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Protection of employment tribunal awards: a safe harbour in the civil courts?

The Court of Session in Scotland has ruled in AA v Secretary of State for Business, Energy and Industrial Strategy [2018] CSOH 54 that employment tribunal claimants can seek interim protection from the civil courts while their claims for compensation are still pending. Claimants can apply for “diligence on the dependence”, to freeze a respondent’s assets, so that those assets can be used to satisfy any eventual tribunal award. The typical form of diligence on the dependence is by means of arrestment of an opponent’s bank accounts. This remedy is available where the opponent is in dire financial straits, or where there is a substantial risk that the opponent will disperse their assets.

The action must include a crave for payment of a specific sum of money (section 15A(2), Debtors (Scotland) Act 1987). A claimant is unlikely to have a precise figure as to what they will be awarded if their claim succeeds. A claimant should seek the highest sum that they could reasonably expect to be awarded. If more than £5,000 is sought, then the action is raised by initial writ under ordinary cause procedure.

The initial writ should narrate that the action is being raised solely to obtain diligence on the dependence, and that once the application for that has been dealt with, the action will be sisted.

A writ can be presented any time after employment tribunal proceedings have been commenced. An application for diligence is made by motion with an accompanying statement in Form G4A and can be presented with the initial writ. Where there is good reason to fear that the opponent will seek to evade payment of the claim, rather than merely being unable to pay, the prudent course is to seek the grant of diligence on the dependence without a hearing (section 15E, Debtors (Scotland) Act 1987). In that circumstance, it is unnecessary to notify the opponent beforehand (section 15D(3)).

Requirements for granting diligence on the dependence

There are three requirements for the granting of diligence on the dependence:

  • A claimant must have a prima facie case to recover the sum sought (sections 15E(2)(a) and 15F(3)(a), Debtors (Scotland) Act 1987)). This is a “substantial hurdle”, and requires a “good arguable case” (Gillespie v Toondale Ltd 2006 SC 304, paragraphs 12 and 13). A “good arguable case” is one that is more than barely capable of serious argument but not necessarily one which the court believes to have a better than 50% chance of success (Scottish Ministers v MacDonald 2016 SC 528, paragraph 25, approving Szepietowski v Director of the Asset Recovery Agency [2007] EWCA Civ 766, paragraph 111).
  • An applicant must show that there is a real and substantial risk that enforcement of an award would be defeated or prejudiced by reason of the opponent being insolvent, or verging on insolvency, or by the likelihood of the opponent removing, disposing of, concealing or otherwise dealing with all or some of their assets (sections 15E(2)(b) and 15F(3)(b), Debtors (Scotland) Act 1987). Where an application is being dealt with by the court without a hearing, the court must be satisfied that the real and substantial risk would arise were the application not granted in advance of a hearing (section 15E(2)(b), Debtors (Scotland) Act 1987). If there is no urgency and no reason to believe the opponent might act improperly in the meantime, the court should refuse the application for the time being. In such a case, an applicant could insist that their application be reconsidered at a hearing (section 15E(6)).
  • It must be “reasonable in all the circumstances” to grant the application (sections 15E(2)(c) and 15F(3)(c), Debtors (Scotland) Act 1987). Relevant circumstances include the effect on the opponent of their assets being frozen and the strength of the claimant’s case.

A copy of the employment tribunal claim form (ET1), and any reply from the respondent (ET3), should be lodged with the court. Any further documentation which demonstrates the strength of the claim should also be lodged, such as witness statements or affidavits, emails, or minutes of meetings.

Material demonstrating why there is a real and substantial risk to enforcement should also be lodged. A report from a credit reference agency can be obtained. Where the respondent is a company, accounts can be sought from Companies House. Any circumstantial evidence suggesting the business is in financial distress or might evade its obligations should also be lodged. Examples would be if the respondent’s main place of business was being advertised for sale, or had been closed down, or if the directors or owners of the respondent had been involved in previous insolvent enterprises. Former employees may be able to provide statements as to the opponent’s financial viability and probity.

The accompanying statement should set out the relevance of the documentary evidence. This is vital if the application is to be dealt with without a hearing.

Once the application for diligence is dealt with, the action should be sisted. The action can be dismissed once the employment tribunal claim is finally determined and any award paid.

If the court grants diligence on the dependence, sheriff officers should be instructed to serve the court’s warrant on the opponent’s bank or other business holding its assets. It is only effective once it has been served. If the application has been granted without a hearing, then a hearing will be fixed at which the application for diligence will be reconsidered.

Julius Komorowski was junior counsel for the Secretary of State in the case of AA v Secretary of State for Business, Energy and Industrial Strategy.

Terra Firma Chambers Julius Komorowski

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