| NICh 4||Ref:||TRE10634|
|Judgment: approved by the Court for handing down||Delivered:||20/04/2018|
|(subject to editorial corrections)*|
2014 No. 120539
"...to determine the issues in relation to the notice of intention, namely, was it served? If it was not served, what is the effect of a failure to allow the notice in? Was the affidavit that has now been lodged correct?"
There was a further short hearing on Friday 11th August when the Court of Appeal identified the following questions:
(1) Whether the Notice of Intention to appoint an administrator dated 17th October 2011 was valid;
(2) What effect the failure of any file or record of the decision of the directors to appoint an administrator had on that appointment;
(3) Whether in any event the subsequent lodgment of a copy of the Notice of Intention to Appoint, with a record of the decision of the directors attached, has rectified any such failure.
That matter was remitted to another Judge for adjudication by this Court. At the hearing before me evidence was given by Mr McVeigh of EDG, the solicitor retained on behalf of the administrator. Evidence was also given by the appellant, Brigid Quinn.
The evidence before me
"The Regulations (i.e. the Companies (Tables A to F) Regulations (Northern Ireland) 1986) shall apply to the company. Article 3 describes those Regulations which are dis-applied; Regulation 88 is not included. Article 28 provides for the modification of Regulation 88 by the deletion of the third sentence (which provides that the chairman shall have a second or casting vote in the event of a tied vote)."
The meeting in question was of the directors and not a general meeting of the shareholders. There are no specific notice requirements for such a meeting of directors unlike, for example, an AGM.
The Administration Application
(i) that Michael Quinn sought to appoint an administrator without proper authority and without the consent of his co-director Brigid Quinn;
(ii) that the Notice of Appointment (per paragraph 30 of Schedule B1) did not have annexed to it a "Company Resolution".
"2.023. The notice of intention to appoint shall be accompanied by either a copy of the resolution of the company to appoint an administrator (where the company intends to make the appointment) or a record of the decision of the directors (where the directors intend to make the appointment)."
The approach of the courts to procedural defects
" …..As a separate and independent ground I hold that IR2.8 is to be construed in the sense that Parliament did not intend that a failure strictly to comply with the rule as to service of the Notice of Intention at the registered office should invalidate the giving of notice where at a valid meeting of the directors of the company (a) it was resolved that the company enter administration and that Notice of Intention to Appoint be given and (b) an agent was appointed to act on behalf of the company in respect of the appointment of the administrators (that engagement to include the taking receipt of, and dealing on the company's behalf with, all relevant notices and formal documentation)."
"For the reasons which I gave in paras  to  of my judgment in Re Bezier Acquisitions Ltd  2 BCLC 322 I consider that the correct approach to the construction of a provision such as para 26(2) of Sch B1 and IR 2.20(2) is to focus intensely on the consequences of non-compliance, and to pose the question, taking into account those consequences, whether Parliament intended the outcome to be total invalidity."
"I propose to adopt the approach taken by Judge McCahill QC in Hill and Pope v Stokes plc  EWHC 3726 (Ch),  BCC 473 at –, by Judge Purle QC in Re Assured Logistics Solutions Ltd  EWHC 3029 (Ch),  BCC 541 at , and which I followed in Re Bezier Acquisitions Ltd  2 BCLC 322 and Re Virtualpurple Professional Services Ltd  2 BCLC 330 (which themselves have been followed by Arnold J in Re Ceart Risk Services  2 BCLC 645 and by Judge Purle QC in Re BXL Services  EWHC 1877 (Ch),  All ER (D) 87 (July). This is to focus on the consequences of non-compliance and, taking into account those consequences, to consider whether Parliament intended the outcome of non-compliance to be total invalidity: in short, to ask whether it was a purpose of the legislation that an appointment made in breach of para 28(2) should be null."
"An appointment may not be made under paragraph 22 after the period of 10 business days beginning with the date on which the notice of intention to appoint is filed under paragraph 27(1)."
"The appointment of an administrator under paragraph 23 takes effect when the requirements of paragraph 30 are satisfied."
The appellants contend that the failure to attach the "record of the decision of the Directors" therefore prevented the appointment of the administrator from taking effect.
"7.50. No insolvency proceedings shall be invalidated by any formal defect or by any irregularity, unless the court before which objection is made considers that substantial injustice has been caused by the defect or irregularity, and that the injustice cannot be remedied by any order of the court."
" I am mindful also that administration is a class remedy in respect of which the interests of all creditors have to be taken into account. There is obvious potential for injustice where an appointment is made against a company prematurely. In the present case, however, unless the company can dispel the clear impression that I have from the evidence that that is all it was – a premature appointment – and that the company could not and would not have met the unchallenged part of the demand in time, a valid appointment would have followed at most two days later. In those circumstances, it seems to me that the prejudice to the company is very limited and there is no substantial injustice. It is only substantial injustice which is capable of invalidating an appointment under r 7.55. There is, however, room for real prejudice to creditors if an undoubtedly insolvent company is taken out of administration. In my judgment, as the company has suffered no substantial injustice, I propose to declare the appointment to be valid, notwithstanding the defect, and (so far as I need to) to waive the defect."
"105. An act of the administrator of a company is valid in spite of a defect in his appointment or qualification."