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The appointment of administrators - where are we now?

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Two new cases have recently been published, adding to the significant (and growing) body of case law on the appointment of administrators in the e-filing age.

The first case

The facts of the first case (Keyworker Homes (North West) Limited [2019] EWHC 3499 (Ch)) were fairly simple. On 11 October 2019, a notice of intention to appoint administrators was e-filed by the directors of Keyworker Homes (North West) Limited. The notice was filed at 4:29pm, 29 minutes after the Court counter closed. The notice was duly served on the qualifying floating charge holder, who gave their consent to the appointment of the administrators.  As a result, a notice of appointment of administrators was filed on 24 October 2019 at 6pm.

When the notice of appointment was received back from the Court, it was endorsed with the words “This notice was filed on 25 October 2019 at 10am”, seemingly in accordance with previous cases, in which notices filed after the Court counter closed were not considered to become effective until the next day.

This caused some concern on behalf of the administrators given the requirement in para 28 (2) of Schedule B1 to the Insolvency Act 1986.

Para 28 (2) specifies as follows:

“An appointment may not be made under paragraph 22 after the period of ten business days, beginning with the date on which the appointment was made.”

The administrators’ concern was that, should you count 11 October 2019 as the day on which the notice of intention was filed, and if you also take the view that a notice filed outside of the Court counter opening hours only takes effect on the following day, the notice of appointment could be considered to have been filed a day late and therefore would be invalid.

The Court ruled as follows:

  1. that a notice of intention (filed by the company or its directors) could be filed at Court out of hours and would take effect at the time it was filed;
  2. that the date on which the notice of intention is filed should not be counted in the ten business day period under paragraph 28 (2); and
  3. that a notice of appointment (filed by the company or its directors) could also be filed at Court outside of working hours and would take effect at the time it was delivered.

Based on those findings, the Court held that the notice of appointment had been filed within the window prescribed by paragraph 28 (2) and was therefore valid.

It should be noted that this decision was a first instance decision and there have been other, conflicting cases.  It remains to be seen whether the Judge’s reasoning will hold up in similar cases, particularly when it seems to ignore the wording in paragraph 28 (2), which specifically provides that the period of ten business days should begin with the date on which the appointment is made. 

In addition, if the rulings in this case are correct, notices filed by the company or directors can be validly filed by way of e-filing outside of Court hours and will take effect at that time, whereas should a qualifying floating charge holder wish to file a notice out of Court hours they must follow the specific procedure set out in the Insolvency Rules 2016. This seems at odds with the reason the special procedure for qualifying floating charge holders was introduced in the first place, i.e. as a benefit to qualifying charge holders following the removal of their right to appoint administrative receivers after September 2002. It is now arguably more difficult for a qualifying floating charge holder to appoint out of hours than it is for the company or directors.

The second case

However, the second case (Causer and another v All Star Leisure (Group) Ltd [2019] EWHC 3231 (Ch) (28 November 2019) seems to confirm this anomaly. This case involved the filing of a notice of intention 18 minutes after the Court counter closed. The notice was e-filed, and the solicitor acting for the qualifying floating charge holder did not comply with the special procedure set out in rule 3.20 of the Insolvency Rules 2016. The Judge in that case held that the notice of appointment would therefore not take effect until the next time the Court counter opened (i.e. 10am on the next working day). Luckily for the administrators (who had sold the business and assets of the company in the meantime) the Judge agreed that the late filing of the notice was a defect which could be remedied by the Court and ordered that the appointment should take effect at the time it was filed.

Unfortunately, given the number of conflicting judgements in this area, it remains unclear how practitioners should approach the appointment of administrators. Until there is some clarification by a higher Court, or some amendment to the legislation in this area, it seems the safest route would be to e-file notices within the Court counter opening time where possible, and continue to include the date on which the notice of intention is filed in the calculation of the ten business day period under paragraph 28 (2).

ure (Group) Ltd [2019] EWHC 3231 (Ch) (28 November 2019) seems to confirm this anomaly. This case involved the filing of a notice of intention 18 minutes after the Court counter closed. The notice was e-filed, and the solicitor acting for the qualifying floating charge holder did not comply with the special procedure set out in rule 3.20 of the Insolvency Rules 2016. The Judge in that case held that the notice of appointment would therefore not take effect until the next time the Court counter opened (i.e. 10am on the next working day). Luckily for the administrators (who had sold the business and assets of the company in the meantime) the Judge agreed that the late filing of the notice was a defect which could be remedied by the Court and ordered that the appointment should take effect at the time it was filed.

Unfortunately, given the number of conflicting judgements in this area, it remains unclear how practitioners should approach the appointment of administrators. Until there is some clarification by a higher Court, or some amendment to the legislation in this area, it seems the safest route would be to e-file notices within the Court counter opening time where possible, and continue to include the date on which the notice of intention is filed in the calculation of the ten business day period under paragraph 28 (2).

 

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