A company administrator can dismiss employees and manage the business. Was that control enough to make him an officer of the company for a criminal offence concerning notice of redundancies? The Supreme Court held that the answer depended on the office the person held within the company’s constitution.
The appeal concerned a point of statutory construction. Section 194(1) of the Trade Union and Labour Relations (Consolidation) Act 1992 makes it an offence for an employer to fail to give the Secretary of State the required notice of proposed redundancies. Section 194(3) provides that, where such an offence by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to neglect on the part of, “any director, manager, secretary or other similar officer of the body corporate”, or a person purporting to act in any such capacity, that person is also guilty of the offence. The question was whether an administrator appointed under the Insolvency Act 1986 falls within those words.
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The statutory duties and the administrator’s role
Under the legislation at the time, collective redundancies triggered duties to consult employee representatives and to notify the Secretary of State. This prosecution concerned the notice to the Secretary of State. The company’s duty and the question of an individual’s criminal liability were separate.
An administrator is appointed under the Insolvency Act 1986 to manage the company’s affairs and pursue statutory objectives. The powers may be extensive. The appeal concerned whether appointment to that statutory role placed the administrator in the same legal category as a company director, manager or secretary.
What happened at USC
The facts were not in dispute and did not affect the point of principle. Robert Palmer was appointed one of three joint administrators of West Coast Capital (USC) Ltd on 13 January 2015, with responsibility among them for employees and preferential claims. USC, a Sports Direct group retailer, traded from premises mainly in northern England and Scotland, including a warehouse at Dundonald. On the day of appointment the administrators sold the business, other than that warehouse, in a pre-pack sale to another group company.
On 14 January 2015 staff at the Dundonald warehouse received letters signed by Mr Palmer. One warned that redundancy was possible and invited them to a meeting. A later letter dismissed them with immediate effect. The form notifying the Secretary of State was sent on 4 February.
The decisions under challenge
In July 2015 the Secretary of State began summary proceedings in the Northern Derbyshire Magistrates’ Court against Mr Forsey and Mr Palmer under section 194(3). The allegation against Mr Palmer concerned the period from the administration until 4 February 2015. Both pleaded not guilty. In a reserved judgment of 29 May 2018, District Judge Davison ruled that an administrator is an officer within section 194(3).
The Divisional Court dismissed Mr Palmer’s claim for judicial review. It reviewed Schedule B1 and concluded that an administrator has day-to-day conduct of the company’s affairs, including power to make employees redundant. Relying on earlier first-instance authority, it held that an administrator was therefore an officer for section 194(3). It was concerned that any other conclusion would leave no deterrent and make the criminal sanction meaningless where collective redundancies were likely, creating what it described as a vacuum in responsibility.
Why an administrator is not an officer
Lord Richards, with whom Lord Reed, Lord Hodge, Lord Burrows and Lady Rose agreed, began with the Insolvency Act 1986, the statute creating and governing administration. It contains very many references to an “officer” of a company. Section 251 defines “officer”, in relation to a body corporate, as including a director, manager or secretary. That definition is not exhaustive, but it was striking that administrators were not included when the Act created the office. More importantly, several provisions positively distinguish an administrator from an officer.
Section 212, dealing with misfeasance in a winding up, lists separately a person who is or has been an officer, a person who has acted as liquidator, administrator or administrative receiver, and a further person who, without falling into either category, has been concerned in the company’s management. Equivalent distinctions appear in the original administration provisions and in Schedule B1. Paragraph 45(2), for example, separately identifies the administrator, an officer of the company, and the company as persons who may commit an offence by authorising or permitting a contravention. Paragraph 64 prevents the company or an officer from exercising a management power without the administrator’s consent. Lord Richards held that these provisions give a clear picture: the legislation did not classify an administrator as an officer of the company.
The Court rejected earlier first-instance decisions that had treated administrators as officers for the purpose of relief from liability. A person can hold an office relating to a company, or be an officer of the court, without holding an office within that company.
No extended meaning in section 194(3)
Even if an administrator is not generally an officer, the Court considered whether “other similar officer” could be given an extended meaning for section 194(3) alone. Conventional construction left no scope for that reading. Nothing in the language invited an expansive interpretation, and the requirement that the officer be “similar” to a director, manager or secretary pointed the other way.
Policy arguments did not alter the construction. Administrators may need to act quickly, and continuing employment contracts for more than 14 days can give employees priority under paragraph 99 of Schedule B1. That dilemma might support excluding companies in administration altogether, but it was not suggested that sections 193 and 194 exclude them. Section 193(7) already prevents an offence where special circumstances make compliance not reasonably practicable. Insolvency is not by itself such a circumstance, and the appointment of an administrator does not automatically make compliance impracticable; that depends on the facts.
The Divisional Court’s test would have reached anyone responsible for day-to-day management. Parliament had used broader wording elsewhere when that was its intention. Here it had listed particular offices and then referred to other similar officers.
The meaning of “officer” in this context is essentially constitutional. The question is whether the person holds an office within the constitutional structure of the body corporate, as directors, managers and secretaries do. The words “other similar” reinforce that ordinary meaning. Bodies corporate take many forms, and their officers may have varied titles, but liability depends on similarity to those constitutional offices, not on practical day-to-day control. An administrator does not hold such an office.
Verdict: The Supreme Court allowed the appeal and quashed the District Judge’s decision of 29 May 2018 that Mr Palmer, as administrator of USC, was an officer of USC within section 194(3) of the Trade Union and Labour Relations (Consolidation) Act 1992. The judgment determines that point of construction; it does not itself decide whether any offence was committed by the company or by any person who does fall within the provision.
Source: R (on the application of Palmer) v Northern Derbyshire Magistrates’ Court and another [2023] UKSC 38
