August 14, 2020

Volume X, Number 227

August 14, 2020

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August 12, 2020

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Appointing Administrators: Does Recent Guidance Provide Any Relief For Practitioners?

Following on from our blog: Does e-filing give you a headache? Does the recent guidance issued by the Chancellor help ease the pain?

In this blog we consider that guidance, two recent cases on e-filing a notice of appointment of administrators (“NOA”) out of hours and further judicial consideration on how the 10 day period following filing a notice of intention to appointment administrators (“NOI”) should be calculated, as well as setting out what options practitioners now have if the court rejects an e-filed NOA.

What does the guidance from the Chancellor say?

It is quite short and quite simple. If an NOA is e-filed out of court hours (by the directors, company or a qualifying floating charge holder) it will be referred to a judge to determine whether the appointment is valid. To access the guidance click here.

This must provide some relief to court staff who are on the front line when it comes to dealing with e-filing, particularly in light of the recent cases offering different opinions about whether an NOA can be e-filed out of hours.

For practitioners, the guidance must surely dissuades any out of hours e-filing given the time delay created by referral to a judge – the more assured approach being to file within hours to avoid the delay (and uncertainty) that a referral creates.  But does it? See further below.

A different approach – two recent out of hours cases

Two recent cases have dealt with NOAs that were filed out of hours slightly differently, swerving the need for the Court to consider whether the out of hours filing was valid at all.

In Re Carter Moore Solicitors Ltd [2020] EWHC 186 (Ch) an NOA was e-filed but then rejected by the Court because the wrong drop down menu was selected. The option of “new case” instead of “existing case” was incorrectly used which meant that the system did not recognise that the NOA related to an existing matter. The practitioner was advised to resubmit the NOA in the existing proceedings, which they did.

However, by the time the Court had notified the practitioner of the error (after 4pm) and the practitioner had rectified the issue the second NOA was filed out of hours.

In Re Statebourne Cryogenic Limited [2020] EWHC 231 (Ch) the NOA was rejected because it was “headed with the incorrect court”. For reasons that are not entirely clear the NOA was processed in London although headed Business and Property Courts in Newcastle (the preceding NOI having the same heading and having been accepted).

Again, by the time that the practitioner was notified (after 4.30pm) and the heading on the NOA changed and re-submitted, the filing of the second NOA occurred out of court hours.

Whilst Carter Moore pre-dates the Chancellor’s guidance and Statebourne post-dates it, the approach taken in both cases was to remedy the error of procedure, as permitted by Practice Direction 51O (the Electronic Working Pilot Scheme) and the Civil Procedure Rules (CPR).

What solution does the CPR provide?

If an error of procedure occurs when using e-filing, PD 51O paragraph 5.3(b) allows the court to remedy that in accordance with CPR 3.10(b) by making an order to remedy the error. If the court makes an order under CPR 3.10(b) the e-filed document does not fail “Acceptance” because of that error.

In Carter Moore the first NOA complied with all the requirements set out in the Insolvency Act 1986 (the “Act”) and the Insolvency Rules 2016 (the “Rules”), the only error was selecting the wrong drop down menu. Accordingly, the court made an order remedying the error of procedure meaning (under PD510 para 5.3(b)) that was the first NOA did not fail Acceptance. The judge ordered that it should be treated as having been validly filed within court hours at the time and date when it was first filed.

In Statebourne the Judge concluded that there was no requirement in the Rules to specify a particular court centre, but if the NOA was defective because it was headed “Newcastle Business and Property Court” (which he made no ruling on) that also was an error of procedure that could be waived pursuant to CPR 3.10(b). Accordingly, he directed that the first NOA should be treated as having been filed and accepted by the Court at the time and date when it was filed.

The upshot of both cases being that the errors of procedure were waived and the first NOAs accepted as filed in hours when originally submitted. As such, there was no need for the Court to determine whether the second NOAs filed out of hours were valid.

Options for practitioners when faced with rejection

Practically speaking, for those cases where practitioners have filed an NOA that complies in all respects with the requirements of the Act and the Rules but, for whatever reason the Court rejects it, practitioners now have a few options:

  1. If the rejection occurs in Court hours and there is time to re-submit the NOA within court hours the practitioner can and should re-submit the NOA the same day.

  2. If there is insufficient time to re-submit the same day then a practitioner can:

  •  file at 10am the next business day (assuming they are still within the 10 day period of the moratorium – see further on this below);

  • if it is an option, seek an out of hours appointment by a qualifying floating charge holder;

  • if the matter is urgent, make a court application, even if this is on an out of hours basis;

  • make an application to Court as soon as possible asking the Court to remedy any error of procedure (in light of the decisions in Carter Moore and Statebourne); or

  • perhaps only in extreme circumstances, file a second NOA out of hours to ensure that the matter is referred to a Judge at the ‘first opportunity’- given the guidance issued by the Chancellor.

It might be an unintended consequence of the Chancellor’s guidance, but if the rejected NOA is filed on the tenth business day and there is no time to remedy this within court hours, filing a second NOA out of hours might be the quickest way to refer the matter to a Judge.

The court could (in light of the aforementioned cases) make an order remedying the defect in procedure or, in light of the Chancellor’s guidance, it could make an order validating an out of hours appointment. Either way, it potentially avoids a separate application and potentially gives the appointee two chances to ensure that the appointment is made/confirmed.

Another view about how the 10 day period in paragraph 28(2) of schedule B1 of the Act should be calculated

In Statebourne the Judge confirmed that the 10 day period specified in paragraph 28(2) commences on the day that the NOI is filed. This was the widely held view prior to the decision of Judge Hodge in Keyworkers when, having applied the expansive clear day rule, he determining that the day the NOI is filed should not be counted.

The findings in Statebourne align with Judge Burton’s view in SJ Henderson and are consistent with the Court of Appeal decision in Zoan v Rouamba [2000] 1 W.L.R 1509 and should alleviate uncertainty amongst practitioners about when the 10 day period commences.

See our previous blog that questioned the findings in Keyworkers on this point and for further comments.

Concluding thoughts

The recent guidance and the pragmatic way that the Court dealt with matters in Carter Moore and Statebourne are welcome, providing clearer direction for practitioners using e-filing to appoint administrators.  That is, at least, for the time being.

© Copyright 2020 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 44

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About this Author

Professional Support Lawyer

Rachael is the professional support lawyer for the Restructuring & Insolvency team, based in Leeds and responsible for providing training, support and updates to all UK offices and working with international colleagues to deliver legal knowledge and know-how to clients and contacts.

Rachael has over 10 years’ experience working as a senior associate in the corporate recovery market and has a wealth of experience working with accountants, insolvency practitioners, banks and directors in the region and nationally on transactional and restructuring matters.

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