R (on the application of Palmer) (Appellant) v. Northern Derbyshire Magistrates Court and another (Respondents) [2023] UKSC 38

Background 

On 1 November 2023, the Supreme Court handed down its decision in the case of R (on the application of Palmer) v. Northern Derbyshire Magistrates Court.  In a unanimous decision, the Supreme Court held that an administrator appointed under the Insolvency Act 1986 (“IA 1986”) is not an “officer” of the company within the meaning of the phrase “any director, manager, secretary or similar officer of the body corporate”, as contained in s.194 of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”). 

Section 193(2) TULRCA provides that: 

  “193(2) An employer proposing to dismiss as redundant 20 or more employees at one establishment within such a period shall notify the Secretary of State, in writing, of his proposal: 

  (a) before giving notice to terminate an employee’s contract of employment in respect of any of those dismissals, and 

  (b) at least 30 days before the first of those dismissals takes effect.” 

Notification of the intended redundancies is by way of filing form HR1. By s.194(1) TULRCA, failure to comply with this requirement is a criminal offence. Section 194(3) provides that any “director, manager, secretary or other similar officer of the body corporate” may be liable to a fine if they consented or connived with the offence, or if it can be attributed to their neglect.  

Facts 

The appellant, Mr Palmer, was appointed as one of three joint administrators of West Coast Capital (USC) Ltd (“USC”) on 13 January 2015.  Among the administrators, Mr Palmer had responsibility for employees and preferential claims. 

On 14 January 2015, the employees at the Dundonald warehouse were handed a letter signed by Mr Palmer, stating that they were at risk of redundancy and giving notice of USC’s intention to consult with them at a staff meeting that day. Shortly afterwards, they were handed a further letter, also signed by Mr Palmer, dismissing them with effect from that day.  No notice of the redundancies was given to the Secretary of State until form HR1, signed by Mr Palmer, was emailed on 4 February 2015. The form was dated 14 January 2015.  Mr Palmer’s evidence was that the form had been signed and largely completed on 14 January 2015, which was when the joint administrators intended to file it. However, the form was held on file awaiting further information and the fact that it had not been completed and returned had been overlooked until the RPS contacted them. 

In July 2015 criminal proceedings were commenced in the Northern Derbyshire Magistrates’ Court by the Secretary of State under s.194(3) TULRCA.  It was said, as against Mr Palmer, that he consented to, connived at, or neglected to prevent the failure by USC to notify the Secretary of State of the proposed redundancies, in his capacity as the administrator of USC, from the time that it went into administration to 4 February 2015. 

The basis on which Mr Palmer was prosecuted was that, as an administrator, he was an “other similar officer” of the company within the meaning of s.194(3) TULRCA.  Mr Palmer sought judicial review of the decision to prosecute him. 

Judgment 

In reaching its decision, the Supreme Court noted that there was no definition of the term “officer” for the purposes of s.194(3), whether under TULRCA or any other enactment. Therefore the meaning of the term under IA 1986 – under which an administrator is appointed – was considered. Per Lord Richards at paragraphs 21-22: 

  “[21] Both as originally enacted and in its current form, the IA 1986 contains a large number of references to an “officer” of a company – nearly 120 as originally enacted and some 170 in its current form. None of those references suggest that an administrator is an officer of a company. Importantly, some of the references clearly show that an administrator is not considered to be an officer of a company. 

  [22] “Officer” is defined in section 251, for the purposes of the IA 1986 as it applies to company insolvency: “‘officer’, in relation to a body corporate, includes a director, manager or secretary”#. This formulation is taken from the Companies Acts. It is not an exhaustive definition, but it is very surprising, if administrators are to be categorised as officers, that they were not expressly included in that definition, given in particular that administration was created by the Act.” 

In his conclusion on this point at paragraph 27, Lord Richards went on to find that: 

“[27] In my judgment, these and other provisions of the IA 1986 provide a clear picture that the legislation, in creating the process of administration, did not classify an administrator as an officer of the company in administration.” 

Lord Richards was fortified in that finding by the earlier decision of the Court of Appeal in In re B Johnson & Co (Builders) Ltd [1955] Ch 634, that a receiver and manager appointed by the holder of a floating charge was not an officer of the company (see paragraph 54). 

The Supreme Court acknowledged that this meant there was therefore no deterrent against deliberate non-compliance by administrators, since administrators could not be guilty of any offence in the way that a company’s directors could. 

In conclusion, the Supreme Court held: 

 “[55]  What then is meant by an “officer” of the body corporate in the context of a provision such as section 194? In my judgment, the answer is tolerably clear. It is essentially a constitutional test. Does the person hold an office within the constitutional structure of the body corporate, as is the case with directors, managers and secretaries? That is the normal meaning of an officer of a company or other institution, and the normal meaning is emphasised by the prior reference to directors, managers and secretaries, all of whom are officers in the conventional sense, together for good measure with the words “other similar” before “officers”…” 

Conclusion 

The decision clarifies that administrators cannot be criminally liable for failure to notify the Secretary of State in relation to redundancies under s.194 TULRCA.  However, there is nothing that prevents administrators from so doing, and it would seem best practice to do so wherever possible.  Whether or not the law will be changed to bring administrators within the ambit of s.194 TULRCA remains to be seen. 

Article by Mark O’Grady