In Pressure Cookers Ltd v Molloy and others, the EAT held that where an employee of an insolvent company transferred to another company in the context of a prepack administration sale and was dismissed shortly thereafter, it was the new purchaser company rather than the Secretary of State who had to pay the unfair dismissal basic award and notice pay.
The EAT followed the reasoning in OTG Ltd v Barke that where a transferor company is in administration the regime applicable to ‘non terminal’ proceedings in the TUPE Regulations will apply. This means that employees will transfer and be protected in the usual way against dismissals by reason of the transfer. In general, certain liabilities may nonetheless be met by the Secretary of State out of the National Insurance (NI) Fund. In this case, the transferee argued that the unfair dismissal, basic award and notice pay liabilities should be met out of the NI Fund. The EAT however highlighted the key words in Article 5.2 of the Acquired Rights Directive (from which the TUPE Regulations are derived) that debts must be ‘payable before the transfer’. In other words, under the relevant rules, the debts payable by the Secretary of State must have crystallised before the transfer. It was not within the intention of the Directive or the Regulations to extend the cover of liabilities of certain debts to those arising after the date of transfer. As Mr Molloy had been dismissed after the transfer took place, his basic award and notice pay were payable by the new purchaser.
This decision makes clear at what point the Secretary of State’s obligation to pick up liabilities in the context of a pre-pack administration sale cease. As soon as the transfer takes place, all such liabilities fall at the transferee’s door.