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This article discusses a recent High Court decision which clarifies the consequences of a notice of appointment of administrators by a QFCH being filed outside of court opening hours, and gives guidance on how, if necessary, such appointments can be validated so as to take effect from the time of filing. There had been two recent conflicting authorities on those points, and HHJ Cooke set out his analysis of the existing legislative framework, the proper application of the existing rules, and his recommendations for future reform so to avoid confusion. Written by Ali Tabari, barrister at St Philips Chambers, who appeared for the applicants.
Causer and another v All Star Leisure (Group) Ltd  EWHC 3231 (Ch)
There are two main conclusions to draw from this case. The first is that, if a notice of appointment is filed at court by CE Filing after the court’s published opening hours, on the face of it that appointment does not take effect until the court next opens. This is consistent with the existing combination of the Practice Direction—Insolvency Proceedings (PDIP), the Insolvency (England and Wales) Rules 2016 (SI 2016/1024) and CPR PD51O (pilot scheme on electronic working), and is also consistent with the recent decisions in Re Skeggs Beef Ltd Eason and another (as joint administrators of Skeggs Beef Ltd (in administration)) v Skeggs Beef Ltd (in administration)  EWHC 2607 (Ch), per Marcus Smith J, and Re S J Henderson & Co Ltd; Re Triumph Furniture Ltd  EWHC 2742 (Ch), per ICCJ Burton.
The second is that, if such an appointment does not, strictly speaking, take effect until the next time the court opens, the court may still determine that it took effect from a different time (in this case, the time and date it was filed with the court). This is because it is a formal defect which is capable of remedy under IR 12.64, provided that there is no substantial injustice caused by doing so. This was consistent with the approach taken in Re Skeggs Beef Ltd and an earlier decision in Wright and others v HMV Ecommerce Ltd and another company  EWHC 903 (Ch), per Barling J, and diverged from the reasoning and decision in Re S J Henderson & Co Ltd.
In this case, the notice of appointment had been filed 18 minutes after the published court opening hours had ended, despite the best efforts of the solicitor to file it beforehand (there had been some major technological difficulties which resulted in otherwise timely documents not having been properly uploaded via the CE Filing system). Before the court next opened the following morning, the business of the company and its other group entities had been sold by the administrators—if the administration appointment were invalid and could not have taken effect until the following morning, the sale would potentially be deemed void and the whole deal would have needed to have been unwound, which would not only be practically impossible due to the time that had passed since the business had been sold, but which would also have jeopardised the jobs of the 250 employees.
HHJ Cooke questioned how it could be that the PDIP and PD51O could have created a mandatory requirement for out-of-court-hours appointments by a Qualifying Floating Charge Holder (QFCH) to be effected by sending the notice of appointment to a specified email and fax number, when the wording on electronic working in the Insolvency Rules (IR 3.20) does not appear to impose any such mandatory requirements. The judge doubted that it could have been the intention of those drafting the various components of the current framework to fetter the actions of a QFCH in a way which would be inconsistent with their existing powers to appoint administrators. Nevertheless, the judge felt constrained to follow the strict interpretation of the various provisions (paras – of the judgment), and to find that an appointment by a QFCH filed by CE Filing outside court opening hours was not effective until the court next opened.
However, following on from his doubts as to the apparent operation of the framework, the judge was content to find that, if required, the administration could take effect from the date and time of the notice being filed, if that were outside court opening hours. He found that it could not have been the intention of those drafting the framework to impose draconian sanctions on QFCHs which would have had the kind of potentially disastrous consequences looming large in this case; accordingly, he found it was an appropriate use of the discretionary power in IR 12.64 to give effect to the administration from that earlier time and date.
The judge also urged a reform or amendment to the current framework so as to remove the uncertainty that the current wording appears to have imposed on the profession, proven by the conflicting judgments in Re Skeggs Beef and Re S J Henderson.
Court: High Court (Business & Property Courts)
Judge: HHJ David Cooke
Date of judgment: 28 November 2019
Ali Tabari is a barrister at St Philips Chambers. If you have any questions about membership of LexisPSL’s Case Analysis Expert Panels, please contact email@example.com.
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Zahra started working as a paralegal at LexisNexis in the Lexis®PSL Banking & Finance and Restructuring & Insolvency teams in April 2019 and moved to the Corporate team in June 2020, where she currently works as a Market Tracker Analyst. Zahra graduated with 2.1 honours in BA French and Spanish and completed the GDL at BPP University. She has undertaken voluntary work for law firms in London, Argentina and Colombia.
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