Ahead of the Insolvency Rules Review expected this summer, the Insolvency Service have published a new statutory instrument (SI) that will come into force on 22 June. This seeks to tidy up a few of the “niggles” found in the Insolvency Rules 2016 (Rules) that have caused practitioners a headache, as well as making a change to r18.30 regarding approval of remuneration and a few minor tidy ups alongside those.
What are the key changes?
- Requirement to file multiple copy documents
A change to Rule 1.46 provides that where documents are delivered to or by the court and they are delivered electronically only one copy of the document needs to be filed or returned. In practice this will change Rules 3.18 and 3.26 which currently require three copies of a notice of appointment to be filed with the court by the appointor.
Although the Rules provide for three copies to be filed, in practice many practitioners filed only one, until the case of QM Systems (see our blog) where the court considered that only filing one was a procedural defect, albeit one that could be remedied.
Since the introduction of ce-filing that has been no useful purpose in filing three copies (there was, when documents were printed and physically taken to court) but nonetheless, to avoid suggestion that there was a defect in the appointment process, following QM Systems many practitioners started to file three copies of the notice of appointment if they did not do that already.
The forthcoming change is helpful for both practitioners, who will now only have to file one copy of a document at court, but also for the court by clarifying that it only needs to return one copy (which is practice it did already).
- Change of prescribed information to remove “time and date”
Both Rules 3.24 and 3.25 will be amended, deleting the requirement to include the time and date of appointment in the notice of appointment.
In practice the requirement to include the “time and date” led to questions over what should be inserted. The Insolvency Service expressing the view that it could be left blank[1].
Many practitioners adopted wording (or similar) to that suggested by J Nugee in Spaces London Bridge Limited [2018] EWHC 3099 (Ch) along the lines of “This appointment will take effect at the date and time specified below as the date and time when the notice is filed” – following the court having to consider in Spaces whether failure to include the time and date was a procedural defect.
With the Rule change practitioners may need to amend their precedent forms to take account of the fact that this information is no longer required.
With only a few weeks to make changes it is feasible that after 22 June we may see notices of appointment that haven’t been altered to reflect this change. If that occurs, will the inclusion of this information, rather than exclusion (as per Spaces) be a procedural defect?
It seems absurd to pose that question, but in practice small procedural “blips” are picked up on a security review. The answer, in our view, is that this is unlikely, because including that information has no effect on the appointment itself. There needs to be a pragmatic approach to appointment reviews if appointors have not made the necessary amends.
- Removing use of fax
There are various changes to the Rules removing the use of fax to send documents. This is particularly relevant to out of hours, out of court QFCH appointment of administrators, given a QFCH can make an appointment out of hours by faxing or emailing the required documents to a designated fax number/email address. From 22 June, only email is available.
This is unlikely to make much of a change in practice, given that fax is rarely if ever used to communicate nowadays, but the change brings the Rules in line with day to day practice.
The requirement in Rule 3.20(9) to take “three copies” of the relevant appointment documents to court on the next day the court is open for business has not changed, but with the practice note allowing practitioners to file these documents by ce-file, practitioners will (at least from 22 June), be able to ce-file one copy of the documents to meet the requirements in Rule 3.20.
- Remuneration Approval
Rule 18.30 will be amended as follows (see bold and italics):
18.30.—(1) The office-holder must not draw remuneration in excess of the total amount set out in the fees estimate without approval.
(2) The request for approval must be made—
- where the court fixed the basis, to the court;
(b) where there is a committee (unless the court fixed the basis), to the committee;
(c) in other cases where the creditors or a class of creditors fixed the basis, to the creditors or that class of creditors
This means that unless the court has fixed the basis of remuneration then only a creditors committee or the class of creditor who approved remuneration initially will be able to increase fees above the fee estimate.
This might actually create some difficult in practice if (a) there is no creditor committee, or (b) the class of creditor who approved fees have all been paid. Although Dear IP 168 leaves IPs with the discretion to determine who is a creditor in respect of a particular provision (which arguably gives scope to seek approval from paid creditors), lack of engagement or unwillingness to participate in a decision where the relevant creditor has no economic interest may be problematic. Who then approves?
You might also be interested in our remuneration special newsletter for further discussion on recent cases relevant to fee approval/changes.
- Court limit for bankruptcy petitions increased
For bankruptcy petitions presented in London, the High Court will only deal with petitions where the debt value is £500,000 or more – currently a petition will be dealt with by the High Court where the debt is £50,000 or more. This will shift lower value petitions to be dealt with by the London County Court.
Concluding Comment
The changes are not significant but do offer practical solutions to some of the problems faced in practice. We are sure, however, that there are many more Rules that practitioners would like to see updated/changed to reflect the challenges in practice – perhaps they will be picked up following the Rules review consultation – we can only wait and hope.
[1] R3 Technical Bulletin 119.3.