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Does E-filing Administration Appointment Documents Give You a Headache?

Causer v All Star Leisure (Group) Ltd [2019] EWHC 3231 (Ch) (Causer) is yet another case which highlights the issues that e-filing can cause for practitioners when using the system to appoint administrators.

The decision in Causer followed Skeggs Beef in concluding that whilst the appointment of an administrator by a QFCH out of hours using the e-filing system is defective it is a defect capable of remedy. The case is nevertheless worthy of note because:

(a) it is a further reminder that when a QFCH wishes to appoint administrators they must follow the out of hours procedure set out in the Insolvency Rules 2016. Failure to do so will inevitably incur the costs of an application to remedy the defect; and

(b) it highlights a number of issues that e-filing creates, which we discuss further below. (In fact, in this case it appears that IT problems contributed to the defective appointment).

Background

The appointment of administrators can result in balancing a tight timeframe, amid flurries of emails and phone calls in order to ensure all of the paperwork is in order before submitting the notice of appointment at Court. Where a pre-pack sale is envisaged timing is all of the more important.

Some of the frustrations that practitioners have experienced with e-filing played out in the Causer case where the solicitor acting on behalf of the QFCH attempted to e-file the NOA five times.

The first attempt to file was at 3.37pm (within court hours) but for whatever reason the system would not accept the e-filed NOA. When it was eventually submitted (at 4.18 pm) the solicitor was advised that the filing had been rejected because the wrong details had been input onto the e-file system. Sound familiar?

The solicitor acting for the QFCH eventually managed to upload an NOA at 4.37pm. That NOA was acknowledged by the court as having been received at 4.38pm. For some unexplained reason the sealed NOA received was in fact the version that been uploaded earlier at 4.18pm (but rejected).

The upshot was, that by the time the documents were accepted and sealed, the NOA was filed out of hours. However, an out of hours QFCH appointment should be effected using the prescribed steps under rule 3.20 of the Insolvency Rules 2016. The question for the court was whether the appointment was valid?

Decision

The appointment was defective but HHJ Cooke was easily able to deal with that and following the earlier decision in Skeggs Beef ruled that the defective NOA was merely an irregularity which did not cause any injustice that was substantial. He therefore declared that the appointment was in fact valid and took effect at 4:18pm.

However of note are his comments and views about e-filing.

He said that there did not appear to be a good reason to prevent a company or its directors from e- filing an NOA out of court hours, and if there was, there is no good reason to prevent a QFCH from using e-filing out of hours but also highlighted further issues with this and the system.

Beating a winding up petition

Directors cannot appoint administrators when a winding up petition is outstanding, but if the directors could e-file a notice of appointment at any time would this enable directors to beat a winding up petition?

Judge Cooke commented that giving directors an opportunity to make an appointment out of hours would allow them to “get in first” before a creditor is able to file a winding up petition. However, he questioned why this would be unfair. If anything, it was unfair to allow creditors to file a petition outside of hours using the e-filing system but directors could not.

That might be so, but what the judge didn’t take into account, is the fact that a winding up petition is date and time stamped when the official receiver’s deposit is paid, not when the document is e-filed, and that payment can only be made when the Court is open.

Court opening hours

The judge observed that Courts do not have the same published opening hours and different opening hours could cause confusion. If a QFCH can only e-file an NOA during Court hours and directors can only do the same, what are the Court opening hours?

In the regions, the Court counters are open from 10am until 4pm but in London they are open until 4.30pm. He commented that it was bizarre that “the appointer in this case could apparently have filed using the CE File system at 4.18 pm if he had specified the court in London as the court of issue, but not when he specified Birmingham”.

This is a consequence of the filing time being dependent on the court opening hours, such that if a QFCH files in the regional Courts after 4pm then they will have to use the out of hours procedure in the Insolvency Rules, but in London the QFCH could still e-file an NOA until 4.30pm.

It has previously been debated what is meant by filing during “normal Court office opening hours”. Is it when the building is open or when the Court counter opens? The times can be quite different. Although, it appears to be accepted amongst practitioners that this means when the counter opens even though the practice direction is unclear.

Final comments

Although this ruling confirms the position in Skeggs Beef, a cautious approach to e-filing should still be taken when e-filing an NOA outside of court hours.

We expect that the judgment in Keyworker Homes will create further issues for practitioners given that it is expected to confirm that directors can appoint administrators using e-filing at any time, whereas a QFCH can only file out of hours using the procedure under the Insolvency Rules.

Once that decision is published we will confirm the position, but presently we are left with a number of conflicting decisions concerning invalid or defective administration appointments. It seems that a change to the rules will be required to give certainty to practitioners over what should be a straightforward administrative step.

Co-Authored Phillipine Wiegand-Forson

© Copyright 2020 Squire Patton Boggs (US) LLP

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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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