Assured Logistics Solutions Ltd & Anor, Re

Factual and Procedural Background

These applications involve, in one case, the sole director of a company, and in the other case, the directors of a company seeking declarations regarding the validity of out of court appointments of administrators made by them. Alternatively, retrospective administration orders are sought, relying on the practice established in a prior case. There is no person entitled to appoint an administrator by virtue of a qualifying floating charge or an administrative receiver in these cases. The appointments were made pursuant to paragraph 22 of Schedule B1 of the Insolvency Act 1986, which permits a company or its directors to appoint an administrator. It is accepted that the appointments were made by the director(s) acting in their capacity as such, not as company appointments.

Legal Issues Presented

1. Whether out of court appointments of administrators made by directors under paragraph 22 of Schedule B1 of the Insolvency Act 1986 are valid in the absence of a qualifying floating charge holder.
2. Whether the failure to give notice of intention to appoint to prescribed persons, including the company itself, invalidates such appointments.
3. The proper construction and application of paragraphs 26, 27, 28, 29, and 30 of Schedule B1 and relevant Insolvency Rules concerning notice requirements and procedural compliance for administrator appointments.
4. The effect of procedural irregularities or formal defects, such as failure to give notice or errors in statutory declarations, on the validity of out of court appointments.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Court's Reasoning and Analysis

The court examined the statutory framework under Schedule B1 of the Insolvency Act 1986 and the corresponding Insolvency Rules concerning the appointment of administrators by directors in the absence of a qualifying floating charge holder. It noted the distinction between the company and its directors under paragraph 22 and the notice requirements under paragraphs 26 and 28 of Schedule B1. The court interpreted these provisions to mean that where no qualifying charge holder exists, the notice provisions in paragraph 26(1) do not apply, and consequently, the additional notice requirements under paragraph 26(2) and Rule 2.20(2) also do not arise.

The court considered conflicting judicial views from Minmar and Hill v Stokes. While Minmar suggested notice to the company was required even without a qualifying charge holder, Hill v Stokes held that failure to give such notice was not fatal to the appointment. The court found it unnecessary to resolve this conflict definitively, as the facts here involved directors acting constitutionally with full board approval and no underhand conduct.

The court further analyzed the prescribed forms, noting that Form 2.10B (used here) presupposes no notice of intention to appoint is required in the absence of a qualifying charge holder, consistent with the court's interpretation. It found compliance with filing requirements, including statutory declarations, which, even if containing inadvertent errors, were made in good faith and subject to penalty provisions, thus not invalidating the appointments.

Drawing on judicial principles and Rule 7.55 of the Insolvency Rules, the court reasoned that formal defects or irregularities that do not cause substantial injustice should not invalidate insolvency proceedings. The failure to give notice to the company or other prescribed persons, when directors act properly and no prejudice arises, is a material but not necessarily fatal defect. The court emphasized that the burden lies on challengers to demonstrate why an appointment should be set aside.

Holding and Implications

The court declared the out of court appointments of administrators by the directors to be valid. The court found that all essential procedural requirements were satisfied, and any failure to give notice to the company or other prescribed persons was not fatal to the validity of the appointments in the circumstances presented.

The costs of the proceedings are to be borne as part of the costs and expenses of the administration in each case.

No new precedent was set; the decision applies the existing statutory framework and judicial authorities to the facts before the court, reaffirming that minor procedural defects without prejudice do not necessarily invalidate administrator appointments.