Electronic filing of Notices of Appointments of Administrators outside Court hours – where are we now?

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Electronic filing of Notices of Appointments of Administrators outside Court hours – where are we now?

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Two recent High Court decisions have expressed disapproval of the lack of clarity in the provisions of Practice Direction 51O and Practice Direction – Insolvency Proceedings, relating to the e-filing of notices of appointment of administrators.  

 

With the recent decisions in All Star Leisure and Keyworker Homes, insolvency professionals, secured creditors and directors now face five conflicting High Court opinions in different registries of the High Court about their ability to make and take appointments outside of court hours.

 

In this article, we summarise the current state of play and our guidance for insolvency professionals and parties appointing them.

Statutory background

 

Confusion about the situations in which administrators can be appointed out of hours arises from paragraph 2.1 of Practice Direction 51O (“51O”) on electronic filing and paragraph 8.1 of the Practice Direction – Insolvency Proceedings (“PDIP”). 

 

Insolvency Rule 1.46 permits electronic filing if expressly authorised by the Civil Procedure Rules, a practice direction, or the Insolvency Rules 2016.   Under paragraph 2.1 of 51O, parties are authorised to “issue proceedings and file documents online 24 hours a day every day all year round, including during out of normal Court office opening hours and on weekends and bank holidays”.   However, a specific exception is created under paragraph 2.1(c) for “a notice of appointment by a qualifying floating charge holder … [filed when]… the court is closed”, in which case “the filing must be in accordance with rule 3.20 of the IR 2016”.

 

Unfortunately, the drafter of paragraph 2.1(c) did not think to impose a limitation on appointments by directors or companies.  Read literally, paragraph 2.1 would permit out-of-hours appointments by directors via e-filing, but require the slower, more complicated out-of-hours procedure set out in the Insolvency Rules to be used by charge holders. 

 

Intending to clarify the position, paragraph 8.1 of the PDIP states that “paragraph 2.1 of the Electronic Practice Direction 51O shall not apply to any filing of a notice of appointment of an administrator outside Court opening hours, and the provisions of Insolvency Rules 3.20 to 3.22 shall in those circumstances continue to apply”.

 

In addition, none of the guidance explains what should happen when a court accepts a Notice filed outside of counter hours.  Is the filing to be rejected or invalidated, is it to be treated as accepted when filed, or is it treated as accepted when the Court counter next opens?

 

The 2019 decisions

 

 To help professionals keep up with the state of play, we have prepared a table comparing the different decisions. 

 

Case Name (in date order)

Skeggs Beef

HMV Ecommerce

SJ Henderson

Keyworker Homes

All Star Leisure

Who appointed?

Charge holder

Directors

Directors

Directors

Charge holder

Date heard

5.10.2019

18.10.2019

8.11.2019

11.11.2019

28.11.2019

London /District Registry

London

London

London

Manchester

Birmingham

Effect of Rule 1.46

Not considered

Not considered

Not specific enough to override Rule 3.20

Contemplates e-filing if expressly permitted by a practice direction

Does not prohibit e-filing as does not define “delivery“ to the court

Rule 3.20

Overrides PD and does not anticipate e-filing out of hours by QFCH

Not relevant to appointment by directors

Does not provide for out of hours filing by directors

Not definitive as e-filing not available when drafted

Rule as to fax or email filing out of hours is permissive; rule 1.46 and 51O imply e-filing is also acceptable.

51O

Permits e-filing only where consistent with other rules

Not considered

Cannot override the Rules

Permits e-filing other than by QFCH so permits it for directors

Overridden by Rules and wrong to interpret it as preventing out of hours filing for policy reasons

PDIP

Not analysed, but Rules take priority in any event

Breach of PDIP is at most a breach of time period; court has power to extend time under r.3.10

Confirms that the effect of PD51O is not to extend the ability to appoint out of hours to companies/directors

Only covers charge holders so not relevant

Inconsistent with the Rules

Decision

Appointment took effect the next working day at 10am

Appointment took effect when e-filed out of hours at 17:30 approx.

Appointment took effect the next working day at 10am

Appointment took effect when received at 16:29

Appointment took effect when received at 16:18

 

How should IPs approach e-filing following these cases?

 

There have now been two cases ruling that appointments by a qualifying floating charge holder (QFCH) must be in court hours and three arguing strongly the other way. The Keyworker Homes case is particularly persuasive in its methodical review of the law and previous judgments, and its bold correction of drafting error. However, until 51O and the PDIP are revised in a consistent manner, or an appeal court ruling lays down a clear rule for courts and professionals, there remains the risk that an appointment outside court hours may be defective.

 

To avoid a costly and inconvenient application to the court to rule on the validity of an appointment, we recommend that:

 

1)      Director or company out-of-court appointments should be made only within court counter hours;

2)      When the court counter is not open, all QFCH appointments should be made using the “traditional” out of hours procedures in Insolvency Rules 3.20 to 3.22.

 

Although none of the recent decisions invalidated an appointment for not complying with the PDIP or 51O, it would be unwise to assume that e-filing out of hours will not cause problems, particularly where the exact timing of an appointment is critical – for example, where a pre-pack sale is to take place upon appointment, the 10-day limit on a right to appointment is about to expire, or where a secured creditor or financier will rely on the timing of appointment.

 

Judicial pressure is mounting for law reform and an appeal court decision would be helpful. 

 

If you are taking or making an out of court appointment or have questions about filing notices of appointment and notices of intention or concerns about any recent appointments, please contact Claire Butler or a member of our Insolvency Team for advice. 

 

Case References

Re HMV Ecommerce Ltd and anor [2019] EWHC 903 (Ch)

Re Skeggs Beef Ltd [2019] EWHC 2607 (Ch)

Re SJ Henderson and Company Ltd [2019] EWHC 2742 (Ch)

Re Keyworker Homes (North West) Limited [2019] EWHC 3499 (Ch)

Re All Star Leisure (Group) Ltd [2019] EWHC 3231 (Ch)

 

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. PDT Solicitors LLP accepts no responsibility for the content of any third party website to which this webpage refers.

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