Ali Tabari writes for Lexis Nexis on Defective Appointment of Administrators

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In the latest example of practitioners falling foul of the numerous tripwires surrounding the appointment of administrators using the CE-Filing system, the decision of Mr Justice Snowden in Re Carter Moore Solicitors [2020] EWHC 186 (Ch) demonstrates the Court’s increased willingness to exercise its discretionary powers to validate the appointment. It also highlights the pitfalls of a system presently designed to bring certainty and ease of use, but which instead brings about potentially disastrous consequences for relatively minor infractions.

What was the background?

The directors of the company filed a Notice of Intention to appoint administrators (“the NOI”) on Monday 13th January 2020, pursuant to which they had 10 business days in which to make the appointment before the NOI lapsed.

On the final day, Friday 24th January 2020, the directors filed a Notice of Appointment of administrators (“the Notice”) via the CE-Filing system at 2.17pm. Everything within the Notice was compliant, except that the person uploading the document to the system selected the wrong drop-down box – instead of marking the Notice as being filed within existing proceedings, it was marked as a new case. For that reason, the Court clerk rejected the Notice, but only did so at 4.04pm (i.e. outside the listed Court opening hours for the purposes of the various Rules and Practice Directions concerning CE-Filing).

Within 3 minutes of receiving the rejection, the Notice was re-filed electronically by the applicants, this time using the correct drop-down box. However, the Court did not contact the applicants until 9.42am the following Monday, and the Court marked the administration as having taken effect from 10.00am on the Monday, as that was when the Court opening hours began. Unfortunately, this was 11 days after the NOI, and the applicants sought declaratory relief to regularise the position.

What did the Court decide?

Snowden J took into account the previous decision in Re SJ Henderson & Co Ltd [2019] EWHC 2742 (Ch), in which ICCJ Burton had held that a Notice filed electronically outside of Court opening hours would only take effect when the Court next officially opened. The Judge does not appear to have been taken to other cases on the same point in which the general curative provision in Insolvency Rules 2016 r.12.64 was utilised to regularise the position by declaring the administration to have taken effect at an earlier time (Re Skeggs Beef Ltd [2019] EWHC 2607 (Ch) per Marcus Smith J; Re All Star Leisure (Group) Ltd [2019] EWHC 3231 (Ch) per HHJ Cooke). However, the Judge reached a pragmatic and sensible solution by a different method, namely relying on Practice Direction 51O paragraph 5.3(2), which allows the Court to “remedy an error of procedure made while using Electronic Working, in accordance with CPR 3.10(b)”. In this case, the Judge took the view that:

  • the Notice was compliant in every substantial way;
  • the original Notice was initially filed within Court opening hours, and the compliant Notice was filed within 3 minutes of receiving the Court’s initial rejection message;
  • there was no intention on the applicants’ part to pay a lower Court fee or gain any advantage by selecting the wrong drop-down box; and
  • the mistake was obviously inadvertent.

Accordingly, the Judge declared that the administration took effect from the date of the time of the first attempt to file it electronically, i.e. 2.17pm on the Friday which was the 10th working day after the NOI.

What are the practical implications of this case?

This case is a further demonstration of the Court’s ability to use its discretion sensibly when confronted with an error arising from the use of CE-Filing, and lends yet more support to applicants wishing to persuade Judges to validate the appointment of administrators in cases where there has been some error or failure to comply with the various Rules and Practice Directions concerning electronic working.

Unfortunately, this case also demonstrates the potential consequences of even the most minor procedural default, and ought to hasten a change in the rules which will put practitioners’ minds at rest and prevent the need for so many applications for declaratory relief being listed in an already-crowded Court system.

Interestingly, in the past fortnight the Chancellor of the High Court, Sir Geoffrey Vos, has issued an interim practice direction which states that Notices of Appointment of administrations filed electronically outside Court hours will be referred to a High Court Judge “at the first possible opportunity” for them to determine the effective time and date of the appointment, such decision to be made on paper if possible in the first instance. Until there is a formal change in the Rules or Practice Directions, this should hopefully be of some assistance and comfort.

This article was first published by Lexis®PSL on 17 February 2020.