E-filing a notice of appointment of administrators outside of court counter opening hours can impact the validity of an administrator’s appointment.

The recent high court rulings in SJ Henderson & Company Limited and Re Triumph Furniture Limited [2019] EWHC 2742, and Re Skeggs Beef Limited [2019] EWHC 2607 (Ch) should serve as a caution that a company, the directors or a qualifying charge holder (QFCH) intending to e-file a Notice of Appointment (NOA) should always file this within court counter opening hours in order to be certain that the administrators are validly appointed.

A QFCH can file an NOA out of court hours but the prescribed steps under rule 3.20 of the Insolvency (England and Wales) rules (IR 2016) must be followed.

In terms of a Notice of Intention to Appoint Administrators (NOI) Judge Burton in SJ Henderson concluded (although her comments were obiter) that an NOI can be e-filed by either the directors, the company or a QFCH at any time.

Why has the introduction of e-filing caused confusion about how and when an administrator is validly appointed?

Practice Direction 51O introduced the Electronic Working Pilot Scheme (Scheme) enabling court applications across England and Wales to be e-filed 24 hours a day on any given day.

Although the Scheme provides flexibility, it has been unclear whether administrators appointed by an NOA e-filed outside of court opening hours were effectively appointed or whether the appointment was invalid.  It has also been a matter of debate as to whether an NOI could be e-filed outside of court hours.

The insolvency legislation expressly permits a QFCH to appoint administrators out of court hours by following the prescribed procedure under 3.20 IR 2016 (which includes either faxing the NOA to a designated telephone number, or by emailing it to a designated e-mail address). However there are no express rules in the IR 2016 permitting a company or a director to do the same.

Prior to the introduction of e-filing the directors and company’s ability to appoint an administrator was restricted to when the court office was open and a QFCH could only appoint out of hours following the procedure set out in the IR 2016 – however the e-filing system enables court documents to be filed 24/7 without the need to fax or email.

It is no wonder, therefore, that practitioners have been uncertain about whether and when an NOA e-filed outside of court opening hours takes effect.

Given the urgency and nature of an administration and the need to take control of and make decisions about the distressed business the high court rulings are welcome in clarifying the position.

Re Skeggs Beef Limited

The facts

The QFCH filed an NOA using the e-filing system at 5.03pm outside of court hours instead of using the out of hours procedure set out in the IR 2016.  Although the QFCH used the incorrect procedure for an out of hours appointment the court endorsed the NOA at 5.03pm.

The administrators applied to court seeking an order to confirm that they had been validly appointed at 5.03pm.

Decision

Marcus Smith J ruled that a QFCH cannot use the court’s e-filing system to file an NOA outside court hours and the appointment was defective.  However he determined that the defect was of the type that was capable of remedy given that a QFCH does have the power to appoint under the IR 2016.

Accordingly rule 12.64 of the IR 2016 allowed the court to remedy the defect and declare that the administrators appointment had in fact taken effect at 5.03pm.

SJ Henderson & Company Limited; Re Triumph Furniture Limited

SJ Henderson

In SJ Henderson & Company Limited, the directors of the company served two NOI’s on the company’s QFCH, and after the expiry of the second NOI, used the e-filling system to file an NOA at 6.03 am. Within the NOA, it stated that the administrators had been appointed at 2pm on the previous day. The court accepted the NOA at 9.44am but endorsed the time of filing as 6.03 am.

The administrators asked the court, amongst other things, to declare that their appointment was valid.

Re Triumph Furniture Limited

In Triumph the sole director e-filed an NOA at 9.29am. The court confirmed the e-filing at 10.22am and endorsed the NOA at 9.29am.

The administrators applied to court seeking a declaration that their appointment was valid.

Decision

ICC Judge Burton concluded that under the IR 2016 only a QFCH has power to appoint administrators out of hours and the rules do not permit either the directors or the company to do so.  However she went on to order that the NOAs filed outside of court hours took effect at 10am on the next working day when the court counter opened.

She also commented (albeit obiter) that an NOI can be e-filed by either a company, the directors or QFCH at any time because the IR 2016 does not differentiate (as it does with NOAs)  between director/company NOIs and QFCH NOIs.

Accordingly an NOI filed out of hours will take effect at the time and date it is e-filed. A question which has perplexed practitioners for some time.

When should an NOA be filed to avoid a defective appointment or subsequent court application?

In order to be certain that administrators are validly appointed the directors or company or QFCH should only e-file an NOA during court hours unless a QFCH wishes to appoint out of hours, in which case the out of hours procedure in the IR 2016 must be followed.

Waiting to file an NOA within court counter opening times far outweighs the uncertainty and costs and time of going to court to remedy the defect of an e-filed out of court hours NOA.  If an appointment is urgent then a QFCH out of hours appointment or court application is the better option.

Plus there is no guarantee that a Court would remedy a defect, particularly in light of a decision which confirm that the directors and company have no power to appoint out of hours and that a QFCH should use the out of hours prescribed by the IR 2016.

Whilst SJ Henderson suggests that an NOA filed out of hours by the directors or company will be time and date stamped when the Court office next opens consider that:

(a) a director or company has no power to appoint out of court hours under the IR 2016;

(b) according to PD51O e-filed documents should be date and time stamped when filed; and

(c) there is no legislative power to simply apply a 10am time stamp.

Therefore, is an out of hours NOA filed by a director or company void because neither the directors nor company have power under the IR 2016 have power to appoint? If it is not void, when should the NOA be time and date stamped; when filed but effective from 10am or at 10am when the court office opens?

If the NOA is time and date stamped when e-filed but the appointment is not effective until 10am does the wording suggested by Justice Nugee in Re Spaces London Bridge as to the time and date of appointment still apply?

Until there is further guidance or legislative change it would be prudent for a director or company to only e-file an NOA within court hours.

Authored by By Phillipine Wiegand-Forson