New Insolvency Proceedings Practice Direction

Frances Coulson, senior partner at Moon Beever, highlights the key changes introduced by the new Insolvency Proceedings Practice Direction which came into force on 25 April 2018, and assesses what this means in practice for insolvency professionals.

Following the identification of a number of errors, it has been announced that the new Practice Direction will remain in force, despite being subject to future amendment. Although it was first announced that the Practice Direction had been withdrawn, it has been subsequently clarified that this is not the case. The Practice Direction therefore remains in force, subject to future amendments to correct the errors identified. The timing of when these amendments will be published and come into force will depend on whether the amendments require the approval of the Lord Chancellor.

In addition to the below analysis, a more detailed Practice Note on the changes contained in the Practice Direction will be published on LexisPSL Restructuring & Insolvency.

How does the new Practice Direction update the previous one?

The old Insolvency Proceedings Practice Direction (PD) was heavily out of step given the new Insolvency (England and Wales) Rules 2016, SI 2016/1024 (Insolvency Rules 2016) and various changes to the Civil Procedure Rules (CPR). I was pleased to work on the sub-committee of the Insolvency Court Users Committee working on this PD, chaired initially by former Chief Registrar Baister then Chief ICC Judge Briggs, with Mr Justice Norris, District Judge Anson, Catherine Addy QC and Matthew Watson of XXIV Old Buildings. The new PD took time partially because of its reliance on other Practice Directions which were concurrently in train, including the CPR Practice Direction 51O and the CPR Business and Property Courts Practice Direction.

What are the key points of change set out, and what will this mean in practice for insolvency professionals now?

Distribution of insolvency business

Aside from tidying up the PD to fit the new Insolvency Rules 2016 and CPR changes, one of the biggest changes is the new arrangements for the distribution of business, with welcome expanded jurisdiction of the Insolvency and Companies Court (ICC) judges. ICC judges can now hear administration applications, injunction applications (aside committals for contempt, freezing and search orders, and ancillary orders under part 25.1 (1)(g), CPR which must still go to a High Court judge). This is very welcome as the ICC judges are highly skilled, specialist and well equipped to deal with such matters.

District judges in county courts with insolvency jurisdiction can hear unopposed winding up or bankruptcy petitions (‘local business’) but other insolvency applications are required to be transferred to be heard by a district judge in the relevant district registry or an ICC judge in the Royal Courts of Justice.

The powers of court officials in the Royal Courts of Justice has also expanded as set out in paras 10.1 and 13.1, PD but in county courts the same applications must be dealt with by a district judge.

Application to transfer a case

Other changes include a requirement for the Official Receiver to give 14 days’ notice to an incumbent officeholder of any application to transfer a case. This should save the cost of applications to transfer back when the office-holder only finds out about such transfers after the event. It will also eliminate unnecessary delay.

Filing winding up and bankruptcy petitions

Winding up and bankruptcy petitions filed electronically are not treated as issued until the court fee and Official Receiver’s deposit have been paid (which should be within seven days). The PD provides for automatic strike out of the petition where this is not complied with. Unfortunately, the Official Receiver deposit is still paid by cheque (albeit it can be paid by debit or credit card over the phone in the Royal Courts of Justice) which makes the electronic process rather manual.

Routes of appeal

Routes of appeal are now subject to a new regime set out in para 17, PD. Applications for permission to appeal cannot be heard by deputies, whether ICC or High Court judges in corporate matters, nor applications for permission in personal insolvency. Challenges to decisions by the adjudicator are not appeals but applications—which is logical as no judicial decision-making process has yet taken place.

The PD provides detail on routes of appeal in insolvency proceedings under the Insolvency Act 1986, Insolvency Rules 2016 and CPR 52.

Does the PD provide clarity on how to appoint an administrator out of hours in light of the confusion over Electronic Practice Direction 51O?

The PD confirms that applications for out-of-hours appointments of administrators are to be effected by fax or email as per the Insolvency Rules 2016, not using the e-filing set out in the Electronic Practice Direction 510.

Interviewed by Susan Ghaiwal

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

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First published on LexisPSL Restructuring and Insolvency 

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