We had a 'double take moment' in the NTI newsroom this morning (Friday 10 March). A headline came in from Reuters saying, "Administrator Fights to Avoid Criminal Liability in Test Case". Counsel for the Administrator of Sports Direct argued before the Supreme Court that his client should not face criminal charges for failing to notify the Government about the redundancy of 84 employees at the subsidiary of a retail chain, in an alleged breach of the Trade Union and Labour Relations (Consolidation) Act 1992.
The argument before their Lordships is on the very lean side of slim, in that counsel stated legislation envisaged the person carrying out the redundancies to be a manager or 'similar officer of the company', which an Administrator was not.
When lecturing our students on Administrations just before the last Joint Board exam in November 2022 we (quite rightly, by the way) told them that Administrators have authority over the company, but they are not of the company. They are not appointed by the company in the sense of being within its own terms of powers, they are not answerable to the company itself.
On behalf of the Administrator counsel is seeking to overturn a ruling by a magistrates' court in Derbyshire, which found that an Administrator could be a manager or hold an equivalent position at a company under the 1992 act. The High Court also dismissed counsel's attempt to bring judicial review in November 2021. So there is everything to play for in front of the most senior court in the land.
The Administrator of Sports Direct is one of only two cases every to have been brought under the 1992 legislation. The Kings Counsel representing the Government's position stated that: "Individuals concerned with the default (the Administrator in this case) would escape a criminal sanction and not be deterred from engaging in the criminal conduct".
He added: "It would not achieve the purpose of the statute, which is to make people running the company send the form (for notifying of the redundancies)."
Counsel argued that another possible consequence of Administrators dodging responsibility would mean that the company, which cannot act independently when it is in Administration, could be liable for the acts of the Administrator. Any financial penalties faced by the company would be to the detriment of its creditors; and the Administrators are meant to act in their interests.
The stakes could not be higher (or more interesting). NTI will be back to you with the decision, when it is reached, on CPD TAP.