London,
26
April
2016
|
15:48
Europe/Amsterdam

All aboard the Insolvency Express (Trials pilot scheme)

Business Recovery & Reconstruction E-alert - News & Views from The Bridge

What is it?

The Insolvency Express Trials (“IET”) pilot scheme commenced on 1 April 2016 and will operate for two years. The scheme has been introduced by a new Practice Direction and applies to proceedings:

  • Before the Bankruptcy Registrars
  • That can be disposed of in no more than two days
  • That require limited directions and disclosure
  • Where the costs of each party will not exceed £75,000 (excluding VAT and court fees but including any conditional fee agreement uplift).

In IET proceedings, the applicant must file its evidence at the time of issuing the application and exhibit all documents relied upon. The court will give a date for the directions hearing, which will be no more than 45 days from the date of issue. Any evidence in response to the application must be filed no later than 14 working days before the directions hearing. The applicant can file a reply no later than seven working days prior to the hearing.

The final hearing should be within three to six months of the directions hearing. That trial date may not be vacated by consent and an adjournment will only be granted in exceptional circumstances.

The provisions for costs management within the Civil Procedure Rules will not apply.

Why has the scheme been introduced?

Chief Registrar Baister has said that two main reasons underpin the decision to pilot IETs, which are:

  • The perceived need for faster and cheaper trials
  • To relieve the parties and court of the burden of costs management if costs could be kept to a reasonable sum.

The provisions set out in the Practice Direction certainly appear to satisfy both of these.

What do we think?

In some senses there is nothing new in the pilot scheme. Chief Registrar Baister has said that there is no reason why cases should not be heard quickly and at relatively low cost within the existing framework. However, practitioners and their clients will know that the theory and the practice are some way apart. The guaranteed express timetable provided by the scheme, with limited scope for adjournment and extensions, would seem to have real potential to achieve (relatively) swift resolution of appropriate proceedings.

The disapplication of costs budgeting is welcome in these cases where the costs of budgeting and management are most likely to be disproportionate to the costs themselves.

However, we wonder at this stage just what volume of proceedings will benefit from the scheme. The number of proceedings before Bankruptcy Registrars that meet the IET criteria could be relatively low and there is no obligation to use the scheme where the proceedings meet the criteria. Practitioners may be particularly concerned by the seven working days in which any evidence in reply must be prepared and if there are any doubts about the suitability of the IET scheme, parties may well err on the side of caution. Chief Registrar Baister stated that he has no idea what proportion of suitable claims he expects to be dealt with by IETs.

However, the scheme is a pilot after all and we expect there to be sufficient uptake for the registrars to get meaningful feedback. The scheme will be evaluated after 12 months, then every six months and may be refined along the way. The costs cap appears to already be in the sights of certain registrars (although whether it will go up or down is a different question).

Finally, it remains to be seen how the registrars respond to various questions that the scheme presents such as what might be a ‘usual’ disclosure direction in IETs and what will the registrars consider to be suitable/unsuitable for the scheme.

If widely adopted, in due course IETs could be a significant change to the business of the Companies and Bankruptcy Court. 

Get in touch

We would be very interested to hear of any of your experiences. Please do get in touch with our Business Recovery & Reconstruction team if there is anything that you would like to discuss.