The saga of the innocent administrator: R (on the application of Palmer) v Northern Derbyshire Magistrates’ Court

It is probably right to say that not many cases that started life in the Northern Derbyshire Magistrates’ Court have been subject to the scrutiny of the finest legal minds in the country. But a story with its origins in a warehouse in Scotland and a courthouse in the midlands reached its end on 1 November with the Supreme Court’s decision in R v Palmer [2023] UKSC 38. It is an unusual story – and something of a cursory tale about the importance of clear drafting in statutory criminal offences.

On 4 January 2015, employees at a warehouse in Dundonald, Scotland, were handed two letters. The first letter told them that they were at risk of redundancy and that there would be a staff meeting later that day. The second letter, handed out shortly afterwards, told them that they were all to be dismissed.

The warehouse was owned by a company called USC, a member of the Sports Direct Group. The letters had been signed by Robert Palmer. He had been appointed as one of three joint administrators of USC on 13 January. His appointment came after David Forsey, the sole director of USC, decided to put the company into administration.

In July 2015, criminal proceedings were brought against Mr Forsey and Mr Palmer (in Derbyshire). Charges were brought under s. 194 of the Tade Union and Labour Relations (Consolidation) Act 1992 (known by the catchy abbreviation “TULRCA”). TULRCA imposes a duty on employers who are contemplating mass redundancies: these include a duty to consult with representatives of the employees, but also a duty to notify the Secretary of State of the proposed redundancies. This duty to notify is mandatory unless there are ‘special circumstances’ which render compliance not reasonably practicable.

S. 194 of “TULRCA” creates a summary offence for failure to notify. S. 194(3) allows for accessorial liability of officers of a company that has committed an offence:

‘Where an offence under this section committed 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 any person purporting to act in any such capacity, he as well as the body corporate is guilty of the offence and liable to be proceeded against and punished accordingly’.

 Mr Palmer argued before a District Judge that an administrator was not an officer of the company for the purposes of s. 194(3): he lost. Permission was granted for judicial review, and the divisional court upheld the decision below. Mr Palmer appealed to the Supreme Court.

The Supreme Court had to wrestle with conflicting policy arguments. Mr Palmer submitted that subjecting administrators to criminal liability would create a conflict between acting quickly in pursuit of the statutory purposes of administration, or complying with the notification requirements. The respondents argued that s. 194(3) would be rendered meaningless in circumstances where administrators had been appointed, if no criminal liability could attach to them. In the Divisional Court, a ‘functional approach’ to s. 194(3) was formulated: Parliament must have intended that anyone with responsibility for the management or control of the company should be fixed with personal liability for failure to give the statutory notices.

In the judgment of Lord Richards (with which the other Justices agreed), this was wrong. If Parliament had intended to include administrators, it would have done so expressly in s. 194. Instead, it was ‘tolerably clear’ that what is meant by ‘officer’ in a body corporate required 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.

This is good news for Mr Palmer, and good news for administrators. It suggests that real care should however be taken in trying to construct statutory offences that are as ‘tolerably clear’ as TULRCA, and may be authority for a restrictive, rather than ‘functional’ interpretation when it comes to criminal offences.

Rob Dacre