‘Office Holder’ but not ‘Officer’

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The issue on appeal was whether the administrator of a company appointed under the Insolvency Act 1986 (IA 1986) is an “officer” of a company within the meaning of Section 194 of the Trade Union and Labour Relations (Consolidation) Act 1992 (the Act), which refers to any director, manager, secretary or similar officers of the body corporate”. Certain provisions in the Act impose duties on employers who are proposing to make employees redundant.  

Facts

Mr. Palmer, the Appellant in this case, was appointed as one of three joint administrators of a company called West Coast Capital (USC) Limited (“WCC”) in January 2015, the day after his appointment, several employees within WCC were handed a letter signed by Mr. Palmer warning that they were at risk of redundancy and giving notice of WCC’s intention to consult with them at a staff meeting scheduled for the following day. However, later on the same day, they were issued with a further letter, again signed by Mr. Palmer, which contained a notice of dismissal with immediate effect. 

Sections 193(1) and (2) of TULRCA provide that, where an employer proposes to dismiss at least 20 employees as redundant within 90 days, it is required to give notice to the Secretary of State at least 30 days before those dismissals take effect.  

An employer who fails to give notice as required commits an offence under section 194(1) and, where the offence is proved to have been committed by a body corporate with the consent or connivance of or to be attributable to neglect on the part of, “any director, manager, secretary or other similar officers of the body corporate“, that person commits an offence under section 194(3). 

At the time the relevant employees were dismissed, Mr. Palmer had not given notice of the redundancies to the Secretary of State and, indeed, did not do so until the relevant form was emailed to the Secretary of State on 4 February 2015, some three weeks later.  

As a result, in July 2015, criminal proceedings were issued against Mr. Palmer alleging that he was criminally liable under Section 194 (3) of the Act for failing to give the requisite notice to the Secretary of State. The proceedings were defended by Mr. Palmer, who asserted that an administrator appointed under the IA 1986 is not an “officer” within the meaning of Section 194 (3) and, as such, no criminal offence had been committed. 

Mr. Palmer was held, by the magistrates court, to be an “officer” of WCC. His subsequent claim for judicial review was dismissed by the divisional court. One of the reasons for this was that the divisional court was concerned that if an administrator is not an “officer” there would be nothing to deter non-compliance and it would render the criminal sanction in cases involving companies in administration meaningless. Mr. Palmer then appealed the issue to the Supreme Court.  

Findings

The Supreme Court unharmoniously allowed Mr. Palmer’s appeal and Lord Richards, giving judgment and quashing the ruling of the magistrates court, set out the following: 

  1. Neither the Act nor any other enactment define “officer” for the purposes of Section 194 (3), nor is there a clear line of authority which could be taken as a definition of what is generally understood to be an officer.  
  2. In light of the above, the first recourse in determining whether an administrator is to be considered an “officer” must be the IA 1986 given that this is the statute that principally created and governs the process of administration and the position of administrator.  
  3. Despite the IA 1986 in its current form containing over 170 references to an “officer” of a company, none of these references indicate that an administrator is an officer of a company. In fact, the reserve is true. For example, in Section 251, “‘officer’ in relation to a body corporate includes a director, manager or secretary”.  
  4. Although the Section 251 definition should not be seen as exhaustive, it would be very surprising that there is no express reference to administrators within this definition if Parliament had intended that they be included. Further, other parts of the IA 1986, for example, Section 212, draw a clear distinction between an officer of a company and an administrator or a liquidator.  
  5. As such, the IA 1986 provided a clear picture that the legislation, in creating the process of administration, did not classify an administrator as an officer of the company that is in administration.  
  6. As for the divisional court’s policy concerns, they had limited weight and did not overcome the clear language in Section 194, which essentially requires a constitutional assessment (i.e. does the person hold an office in the constitutional structure of the body corporate). In the circumstances, an administrator of a company appointed under the IA 1986 is not an “officer” of the company within the meaning of Section 194. 

Key takeaways

The Supreme Court’s judgment will come as a relief to administrators as they can have comfort that they will not be guilty of a criminal offence under Section 194 should they fail to give the required notice (HR1). That is particularly welcome given that administrators will often have to make swift decisions about a company’s employees to achieve the statutory purpose of administration. This aside, it of course remains best practice for administrators who find themselves in this situation to ensure that correct notice is given to employees at risk of redundancy.   

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