Although a failure to give notice to the members
of a company of the proposed appointment of administrators was arguably a
defect in the procedure, the administrators’ appointment was not a nullity and
was declared to be valid as there had been no ascertainable prejudice.
The applicant joint administrators of an
insolvent company applied for a declaration that their appointment was valid.
The company's directors had unanimously resolved to appoint the administrators
and the company's parent company had been aware of and agreed to the proposed
appointment. The issue was whether the appointment was invalid because notice
of intention to appoint should have been given to the “company” under the
Insolvency Act 1986, Sch.B1, Pt 4 para.26(2) and para.26(3), and the Insolvency
Rules 1986 Pt
2 (4), r 2.20 to 2.22. The administrators argued that, even if notice was
required, the failure to give it had not rendered their appointment a nullity.
The judge granted the
application. While a notice should have been served, the failure to do so did
not result in the administrators’ appointment being a nullity (applying Re Ceart Risk Services Ltd  EWHC
1178 (Ch),  Bus. L.R. 116, Re Assured
Logistics Solutions Ltd  EWHC 3029 (Ch),  B.C.C. 541 and Re BXL Services  EWHC 1877 (Ch),
 B.C.C. 657). The company owners had been aware of and fully approved of
the decision to appoint, and there had been no ascertainable prejudice of any
kind. There was no substantial, irremediable injustice, which under r 7.55
of the Rules would cause the insolvency proceedings to be invalidated by any
formal defect or irregularity.