Two directors have been granted permission by an Employment Tribunal to bring a case for unfair dismissal against a company controlled by the former Secretary of State for Health, Stephen Dorrell.
Despite the fact that the original company they worked for is now insolvent, the Tribunal ruled that employees can sue the new business “born out of the ashes” of the one that employed them and where there is “commonality” of ownership between the two.
During a Tribunal hearing, it was alleged that Mr Dorrell used a contentious insolvency procedure known as pre-pack administration, or ‘phoenixing’ to move assets of a publishing company into a new corporate entity which he owned. This resulted in the value of shares owned by Mr Dorrell’s business partners being wiped out.
Now, a Tribunal Judge has ruled that Mr Dorrell’s new company, Pixel West, can be made liable for the liabilities of the old company, Project Viva, saying that there was “commonality of ownership and directorship between the companies so this [action] was hardly out of the blue”.
The two directors, Matti Rogers and his wife, Kate, who launched the legal action said they were delighted by the judge’s decision, claiming that they were both removed from Project Viva in a “sham redundancy exercise” that then allowed Mr Dorrell to transfer assets out of the business.
The husband and wife team have alleged that they were manoeuvred out of their roles with the firm in 2015 because they had opposed plans by Mr Dorrell to take over control of the firm. The pair had originally launched the unfair dismissal case against Project Viva, but just weeks before the hearing, the company was placed into administration. The new hearing, in front of West Midlands Employment Tribunal, took place after Mr and Mrs Rogers successfully applied for Pixel West to be added to the claim.
Lara Murray, an Associate and employment law expert with Palmers, said: “This decision is being viewed as a landmark ruling and could lead to similar tribunals involving employers who have deliberately wound up their companies in this way.
“It also serves to highlight the fact that, despite what was seen by some as a dilution of employment legislation in 2013, TUPE employment protection laws can still lead to far reaching consequences for employees and employers alike.”
The full tribunal hearing, involving Mr and Mrs Rogers and Pixel West, is due to take place in May.
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