Protective Awards Recoverable in Litigation

This is an abridged version of a summary prepared by www.emplaw.co.uk to whom I extend my thanks

The Court of Appeal has, yesterday, overturned the EAT's decision in Haine v Day (see bulletin 15/1/08 for EAT decision).

Mr Haine was employed by an insolvent company. He tried to enforce "protective awards" made by an employment tribunal under TULR(C)A 1992 ss. 188 & 189 for failure to consult about dismissals as the company went into insolvent liquidation. The problem was that the tribunal made the awards some months after the liquidation. The High Court concluded that therefore they were not debts provable in the liquidation of the company, and on that basis, the Liquidator was not liable to pay them.

The Court of Appeal, seemingly driven by the policy argument that "if the Liquidator does not need to pay, the Secretary of State will have to", concluded that the obligation to consult under section 188 arose before the liquidation of the company and at that point the protective award was a debt or liability to which the company "may become subject" in due course. Therefore the protective awards in this case were contingent liabilities of the company, and within rule 13,12(1)(b). It followed that liability therefore lay with the Liquidator. The appeal was allowed.