In Pressure Coolers Ltd v Molloy the EAT followed the line of reasoning in OTG v Barke that liabilities in respect of an employee who transfers under TUPE cannot fall to be paid by the Secretary of State out of the National Insurance Fund.
In this case, Mr Molloy was employed by MI Ltd as a bench fitter. MI entered into a creditors’ voluntary arrangement and then agreed that PC Ltd would acquire its business. An administration pre-pack was prepared, MI Ltd was put into administration and its business simultaneously transferred to PC Ltd under a pre-pack sale agreement.
Mr Molloy’s employment transferred to PC Ltd but on the same day PC Ltd dismissed him with immediate effect by reason of redundancy. Mr Molloy was owed wages and entitled to accrued and unpaid holiday. Mr Molloy brought proceedings against MI Ltd and PC Ltd for unfair dismissal, notice pay, unpaid holiday and wages due and also joined the Secretary of State.
With regard to the Secretary of State, the EAT upheld the tribunal’s decision that the relevant debts (pay arrears and holiday pay) had to arise before the transfer to qualify as debts to be paid out of the NI fund. The EAT noted the decision in OTG v Barke that the Secretary of State would only take on ‘past liabilities’ owed by the transferor to the employees as at the date of transfer. The relevant debts had to arise before the transfer in order to come within the State guarantee. In respect of the unfair dismissal basic award and notice pay, neither of these liabilities in any event could be said to have crystallised at the point of transfer since they only accrued when Mr Molloy was dismissed.