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My employer went into administration Dec 2012, and failed to consult. I lodged a tribunal claim which was suspended...

Hi, my employer went into...
Hi, my employer went into administration Dec 2012, and failed to consult. I lodged a tribunal claim which was suspended whilst they were in administration. However, after 12 months (Dec 2013) they went into voluntary insolvency. The judge then reviewed by claim and awarded in full, including an additional 90 days pay for failure to consult. The Liquidators are refusing to pay, so I have taken up the option of Crown Enforcement. A writ has been served via High Court Enforcement Officers, but the Liquidators are now saying my claim is not of a preferred creditor, and that any costs incurred by the Liquidators will be sought directly from me. What do you think? Darren
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6/22/2014
Ben Jones
Ben Jones, UK Lawyer
Category: UK Employment Law
Satisfied Customers: 50,161
Experience: Qualified Employment Solicitor
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Ben Jones :

Hello, my name is ***** ***** it is my pleasure to assist you with your question today. Why are they refusing to pay - are there no assets in the company?

Customer:

The assets of the company have all been sold during the administration process and they are currently holding about £900k. The total claim by creditors against the administration - now insolvency is probably over £2m, but the insolvency hasn't been completed yet. The last time I spoke to the liquidators back in April, they weren't expecting to be able to write with an initial offer until the end of this year. But in the mean time the Court ruled in my favour anyway

Ben Jones :

The liquidators are correct that your debts (or at least part of them) would not rank as preferential debts and as such they will rank rather low in the order of priority when satisfying the debts of the company.


 


Preferential debts in relation to employees consist of:



  • Remuneration owed for the four month period before the start of the relevant insolvency proceedings, subject to a maximum overall claim (per employee) of £800. This includes wages or salary, sick pay, contractual commission or bonus; overtime payments; and protective awards

  • Accrued holiday pay in respect of any period prior to the start of proceedings and not limited to the £800 cap.

  • Certain pension contributions into occupational pension schemes and contributions deducted from the employee's pay.


 


Any other payments will be unsecured debts and will rank way down the list once the liquidators begin realising the assets and paying off the company’s debts.


 


The general order of priority of debts is as follows:



  • Debts secured by fixed security (from the proceeds of secured assets).

  • Expenses of winding up (from the proceeds of unsecured assets).

  • Preferential debts.

  • Debts secured by floating charges

  • Unsecured debts

  • Any surplus will be paid to members of the company.


 


So as you can see, assuming your debts are unsecured there are at least four levels of debts above yours which must be satisfied in full before yours can even be considered. It would be a matter of the liquidators going through all creditors of the company in order and satisfying the debts in turn and waiting for yours to come unfortunately. As such there are never any guarantees that there would be anything left in the pot but I am afraid that is the nature of insolvency proceedings.

Customer:

Just to give you a bit of background, I received a judgement of employment tribunal in accordance with rule 21, to receive the following: notice pay, expenses, outstanding wages, holiday pay, redundancy pay and a failure to consult order of 90 days pay. This was awarded by Employment Judge Baron on 10th April this year. They had a month to respond and didn't, so I took up the offer of High Court Crown Enforcement. Do they still not have to pay, even though it's been awarded by a tribunal judge?

Ben Jones :

a tribunal judgment is a legal judgment which would be legally binding, the issue is that the contents of the judgment are not all preferential debts - some would be, but others would not. So whilst you can ask them to treat parts of the judgment as preferential debts and others and unsecured debts, that does not guarantee you payment immediately. The liquidators have a legal duty to pay the debts of the insolvency in the strict order mentioned above - you cannot 'jump the queue' just because you have a tribunal judgment. So they will have to pay at least 2 levels of debts before they even get to the preferential debts that make up part of your claim

Customer:

So the fact that the ET letters state that they have a set time in which to pay, and that debts will then incur interest at 8% doesn't really stack up??

Ben Jones :

they would say that in any event - it is standard wording that applies to all claims, but in your case the situation would be different due to the insolvency being in progress - the tribunal would not have taken that into consideration when including that wording

Customer:

Hmmmm, the case is me v the company (In Liquidation) so this kind of implies they would know

Ben Jones :

tI am sure they knew but they do not change anything in that respect - they just issue the judgment and include the standard wording, after that there could be other rules and regulations that apply depending on the situation and these are governed by law, such as the order of debt satisfaction in insolvency. The fact the tribunal did not change the wording of the judgment, which they would not do anyway, does not change the law that applies here

Customer:

ok, thanks for your advice

Ben Jones :

you are most welcome

Ben Jones
Ben Jones, UK Lawyer
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