When an employer is insolvent and administrators appointed, job losses are often an inevitable consequence. In this blog we look at the legal obligations arising where redundancies meet the threshold for collective consultation, and the implications for administrators arising out of the recent Supreme Court in the case of R (on the application of Palmer) v Northern Derbyshire Magistrates Court and another.

When does the legal obligation to collectively consult apply?

On 24 February, the Government published draft regulations that, if implemented, will impose new restrictions on pre-pack administration sales to connected parties. For all `substantial disposals' (which will include `pre-pack' sales) to connected parties, taking place within eight weeks of the administrators' appointment, the administrators will either need creditor consent or a report from an independent `evaluator'.

Context

In our Law-Now of 4 April 2012 (click here for link), we reported on the decision of the court in the case of Leisure (Norwich) II Limited v Luminar Lava Ignite Limited (in administration).  The detailed judgment has now been released, setting out the rationale for the decision and summarising the position on rents in administration generally.

The legal position on this issue is now:

Landlords have lost round two in the ongoing battle as to whether rent should be paid as an expense of the administration. The decision of the Court last week in the X-Leisure / Luminar case was in favour of administrators.

Following the Goldacre case, if an administrator is using the property for the purposes of the administration on the quarter day then the full quarter’s rent is payable as an expense of the administration.  What was not clear, was whether if the administrator was appointed just after the quarter day rent was payable as an expense.