This ThinkHouse TUPE Club Q&A deals with our Top 10 questions on:

• the key employment issues in Administrations and Liquidations; and
• how TUPE applies when there is an insolvency situation.

Q1. What is the effect of insolvency on contracts of employment?

There are various types of insolvency proceedings and these are designed to achieve various different end results. The different types of insolvency also have different consequences for the entity and employees.

Administration

In our update this month we take a look at three cases that provide helpful clarification from the courts on issues that will be of interest to the insolvency and fraud industry - the key message from each case confirms:

Defendant's threat of insolvency did not prevent adjudicator's decision being enforced.

This month we review the court's view on open ended suspension of discharge from bankruptcy and the difficulty of 'substituting' a defendant in proceedings where the relevant limitation period has expired:

Suspension of discharge from bankruptcy should not be open ended

The High Court has held that only in the most serious cases of non-co-operation should a discharge from bankruptcy be suspended otherwise than on a specified period or condition basis.

Notice of assignment

Notice of assignment can be given by either the assignee or assignor under the Consumer Credit Act 1974 (CCA).

This was the High Court's finding in Smith v 1st Credit (Finance) Ltd and another. Smith was notified by her credit card company that her credit card debt had been assigned to 1st Credit. 1st Credit wrote to Smith shortly afterwards confirming the assignment and advising how payment could be made. Smith failed to pay and was made bankrupt by 1st Credit which subsequently repossessed and sold Smith's property.

When a company goes into administration, time does not stop running against its creditors' claims for the purposes of the Limitation Act 1980. This is different to where a company goes into liquidation as time does then stop running. The effect there is that the claim stays live whereas in an administration, once the limitation period has expired, the claim is time-barred.

Independent Trustee Services Ltd (the trustee) was the sole trustee of the Ilford Pension Scheme (the Scheme), which was underfunded when the sponsoring employer went into administration in 2004. There was a proposal that the trustee should buy out certain benefits for members of the Scheme, for whom no Pension Protection Fund (PPF) compensation would be available, before the Scheme entered an assessment period.

Repossession of a bankrupt's property will be ordered unless there are exceptional circumstances making such an order inappropriate.

In Brittain v Haghighat, the only asset in the bankrupt's estate was the family home. One of the bankrupt's children was severely disabled with quadriplegic cerebral palsy, requiring continuous care. The trustee applied for an order for possession under s336 and s337 Insolvency Act 1986.

Having obtained a possession order against the claimant’s property, the bank then sold it. Issues arose as to whether certain fixtures, fittings and chattels in the property formed part of the sale of the property. The claimant brought claims, amongst others, to recover the fittings and other items, a claim for damages for conversion of those items, and a claim that the property had not been effectively transferred to the buyer as the bank had no title to transfer the chattels to the buyer.

The Corporate Insolvency and Governance Act 2020 (the "Act") obtained Royal Assent on 25 June 2020 and came into effect on 26 June 2020.

The Act is intended to offer protection to businesses that are having difficulties trading due to the current economic downturn and beyond, and generally marks a shift towards a more debtor-friendly regime. The provisions will be relevant to occupational pension schemes.

The Court of Appeal decision in Triple Point Technology Inc v PTT Public Company Ltd turns on the wording of that particular contract, but was, in part, unexpected.

This decision does not reflect the generally held view (prior to this case) that liquidated damages will be recoverable until the point of termination at least.

Background