Glegola v Minister for Social Protection

• Jurisdiction: Ireland
• Judge: O'Donnell J.
• Judgment Date: 20 December 2018
• Neutral Citation: [2018] IESC 65
• Court: Supreme Court
• Docket Number: 2017/56,[S.C. No. 56 of 2017]
• Date: 20 December 2018

Between/

Magdalena Glegola

Applicant/Respondent

AND

The Minister for Social Protection, Ireland

and

The Attorney General

Respondents/Appellants

[2018] IESC 65

O'Donnell Donal J.

O'Donnell Donal J.

McKechnie J.

Dunne J.

Charleton J.

O'Malley Iseult J.

2017/56

AN CHÚIRT UACHTARACH

THE SUPREME COURT

Insolvency – Employees of insolvent employer – Protection of employees – Directive 2008/94/EC – Whether directive transposed correctly

Facts: The respondent had been employed by a company which dismissed her on redundancy stating the company was going into liquidation. The company however continued to trade and the Rights Commissioner awarded her a sum in compensation. The respondent had applied to the Minister for payment of the award from the Social Insurance Fund and argued that the State had failed to transpose Directive 2008/94/EC correctly. The High Court had dismissed her application for judicial review, which was reversed by the Court of Appeal. The matter now came before the Supreme Court.

Held by O’Donnell J, the other Justices concurring, that the appeal would be dismissed. The Court of Appeal’s analysis of the Directive and the failure of the State to transpose it was correct, and the respondent was entitled to recover on that basis.

Judgment of O'Donnell J. delivered the 20th day of December 2018

Introduction

1 The Protection of Employees (Employers Insolvency) Act 1984 (as amended) (‘the 1984 Act’) is an important piece of legislation permitting employees to recoup certain debts owed to them by an insolvent employer from the Social Insurance Fund. Section 1(3) of the 1984 Act provides as follows:-

‘For the purposes of this Act, an employer shall be taken to be or, as may be appropriate, to have become insolvent if, but only if,

(a) he has been adjudicated bankrupt or has filed a petition for or has executed a deed of, arrangement (within the meaning of section 4 of the Deeds of Arrangement Act, 1887); or

(b) he has died and his estate, being insolvent, is being administered in accordance with the rules set out in Part I of the First Schedule to the Succession Act, 1965; or

(c) where the employer is a company, a winding up order is made or a resolution for voluntary winding up is passed with respect to it, or a receiver or manager of its undertaking is duly appointed, or possession is taken, by or on behalf of the holders of any debentures secured by any floating charge, of any property of the company comprised in or subject to the charge; or

(d) he is an employer of a class or description specified in regulations under section 4 (2) of this Act which are for the time being in force and the circumstances specified in the regulations as regards employers of such class or description obtain in relation to him; or

(e) the employer is an undertaking which is insolvent under the laws, regulations and administrative procedures of another Member State in accordance with Article 2(1) of Council Directive 80/987/EEC of 20 October 1980 as amended by Article 1(2) of Directive 2002/74/EC of the European Parliament and of the Council of 23 September 2002 and the employees concerned are employed or habitually employed in the State.’

2 As this case concerns a company, the relevant provision is s. 1(3)(c). Accordingly, for the purposes of the 1984 Act, an employer company will be taken to be or to have become insolvent if, but only if, one of the events in that subparagraph has occurred. In this case, there is no question of a receiver or manager being appointed, or of possession being taken of any property of the company on foot of a floating charge. The focus of the dispute is on the requirement in s. 1 (3)(c) that, in order to be deemed insolvent for the purposes of the 1984 Act, the company must be the subject of a winding up order, or a resolution for voluntary winding up.

3 Although the 1984 Act is not expressed to be a measure giving effect to a European Union law measure, it is common case that the 1984 Act is and was the implementing legislation in respect of the obligations established originally by the terms of Directive 80/987/EEC on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer (‘the 1980 Directive’). In accordance with Article 11(1) of the 1980 Directive, the deadline its transposition was 23 October 1983. The 1980 Directive was subsequently amended by the provisions of Directive 2002/74/EC (‘the 2002 Directive’), and the amended version codified in Directive 2008/94/EC (‘the 2008 Directive’). The relevant provision for present purposes is Article 2(1) of the 2008 Directive. It provides:-

‘For the purposes of this Directive, an employer shall be deemed to be in a state of insolvency where a request has been made for the opening of collective proceedings based on insolvency of the employer, as provided for under the laws, regulations and administrative provisions of a Member State, and involving the partial or total divestment of the employer's assets and the appointment of a liquidator or a person performing a similar task, and the authority which is competent pursuant to the said provisions has:

(a) either decided to open the proceedings; or

(b) established that the employer's undertaking or business has been definitively closed down and that the available assets are insufficient to warrant the opening of the proceedings.’

The 1984 Act continues to be the legislation satisfying the obligation contained in the above Directives to bring their provisions into effect in national law.

Facts

4 The respondent to this appeal, Ms. Glegola, had been employed by a company, Metro Spa Limited, which had premises at Clarendon Street in Dublin. She claimed that she was dismissed from this employment on 30 November 2011, having been informed that the company was going into liquidation. The reason given for her dismissal was redundancy. As set out in the judgment of Finlay Geoghegan J. for the Court of Appeal herein (see [2017] IECA 37), it appears that Ms. Glegola formed the view that the company had continued to trade, and accordingly made a complaint to the Rights Commissioner Service of the Labour Relations Commission in May 2012 under the Payment of Wages Act 1991, the Organisation of Working Time Act 1997, and the Unfair Dismissals Acts 1977 to 2001. Her solicitor wrote to the company alleging that the company was still trading, and demanding reasons for the respondent's dismissal. On 7 June 2012, solicitors for the company responded by stating:-

‘Our client ceased trading in November 2011. This can be verified from an inspection of the premises at Clarendon Street from which it used to trade. The only reason the company has not entered into liquidation is because of the costs which would be attendant on same and a lack of any resources within the company to meet the same. In the circumstances it is clear that a true redundancy situation did exist and is verifiable.’

5 A hearing was held before a Rights Commissioner in August 2012. The company did not attend. A recommendation was issued on 11 October 2012. That recommendation stated:-

‘As there was unexplained absence of the respondent, I accept the uncontested evidence presented on behalf of the claimant. I find her claim is well founded and make the following awards:

Unfair Dismissals Act – €10,000 in compensation

Organisation of Working Time Act – €5,000 in compensation

Payment of Wages Act – €1,818.75 in unpaid wages.

Therefore, the total amount awarded was €16,818.75.

6 Again, as is set out in the judgment of the Court of Appeal, the recommendation also contained a summary of Ms. Glegola's position, which stated:-

‘The claimant does not accept that a redundancy situation exists and further asserts that the procedures applied to her, culminating in her dismissal were unfair. The respondents company has not been placed in liquidation and continues to trade. There were plenty of opportunities for the claimant to be reengaged and retrained where appropriate.’

It is accepted that the recommendation, not having been appealed, has now become binding, and consequently constitutes a debt due by the company to the respondent. On 16 October 2013, the company was struck off the Register of Companies for failing to file accounts. On 13 March 2014, Ms. Glegola issued a petition in the High Court in which she sought ( inter alia) an order restoring the company to the register, an order winding up the company pursuant to the provisions of the Companies Acts, and a declaration pursuant to s. 251 of the Companies Act 1990 (‘the 1990 Act’). The petition was served on the company, but was not advertised in the ordinary way. The petition and the grounding affidavit explained that the purpose of the petition was to seek to have the award from the Rights Commissioner paid from the Social Insurance Fund (which is the fund nominated under the 1984 Act in succession to the Redundancy Fund established under s. 26 of the Redundancy Payments Act 1967, and re-designated as the Redundancy and Employer's Insolvency Fund pursuant to s. 2 and 6 of the 1984 Act, on its initial enactment). It was explicitly submitted that the company was unable to meet the costs of a liquidator, and the respondent was therefore seeking not the appointment of a liquidator and winding up of the company, but rather a declaration under s. 251 of the 1990 Act, on the basis that she was advised that it would sufficient to comply with the requirements of Article 2 of the 2008 Directive, which, it was also contended, had direct effect. In plain terms, therefore, the object of the proceedings was to seek to access the Social Insurance Fund to secure payment to the respondent of the amount recommended by the Rights Commissioner. It might be observed at this juncture that had it been practicable for a winding up order to be made and a...