Case commentary:
R (on the application of Palmer) v. Northern Derbyshire Magistrates Court & another [2023] UKSC 38.
Administrators across the nation will breathe a sigh of relief at the recent Supreme Court clarification that they won't be criminally liable for the failure of a company to comply with redundancy notification rules.
A previous decision of the Magistrates Court decided that an administrator was an "officer" for the purposes of s.194(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA) and may be found personally and criminally liable if they, or the company over which they are appointed, failed to notify the Secretary of State of proposed redundancies prior to making them.
TULRCA requires employers to notify the Secretary of State if they propose to make 20 or more employees redundant within 90 days, and to notify at least 30 days before the redundancies take effect. Failure to give notice is a criminal offence, and where an offence has been committed with the consent or connivance of, or can be attributed to neglect on the part of, any director, manager, secretary, or other similar officer of the company, that individual will also be guilty of an offence.
The administrators concerned were appointed over the retail chain USC on 13 January 2015. The day after their appointment, they made a number of employees redundant. Notice of the intention to make redundancies was not provided to the Secretary of State until the relevant form was emailed to the Secretary of State three weeks later.
Criminal proceedings were commenced by the Secretary of State against the administrator who signed the redundancy letter and notification, alleging that he committed an offence under TULRCA by failing to notify, at least 30 days before the redundancies took effect. The Magistrates Court found him personally liable for a failure to notify, and the Divisional Court dismissed his subsequent claim for judicial review.
The case went to the Supreme Court, which has now (thankfully) confirmed that an administrator of a company is not an "officer" for the purposes of TULRCA and therefore cannot be personally liable for a failure by the company to comply with redundancy notification requirements.
When an administrator is appointed, they must determine the appropriate purpose of the administration, with reference to the prescribed statutory purposes. To achieve one of them, they may decide that the business must immediately cease, with the result that employees are immediately redundant.
The Secretary of State's case and the Magistrates decision failed to properly understand that; and placed administrators in an impossible position with regard to redundancies – where their obligations under TULRCA would wholly conflict with their general duty to the act in the best interests of the creditors.
The Supreme Court decision is welcome and, in my view, a sensible resolution to a flawed initial decision that wholly failed to understand the context and statutory insolvency framework within which administrators work. A sadly all too common demonstration of one arm of government not working with, or understanding, the other.
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