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Freezing orders in support of employment tribunal proceedings: The European dimension

Adam-Ohringer

Adam Ohringer looks at the Opinion of the Court of Session (Lord Tyre in the Outer House) in AA v The Secretary of State for Business, Energy and Industrial Strategy [2018] CSOH 54.

The rate of non-payment of awards made against employers by employment tribunals is scandalous. A 2013 study by the Department for Business Innovation & Skills found that only 51% of successful claimants recovered their award in full and 35% received nothing at all. The position in Scotland was particularly bad. To some extent users of employment tribunals are in the same position as all litigants in the civil courts. A tribunal judgment is enforceable as if it were a judgment of the county court (or sheriff court in Scotland) and the full range of enforcement procedures are available. The difficulty arises where, before or during tribunal proceedings, there is evidence suggesting that the respondent will deliberately dissipate its assets or otherwise put them out of reach to avoid payment. Where this occurs in a claim before the civil courts, an application can be made under s.37(1) of the Senior Courts Act 1981 for a freezing injunction (or in Scotland for an order for ‘arrestment on dependence’ under s.15 of the Debtors (Scotland) Act 1987). When done correctly, the respondent can then be prohibited, under the threat of imprisonment for contempt of court, from transferring assets without the court’s permission.

In England, the High Court has shown a willingness to extend its jurisdiction to grant freezing injunctions in support of claims in the employment tribunal (and other fora). For example, in AMICUS v Dynamex Friction Ltd [2005] IRLR 724, a freezing injunction was granted in support of a claim pending before the employment tribunal for failing to inform and consult under TUPE. Anecdotally, there are a few similar examples of such orders being made against employers run by delinquent directors or where the employer is based overseas. Since 2014, such orders can also be made by a circuit judge in the County Court.

The position under Scots Law has, until now, been uncertain.

AA had brought and won proceedings in the Glasgow employment tribunal for harassment on the grounds of sex, race and religion. An award of approximately £75,000 was made in her favour. Efforts were made to enforce the award in the Glasgow Sheriff Court, however, by that stage, the employer had emptied its bank account and the award was never paid.

AA complained that, had she been able to obtain an arrestment on dependence when she commenced her tribunal proceedings, she would not be in the position she was now: with a substantial but unenforceable tribunal award.

It was argued on her behalf that, as an employment tribunal does not have the power to make such an order, claimants bringing cases of unlawful discrimination in the field of employment are at disadvantage. That disadvantage, it was argued, was a breach of the principles in European Union law requiring the procedures for enforcing European-derived rights to be effective and equivalent to the procedures for enforcing domestic rights. She sought compensation from the Secretary of State for that deficiency and the loss it had caused her.

The Court of Session dismissed the action. In doing so, it analysed the powers of the Scottish courts to order an arrestment on dependence. Although there was no example in the authorities (or indeed to anyone’s knowledge) of an arrestment on dependence being granted in support of employment tribunal proceedings in Scotland, s.15 of the Debtors (Scotland) Act 1987, especially when read in light of the requirement to uphold EU law, allowed just that. The Sheriff Court and the Court of Session held such a power, in spite of the apparently exclusive jurisdiction of the tribunal under the Equality Act 2010..

The Court then went on to consider the secondary argument, that requiring a litigant in the employment tribunal system to then embark on a separate action in the civil courts, placed them under an unreasonable burden. It was argued on AA’s behalf that it was incumbent on the Secretary of State to lift this burden by giving employment tribunals powers to order an arrestment on dependence. The Court rejected this argument. It found that, although it was not ideal to require a litigant to bring proceedings in two separate fora, that was not such an onerous undertaking as to constitute a breach of the principle of effectiveness in EU law.

On the question of equivalence, the Court referred to the judgment of the Court of Appeal in Totel Ltd v HMRC [2017] 1 WLR 2313 in which it was stated that equivalence required member states to apply procedural rules for the pursuit of EU-derived rights as were applied to similar claims in respect of domestic rights. Where there are a range of different procedures in respect of different comparable domestic rights, the principle of equivalence does not require the state to apply that which is most favourable. An appeal to the Supreme Court in Totel was heard on 26 April, so this may change.

The Court observed that the impediment caused by having to go to the civil courts to obtain an arrestment on dependence was the same whether the tribunal proceedings concerned EU-derived rights, as in claims for discrimination, or entirely domestic rights such as claims for wages or unfair dismissal. The procedure for EU claims was therefore equivalent, indeed identical, to that for domestic claims. The Court further rejected the argument, put forward by the EHRC as intervener, that it was a breach of EU law to have a more cumbersome procedure in place for claims of discrimination in the employment context than in other settings, such as the provision of goods and services, where the entire proceedings including any protective proceedings could be held within the Sheriff Court. It was held that the state was entitled to have different legal regimes in place to uphold the prohibition on discrimination in different contexts. That did not offend the principle of equivalence.

Conclusions

Of immediate practical importance is the holding by the Court that the Scottish courts, like their English counterparts, may order the freezing of assets of an employer by an application ancillary to and in support of a claim before the employment tribunal.

The discourse on the principles of effectiveness and equivalence provides food for thought. If nearly half of tribunal awards go unpaid, is the legal process really providing an effective remedy?

It is understood that an appeal is being considered.

Jonathan Mitchell QC of Cloisters represented AA.

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