Administrators facing prosecution over redundancies

The High Court has decided that Administrators can be prosecuted personally for failing to notify the Insolvency Service about collective redundancies

Following the recent decision in the High Court in R (on the application of Palmer) v Northern Derbyshire Magistrates Court, it was declared that an administrator can be held personally liable for failing to notify the Insolvency Service on collective redundancies as a result of a company being put into administration.

Under section 193 of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA), an employer proposing to dismiss 20 or more employees at one establishment within a 90-day period is under obligation to notify the Secretary of State in writing of his proposal. This must be done before providing notice to terminate an employee’s contract of employment under these dismissals, as well as giving at least 30 days before the first of those dismissals take place. Failure to comply is a criminal offence.

In the above case Mr Palmer’s was a joint administrator of West Coast Capital (USC) Limited, with his responsibilities being ‘preferential claims’ and ‘employees’. In January 2015, USC filed a notice of intention to appoint Administrators, causing the USC warehouse to cease operations, which consequently would lead to the dismissal of 84 employees. USC went into Administration on 13 January 2015 and the following day the administrators made all warehouse employees redundant. The Insolvency Service questioned whether a HR1 had been sent, where it was found that it had overlooked sending the form which was subsequently emailed on 4 February 2015, despite being signed and dated by Mr Palmer on 14 January 2015. Criminal charges were issued against Mr Palmer due to his failure to comply with section 193 TULSCA.

It was the High Court’s decision which found the original ruling to be correct. An Administrator can be prosecuted under section 194 TULRCA. This was because when the Administrator assumes office, no one else could give statutory notice on behalf of the company without the Administrator’s direction. An Administrator is both an officer of the court and an officer of the company.

Due to the confirmation of the decision, it is important that Administrators/Liquidators and Companies consider whether plans made for the company may result in redundancies of more than 20 people. If this is the case, the office-holder should submit the HR1 without delay.


NOTE: Nothing in this article constitutes legal advice or gives rise to an advisor/client relationship. Specialist legal advice should be taken in relation to your specific circumstances. This article is provided for general information purposes only. Whilst we endeavour to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and we do not accept any liability for error or omission as it is based upon our interpretation of the law. Please be aware that the legal circumstances may have changed since this article was first published in December 2021 and you should contact us for specific up to date advice on your circumstances.

When is home time?

Let me ask you a simple question. At what time do you throw in the towel at the end of the working day? When do you think enough is enough and head for home?

Flexi working has encouraged employers and employees to open the mind and think differently about their start and finish times but one High Court judge has given lawyers and clients a warning about setting unrealistic deadlines, after receiving an evening email to say a hearing could not wait.

The Honourable Mr Justice Fancourt explained that his clerk was recently emailed by lawyers at 7.52 pm asking for an urgent hearing that same evening, to deal with the pre-pack sale of Nationwide Crash Repair Centres Ltd. The weighty email comprised of bundles, a skeleton argument, as well as the required certificate of urgency.

Initially, it was thought that applications to appoint administrators would be heard the following morning, but another email from lawyers at 9.16 pm said that a deal agreed with a purchaser would be pulled if not completed by midnight. The hearing was held by telephone that same evening and the order was finally made at 11.56 pm. It later transpired that the midnight deadline had been included in contract documents negotiated over the preceding days.

The High Court Judge involved in the matter said there was nothing in the circumstances that required such urgency, and the deadline was only necessary because of terms agreed outside the court’s control. Honourable Mr Justice Fancourt added: “It is wholly unacceptable for clients and lawyers and other professionals acting for them to negotiate terms that have the effect of presenting the court will (sic) an artificial ultimatum and require important matters affecting the livelihoods of thousands of people to be decided under undue pressure of time.”

He went on to stress that the court was not to be treated as a “rubber stamp” for the appointment of administrators and warned that applicants should allow time for a fair hearing to be held.

Administrators were appointed to handle the sale of the repair business. The court was told that the sale would bring an immediate return to secured lenders of around £26.7m and save almost 2,900 jobs. The only realistic alternative was to force the repair centre into liquidation, with all jobs lost and returns reduced to £19m.

We bring this story to light because it is important to note the judiciary’s standpoint on these apparent urgent midnight hearings. In our experience, parties use these artificial pinch points to apply unfair pressure to bolster their already unequal bargaining power. We believe the best all-round results arise from situations where due care and attention, together with some reflection time, is afforded to the matter in hand and then planned accordingly in advance. We urge you to contact us to discuss any potential situations you have and consider working alongside us as trusted strategic partners to maximise the benefit to you in your business, rather than the last-minute rush which is often both damaging and costly.