation for unfair dismissal from a tribunal, would do well to consider carefully consenting to the request. Acceding to such a request should not prejudice other creditors provided no assets of the insolvent employer are spent on defending the claim.

In such a case, it would be for the Secretary of State to consider whether to raise any defence to the claim – for example, that the dismissal was fair - as in the case of a claim for arrears of pay (cf. the Graysons Restaurants Ltd case). An administrator or liquidator who is willing to accede to such a request should be comforted by the employee’s undertaking not to pursue the claim for any other purpose than to obtain a basic award and then recover the amount of that award from the Secretary of State, not the insolvent employer. Any compensatory award would be an ordinary debt without any priority over other creditors; or the employee might undertake not to seek a compensatory award.

A corollary of the above is that if such a request is refused and the employee then applies to the insolvency court for permission to proceed, the latter court might well be willing to grant permission - and the liquidator or administrator might be correspondingly exposed as to the costs of the application to the insolvency court if it did not consent - provided again that the employee undertakes not to pursue the claim for any other purpose than to obtain a basic award for the purpose of recovery against the Secretary of State under Part XII of the ERA.