In order to protect the rights of third parties, for instance in circumstances where one of the parties to a contract which was insured has gone bust, the law says that a “court” may give judgment against the insurer. In Irwell Insurance Co Ltd v Watson and ors, the Court of Appeal held that a tribunal is a “court” for those purposes.
Basic facts
Mr Watson brought claims of unfair dismissal and disability discrimination against Hemingway Design Ltd in April 2017. Although the company had a policy with Irwell Insurance Company insuring it against awards from successful tribunal claims brought by employees, Hemingway was required as a term of the contract to seek advice from the insurer’s employment law advisors before taking any action against an employee. Failure to comply with the condition voided the policy.
In July 2017, Irwell notified Hemingway that, because it had not sought advice in relation to Mr Watson’s claims, it would not be able to claim back any compensation he might be awarded by the tribunal. Hemingway was subsequently dissolved and Mr Watson applied to join Irwell to his claim on the basis that when it was liquidated, Hemingway’s liability transferred to Irwell under the Third Parties (Rights against Insurers) Act 2010. Irwell argued that the tribunal did not have jurisdiction to hear the claim.
Relevant law
Section 2(6) of the 2010 Act states that “where the court makes a declaration under this section … the court may give the appropriate judgment against the insurer.”
The issue was whether an employment tribunal was a “court”.
Tribunal and EAT decisions
The tribunal judge stayed the proceedings while the “ordinary courts” decided whether Irwell was liable to Mr Watson under the 2010 Act.
Mr Watson’s appeal against that decision was allowed by the EAT which held that “the context calls for a purposive construction”. Given existing case law, which provided sufficient authority for the proposition that an employment tribunal is included within the words "the court" in section 2(6) of the 2010 Act, the EAT was satisfied that the Act was intended to promote a "single forum" solution to recovery against an insurer where the insured had become insolvent.
As employment tribunals function like courts, are independent of the state, determine rights and liabilities, administer oaths and affirmations and award remedies including compensation, the EAT concluded that tribunals are courts.
Decision of Court of Appeal
Agreeing with the EAT, the Court of Appeal said that the whole point of the 2010 Act was to avoid a third party (such as Mr Watson) having to issue two sets of proceedings in order to make a successful claim against the insurer of an insolvent company that was being sued in the courts.
If tribunals were not courts, the "one-stop shop" service which the 2010 Act created for claimants bringing claims in the civil courts would then not be available to claimants bringing proceedings such as unfair dismissal within the tribunal system.
It also dismissed the argument that because tribunals lack enforcement powers, they could not be considered as “courts” within section 2(6). Parliament had given county courts these powers in order to avoid creating a separate division of tribunal staff including bailiffs and the like, not because tribunals were too lowly or inadequate to exercise such powers.
Finally, it rejected the argument that Parliament could not have intended tribunals to deal with questions of insurance law. As the Court pointed out, they regularly deal with difficult questions of law across a variety of topics and complex facts, sometimes involving millions of pounds.
Comment
The insurance policies taken out to cover compensation that courts and tribunals can award in employment cases are not common except in respect of claims by the most senior staff. Because of that, this case may not have far reaching effects, but it will mean that it may be necessary to investigate in cases involving insolvent or closed employers whether they had insurance covering liabilities to employees. Whether a tribunal is regarded as a court will depend on the statute being considered. This decision was specific to the interpretation of the Third Parties (Rights against Insurers) Act 2010 and for most people, and most cases, there is no real difference between going to court and going to a tribunal.