Sophie Rebecca Perhar v Louise Freestone & Ors
[2024] EWHC 945 (Ch)
Matthew Robert Haw & Anor v QM Systems Limited (in administration)
29 July 2024
[2024] EWHC 1944 (Ch)
High Court
Some paperwork mistakes were made when appointing administrators to a company. A judge decided that these were minor errors that didn't harm anyone, so the appointment is valid. The judge preferred fixing the small mistakes over canceling the appointment.
Key Facts
- •QM Systems Limited (in administration) appointed joint administrators (Matthew Robert Haw and Diana Frangou) on July 15, 2024.
- •The Notice of Appointment (NOA) contained errors: incorrect heading suggesting the company, not the directors, made the appointment; only one copy filed instead of three; and missing consent from National Westminster Bank (NWB), holder of a qualifying floating charge.
- •The administrators sought court confirmation of the appointment's validity under paragraph 63 of Schedule B1 to the Insolvency Act 1986 and r.12.64 of the Insolvency (England and Wales) Rules 2016.
Legal Principles
An administrator may apply to the court for directions concerning their functions.
Paragraph 63 of Schedule B1 to the Insolvency Act 1986
Insolvency proceedings are not invalidated by formal defects or irregularities unless substantial injustice is caused and cannot be remedied by a court order.
r.12.64 of the Insolvency (England and Wales) Rules 2016
Notice of appointment must be headed correctly and contain prescribed information (including a statement of who appointed the administrator).
r.3.24(1) of the Insolvency (England and Wales) Rules 2016
Three copies of the notice of appointment must be filed with the court, along with the administrator's consent and the written consent of those notified under paragraph 26(1) of Schedule B1 (unless the notice period has expired).
r.3.26(1) of the Insolvency (England and Wales) Rules 2016
Considerable weight should be given to streamlining business rescue when considering out-of-court appointments.
Re Euromaster Ltd [2012] BCC 754 at [26]
Defective out-of-court administration appointments are categorized as fundamental (nullity), non-fundamental causing no substantial injustice (valid), or non-fundamental causing substantial injustice (remediable).
Eason & Anor v Skeggs Beef Ltd [2019] EWHC 2607 (Ch) at [21]
When considering the effect of a breach of rules, determine if Parliament intended the breach to result in a nullity or irregularity.
Gregory v A.R.G. (Mansfield) Ltd [2020] EWHC 1133 (Ch), applying Soneji v Soneji [2005] UKHL 49
Failure to meet provisions defining circumstances for appointment power renders it a nullity; minor procedural matters result in an irregular but valid appointment.
Re Euromaster Ltd [2012] EWHC 2356 (Ch)
Outcomes
The court confirmed the validity of the administrators' appointment.
The incorrect heading was a procedural defect, not a fundamental flaw, causing no substantial injustice. The other defects (single filing, missing NWB consent) were also deemed procedural and curable under r.12.64. The court emphasized the importance of substance over form and the need to avoid invalidating appointments for minor procedural errors.