The Court of Appeal has reversed the EAT's decision in the above case, although it has not definitively ruled out the application of Regulation 8(7) of TUPE in instances of pre-pack administration.

The facts relate to the sale by joint administrators of the business and assets of Wellswood Limited via a pre-pack to a newco, Wellswood (Yorkshire) Limited. Mr Oakland was an employee of the insolvent company whose contract of employment was taken over, with other employees, by the newco. Shortly after the sale Mr Oakland's employment was terminated and he claimed unfair dismissal on the basis that his contract had transferred to newco under TUPE. Wellswood (Yorkshire) Limited asserted that Mr Oakland did not have the qualifying period of employment to bring a claim of unfair dismissal as his contract of employment had not transferred under TUPE.

The question considered by the EAT was whether the transfer in question fell within Regulation 8(6) or 8(7) of TUPE – Regulation 8(7) provides an exception to the application of TUPE where the administration has been instituted 'with a view to the liquidation of the assets of the transferor'. The EAT determined that on the basis that the administrators had been appointed with the ultimate aim of liquidation that Regulation 8(7) applied. As a result Mr Oakland had not maintained his continuity of employment under TUPE and was not eligible to claim unfair dismissal. This decision appeared to be at odds with guidance given by the Secretary of State in 2006 as to when it would make payments from the National Insurance Fund. In its guidance the Secretary of State had indicated that TUPE would always apply in instances of pre-pack administration.

The written judgement on this case is still awaited, but in coming to its decision the Court of Appeal focused on section 218(2) of the Employment Rights Act 1996. This states (irrespective of the application of TUPE) that the transfer of a business does not break the continuity of any employee who transfers with it. Although the Court of Appeal did not focus on TUPE in coming to its decision, it did indicate that it considered that it was unlikely that Regulation 8(7) would apply in relation to pre-pack administration sales. This, however, may not prevent such an argument being used by purchasers in the future and we shall have to wait for a future case to give a definite ruling on the issue.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 18/08/2009.