Wright & Ors v HMV Ecommerce Ltd & Anor

Non-compliance with a procedural requirement governing the filing of an administrator’s notice does not automatically invalidate the appointment. The court must identify the provision’s purpose and ask whether the requirement goes to the power to appoint or merely regulates the appointment’s procedure or effective time. Inadvertent non-compliance, particularly where its consequences are trivial and readily remediable, ordinarily produces an irregularity rather than a nullity. Under the Insolvency Rules 2016, proceedings should not be invalidated for a formal defect or irregularity unless substantial injustice has been caused and cannot be remedied by court order.

Directors of two companies filed notices appointing administrators electronically at 5.54pm on 28 December 2018, outside ordinary court opening hours. The filing was made under the Electronic Working Pilot Scheme. A later Insolvency Practice Direction appeared to restrict out-of-hours filing of notices of appointment, although its wording was ambiguous and principally addressed filings by qualifying floating charge holders.

The administrators sought declarations confirming the effective date of their appointments and the validity of acts taken thereafter. They also sought, alternatively or cumulatively, an extension of time and waiver of any non-compliance under the Insolvency Rules 2016. The central issue was whether the possible breach rendered the appointments or subsequent acts invalid.

1. The appointments were effective. The possible breach of paragraph 8.1 of the Insolvency Practice Direction did not invalidate or nullify the appointments. The provision did not concern the directors’ power to appoint. At most, it regulated the timing or procedure of filing.
2. The proper approach to non-compliance was to identify the purpose of the relevant provision, consider whether the requirement went to the root of the appointment, and distinguish a restriction on the power to appoint from a procedural requirement. The court should also consider whether the breach was inadvertent or deliberate and the practical consequences of non-compliance.
3. A time limit does not necessarily create a fundamental requirement. Where the breach is inadvertent, its consequences are trivial, and any defect could readily be remedied, the purported appointment and acts taken on its strength are not rendered nullities. The cases concerning defects in administrator appointments, including Euromaster [2013] BUSLR 466, In the matter of Spaces London Bridge Ltd [2018] EWHC 3099 (Ch), We Care People Ltd (in administration) [2013] EWHC 1734 (Ch) and In the matter of Eiffel Steelworks Limited [2015] EWHC 511 (Ch), provided helpful guidance.
4. There was no substantial injustice. Accordingly, rule 12.64 of the Insolvency Rules 2016 indicated that the proceedings should not be invalidated.
5. The court granted declarations confirming that the administrations took effect at 5.54pm on 28 December 2018 and confirming the validity of steps taken by the administrators. It also cumulatively extended time under CPR Part 3 and waived any non-compliance under rule 12.64.