Redundancy by Administrators: Will it ever be fair?

15-Dec-2011  |  Employment & Pensions, Restructuring & Corporate Recovery


Spaceright Europe Limited v Baillavoine and others

The Court of Appeal on 14 December 2011 handed down its decision in the case of Spaceright Europe Limited v Baillavoine and others. Upholding the decisions of the employment tribunal and the Employment Appeals Tribunal, it held that the dismissal of the Claimant was for a transfer-connected reason and was automatically unfair. The expense of the reward should fall to the transferee wchich under TUPE, is liable for that dismissal.

Facts

Bruno Baillavoine was employed as Chief Executive Officer of Ultralon Holdings Limited ("Ultralon"), a manufacturer of office equipment. In May 2008, the company was placed into administration and the same day, his employment was terminated. A month later, the business and assets of Ultralon were sold as a going concern to Spaceright Europe Limited ("Spaceright"). This was a "relevant transfer" under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Mr Baillavoine claimed his dismissal was automatically unfair under TUPE, since it was connected with a transfer.
The Administrator produced evidence to show that there was no need for a managing director (given the Administrator's appointment). He was effectively an unneeded expense.

Findings

  • The Court did not accept the Administrator's evidence of the reason behind the dismissal, holding that it was an intent to make the business more attractive to prospective purchasers.
  • There need not be a specific intent to sell, or a transferee in mind, in order for that dismissal to be "in connection" with the transfer.

Comment

  • This decision presents a further TUPE liability to which a purchaser of a business out of administration will be exposed. This will put further pressure on the amount purchasers will potentially pay, without presenting any final clarity.
  • We agree that if "a" transfer is in mind, rather than a specific sale, a termination to facilitate it should be unfair, but there is a danger of a presumption that Administrators are never terminating for business conduct. That would be unfair, outside the real purpose of TUPE, and harmful to the rescue culture.

Click to view the full judgment

Lawyers Sean Nesbitt, Neil Smyth