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15th August 2017

Court in the Act? Is our courts system working for the insolvency profession?

15th August 2017

Court in the Act? Is our courts system working for the insolvency profession?

Mike Pavitt

Posted: 15th August 2017

T: 023 8048 2275

E: Email Me

As a solicitor of the Senior Courts of England & Wales of some 18 years now, and as the current chairman of the Association of Business Recovery Professionals (R3) in the Southern Region, it is extremely important to me that Her Majesty’s Courts and Tribunals Service (HMCTS) continues to provide processes and solutions which work for insolvency practitioners, and for others needing to pursue their rights and remedies under the Insolvency Act 1986. Put simply, if they cannot count on having the power of the courts behind them, the ability of insolvency professionals (insolvency practitioners and insolvency lawyers) to deliver the best outcomes for creditors, the most timely results for those involved in an insolvency situation and the fairest treatment for those facing potential action, is severely compromised.

Change is the law of life…

So said a past US President generally more respected than the current one (so take your pick, but bonus point if you can name him), “…And those who look only to the past or present are certain to miss the future.”

There are many in the legal profession who bemoan the vast changes we have seen in the courts system in England and Wales in recent years, some who would even call them now unfit for purpose. These people often blame successive budget cuts at the Ministry of Justice and policy changes in government which (they will say) have placed access to justice far lower on the list of priorities than it ought to be. They will often point to the fact that – not so very long ago at all – if you wanted to make an urgent application, you could draft it, take your copies, draw your cheque, walk it all up to a clerk you knew at your local court counter and come away with an early listing and the right number of sealed copies which you could then set about serving the same afternoon.

I myself sometimes add my own voice to the doubters. Clearly not all change is for the better. For example, I lean heavily to the view that the (still relatively recent) hikes in court fees for general proceedings (though thankfully not yet specialist insolvency claims) were patently wrong, not least as they were made in the pursuit of a constitutionally unjustifiable aim to commoditise justice as something which should be self-sustaining, with fees out of all proportion to the service provided. In insolvency terms, one of the results we have seen is that creditors and claimants are paying up to £10,000 to issue a claim, only to secure a default judgment they cannot effectively enforce because the defendant is then found to be insolvent (perhaps partly because they cannot afford to reimburse the court fee as well as the debt). Who can blame creditors, in those circumstances, for deciding it is not worth the cost of accessing the courts system and/or losing confidence in their contracts and becoming unwilling to extend credit in the first place. Measures like that reward late payment practices, breaches of contracts and put unnecessary strain on more responsible contracting parties.

However, a great deal of change is for the better. In insolvency terms, the reality is that the days when you could get an Insolvency Act application on very swiftly in your local court were not so very halcyon after all. Then, as now to a slightly lesser extent, the applications would come before a deputy or full-time district judge who perhaps had little or no insolvency experience, and transfers between courts were difficult to achieve. Now that most issue decisions are – to an extent – centralised at least a judge will review the applications before they are formally issued and seek to ensure they are listed before a more appropriate judge, and for a suitable length of listing.

Steps are also being taken by HMCTS to improve access to specialist judges and lists, for example with the formal commencement – on 2 October 2017 – of the Business and Property Courts, which will be the new list for all insolvency cases in the High Court, replacing a number of specialist lists including the Chancery Division. Of this development, the Lord Chancellor has said, “[h]aving business and property courts across England and Wales that are served by a critical mass of specialist judges will mean that all classes of case should be capable of being managed and tried away from the capital”. Whilst I personally remain sceptical as to the need to ‘dumb down’ the lists with a change of name when the old lists have served us well for decades, and in some cases centuries, in principle (and particularly for those of us based in ‘the regions’) this ought to be a positive development. Anything which improves consistency between judicial decisions is likely to result in less caveated legal advice and improved confidence in the availability of options which involve the courts at some level.

For now, though, accessing solutions through the courts, which is rather vital of course as we are all still getting to grips with the Insolvency Rules 2016 and needing assistance with their proper interpretation and application, remains somewhat problematic.

On-line courts and the CE-file system

Even the die hard traditionalists in the legal profession are coming around to the inevitable, that more and more of the courts system will be delivered on-line. In principle this delivers not just savings of cost for the courts service but improvements in efficiency, accuracy and therefore time and cost for parties making use of the courts.

I personally hope that the required solemnity of giving evidence and persuasiveness of oral argument will never give way completely to remote access, even on the proposed ‘intermediate track’ (for claims up to £100,000), as per the direction of creditors’ meetings under the 2016 Rules, but in principle having instant access to the progress of a case before the courts is an entirely laudable aim.

The problem as things stand, however, is that electronic filing and CE-filing in particular, does not yet work as it needs to. As a litigator, but also as Chairman of R3 in the South I have seen dozens of examples of the system we now have resulting in inaccuracy, inefficiency and even injustice. Clearly Rome was not built in a day, and we all have to try to make the best of such innovations and give our feedback when we can so that improvements can be made, but in the meantime I suggest all users look out for (amongst other things):

  1. the system not informing the claimant/applicant that their claim/application has actually been issued or listed or that any other filing has occurred, such that all matters need to be checked on-line daily ‘just in case’ to avoid missing deadlines or hearings – hugely inefficient for larger practice;
  2. the system listing matters for hearing without consultation as to dates or length of hearing, producing hearings with insufficient notice to comply with rules and/or insufficient time;
  3. the system automatically serving respondents with application notices – but not the supporting evidence – before sealed copies of the application have been uploaded or otherwise made available to the claimant/applicant;
  4. general delays in uploading orders and notices, such that you might receive sight of a block transfer order 10 days after the court has actually made the order, so you are in difficulty with mandatory notice to other agencies and having to excuse delays not of your making;
  5. general transfer of control of proceedings away from the claimant/applicant’s solicitors and towards the system with no consistent human input, resulting in unnecessary duplication of effort, misunderstandings and damage limitation with opponents which would not have occurred when proceedings were issued by registry agents and/or returned for solicitor service.

Rising to the challenge

Our task as an insolvency profession is, in part, to adapt and adjust and to find ways of keeping the cash flowing so our markets do not stagnate, and we have always been very good at finding ways to deliver on this, whether it be through lobbying for further changes to rectify such undesirable effects, or simply making the most of the tools and resources we do have.

It is to be hoped that recent overtures from opposition parties towards the idea of reversing some of the court fee hikes in the wake of the Supreme Court decision on employment tribunal fees (see my colleague Clive Dobbin’s blog here) are more than just rhetoric and that this particular problem will be alleviated in time. For now, however, we are seeing anecdotally an increased volume of petitions being issued in both the public and private sectors, which of course represents a different kind of opportunity for the insolvency profession, even if it does unhelpfully truncate the timescale and range of options available to the debtor. Again, hopefully R3’s lobbying for its ‘breathing space’ proposals will help here.

Conclusion

What we really need is a courts system which works for insolvency proceedings, which recognises that creditors who are out of pocket can ill afford to shell out again for swingeing court fees, which is accessible in terms of real or virtual counter time, and which allows for two-way communication with users ( or at the very least which updates users the moment something is uploaded and adopts a common form of communication, rather than hit and miss between email and hard copy letters, etc.)

As this is some way off for now we must take the positives from the promise of greater consistency as a result of the court consolidation, the prospect of reduced or better staged issue fees for creditor claims if current political pressure holds sway, and the fact that we do have some excellent insolvency judges and registrars coming through.

I am hopeful that some of our speakers at the forthcoming, inaugural R3 Southern Area Conference in Bournemouth on 21/22 September 2017 – which will include His Honour Judge Brian Rawlings and former Chief Registrar Stephen Baister – can be prevailed upon to offer us some of their thoughts as to how we, as a profession, may get the most out of our courts system, as it stands and as it develops.

In the meantime, we at Paris Smith – rather like HMCTS but on a smaller scale – are looking to deploy our own resources in the best way for the coming period, so to coincide also with the opening of the new football season, we have recently re-launched our football themed organogram demonstrating the strength in skills and in depth which we are able to bring to bear in insolvency matters.

If we can assist with any enquiries relating to the courts system in an insolvency context, or with any other insolvency linked matter, please do not hesitate to contact us.

Finally, I take this opportunity to wish all of our insolvency blog readers a very pleasant last few weeks of the Summer holidays, and I hope to see a number of you at the R3 Southern Conference.

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Mike Pavitt

Posted: 15th August 2017

T: 023 8048 2275

E: Email Me