The Supreme Court in R (on the application of Palmer) v Northern Derbyshire Magistrates Court and another has held that an administrator is not an "officer" of a company in administration and so did not commit an offence under the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) when he failed to give notice of proposed redundancies to the Secretary of State (SofS). This overturns a previous decision in this case in 2021 which held that a criminal prosecution could be brought against an administrator because he was such an officer.
Under TULRCA, if an employer plans to make 20 or more employees at one establishment redundant within 90 days, it must inform the SofS at least 30 days before the dismissals using Form HR1. Failure to do so is a criminal offence and ‘any director, manager, secretary or similar officer of the employer company’ may be held liable on conviction, to a fine.
In this case Mr Palmer was appointed joint administrator of USC on 13 January 2015. The following day, 84 employees were made redundant, and Mr Palmer submitted Form HR1 over two weeks later, on 4 February 2015. Criminal charges were brought against Mr Palmer that he was an "officer" within the TULRCA definition and the failure to notify had taken place with his consent or connivance, or as a result of his neglect. Mr Palmer argued that he had not committed an offence because an administrator appointed under the Insolvency Act 1986 (IA 1986) is not an ‘officer’ within the meaning of that section. The Northern Derbyshire Magistrates Court held that Mr Palmer was such an “officer”. The Divisional Court dismissed his claim for judicial review and decided that a prosecution could be brought against an administrator under TULRCA, as an officer of the company. This would mean he could be personally liable for the offence in the same way as company directors.
Supreme Court's decision
The main issue of Mr Palmer's appeal to the Supreme Court was whether an administrator of a company appointed under the IA 1986 was an “officer” of the company under TULRCA. The Supreme Court unanimously allowed Mr Palmer's appeal, considering that:
- none of the many references to “officer” within the IA 1986 nor existing case law suggested that an administrator is an officer of a company. Nor was there scope for giving the phrase "other similar officer" in TULRCA an extended meaning to include an administrator
- the inclusion of administrators within TULRCA would confront administrators with a dilemma of either acting swiftly in the interests of achieving the statutory purposes of administration or less quickly but then complying with the notice requirements of submitting the notice of proposed redundancies to the Secretary of State. The Supreme Court held that administrators could not be excluded on this basis, given that companies in administration were not excluded from submitting Form HR1.
The Supreme Court therefore held that an administrator of a company appointed under the IA 1986 was not an “officer” of the company. The appeal was allowed, and the decision of the District Judge in the Magistrates' Court was quashed.
Practical effect
The Supreme Court decision clarifies the position for administrators, who often seek legal advice about their personal liability in connection with the filing of the HR1. Administrators are not considered to be "officers" of the company and therefore are not at risk of criminal prosecution. This is particularly welcome given both the competing demands which fall on administrators upon their appointment and the often limited employee information they have access to at this stage.
However, administrators still need to ensure that the company complies with its obligations under TULRCA. A company in administration is still under an obligation to file form HR1 and could face an unlimited fine for failure to do so. A failure to collectively consult regarding large scale redundancies may also lead to substantial protective award claims against the company, thereby increasing the potential liabilities of the company in administration.
