Out-Law Legal Update | 24 Oct 2019 | 3:53 pm | 4 min. read
High Court rulings have said that a notice to appoint administrators must not be filed electronically outside of court counter opening hours, which are 10am-4.30pm in London and 10am-4pm in respect of the business and property courts in the regions.
The rulings have validated several administrator appointments but have clarified that the only way to ensure that appointments are valid is to use the electronic filing system when the court counters are open.
An out of hours appointment can still be made by a qualifying floating charge holder (QFCH) at any time but only using the pre-existing procedure under Rule 3.20 of the Insolvency (England and Wales) Rules 2016 (IR16).
Since April 2019 electronic court filing has been mandatory in regional business and property courts. This was an extension of the mandatory electronic filing in place in the Rolls Building in London since April 2017.
Electronic filing is governed by the Practice Direction 51O of the Electronic Working Pilot Scheme (Electronic Practice Direction). The Electronic Practice Direction allows for filing of documents 24 hours a day every day. This is subject to two exceptions relating to the filing of a notice to appoint administrators:
The question before the court in SJ Henderson and Triumph Furniture was whether the correct interpretation of paragraph 8.1 meant that directors and companies are prevented from electronically filing a notice to appoint administrators outside the court's usual counter opening hours and if so, whether this invalidated the administrators' appointments.
In SJ Henderson and Triumph Furniture, the directors had filed notices to appoint administrators outside of court opening hours using the e-filing system. The court endorsed the notices with the time and date at which the notices had been electronically filed. The High Court considered the meaning of paragraph 8.1 and ruled that the appointments could not take effect until the court counter formally opened at 10am.
In a second case concerning Skeggs Beef Limited, the High Court has also clarified that QFCHs that want to appoint an administrator out of court hours must use the process described at Rule 3.20 of IR16. In that case, the QFCH electronically filed the notice to appoint administrators out of court hours but did not use the procedure set out in Rule 3.20 of IR16. The judge ruled that the appointment was defective but curable under R12.64 of IR16.
The judgment relating to Skeggs Beef was handed down (but not published) before the judge had seen the ruling in the SJ Henderson and Triumph Furniture case and the appointment was held to have taken effect from the time and date that the notice had been electronically filed at court, in accordance with the recent HMV ruling.
These cases seek to address the uncertainty around electronically filing notices to appoint administrators out of court hours. The uncertainty stems from the introduction of the Insolvency Practice Direction but was not helped by the decision relating to HMV.
In that case, a notice of appointment had been filed electronically by directors out of court hours. The High Court upheld the validity of the administrators' appointment but did so by waiving any "potential" non-compliance with the Insolvency Practice Direction on the basis any non-compliance was a curable defect. The judge did not clarify exactly what paragraph 8.1 of the Insolvency Practice Direction should mean.
In the cases of SJ Henderson and Triumph Furniture and Skeggs Beef, the judges disagreed with the HMV decision and said that paragraph 8.1 clarifies that electronic filing does not give a company, its directors or a QFCH the ability to appoint administrators out of court counter opening hours. The cases are clear therefore, in that the only way a notice of appointment can be filed out of court opening hours is by a QFCH under Rule 3.20 in IR16.
However, the two cases do differ in how they treated the defective appointments. In Skeggs Beef, the judge validated the appointment from the time and date the notice was electronically filed at court. Whereas in SJ Henderson and Triumph Furniture, the judge ruled that the appointments took effect from the time that the court counter next opened for business after filing.
On a related point, the judge in the SJ Henderson and Triumph Furniture case said that there is nothing to prevent a notice of intention to appoint an administrator being electronically filed by any party out of court hours and the notice of intention will take effect at the time and date it was filed. It remains to be seen however, whether the court representatives who seal the notices of intention adopt this approach in practice.
Overall, it cannot be said with any certainty whether a further case will arise which will seek to interpret paragraph 8.1 differently. It seems however, that some clarity is beginning to prevail. A cautious approach remains advisable: directors and companies should only electronically file a notice to appoint administrators within the usual court counter opening times. If an out of hours appointment is to be made by a QFCH, follow the procedure set out in Rule 3.20 IR16.
Sarah Jennings is a restructuring expert at Pinsent Masons, the law firm behind Out-Law.com