Failure to state date and time does not invalidate administrator appointment

Out-Law Legal Update | 03 Dec 2018 | 11:25 am | 2 min. read

LEGAL UPDATE:  The High Court in England has ruled that the out-of-court administration appointment procedure is a two stage process, but that the appointment can take place at the same time as the appointment becomes effective, which is when the correct documentation is filed at court.

This decision provides further assurance to insolvency practitioners and solicitors that courts will not challenge the appointment of administrators because the notice of the administrators' appointment does not include a date and time of appointment that precedes the date and time of the filing of the documentation at court.

The judge in a case involving Spaces London Bridge Limited said that using the customary wording of "This appointment will take effect at the date and time specified below as the date and time when the notice is filed” is sufficient and even went as far as saying that a failure to include anything at all may not even amount to a defect.

The ruling is the latest in which the validity of out-of-court procedures for administrator appointments was called into question due to a failure to include a date or time of appointment in numerical value on the notice of appointment. This requirement appears in rule 3.24(1) (j) of the Insolvency (England and Wales) Rules 2016 (IR16).

The High Court had previously ruled that an administrator appointment can be simultaneous with a court notice in a case involving Towcester Racecourse. A previous case involving NJM Clothing had called the practice into question. The Spaces case was heard by the court after the decision in NJM, but before the decision in Re Towcester Racecourse had been handed down.

In the Spaces case Mr Justice Nuggee agreed with Judge Klein in the NJM case that the Insolvency Act 1986 and IR16 are drafted on the assumption that the appointment of administrators is a two-stage process; the appointment followed by the filing of the notice at court.  However, he said that the process of obtaining just one board resolution to approve both stages of the process was "entirely sensible".

IR16 requires that the date and time of the appointment is specified on the notice of appointment. The judge said that until a notice of appointment has been sealed at court the administrators are not in office - they can do nothing and their appointment is not effective. With that in mind he said that it is "impossible to see what purpose will be served by a requirement that, in addition to the date and time at which the appointment takes effect, that it should identify the date and time of what I have called the prior act that is the act by the company or directors in making the appointment".

Accordingly, Mr Justice Nugee ruled that the IR16 do not require the date and time of the appointment to precede the date and time of filing at court and that a failure to do so will not invalidate the notice. The appointment of the administrators was, therefore, declared valid.  

Tom Storer is a restructuring expert at Pinsent Masons, the law firm behind Out-Law.com.