Out-of-Court appointments of Administrators
I have in recent months, in the course of advising on a number of Out-of-Court appointments of Administrators, been asked whether a Notice of Appointment of Administrator can be filed electronically “Out of Hours”, that is, outside the Court’s usual opening hours of 10am - 4/4:30pm. The answer has always been, and (currently) remains, “No”, but the issue highlights a conflict between the push for electronic filing across the justice system, and the Court Rules governing insolvency proceedings.
Paragraph 2.1 Practice Direction 510 - The Electronic Working Pilot Scheme, (“the E-Filing Practice Direction”), makes clear that proceedings can be issued and documents filed 24 hours a day through the year, including on weekends and bank holidays. The E-Filing Practice Direction goes on to confirm at paragraph 2.2 that it applies to insolvency proceedings.
However, Practice Direction - Insolvency Proceedings 2018 (“the Insolvency Practice Direction”) states at paragraph 8.1 that paragraph 2.1 of the E-Filing Practice Direction shall not apply to any filing of a Notice of Appointment of an Administrator outside the Court opening hours, and Rules 3.20 - 3.22 Insolvency Rules 2016 shall apply in those circumstances.
Confusingly, Rules 3.20 - 3.22 Insolvency Rules 2016 only apply to the appointment of administrators by a Qualifying Floating Charge Holder. This has led some to question whether there is a drafting mistake at paragraph 8.1 of the Insolvency Practice Direction, and that paragraph 8.1 is intended only to record that paragraph 2.1 of the E-Filing Practice Direction cannot be relied upon by a Qualifying Floating Charge Holder. If that is correct, it would mean that a Notice of Appointment of an Administrator could be filed electronically out of hours by a Company or its Directors.
The question of whether it is possible for the directors of a Company to file a Notice of Appointment of an Administrator out of hours came before the Mr Justice Barling in the High Court in January 2019
in the case of Wright and Others v HMV Ecommerce Limited and another .
In that case, director’s Notices of Appointment of an Administrator were filed electronically at 17:54 on 28 December 2018 in respect of HMV Ecommerce Limited and HMV Retail Limited, with an automated response produced by the Court at 17:56. That same evening, there was a telephone hearing before Mr Justice Barling, at which he declared that the administrators were validly appointed as joint administrators of the companies, and that their appointments took effect as at 17.54 that day, being the time at which the Notices of Appointment had been electronically filed.
It is not uncommon for the appointment process to be reviewed following the appointment of Administrators to guard against any inadvertent oversights that may render the appointments invalid and/or subject to challenge. It would seem that such an exercise was carried out here, and that someone highlighted that Paragraph 8.1 of the Insolvency Practice Direction prevents the e-filing of such Notices out of hours, as a hearing took place on 24 January 2019 before Mr Justice Barling at which he was asked to make an Order that,
- if there was an breach of paragraph 8.1 of the Insolvency Practice Direction and/or any defect in the appointment of the Administrators, then the appointment of the Administrators was nevertheless effective as from 5.54pm on 28 December 2018, and that no acts of the administrators were invalid despite any defect;
- if there had been a defect that it was necessary to remedy, the time for filing the Notice of Appointment of an Administrator be extended, and/or to waive the defect.
Whilst the hearing provided the opportunity for the Court to offer clarification on whether a Notice of Appointment of Administrator could be filed electronically out of hours, and despite Mr Justice Barling noting the confusion caused by paragraph 8.1 Insolvency Practice Direction, no guidance was provided on the issue. Instead, relying on
- Rule 12.64 Insolvency Rules 2016“No insolvency proceedings will be invalidated by any formal defect or any irregularity unless the Court before which the objection is made considers that substantial injustice has been caused by the defect or irregularity and that injustice cannot be remedied by any order of the Court”
- Paragraph 104 of Schedule B1 Insolvency Act 1986“An Act of the administrator of a Company is valid in spite of a defect in his appointment or qualification”
Mr Justice Barling ordered that the appointment of the Administrators was effective from 17:54 on 28 December 2018, and if there had been any defect with the appointment, no act of the Administrators was invalid.
There therefore remains uncertainty as to whether a Company or its Directors can file a Notice of Appointment of Administrator out of hours electronically. Until amendments are made to the existing Practice Directions or a new Practice Direction or made, or the Court makes a determination that the existing Practice Directions do in fact allow a Notice of Appointment of Administrator to be filed electronically out of hours, it should be assumed that it is not possible to do so.
If you have any queries arising from this article, or would like to suggest a topic for a future article, please contact me on 01482 337367 or firstname.lastname@example.org. I can also be followed on Twitter at @drinkall_chris and on LinkedIn.
Posted on: 30/04/2019
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.
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