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Out of court appointments of administrators: a return to reason

13 November 2018

When appointing administrators out of court, there is requirement to specify the date and time the appointment is made. This is a development arising since April 2017 as a result of the Insolvency Rules 2016 coming into force. Given that appointments are generally effective at the point of filing, it has been unclear how (absent a crystal ball) practitioners should address the requirement when preparing the Notice of Appointment form. A recent High Court decision resolves the issue, confirming that a notice making reference to a future filing is acceptable.

Background

Prior to April 2017 there was no requirement to specify the date and time of appointment in a Notice of Appointment (“NOA”). The position changed as a result of rr 3.24 and 3.25 of the Insolvency Rules 2016. Their combined effect is to make it necessary to state in the NOA the date and time when the appointment is made.

Practitioners have been left to adopt various approaches to address the resulting conundrum. Some have elected to complete the time and date of appointment in the NOA immediately before lodging papers electronically (potentially a logistical nightmare which depends on a diligent and attentive court officer processing and accepting the form promptly). An alternative has been to not attempt to do so and instead refer to the appointment being made at the date and time of filing.

NJM Clothing: a shiver down the spine

In March 2018, the court was faced with a referential NOA (NJM Clothing Ltd, Ross & Higgins v Fashion Design Solutions Ltd and Asis Couture [2018] EWHC 2388 (Ch)). The judge (HHJ Klein) considered the order of events under statute leading to an appointment before concluding “[i]t would be absurd if the appointment could take effect before an appointment is in fact made and so it seems to me that the language of the Act requires the appointment precedes, even if only momentarily, the filing of the [NOA]”.

In addition to this, the judge was apparently concerned that the NOA “did not accurately record the precise moment during 2.50pm on 17 October when the appointment was made and that it was made before the notice of appointment was filed.”

This temporal bombshell sent a shiver down the spine of practitioners. The analysis was widely understood to mean that NOAs relying on a reference to filing itself would be defective.

Towcester Racecourse: a return to reason

In Orton and others v Towcester Racecourse Company Ltd (in administration) [2018] EWHC 2902 (Ch) the court was asked to determine the validity of the administrators’ appointment. The application arose (in part) because the NOA had used referential wording when dealing with the requirement to specify the date and time of appointment.

In his judgment HHJ Matthews paused at the outset to compliment HHJ Klein’s earlier ex tempore judgment, describing it as “a masterpiece of exposition and analysis”. With that out of the way, he went on to observe that HHJ Klein had appeared to be hypothesising defects in the NOA for the purposes of argument, without saying that there actually were defects. This opened the way to him treating the comments as obiter and distinguishing his own findings.

HHJ Matthews confirmed that whilst he agreed an appointment could not post-date the NOA, there was nothing preventing it from taking place at the same time as the notice is filed. He went on to confirm specifically (a) there was no reason why a NOA cannot be completed on a referential basis and (b) there was no requirement to specify to the very second when an appointment takes place.

This is a welcome decision. It removes the long shadow cast by NJM Clothing. Practitioners now have a judicially endorsed approach to dealing with this part of the NOA and can breathe a collective sigh of relief.

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