Krasner v McMath
Encyclopedia
Krasner v McMath [2005] EWCA Civ 1072 (also, Re Huddersfield Fine Worsteds Ltd) is a UK labour and insolvency law case concerning the priority of payments to workers of an insolvent company in priority to other creditors.
company, in an appeal joined to another two companies. Barry McMath was one of the employees claiming that his right to compensation for the employer’s failure to consult the workforce about redundancies was payable in priority to the expenses of administration. TULRCA 1992 s 188 gives the right to be consulted 90 days in advance where there are twenty or more dismissals, s 189 gives the right to a ‘protective award’ in lieu of consultation and s 190 specifies this should be one week’s pay per missed week. Mr McMath’s contract had been adopted (in priority to administration expenses) under IA 1986 Sch B1 para 99, and so was owed any ‘liability arising under a contract of employment’. Were protective awards in that category?
Peter Smith J in one case had held that they were payable in priority and Etherton J in the other had held they were not.
. This accorded with the natural meaning of IA 1986 para 99(5) and the list of payments in para 99(6), and accorded with the policy considerations surrounding rescue. In particular, many administrators would not decide that a rescue is possible if they know damages for failure to consult the workers who are retained and have their contracts adopted get super-priority for more than the work they do.
Clarke LJ and Jacob LJ concurred in the judgment.
Facts
Gerald Krasner was the administrator of an insolvent worstedWorsted
Worsted , is the name of a yarn, the cloth made from this yarn, and a yarn weight category. The name derives from the village of Worstead in the English county of Norfolk...
company, in an appeal joined to another two companies. Barry McMath was one of the employees claiming that his right to compensation for the employer’s failure to consult the workforce about redundancies was payable in priority to the expenses of administration. TULRCA 1992 s 188 gives the right to be consulted 90 days in advance where there are twenty or more dismissals, s 189 gives the right to a ‘protective award’ in lieu of consultation and s 190 specifies this should be one week’s pay per missed week. Mr McMath’s contract had been adopted (in priority to administration expenses) under IA 1986 Sch B1 para 99, and so was owed any ‘liability arising under a contract of employment’. Were protective awards in that category?
Peter Smith J in one case had held that they were payable in priority and Etherton J in the other had held they were not.
Judgment
Neuberger LJ held that protective payments under TULRCA 1992 s 189 are not payable in priority to administration expenses. He noted that if a broad interpretation to ‘wages and salary’ is given under then it could hurt the purpose of rescuing insolvent companies, which was inspired by the Cork Report and underpinned the Insolvency Act 1986Insolvency Act 1986
The Insolvency Act 1986 is an Act of the Parliament of the United Kingdom that provides the legal platform for all matters relating to personal and corporate insolvency in the UK.-History:...
. This accorded with the natural meaning of IA 1986 para 99(5) and the list of payments in para 99(6), and accorded with the policy considerations surrounding rescue. In particular, many administrators would not decide that a rescue is possible if they know damages for failure to consult the workers who are retained and have their contracts adopted get super-priority for more than the work they do.
Clarke LJ and Jacob LJ concurred in the judgment.
See also
- European Union Insolvency Protection Directive 2008/94/EC
- Employment Rights Act 1996Employment Rights Act 1996The Employment Rights Act 1996 is a United Kingdom Act of Parliament passed by the Conservative government to codify the existing law on individual rights in UK labour law. Previous statutes, dating from the Contracts of Employment Act 1963, included the Redundancy Payments Act 1965, the...
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[1999] IRLR 379 (C-125/97) - Robins v Secretary of State for Work and PensionsRobins v Secretary of State for Work and PensionsRobins v Secretary of State for Work and Pensions is a UK insolvency law and labour law case, concerning the protection of employees' salaries on their employer's insolvency.-Facts:...
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Sch B1, paras 3 and 99 - Powdrill v Watson