Guilty Or Not Guilty: UK Supreme Court Decides Fate Of Administrator Appointed Under Insolvency Act

• Published date: 02 January 2024
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Insolvency/Bankruptcy, Redundancy/Layoff, Trials & Appeals & Compensation
• Law Firm: Greenberg Traurig, LLP
• Author: Hannah Blom-Cooper, Rupert Cheetham and Alex Swan

Go-To Guide:

Persuaded by the words used in the legislation, UK Supreme Court holds that a company administrator appointed under the Insolvency Act is not an officer of a company under TULCRA. Supreme Court's approach in Palmer to analysing who is a company officer is instructive in focusing on the substance and not merely the title of a person's role within a company. Decision is not a green light to disregard the provisions of TULCRA; failure to observe a company's obligations under the act may expose the company to civil claims.

'Tis the season for giving, and the recent UK Supreme Court decision in R (on the application of Palmer) v Northern Derbyshire Magistrates' Court and another [2023] UKSC 38 is a welcome gift to insolvency practitioners. The Supreme Court held that an administrator of a company appointed under the Insolvency Act 1986 is not an officer of a company within the meaning of the phrase "any director, manager, secretary or similar officer of the body corporate" used in section 194(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULCRA). As such the administrator is not criminally liable under section 194 of TULCRA for failing to give notice to the Secretary of State of certain redundancies.

The Facts (abridged)

On 13 January 2015, Mr Robert Palmer of the Gallagher Partnership was appointed as one of three joint administrators of West Coast Capital (USC) Ltd ("USC"). The next day employees of USC were given 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 later that day. Shortly afterwards, the employees were handed another letter, also signed by Mr Palmer, dismissing them with effect from that day.

In July 2015, criminal proceedings were brought against Mr Palmer under section 194 of TULCRA. In accordance with TULCRA, employers contemplating mass redundancies are under a duty to consult with representatives of the employees and to notify the Secretary of State of the proposed redundancies. Section 194(3) allows for accessorial liability to officers of a company that has committed an offence.

Mr Palmer entered a plea of not guilty to the offence and raised a preliminary legal argument before the District Judge in the Magistrates' Court that an administrator could not be an officer of a company within the meaning of TULCRA. The District Judge ruled against Mr Palmer, but he was given permission for judicial...