Matthew Robert Haw & Anor v QM Systems Limited (in administration)

Defects in an out-of-court administration appointment do not automatically render the appointment void. The court must distinguish requirements defining when the power to appoint arises from procedural requirements governing how an appointment is recorded. A breach of a procedural requirement is capable of cure under rule 12.64 of the Insolvency (England and Wales) Rules 2016 where it causes no substantial injustice, or where any such injustice can be remedied by court order. An incorrect notice heading, failure to file three copies, and failure to exhibit a qualifying floating charge holder’s consent were procedural defects. They did not invalidate the appointments because the substantive requirements had been met and no prejudice was caused.

The applicants, joint administrators of the respondent company, applied under paragraph 63 of Schedule B1 to the Insolvency Act 1986 and rule 12.64 of the Insolvency (England and Wales) Rules 2016 for confirmation that their appointment was valid.

The notice of appointment had been filed within court hours, but its heading incorrectly stated that the company had made the appointment rather than its directors. Only one copy had been filed instead of three, and the qualifying floating charge holder’s written consent, although given and endorsed on the notice of intention to appoint, had not been exhibited. The central issue was whether those matters were fundamental defects or procedural irregularities capable of cure.

1. Application granted. The court confirmed the validity of the applicants’ appointment and ordered that the defects be cured under rule 12.64 of the Insolvency (England and Wales) Rules 2016.
2. The court adopted the distinction identified in Euromaster: requirements defining the circumstances in which the power to appoint arises are fundamental, whereas procedural requirements concerning the making or recording of an appointment generally produce an irregular but valid appointment.
3. The approach in Gregory, derived from Soneji, required consideration of the statutory purpose, whether the breach caused a nullity or procedural defect, whether substantial injustice resulted, whether any injustice could be remedied by order, and, if the appointment were a nullity, whether retrospective relief was available.
4. The incorrect heading required by rule 3.24 was procedural. The substantive contents of the notice consistently stated that the directors had appointed the administrators. The heading’s purpose was to identify the document, rather than to establish who held the power of appointment. No reasonable reader could have been misled, and no substantial injustice was caused.
5. The failure to file three copies and to exhibit the qualifying floating charge holder’s consent were also procedural defects. The consent had in fact been given. The requirements in rule 3.26 principally provided proof for the appointer, administrators and court that the procedural steps had been completed. Their breach caused no conceivable prejudice and curing the defects caused no injustice.
6. The court endorsed the policy that appointments should not be automatically invalidated for trivial procedural failures, consistent with Euromaster and Kaupthing. The court directed that a detailed explanation be provided concerning the asserted inability to file the documents electronically.