Lee Causer v All Star Leisure (Group) Ltd
| Jurisdiction | England & Wales |
| Judge | David Cooke |
| Judgment Date | 28 November 2019 |
| Neutral Citation | [2019] EWHC 3231 (Ch) |
| Date | 28 November 2019 |
| Docket Number | Case No: CR-2019-BHM-000759 |
| Court | Chancery Division |
[2019] EWHC 3231 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
Insolvency and Companies List (ChD)
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
HHJ David Cooke
Case No: CR-2019-BHM-000759
Ali Tabari (instructed by Gowling WLG) for the Applicants
The Respondent did not appear and was not represented
Hearing date: 8 November 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HHJ David Cooke
This is another application seeking confirmation of the validity of an appointment of administrators as a result of uncertainties arising from the interaction of the regime for electronic filing of documents (CE File), the Insolvency Rules 2016 and the Practice Direction-Insolvency Proceedings (PDIP). Similar issues have been considered by Barling J in ( Re HMV Commerce Ltd [2019] EWHC 903 (Ch)), by Marcus Smith J in ( Re Skeggs Beef Ltd [2019] EWHC 2607 (Ch)) and by ICC Judge Burton in ( Re SJ Henderson & Co Ltd [2019] EWHC 2742 (Ch)). I am very grateful to Mr Tabari for his skeleton and helpful examination of those cases, and for dealing with the various queries I put to him in the course of argument.
The very fact that such applications are having to be made, and that the answers are not straightforward, indicates in my view that there is an urgent need for a review of the drafting of these provisions to ensure they operate effectively in conjunction with each other and do not produce unnecessary traps for the unwary.
Background
The factual background to the appointment in issue is fairly straightforward. All Star Leisure (Group) Ltd (“the company”) is the parent of five subsidiaries which own and operate bowling alleys. A winding up petition had been presented against the company (but not the subsidiaries). It was desired to put all the group companies into administration to implement a pre-pack sale of their combined business. That sale had been negotiated and was ready to proceed on 17 September 2019, subject to placing all the companies into administration.
The appointments in relation to the subsidiaries raised no issues and were effected by their directors pursuant to para 22 of Sch B1 Insolvency Act 1986. The notice of appointment required by para 29 was filed at the court in Birmingham using CE File, within normal court hours.
In relation to the parent company however, because of the pending winding up petition the directors were not entitled to make an appointment. They approached its bank to do so as the holder of a Qualifying Floating Charge, pursuant to para 14 of Sch B1. During the afternoon of 17 September the bank approved and signed the necessary notice of appointment and instructed the solicitors now acting for the applicants to file it.
The witness statement of Mr Miah, the solicitor who was dealing with the filing, sets out the timing that followed:
i) At 3.37 pm he logged on to CE File and attempted to upload the notice of appointment and associated documents. For reasons he is not able to explain, the CE File system would not accept the documents as uploaded and instead saved his attempt as a draft application.
ii) He made a second attempt at 3.50 pm and a third at 4.01pm, with the same result on both occasions..
iii) He printed and re-scanned the documents and made a fourth attempt at 4.18 pm which was successful. He received an electronic confirmation that the documents had been submitted and the fee paid at that time.
iv) He then spoke to a clerk at the court who told him that he had wrongly entered the bank as the filing party in the CE File system, and should have given the company's name instead. He did not agree with that (and it appears to be wrong) but uploaded the same documents again as a precaution at 4.37 pm, this time naming the company as the filing party. He received an acknowledgment of receipt at 4.38 pm.
v) A minute later he received a CE File message, presumably from the clerk he had spoken to, stating that his 4.18 pm filing had been “rejected” because “you need to lodge the company details and not the administrator's”. This was not consistent with what he had been told on the telephone.
vi) The uploaded documents were electronically sealed and became available online at 4.54 pm. Presumably this followed acceptance of his 4.37 upload, but the sealed documents were the same as those he had uploaded at 4.18 pm (and attempted to at 3.37pm).
The pre-pack sale was completed at or about 5.12 pm the same day.
The issue
The issue arises because the counter opening hours of the court at Birmingham, as published on the HMCTS website, are 10 am to 4 pm, and the drafting of the provisions I have referred to creates doubt, to say the least, whether it is open to a party to file such a notice of appointment outside those hours using the CE file system. If on the facts above filing was not effective, and unless the court can rectify the defect, the appointment of the administrators may be invalid, as may the sale and all the transactions consequent upon it, with serious consequences for the applicants, the purchaser and those affected by the operation of the business, including its employees and creditors.
How can this be the case? One of the main advantages of the CE File system is supposed to be that it enables court users to file documents with the court without having to deliver hard copies to the court, and to do so at any time of the day or night. It is an apparent absurdity that a party's ability to use a system designed to operate on a 24 hour basis should be authorised within court opening hours but forbidden outside such hours.
The electronic filing system is strictly still a pilot scheme, and is governed by CPR Practice Direction 51O. Paras 1 and 2 of that PD provide that:
“ General
1.1
(1) This Practice Direction is made under rules 5.5, 7.12 and 51.2 of the Civil Procedure Rules (“CPR”). It provides for a pilot scheme (“Electronic Working”) to—
(a) operate from 16 November 2015 to 6 April 2020;
(b) operate in—
(i) the Chancery Division of the High Court, the Commercial Court, the Technology and Construction Court, the Circuit Commercial Court, and the Admiralty Court, at the Royal Courts of Justice, Rolls Building, London (together, “the Rolls Building Jurisdictions”); …
(iii) the B&PCs District Registries (as defined in paragraph 1.2 of Practice Direction 57AA)”; …
(c) apply …
(iii) in the B&PCs District Registries, to proceedings started on or after 25 February 2019, and will not apply to existing proceedings unless ordered by the court;
(2) Electronic Working is a permitted means of electronic delivery of documents to the court for the purposes of rule 1.46 of the Insolvency (England & Wales) Rules 2016 (“IR 2016”)…
1.2
(1) Electronic Working works within and is subject to all statutory provisions and rules together with all procedural rules and practice directions applicable to the proceedings concerned, subject to any exclusion or revision within this Practice Direction.
Usage and operation of Electronic Working
2.1
Electronic Working enables parties to issue proceedings and file documents online 24 hours a day every day all year round, including during out of normal Court office opening hours and on weekends and bank holidays, except—
(a) [ planned or] (b) [ unplanned down time of the system]…; and
(c) where the filing is of a notice of appointment by a qualifying floating charge holder under Chapter 3 of Part 3 of the IR 2016 and the court is closed, in which case the filing must be in accordance with rule 3.20 of the IR 2016.”
The exclusion in sub-para (c) is expanded upon by the terms of the PDIP, which (as amended in 2018) extends it to notice of appointment by any person (not just a qualifying floating charge holder). Para 8 provides:
“ 8. Administrations
8.1 Attention is drawn to paragraph 2.1 of the Electronic Practice Direction 51O — The Electronic Working Pilot Scheme, … where a notice of appointment is made using the electronic filing system. For the avoidance of doubt, and notwithstanding the restriction in sub-paragraph (c) to notices of appointment made by qualifying floating charge holders, paragraph 2.1 of the Electronic Practice Direction 51O shall not apply to any filing of a notice of appointment of an administrator outside Court opening hours, and the provisions of Insolvency Rules 3.20 to 3.22 shall in those circumstances continue to apply.”
PD 51O constitutes the operative provision of the rules of court authorising filing under the electronic working scheme. There is no doubt therefore that such authorisation applies in principle to filing notices of appointment of administrators, but (assuming for present purposes that the PDIP is effective to extend its terms) not if such notice is given by a charge holder “when the court is closed” or by any other person “outside court working hours”.
Why should this carve out have been made? Marcus Smith J in Re Skeggs Beef made the point that, as para 1 of PD 51O makes clear, the electronic working scheme is subject to any applicable rules or practice directions applicable to particular types of proceedings and so (for instance) could not “trump or override” provisions of the Insolvency Rules. He therefore considered that PD 51O authorised electronic filing only so long as that would not be inconsistent with other rules such as the Insolvency Rules; see his judgment at paras 12–14.
It seems that it may have been thought when drafting PD 51O that the Insolvency Rules provided a mandatory system for filing notices of appointment outside normal court hours...
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Symm & Company Ltd
...they do not apply to the filing of notices of appointment by a company or its directors.” 35 In Re All Star Leisure (Group) Ltd [2019] EWHC 3231 (Ch), HHJ Cooke, in a case concerned with an appointment by a QFC Holder, was also inclined to disagree with both ICCJ Burton and Marcus Smith J.......