Peter Jones (China) Ltd, Re

On 27 November 2020 I made an order containing certain declarations and requiring the registrar of companies (the “Registrar”) to remove from the record of the abovenamed company, Peter Jones (China) Limited (the “Company”), certain pages from the statement of affairs lodged by the applicants (the “Applicants” or “Administrators”). The pages in question contained the schedules referred to in Rule 3.30(6)(b) of the Insolvency (England and Wales) Rules 2016 (“IR 2016”) (schedules of employees and consumers claiming amounts paid in advance for the supply of goods and service) (the “Schedules”).

Under r3.32 IR 2016, administrators are required to deliver to the Registrar of Companies as soon as reasonably practicable a copy of the statement of affairs. However, under paragraph 2 of that rule, the administrator must not deliver to the Registrar, with the statement of affairs, any schedule required by rule 3.30(6)(b).

In this case, as I shall explain, such schedules were incorrectly lodged. As requested, the Registrar originally did not register the statement of affairs (and Schedules) but returned them. However, later he did register the statement of affairs in its entirety and containing the Schedules. (As I understand it, he also registered the statement of affairs in a version that did not include the Schedules.) The Administrators asked the Registrar to remove such filing of the complete statement of affairs (including the Schedules) from the register. The Registrar refused to do so without court order. On 24 November 2020, the Administrators made an application to the court. On 27 November 2020, I granted the relief that I have mentioned, as well as abridging time for service. On that occasion I also ordered the Registrar to pay the costs of the Administrators. As the Administrators had not lodged and served a schedule of costs, I laid down a timetable for such schedule to be lodged and served. I later provided an opportunity for submissions by the Registrar to be lodged to deal with the quantum. Such submissions were lodged in writing on 8 January 2021. Subsequently I gave the Applicants an opportunity to respond to the Registrar’s submissions on the schedule of costs. They did not take up that opportunity. I had earlier indicated that I would give the reasons for my order on 27 November 2020 on a later occasion. This judgment gives those reasons and also deals with the question of the quantum of the costs ordered to be paid by the Registrar determined by way of summary assessment.

The position is set out fully and fairly in the witness statement of Mr Howard Smith dated 24 November 2020 and made in support of the application. He is one of the two Administrators appointed in relation to the Company. Rather than paraphrase it is convenient if I simply set out the main parts of the witness statement, which I do below.

The Administrators were appointed by the directors on 8 July 2020, pursuant to paragraph 22 of Schedule B1 to the IA 1986. They filed their proposals dated 28 August 2020 with the Registrar. The circumstances in which the statement of affairs came to be filed with the Schedules that should not have been filed is explained as follows:

“3.2

As a consequence of the Pandemic and the Guidance the Applicants and their staff are currently working from home. On 3 September 2020 a junior member of the Applicants’ team sent a copy of the statement of affairs sworn by [one of the

directors] on 1 September 2020 (SOA) to the Respondent by email to be filed in respect of the Company and copied his supervisor (Supervisor) into that email. The Supervisor was on annual leave until 7 September 2020. Upon his return to the office and upon opening the email dated 3 September 2020 the Supervisor discovered that the SOA (which shall hereafter be referred to as the “NonCompliant SOA”) that was attached to the email and sent the Respondent by post contained schedules of the employees and former employees of the Company (Employee Schedule) and those consumers claiming amounts paid in advance for the supply of goods and service (together referred to as the “Schedules”) which IR 3.32(2) prohibited the Applicants from delivering to the Respondent. Further in respect of the Employee Schedule the Applicants considered there had been a breach of the Applicants’ data protection obligations pursuant to the General Data Protection Regulation (EU) 2016/679 (Breach).

3.3

On discovering the above the Applicants wrote to the Respondent by email on 7 September 2020 to request that the filing of the Non-Compliant SOA be cancelled in an effort to minimise the consequences of the Breach. A further copy of the NonCompliant SOA was attached to this email. On 8 September 2020 the Applicants sent a further copy of the Non-Compliant SOA to the Respondent and requested that it not be filed with the records of the Company.

3.4

On 11 September 2020 the Respondent confirmed to the Applicants’ office that the Form AM02 had been returned to the Applicants’ Leeds office by unregistered post.

3.5

On or around 8 October 2020 the Applicants subsequently discovered that the Non-Compliant SOA had been filed against the Filing History on 23 and 28

September 2020, notwithstanding the Respondent’s correspondence dated 11 September 2020

3.6

The Applicants subsequently wrote to the Respondent on 8 October 2020 to request that the Non-Compliant SOA be removed from the Filing History.

3.7

On 16 October 2020 the Respondent confirmed that the SOA submitted on 5 September 2020 was rejected on 10 September 2020 in response to the Applicants’ request. The Respondent further advised the Applicants that if they had inadvertently filed two further copies of the SOA then they would require a rectification court order to remove the Non-Compliant SOA from the Filing History.

3.8

On 20 October 2020 the Applicants advised the Respondent that no further copies of the Non-Compliant SOA had been filed since the Respondent’s email dated 11 September 2020 was received. The Applicant also confirmed that a correct version of the SOA had been subsequently filed (which shall hereafter be referred to as the “Compliant SOA”).

3.9

On 28 October 2020 the Respondent confirmed that the following submissions of the SOA had been made: 3 September, 5 September, 7 September and 2 copies of the SOA on 22 September 2020. The Respondent confirmed that the submissions made on the following dates had been rejected: 5 September, 7 September and 1 copy of the SOA on the 22 September 2020 due to poor quality. The Respondent again confirmed to the Applicant that if they had inadvertently filed 2 further copies of the Non-Compliant SOA they would require a rectification court order to remove them.

3.10

On 4 November 2020 the Applicants confirmed to the Respondent that no third copy of the Non-Compliant SOA had been sent to the Respondent and the latter statement of affairs that was filed was the Compliant SOA. The Applicants also requested that this matter be referred to the Respondent’s legal team to review. The Applicants have received no further correspondence from the Respondent in connection with this matter.

Two points emerge from the above. First, the Registrar by his conduct accepted that he was able to reject registration of a statement of affairs as requested, at least when the relevant state of affairs set out in that request were as in this case.Secondly, that there is a factual dispute or at least uncertainty as to whether the Non-Compliant statement of affairs as registered by the Registrar was, by mistake, a version that the Registrar had already agreed not to register or whether, as he asserted in correspondence, a further copy or copies of the Non-Compliant version had been filed.

In the application notice in this case declaratory relief was sought coupled with orders (among others) (1) pursuant to IR 3.45 that the schedule required by IR 3.30(6)(b) of employees and consumers claiming amounts paid in advance for the supply of goods and service must not be delivered to the Registrar and (2) that the Respondent should exercise his power under Section 1076 of the Companies Act 2006 (“CA 2006”) immediately to remove the Non-Compliant SOA that appeared on the Company’s filing history on 23 and 28 September 2020 from the Register, and accept the statement of affairs filed against the Filing History on 30 September 2020 (Compliant SOA) in replacement for the Non-Compliant SOA.

In her skeleton argument, Ms Toman, who appeared for the applicants, submitted, as her primary case, that:

In the alternative, Ms Toman submitted that:

In the further alternative, Ms Toman submitted that:

Rule 3.30 IR 2016 (especially paragraphs (5) and (6)) sets out the requirement that a statement of affairs contain relevant schedules of claims (including in the form of the Schedules), as it did in this case:

“ 3.30 Statement of affairs: content (paragraph 47 of Schedule B1)

(1)

[Heading and content of statement] The statement of the company’s affairs must be headed “Statement of affairs” and must–

(a)

identify the company immediately below the heading; and

(b)

state that it is a statement of the affairs of the company on a specified date, being the date on which it entered administration.

(2)

[Further content] The statement of affairs must contain (in addition to the matters required by paragraph 47(2) of Schedule B1)– (a) a summary of the assets of the company…..

(b)

a summary of the liabilities of the company….–

(c)

a list of the company’s creditors with the further particulars required by paragraph (3) indicating–

(i)

…

(3)

[List of creditors] The list of creditors required by paragraph 47(2) of Schedule B1 and paragraph (2)(c) of this rule must contain the details required by paragraph (4) except where paragraphs (5) and (6) apply.

(4)

[Creditor particulars required] The particulars required by paragraph (3) are as follows–

(a)

the name and postal address of the creditor;

(b)

the amount of the debt owed to the creditor;

(c)

details of any security held by the creditor; (d) the date on which the security was given; and (e) the value of any such security.

The requirement for delivery to the Registrar, and the requirement that the Schedules in this case should not be delivered, is contained within rule 3.32 IR 2016 which provides so far as relevant:

“3.32— Statement of affairs: filing

(1)

[Duty of administrator to file copy with registrar of companies] The administrator must as soon as reasonably practicable deliver to the registrar of companies a copy of–

(a)

the statement of affairs; and

(b)

any statement of concurrence.

(2)

[Rule 3.30(6)(b) schedules to be omitted from statement] However, the administrator must not deliver to the registrar of companies with the statement of affairs any schedule required by rule 3.30(6)(b).

(3)

[Limited disclosure to registrar of companies] The requirement to deliver the statement of affairs is subject to any order of the court made under rule 3.45 that the statement of affairs or a specified part must not be delivered to the registrar of companies.”

Rule 3.45 IR 2016 sets out the power of the court to provide that the statement of affairs or any part of it must not be delivered to the Registrar. It provides, so far as relevant:

“(1)

[Application to court] If the administrator thinks that the circumstances in rule 3.44 apply in relation to the disclosure of–

(a)

the whole or part of the statement of the company’s affairs;

(b)

…. or

(c)

….

the administrator may apply to the court for an order in relation to the particular document or a specified part of it.

The relevant circumstances set out in r3.44 IR 2016 are:

“…the disclosure of information which would be likely to prejudice the conduct of the administration or might reasonably be expected to lead to violence against any person.”

The Registrar’s position and duties are set out in Part 35 CA 2006.

The Register is dealt with by s. 1080(1) and (2) CA 2006, which impose on the Registrar a duty to keep the Register:

“1080.

The register

The records relating to companies are referred to collectively in the Companies

The question of delivery and its effect and the Registrar’s discretion in this respect is dealt with by sections 1072 CA 2016. They provide:

“1072 Requirements for proper delivery

Section 1073 CA 2006 sets out the Registrar’s power to accept documents even if they do not meet the requirements of proper delivery. It provides:

“1073 Power to accept documents not meeting requirements for proper delivery

Section 1074 CA 2006 deals with the position where part of a document should not be delivered:

Section 1076 CA 2006 deals with the Registrar’s power to replace a document on the file which does not comply with the requirements for proper delivery or contains unnecessary material.

Section 1093 CA 2006, deals with the Registrar’s power to correct inconsistencies on the Register. It provides (so far as material):

“1093 Registrar's notice to resolve inconsistency on the register

(1)

Where it appears to the registrar that the information contained in a document delivered to the registrar is inconsistent with other information on the register, the registrar may give notice to the company to which the document relates—

Section 1094 CA 2006, deals with the Registrar’s power administratively to remove material from the Register, including “unnecessary” material. It provides (so far as material):

Section 1096 CA 2016 provides for rectification of the register by court order. So far as material it provides:

“1096.

Rectification of the register under court order

(1)

The registrar shall remove from the register any material—

(a)

that derives from anything that the court has declared to be invalid or ineffective, or to have been done without the authority of the company, or

(b)

that a court declares to be factually inaccurate, or to be derived from something that is factually inaccurate, or forged,

and that the court directs should be removed from the register.”

In Registrar of Companies v Swarbrick [2014] EWHC 1466 (Ch); [2014] B.C.L.C. 655, Mr Richard Spearman QC sitting as a Deputy High Court Judge dealt with an application by the Registrar to set aside an order (the “Previous Order”). The Previous Order had been made in circumstances where the Court had determined that administrators’ proposals that had been filed contained unnecessary material, in terms of confidential information about a sale by the administrators to a third party, and that that material could not readily be separated from the rest of the document. Accordingly, the court held that the document was not properly delivered and ordered, pursuant to s1076 CA 2016, that the Registrar remove the proposals as filed and replace them with a version that omitted the unnecessary material. The Registrar’s application to set aside the earlier order was made on various grounds. There were various issues, for example, whether the material was “unnecessary” and whether the Court could retrospectively make an order under r2.33A Insolvency Rules 1986 (now rule 3.45 IR 2016). For present purposes, however, the key issue was the extent of the Court’s supervisory jurisdiction over the Registrar in the exercise of his powers and duties.

The Judge first approached the issue of the effect of an order under, what is now, r3.45 IR 2016 and held that such an order could be made with retrospective effect. In his judgment, the Registrar was then required to comply with such an order:

“[54] In my judgment, once an order is properly made by the court under rule 2.33A, and is served on the registrar, he is required to comply with it. By an order properly made, I mean an order that is not susceptible to being set aside, whether on grounds of the merits, the jurisdiction to make the order, the exercise of the courts discretion, or any other basis.

[55]

If the effect of an order is to require the registrar to act contrary to a statutory duty, or to do something that he has no power to do, I would regard it as an order that ought not to have been made and therefore as susceptible to being set aside….

[56]

Typically, an order under rule 2.33A will be made before the statement is sent to the registrar. In that case, so long as the order remains in force, the registrar will be obliged to deal with the statement as if it contained the matters set out in paragraph 49 and rule 2.33(2), even though, in light of the order of the court, it does not do so.

[57]

I see no reason why the registrar should not equally be bound by an order under rule 2.33A if it is not made until after the statement has been sent to him. This does not impugn his conduct in placing the statement on the register, but merely means that henceforth he satisfies his duties by placing a redacted version on the register. If necessary, I would hold that the effect of such an order being made after a paragraph 49 statement has been sent to the registrar is that, for purposes of section 1080 of the CA 2006, the original statement is no longer properly regarded as a document delivered to the registrar under any enactment and is replaced for those purposes by the redacted version. Accordingly, the registrar is not in breach of duty by complying with the order.

[58]

If I am wrong in saying that the registrar is required to comply with an order that has properly been made under rule 2.33A, I would nevertheless expect him to do so without the need for further recourse to the court. However, if, to get the registrar to comply, it were necessary to seek relief against him by way of judicial review or according to ordinary public law principles, I consider that it should be possible to rely on traditional public law grounds of illegality, irrationality, and, it may be, proportionality. To take the present case by way of example: the registrar accepts that the disputed material need never have been sent to him or placed on the register at all, and he does not contend that the court was wrong to hold that its retention on the register would prejudice the conduct of the administration. If the registrar chooses not to give effect to the order when to do so would not place him in breach of any statutory duty and when he has power to do so, on what basis can he contend that he is acting legally, rationally and proportionately?”.

Having considered that the r2.33 Insolvency Rules 1986 disposed of the matter, the Judge went on to consider the wider picture.

As regards s1094 CA 2016 he determined that, as a result of the r2.33 Order, the material in question was “unnecessary material” and that it was not disputed that that material was not readily separable from the other material. In this regard, he set out the general effect of the delivery of unnecessary material to the Registrar:

“[70] …I make three observations in this context. (i) First, the consequence of including unnecessary material that cannot readily be separated from the rest of the document is that the document is treated as not meeting the requirements for proper delivery: see section 1074(4). Further, in the case of a statement required to be served under paragraph 49 that could have the effect that the administrator is guilty of a criminal offence: see paragraph 49(7). Accordingly, there are strong incentives for the sender of a document to avoid falling foul of this provision. This gives it teeth notwithstanding the fact that it may not be straightforward for the registrar to detect unnecessary material. (ii) Second, where unnecessary material can readily be separated from the rest of the document, it is reasonable to suppose that it will more easily be discernible by the registrar, who then has power to omit it (see section 1074(5)(a)). In these circumstances, also, the provision would not appear to be lacking in effect. (iii) Third, even where the document contains unnecessary material that can readily be separated from the rest of the document, the registrar is not obliged to omit that material, but may instead register the document as delivered: see section 1074(5)(b). This lends support to the view that section 1074 may be designed to cater primarily for the more egregious instances where extraneous material is included in a document delivered to the registrar. It is not aimed at ensuring that in no circumstances is unnecessary material placed on the register.”

As regards the Registrar’s discretion under s1096 CA 2016 to accept a replacement document for one that had already been delivered, the Judge went on to consider the

Having considered the issue raised in paragraph [82] of his judgment at length, the Judge returned to the facts of the case before him and concluded as follows:

I accept and agree with Ms Toman’s position that there is no power in the court in this case to deal with the issue that has arisen by way of an order for rectification of the register under s1096.

In this case, I do not consider there is any point in, or need to make, an order under what is now r3.34 IR 2016. The effect of such an order would be to provide that the statement of affairs to be lodged should not contain the Schedules. However, that is already the case as a result of r3.32(2) IR 2016. I need not address Ms Toman’s second alternative any further, save to say that I have serious doubts that the conditions set out in r3.34 for the making of an order under r3.45 IR 2016 were met on the facts of the case and I would not have been prepared to imply that such conditions were met, as I was invited to do. In particular, it is not clear to me that the conduct of the administration would be damaged by the disclosure of the information in the Schedules.

In my view, it is clear, applying such general principles as were applied by Mr Spearman QC when considering “unnecessary material”, that the Schedules were indeed “unnecessary material”. Further, they were readily able to be separated from the statement of affairs.

Under s1074 CA 2016, the Non-Compliant SoA was not therefore improperly delivered and the Registrar had a discretion whether to register the statement of affairs in its complete state as delivered or with the unnecessary material removed. It is unclear whether that discretion was exercised at all but, if it was, it was on the face of things exercised wrongly in a public law sense of being exercised irrationally or in a Wednesbury unreasonable sense. If the IR 2016 prohibit delivery of the Schedules to the Registrar it is difficult to see how it could be lawful for him to register them. In those circumstances judicial review would lie. The most appropriate remedy would, in my view, be removal of the Schedules and not (as sought by the Administrators) removal of the entire SoA. No point is taken that judicial review is the necessary procedure and in those circumstances it seemed to me right to order removal of the Schedules only. In essence this is to follow the approach in the Swarbrick case, the main difference being that the requirement that the Schedules not be lodged for registration derives from an express rule in this case rather than (as in Swarbrick) from a court order under what is now r3.34 IR 2016.

However, that is not the only route to the conclusion that I reached and order that I made. In my view, an alternative (and preferable) analysis is that the Registrar, having registered the SOA including the Schedules, had a discretion to remove the Schedules under s1094 CA 2016. He should have done this and his refusal to do so is unlawful and irrational within Wednesbury principles. There may be an issue as to whether he had “power” to register the Schedules. It might be said that he did not have power to do so in the light of what I have said in paragraph 33 above. The counter-argument, which I prefer but on which I did not hear detailed argument, is that the “power” referred to within s1094 CA 2016 is a reference to jurisdiction rather than a reference to whether as a matter of discretion on the facts it could be exercised in a particular manner. The same argument applies as regards the procedure (i.e. an application within the proceedings or judicial review) which I have already addressed.

Finally, I should address the primary submission of Ms Toman, which I did not accept, namely that the appropriate remedy is to order removal of the “defective” Statement of Affairs (which included the Schedules) and its replacement with the Statement of Affairs which did not include those Schedules. First, I do not consider that the entire document can be replaced under s1076(1)(a), in that in my judgment it cannot be said that the defective Statement of Affairs was not properly delivered (see s1074(4) CA 2006). This flows from the fact that the Schedules were readily separable from the document as a whole. Secondly, whilst s1076(1)(b) does apply, the fact is that, as the Swarbrick caseshows (In passages I have not cited), the court has to hedge round orders for replacement because the registrar has to be satisfied that a replacement document meets certain criteria other than not falling foul of the defect identified by the court. Thirdly, the real evil or defect is the Schedules. If, as they can be, separately removed under s1094, then that solves the problem with the least interference with the register.

I would have welcomed assistance from the Registrar on these matters. As I have said, I consider that the order by reference to s1094 was the preferable route on the facts of this case. In the end, however, I am satisfied that at least one of these alternative analyses applies and that this justifies the order that I have made.

I now turn to the question of costs. Having found that the Registrar had a discretion which he should have exercised to remove the Schedules or not to register them in the first place, I ordered that he should pay the costs of the application. His repeated position in correspondence that a court order was necessary was simply wrong.

The applicants had not lodged a costs schedule at the time of the hearing before me. With a view to summary assessment, I laid down a timetable for one to be lodged and served and for the Registrar to lodge written submissions. Such submissions were lodged by the Treasury Solicitor. I then gave the applicants’ an opportunity to reply but that opportunity was not taken up.

The Registrar, by the Treasury Solicitor (“TS”) makes the following points:

The total reduction in the costs claimed is in the sum (ex VAT) of £1,085.

I therefore summarily assess the costs (ex VAT) at £8,614.90 which I have considered as a whole (as well as the individual components) and consider to be reasonable and proportionate.