To cure or not to cure – referential administration appointments

Insolvency Bitesize - November 2018

There has been concern in recent months over whether a string of administration appointments may technically be defective requiring a court declaration to cure the problem. The situation now appears resolved, as we explain below.

When a company or its directors want to appoint administrators out-of-court, they must file a notice of appointment of administrators at court. The Insolvency Rules 2016, unlike the 1986 rules, require the notice to contain the date and time of appointment. However, Schedule B1 to the Insolvency Act 1986 makes clear that the notice of appointment must be filed with the court before the appointment can be effective. In an effort to comply with both the Rules and the Act, a practice has developed of stating in the notice of appointment that the appointment takes effect on the date and time the form is filed with the court, as endorsed by the court.

Earlier this year, however, comments by HHJ Klein in Re NJM Clothing Ltd [2018] EWHC 2388 (Ch) gave rise to concerns that the practice of making such a “referential” appointment could be defective requiring a court order to cure such a defect under Rule 12.64. It also remained unclear how a numeral date and time of appointment could be included in the notice of appointment before filing (and so before the appointment itself became effective).

Thankfully, such confusion now appears to have been resolved. In Re Towcester Racecourse Company Ltd (THE) (in administration) [2018] EWHC 2902 (Ch), HHJ Matthews was firmly of the view that HHJ Klein did “not at all” hold that a referential appointment led to there being a defect. Rather, the judge had simply been “hypothesising defects” which he had then gone on to say would not prevent him from making a declaratory order under Rule 12.64. HHJ Matthews made it clear that:

“I cannot see why it should not be possible to make a referential appointment, so as to say that this appointment is made from such and such an event occurring in the future. I have seen no authority that compels the contrary.”

He continued:

“I do not regard it as a defect in the appointment to specify the moment that the court endorses on the notice filed in court as the point in time at which the appointment is made.”

This clarification is welcome and allows established practice to continue without fear. Nobody wanted another Minmar after all…