Out-of-hours appointment of administrators - e-file with caution!

Two High Court judgments have recently been published concerning the e-filing of Notices of Appointment of Administrators (“NOA”) outside court hours. Given the relative novelty of e-filing, and some inconsistencies these recent cases highlight some important practical points.

The main takeaway from both of these cases is to confirm that it is not possible, in any case, to appoint administrators outside court hours using e-filing.  Appointments out-of-hours are only available to QFCs, in which case the NOA must be filed at court by email or fax in accordance with IR16.

The first case, Eason and another v Skeggs Beef Ltd [2019] EWHC 2607 (Ch), concerned an out-of-hours appointment by a qualifying floating charge-holder (“QFC”). The second case, Edwards and another v SJ Henderson & Company Ltd [2019] EWHC 2742 (Ch), concerned two out-of-hours appointments by company directors. Both judgments were published on the same day and each provides both guidance and confusion (!) regarding the use of e-filing to appoint administrators outside court hours.

Legal framework

The Insolvency (England and Wales) Rules 2016 (“IR16”) are clear that administrators may only be appointed outside of court hours (i.e. other than between 10am and 4:30pm in most cases) by QFCs. In such cases, an appointment may only be made by faxing or emailing the NOA to the court’s designated telephone number or address (see rule 3.20 IR16).

In November 2015, the High Court introduced the e-filing pilot scheme which permitted (and, later, required) the electronic filing of all court documents in the High Court which was not limited to the court’s opening hours. In November 2017, the Electronic Practice Direction 51O (“EPD 51O”) was released, which clarified that QFCs could only use the process as set out in IR16 (i.e. by emailing or faxing the court) to make an out-of-hours appointment of administrators (paragraph 2.1(c)). The appointment of administrators by anyone other than a QFC outside court hours is not permitted by IR16.

Eason v Skeggs Beef Ltd

This case concerned an out-of-hours appointment of administrators by a QFC. The QFC purported to make an appointment by e-filing the NOA at 5:03pm; the NOA was endorsed and returned by the court noting the same time, thereby purporting to confirm the time of appointment as 5:03pm.  

Guided by paragraph 2.1 of EPD 51O, the court found that it is not possible to appoint administrators out of hours using e-filing in any case. In relation to QFC appointments specifically, the provisions of IR16 should be followed, which permit an appointment outside court hours only where the NOA is filed by fax or email.

The court held that the purported appointment of administrators was defective, having been made out-of-hours through the e-filing system. However, the defect was not fundamental in nature and no substantial injustice had been caused; the defect was therefore found to be capable of remedy under rule 12.64 IR16 and the appointment was validly made at 5:03pm.

Edwards v SJ Henderson & Company

This case concerned two purported appointments of administrators by company directors, both attempted by e-filing outside of court hours (in each case, in the morning before 10:00am). The court gave judgment on both purported appointments together, as they had the same set of facts. As noted above, IR16 provides the only route for appointment outside court hours, which is only available to QFCs. The court therefore found that where NOAs are filed out-of-hours, the appointments have no effect during the period in which the court is closed;  and, being made by company directors, the appointments in question were not subject to a defect which could otherwise be remedied by the court.

In reaching this conclusion, the court relied upon paragraph 8.1 of the Practice Direction on Insolvency Proceedings which confirms that the EPD 51O (which permits e-filing 24 hours a day) “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”. As noted above, IR16 only permits the filing of NOAs outside court hours by QFCs, not a company or its directors. The purpose of EPD 51O was not to permit the appointment of administrators outside court hours beyond the scope of IR16.

Fortunately, however, the court found that the administrators’ appointment would take effect from the next time the court opened after the NOA was filed. The purported appointments therefore took effect when the court next opened, at 10:00am later the same business day. On a separate note, the court also commented that notices of intention to appoint administrators could be filed at any time using e-filing and are not therefore subject to the same e-filing restrictions as NOAs.

Summary

• For companies or directors, a NOA e-filed outside court hours does not appear to be fatal to the purported appointment of administrators but, based on Edwards, the appointment would only take effect from the next time the court opens (rather than the time of filing as endorsed on the NOA). To avoid any query as to the validity of appointment, best practice is to e-file appointment documents only during court hours.  
• The conflict between these cases is whether a NOA e-filed outside court hours causes a defective appointment which is capable of remedy (but only at the court’s discretion), or whether it results in an appointment which will only take effect automatically when the court next opens. The latter interpretation is plainly preferable for certainty, particularly in the case of appointments by companies or directors which are not permitted out-of-hours by IR16, but further guidance will be required from the court to reach a resolution.