Employment tribunals, jurisdiction, insurer of insolvent respondent (Watson v Hemingway Design Ltd (In liquidation) & Ors)

Employment tribunals, jurisdiction, insurer of insolvent respondent (Watson v Hemingway Design Ltd (In liquidation) & Ors)

The Employment Appeal Tribunal (EAT) held that an employment tribunal has jurisdiction to determine a claim made by an employee against the insurer of an insolvent respondent under the Third Parties (Rights against Insurers) Act 2010 (TP(RAI)A 2010). It was necessary to interpret the word ‘court’ in TP(RAI)A 2010, s 2 as including an employment tribunal in order to give effect to the clear purpose of TP(RAI)A 2010, which was to enable the liability of the insolvent insured and the claim against the insurer under TP(RAI)A 2010 to be determined in the same set of proceedings. It rejected the insurer’s contention that an employment tribunal was not a ‘court’ and so any claim against the insurer by an employee pursuing a claim against their insolvent employer in an employment tribunal had to be brought as a separate claim in the county court or High Court. Written by David Gray-Jones, barrister at The 36 Group and counsel for the appellant.

Watson v Hemingway Design Ltd (In liquidation) & Ors (UKEAT/0007/19/JOJ)

What are the practical implications of this case?

The case has important practical implications for employees who are bringing claims in an employment tribunal against an employer who is, or who becomes in the course of the proceedings, insolvent. If the employer has insurance covering liability for the employment tribunal claims, the benefit of the cover will pass to the employee under TP(RAI)A 2010, s 1, and the employee can recover compensation from the insurer if it establishes liability against the insolvent employer. The EAT’s judgment means that an employee can apply to add the insurer as a respondent to the employment tribunal proceedings and the employment tribunal can hear and determine the claim against the insurer at the same time as it determines liability against the insolvent employer.

If the EAT had accepted the insurer’s argument that an employment tribunal lacked jurisdiction to determine such a claim then the employee would have to bring a separate claim against the insurer in the county court or High Court to enforce their rights under TP(RAI)A 2010, increasing the costs, time and complexity of the litigation.

What was the background?

Mr Watson brought a complaint of unfair dismissal against his employer, Hemingway Design Ltd (‘Hemingway’) and complaints of disability discrimination against Hemingway and one of its directors, Mr Draycott. Hemingway had an insurance contract with Irwell Insurance Company Ltd (‘Irwell’) covering Hemingway’s liability in respect of the employment tribunal claims.

Hemingway went into liquidation and Mr Watson applied to join Irwell as a respondent under TP(RAI)A 2010. An employment tribunal granted the application. Irwell disputed cover because of alleged policy breaches by the insured then applied for the claim against it to be struck out. An employment tribunal refused the application but stayed the claim, as it held that it had no jurisdiction to hear and determine the claim against Irwell, which would therefore have to be the subject of separate proceedings in the civil courts. Mr Watson appealed.

What did the court decide?

The EAT’s judgment is a textbook example of the application of the purposive approach to statutory interpretation. The EAT held that there was a clear policy behind TP(RAI)A 2010, which was to enable liability against the insolvent insured and the insurer to be determined in a single set of proceedings (under the preceding legislation it had been necessary to bring a separate claim against the insurer). This was clear from the Law Commission reports which led to the passing of TP(RAI)A 2010 and the Explanatory Notes to the Act. It held that in order to ensure that the policy objective was fulfilled it was necessary to interpret the word ‘court’ in TP(RAI)A 2010 as including an employment tribunal. The EAT stated that an employment tribunal has the essential characteristics of a court and rejected any suggestion that a dispute over insurance cover would not be within an employment tribunal’s ‘comfort zone’.

The EAT also held, obiter, that the arbitration clause in the insurance contract, was likely to be void because it would infringe the restrictions on contracting-out in section 203 of the Employment Rights Act 1996 and section 144 of the Equality Act 2010, emphasising the wide application of these provisions.

Case details

  • Court: Employment Appeal Tribunal  
  • Judge: Mr Justice Kerr  
  • Date of judgment: 16 December 2019

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About the author:

Zahra started working as a paralegal at LexisNexis in the Lexis®PSL Banking & Finance and Restructuring & Insolvency teams in April 2019 and moved to the Corporate team in June 2020, where she currently works as a Market Tracker Analyst. Zahra graduated with 2.1 honours in BA French and Spanish and completed the GDL at BPP University. She has undertaken voluntary work for law firms in London, Argentina and Colombia.