Receiver faces legal action from 8,000 dismissed workers: Ruling allows ex-employees of Leyland and Ferranti to make backdated claims

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The Independent Online
MORE than 8,000 former employees of Leyland Daf and Ferranti were yesterday given High Court clearance to sue Arthur Andersen, the receiver of the two companies, for dismissal compensation running into hundreds of thousands of pounds.

Insolvency practitioners must now wait until the end of the year for a final decision on whether sacked staff can make receivers personally liable for past employment contracts. Mr Justice Lightman allowed Andersen to leap-frog the Court of Appeal and go straight to the House of Lords where a similar case relating to administrators is due to be heard on 5 December.

Andersen had asked Mr Justice Lightman to decide whether a February ruling in the case of Touche Ross and Paramount Airways - which dealt with administrators - also applied to receivers.

The Paramount administrators were ruled to be personally liable for sacked employees' contracts - a decision that overturned accountants' understanding of law relating to company rescues. It meant that if administrators retained employees to keep the company running while a buyer was sought - instead of sacking them within a 14-day period - they became personally liable for the workers' contracts.

Michael Heseltine, President of the Board of Trade, introduced emergency legislation, the Insolvency Act 1994, in March to protect administrators against future employees' claims. But he did not make his bill retrospective, and allowed employees to make backdated claims arising before his bill on 15 March 1994.

Yesterday's decision brings receivers into the same net. It opens the way for sacked Leyland and Ferranti employees to make backdated claims under their contracts of employment against the receivers, John Talbot and Murdoch McKillop of Arthur Andersen.

It is likely that the Leyland and Ferranti cases will be joined with the Paramount Appeal in the Lords.

The possibility of sacked employees making compensation claims dating back to 1986 has worried company rescue specialists ever since Mr Heseltine refused to make his emergency bill retrospective.

Ian Bradbery, president of the Society of Practitioners of Insolvency, said: 'Happily, the Insolvency Act 1994 means that a decision like this can never be made in the case of recent or new receiverships, and the decision to allow appeal straight to the Lords means that any uncertainty surrounding older cases will probably be removed before the end of the year.'

Yesterday, Mr Talbot and Mr McKillop announced they had completed the sale of Ferranti's Industrial Systems Division to a UK subsidiary of Thomson CSF. The Division is based at Wythenshawe, Dalkeith and Aberdeen, employs 285 staff and provides software for large industrial plants.

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