Ali Tabari successful in application to validate out-of-hours administration appointment

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In a High Court decision before HHJ Cooke (Re All Star Leisure (Group) Limited [2019] EWHC 3231 (Ch)), Ali Tabari represented the applicant successfully seeking to confirm the validity of an administration appointment in the wake of recent uncertainty about out-of-court-hours appointments by CE-Filing.

Background

In two recent High Court cases, there had been administration appointments made outside court opening hours which, according to a combination of the Practice Direction – Insolvency Proceedings [‘PDIP’] and the pilot scheme for electronic filing system at CPR PD51O rendered the appointment, strictly speaking, ineffective until the court next opened. Those two decisions (Re Skeggs Beef Ltdand Re SJ Henderson & Co Ltd) had come to different conclusions on whether that defective appointment could be cured by the existing Insolvency Rules, or whether it was a much more fundamental issue which could not be cured: in Skeggs, the appointment was deemed curable and was effective from the time of filing, but in SJ Henderson it was deemed to have been incurable and so did not take effect until the court opened the following day. That left practitioners unsure of the effect of any such unfortunate defects, which was the problem facing the administrators of All Star Leisure.

The facts

Here, 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 (CE-Filing, of course, depends on technology being kind to practitioners, and here it certainly was not). 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 was void and the whole deal would need to be unwound, no doubt with great difficulty.

The judgment

Whilst a substantial portion of the judgment centres on the development of the rights of QFCHs with regard to electronic filing as set out within the Insolvency Rules 2016, HHJ Cooke determined that the appointment was, according to the strict wording of the PDIP and PD51O, defective. Crucially, however, he preferred the purposive approach of Re Skeggs Beef Ltd, and found that it could not have been the intention or effect of the pilot scheme to impose draconian sanctions on CE-Filing users which would have the potentially disastrous effects seen in this case. Accordingly, he was content to rely on the general curative provision at IR 12.64, and declared the appointment effective from 4.18pm on the day the notice was filed. The judgment is worth a detailed read, if only to understand the framework currently in place for out-of-court-hours appointments.

 The practical effect

There had been a danger that the somewhat hard-line approach in Re SJ Henderson Ltd would leave practitioners at the mercy of technology failures or other bad luck which could befall anyone trying to use the CE-Filing system, but now applicants can rely on this judgment to encourage Judges in taking a pragmatic approach to any such scenarios. This should come as some relief to solicitors and IPs everywhere, and the Judge also urged those observing the implementation of the pilot scheme to impose some clarity in the wording in order to resolve this apparent lacuna.

Ali Tabari is an insolvency specialist ranked in Chambers & Partners and Legal 500 as a leading junior.