Re Euromaster Ltd

Non-compliance with the 10-business-day period in paragraph 28(2) of Schedule B1 to the Insolvency Act 1986 does not automatically make a directors’ appointment of administrators a nullity. The court must construe the provision by considering its purpose and the consequences of non-compliance. An inadvertent appointment one day out of time does not defeat the underlying power to appoint.

Such an appointment is irregular and is governed by IR 7.55. The proceedings remain valid unless substantial injustice has been caused and cannot be remedied by a court order. The court may declare that the administrators remain in office and that prior acts are not invalidated, while leaving any creditor’s right to apply under IR 7.55 intact.

Euromaster Ltd’s directors gave Lloyds TSB Bank plc notice of their intention to appoint administrators and filed that notice on 3 May 2012. Lloyds consented to a pre-pack sale, but the directors filed the notice of appointment on 18 May, the eleventh business day after filing the notice of intention.

The administrators and directors sought clarification of whether the appointment was a nullity or merely irregular, and, if irregular, what consequences followed for the administration and the asset sale. The court also considered whether it could prospectively waive or validate the defect without the creditors being parties.

1. The appointment was irregular, not a nullity. Paragraph 28(2) of Schedule B1 had to be construed by reference to the purpose of the 10-business-day window and the consequences of breach. The window was principally linked to the interim moratorium under paragraph 44(4): it gave appointors a fair opportunity to address the company’s insolvency while preventing the moratorium from continuing indefinitely.

2. The court adopted the consequence-focused approach in Hill v Stokes, Re Assured Logistics Solutions Ltd, Re Bezier Acquisitions Ltd and Re Virtualpurple Professional Services Ltd, supported by R v Soneji. The expiry of a time limit does not itself establish a fundamental defect. Schedule B1 distinguishes provisions defining when the power to appoint exists from procedural requirements governing its exercise. A breach of the latter category ordinarily produces an irregular appointment.

3. The distinction was illustrated by Re Minmar (929) Ltd and Re Blights Builders, where the appointor lacked power to appoint, and contrasted with procedural defects considered in Re Assured Logistics Solutions Ltd and Re Ceart Risk Services. The wording that an appointment may not be made did not compel identical consequences for every breach.

4. IR 7.55 therefore applied. The administration was not invalidated unless an objector showed substantial injustice caused by the irregularity which could not be remedied by an order short of invalidating the proceedings. No such injustice had been asserted, and the appointment and asset sale had not been challenged.

5. The court declared that Mr Dante and Mr Davis remained administrators, subject to any application under IR 7.55, and that their prior acts were not invalidated merely because of the defect, pursuant to paragraph 104 of Schedule B1. It declined to grant a blanket order preventing future applications by creditors and extended the time for the initial creditors’ meeting by 28 days.