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In the matter of Huddersfield Find Worsteds Ltd

Summary

Wages, payments in lieu of notice and protective award payments for the period of the adoption of a contract, by virtue of the Insolvency Act 1986 Sch.B1 para.99(5)(b), were wages and salary for the purpose of para.99 of the Act and were payable in priority.

Facts

The applicant administrator (K) sought a declaration in the administration of two companies that liabilities for protective awards under the Trade Union and Labour Relations (Consolidation) Act 1992 s.189 and awards of pay in lieu of notice should be treated as unsecured claims and did not fall within the Insolvency Act 1986 Sch.B1 para.99(4) to (6). K was concerned that if a true construction of para.99 was that responsibility for those payments fell to be paid in priority to all other payments, including K's remuneration and preferential creditors, then it would have a large impact on the recoveries of the companies. K argued that in interpreting para.99 the words used should be used consonant with a presumed intention not to frustrate the rescue culture, which sought to preserve viable businesses, and not to produce unworkable consequences. Further if, having regard to those factors, it was impossible to detect a more limited intention then the literal words of that section should be given effect. Only if the consequences of not departing from a literal meaning produced an absurd result was it legitimate for the court to reject those words and seek to determine what Parliament meant.

Held

Wages, payments in lieu of notice and protective award payments for the period of the adoption of the contract, by virtue of para.99(5)(b), were wages and salary for the purpose of para.99 and were payable in priority. Such a construction did not go against the rescue culture. If the draughtsman had intended to have the limited effect as contended for by K, he would have said so more explicitly by reference to Reg.4. The wording of para.99(6)(d) was logical and understandable and it would be unfortunate if items were treated differently under different heads of legislation, Powdrill & Atkinson (joint administrators of Paramount Airways Ltd in administration) v Watson (1995) 2 AC 394 considered.

Application refused.

Chancery Division
Peter Smith J
Judgment date
27 July 2005
References

​LTL 10/8/2005