Insolvency Express Trials pilot scheme—interview with Chief Registrar Baister

Insolvency Express Trials pilot scheme—interview with Chief Registrar Baister

On 1 April 2016, litigants involved in some insolvency applications will be able to take advantage of a new court pilot scheme. Intended to provide litigants with a streamlined procedure and an early date for trial or disposal of simple applications, the pilot scheme—known as Insolvency Express Trials (IET)—will only be available to applications brought in the Bankruptcy and Companies Court of the High Court before the Bankruptcy Registrars.

Original news

The 83rd update to the Civil Procedure Rules (see LexisPSL Dispute Resolution blog post: CPR changes—February and April 2016) includes a new Practice Direction 51P (made under CPR 51.2), which sets out the procedure underlying the IET pilot scheme. Commencing on 1 April 2016, the pilot scheme will operate for two years, and will be evaluated after 12 months, and then every six months. Prior to the expiry of the pilot scheme its success will be assessed, and the Chancellor of the High Court will then determine if it should be continued and made permanent.

We spoke to Chief Registrar Baister to find out more about the background to the IET pilot scheme, and his thoughts and expectations on how it will operate.

What led to the introduction of the IET pilot scheme?

Two main ideas lay behind the decision to experiment with an express trial procedure:

  • the first was the generally perceived need for faster and cheaper trials, a topic which has been under active discussion in the Chancery Division for the last couple of years—indeed longer than that
  • the second was to relieve the parties and the court of the burden of costs management which it seemed to the Registrars could be avoided if costs could be kept to a reasonable sum (although views will vary as to whether £75,000 can be said to be reasonable—personally I think even that figure is too high). The Registrars also took into account the limited disclosure that is needed for many insolvency cases—the relevant documents are often just the company’s books and records which can usually be inspected by informal arrangement

How will the process of IET differ from the process currently in place for applications before the Bankruptcy Registrars? For example, regarding the intention that the trial of an IET case should take place no more than seven and a half months after the date of issue—how does this compare to applications brought outside of the pilot scheme?

In one sense there is nothing in the IET process that could not be achieved using the existing framework in which the Registrars hear cases. If litigants get on with things quickly, there is no reason why straightforward cases should not already be heard quickly and at relatively low cost. The IET scheme is designed to give that possibility some formality—a framework if you like—and to concentrate the litigants’ minds on what can be done. It also has the advantage of incorporating guarantees as to what the court will do, which I accept is not the case for the generality of proceedings.

What are the advantages to both the court and the parties in a case being dealt with by the IET procedure? Are there any potential disadvantages you might envisage?

I’m not sure whether there are any advantages to the court, though there may be some if it enables us to get some cases through the system more quickly than otherwise might be the case. For the parties the main advantages are speed and cutting out costs management, which I am told can be burdensome and expensive, so the hope is that litigation costs will come down.

There could be disadvantages too, I accept. Applicants could try to get quarts into pint pots, by which I mean use the IET procedure for cases that are simply too complicated (because there will inevitably be interlocutory applications which the IET is not designed to accommodate)—and I can see that it could be used oppressively, for example to railroad a disadvantaged litigant to trial at a pace with which he cannot keep up. That is why there is provision to object to the use of the procedure, and the court can take a case out of the IET list if it looks unsuitable for the list. The scheme is being launched as a pilot. These are all things (and others we will not have thought of) we shall have to look at during the pilot phase.

Do you expect an increase in the number of IET cases once the insolvency exemption on the recovery of conditional fee agreements (CFA) uplifts and after-the-event (ATE) insurance premiums comes to an end?

Yes. CFAs had a negative effect in several respects, but one of them was to encourage very costly litigation that from the outset was often about fee rolling and would bring little or no benefit to creditors. The high costs that CFAs meant were also often an obstacle to settlement, because the costs rather than the underlying claim became the focus of the parties (or at least of the applicant). All the Registrars have experience of this. The IET, it is hoped, should keep costs within reasonable boundaries.

Once the insolvency exemption is removed, do you envisage the limit of £75k changing (either up or down)?

Perhaps down. I originally advocated an upper limit of £50,000 but was persuaded it was too low. I suspect that CFA uplifts played a part in the debate. On that basis I would hope that the costs limit might come down, but that may be a pious hope. And, of course, there may be major changes if Lord Justice Jackson’s move in the direction of fixed costs becomes a reality. We shall have to wait and see. In the meantime the best I can say is to remind court users that the current costs limit is just that—it is not a target.

The court will be able to dis-apply the IET procedure of its own motion if it sees fit. Will this only be possible at the time of the directions hearing, or could this happen at any time? Can you envisage any circumstances where the court might dis-apply IET in relation to an application which otherwise satisfies the IET criteria?

I would hope that as a rule disapplication will be dealt with at the first (and only) directions hearing. But I can’t rule out the possibility of disapplication at a later stage, for example if a case that looked simple at first turned out to give rise to disputes about the scope of disclosure or the need for expert evidence or something of that kind.

Is there any scope for an application to be dealt with by the IET procedure after it has been issued? For example if the applicant is a litigant in person and the application is found at the first directions hearing to be otherwise suitable?

This is a good question, and the honest answer is that I don’t think we thought about the possibility when we came up with the idea. I think the simple answer is 'no', but as I said earlier, there is no reason why any application should not proceed as quickly as one under the IET, so that may be the way forward in the situation you contemplate.

Other than the particular case does not satisfy the IET criteria, what test is the court likely to apply when dealing with a respondent’s objection? Will the parties be expected to discuss the IET procedure with their opponent in pre-action correspondence?

Again this is a very good question, but I am not sure whether I can give an answer that goes beyond repeating many of the points I have already covered. The short answer is that we will have to see. Litigation is very unpredictable, and it is hard, therefore, to foresee what any test might be until we have heard argument on the subject—that is, after all, the way we find things out in our system (we hear what people say in court, evaluate what they say, and then decide where it leaves us). I think for the moment I will leave it at that.

As to pre-issue discussion, it would plainly be a good idea, but I would not want to say anything that might be taken as prescriptive or even indicative.

Do you have any indication as to the proportion of suitable claims you expect to be dealt with by the IET procedure during the pilot?

I honestly have no idea. When the IET was floated as an idea it received support from users who thought it was worth trying, which is exactly what we are going to do. The proof of the pudding will, however, be in the eating—or not.

May I end by saying I hope that practitioners will:

  • use the scheme (otherwise it will be a failure and may not continue)
  • use it constructively and sensibly, and
  • let me have their comments and suggestions (positive and negative) when they have tried it

Interviewed by Stephen Leslie.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Further Reading

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The pilot scheme for Insolvency Express Trials

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First published on LexisPSL Restructuring and Insolvency

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.