Effect of administration on employment proceedings

Ms Tunstall, a solicitor, had been dismissed from her employment and brought claims under the Equality Act 2010 against eight Respondents.  The First Respondent had been her employer and the rest were its employees, agents or partners.  The First and Second Respondents entered administration and the Eighth Respondent acquired their business and staff, being the relevant transferee under TUPE.

The administration created a moratorium on ‘legal process being instituted or continued’ by virtue of the Insolvency Act 1986 Schedule B1 paragraph 43(6) against those Respondents in administration and the remaining Respondents argued that the moratorium should also apply to the claim against them as it was common to all parties.  The Employment Tribunal agreed that the proceedings could, however, continue against the remaining Respondents.

The Respondents appealed arguing that only the Companies Court had jurisdiction to give permission for proceedings to continue under section (6)(b) of Schedule B1. 

The Employment Appeal Tribunal disagreed. The Claimant’s claim against the other Respondent could be pursued as stand-alone separate causes of action.  Therefore, whilst only the administrators or the Companies Court could lift the stay vis-à-vis the First and Second Respondents, the ET had jurisdiction to lift the stay as against the other Respondents.  Therefore the question of whether the ET should lift the stay was a matter for the exercise of its general case management discretion.  In the particular circumstances of the case the EAT concluded that the ET had not erred in the exercise of this discretion.

Ince Gordon Dadds LLP & Others -v- J Tunstall & Others [2019] 6 WLUK 323

1. JULIE ANNE DAVEY (Applicant) v (1) JAMES MONEY (2) JIM STEWART-KOSTER (JOINT ADMINISTRATORS OF ANGEL HOUSE DEVELOPMENTS LTD) (Respondents/Section 51 Applicants) & CHAPELGATE CREDIT OPPORTUNITY MASTER FUND LTD (Section 51 Respondent) [2019] 4 WLUK 314
2. DUNBAR ASSETS PLC (Claimant/Section 51 Applicant) v JULIE ANNE DAVEY (Respondent) & CHAPELGATE CREDIT OPPORTUNITY MASTER FUND LTD (Section 51 Respondent) (2019) [2019] Costs LR 399

The principle deriving from Arkin v Borchard Line Ltd, known as the “Arkin Cap”, which operates to limit the liability of commercial litigation funders for adverse costs, need not apply mechanistically in every case.

The Applicants successfully defended a serious claim made against them in the main action and subsequently applied for a non-party costs order against the Respondent, who was the Claimant’s commercial funder.  The Claimant had been ordered to pay the Applicant’s costs of £3.9m on the indemnity basis and whilst the Respondent did not resist the non-party costs order, they did contend, with reliance on the Arkin Cap, that the total liability be limited to the maximum of the funding that it provided to the Claimant – some £1.2m.

The Applicants argued that as the Respondent would have effectively been the sole beneficiary of the original claim, it should be liable for costs in the entire proceedings.  The Court rejected this argument and held that their liability did not extend beyond the point they became the litigation funder.  In spite of this ruling, the Court still fell short of fully applying the Arkin Cap.

In this instance, although the Arkin Cap principle was observed, it was not strictly applied in circumstances where it would not have been just to fully limit the Respondent’s liability.  To simplify the issues at hand; they were fully aware of the Claimant’s conduct in the case throughout and backed it anyway and as such were held liable for costs in the proceedings after the time they provided funding, to be apportioned on an indemnity basis if not otherwise agreed.  The Court were keen to point out that Arkin was not intended to lay down a rule or guideline and should not be applied mechanistically in every case.