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Do Practice Directions make perfect?

7th October 2020

Do Practice Directions make perfect?

This note considers the way in which the practice directions governing insolvency proceedings have evolved during 2020.

By way of introduction to this topic it is worth recalling that by the time the Insolvency (England and Wales) Rules 2016 (“IR 2016”) came into force in April 2017 the Practice Direction on Insolvency Proceedings (“IPD”) had still not been updated to take account of the reforms introduced by IR 2016. Nor had it been updated to take account of the Electronic Working Pilot Scheme in CPR Practice Direction 51O (“EWPS”). In fact, there followed a significant period during which the IPD and IR 2016 were not compatible. The delay was at least in part caused by the reforms to the court system in England and Wales that resulted in the creation of the Business and Property Courts (“B&PC”). A new Practice Direction to govern the procedure in the B&PC came into effect in October 2017 and although subsequently supplemented by other changes, it was not until 25 April 2020 that a revised IPD, compatible with IR 2016, was finally released and even this was quickly superseded by a more definitively revised IPD on 4 July 2018. However, there were some significant anomalies with regard to the intermeshing of these various procedural rules and practice directions, not least in the area of out-of-court appointments of administrators.

This is how matters stood at the beginning of this extraordinary year. In January 2020, following a wave of inconsistent and troubling decisions that had attempted to grapple with the anomalies inherent in the procedure for out-of-court appointment of administrators, Sir Geoffrey Vos (then Chancellor) issued a Guidance Note that was intended to provide a temporary “fix” until a more comprehensive reform, including amendments to IR 2016, could be introduced. We still await the latter. With the onset of Covid-19 it very rapidly became clear that something further was needed. A new CPR Practice Direction 51V on a new Video Hearings Pilot Scheme came into force on 2 March 2020 and the EWPS was also extended in March 2020. As the national lockdown loomed ever closer a Protocol on Remote Hearings was issued on 20 March 2020. On 6 April 2020 a Temporary Insolvency Practice Direction (“TIPD”) was issued to supplement and amend the IPD to take account of the lockdown. As its name implies, this was intended to be temporary and was specifically time-limited: on its face it was said to come into force immediately and “unless amended or revoked” would only remain in force until 1 October 2020.

The TIPD gave further guidance on the appointment of administrators. More significantly it provided (in paragraphs 4 and 5) guidance for the hearing of pending applications and petitions and the listing of urgent matters caught in the maelstrom of the Coronavirus pandemic. Unfortunately, the drafting of these particular provisions produced some problems as to precisely what was covered by the provisions and what was not, but a common-sense approach by both the judiciary and court users meant that these difficulties resulted in few problems in practice. As was explicitly anticipated in the TIPD, these provisions were supplemented by regional guidance notes issued by the relevant presiding judges: Mr Justice Snowden issued one for the North and North Eastern Circuit and Chief Insolvency and Companies Court Judge Briggs did the same for the ICC is the Rolls Building in London. These were expressed to be coterminous with the TIPD.

With the prospect of the reforms that were to be introduced by the Corporate Insolvency and Governance Act 2020 (“GICA”), which eventually came into force on 26 June 2020, it became clear that further adjustments would be needed. On 3 July 2020 a new Practice Direction was issued aimed specifically at dealing with the reforms, both temporary and permanent, that CIGA was bringing in. Because this left some anomalous holes in the IPD, on the same day a revised IPD was also issued. There are, however, some technical issues with the latter: the original 2018 version is still accessible on the justice website and, even more confusingly, the internal hyperlinks in this new IPD have not been amended, so that if one opens the 2020 version and tries to use the contents page to scroll to a particular part of the document, it will take you to the 2018 version and not the current 2020 version in which one started. This is a trap for the unwary.

By 1 October 2020 the TIPD (together with the guidance notes issued by Snowden J and Chief ICCJ Briggs) had lapsed without being amended or revoked. At this point, therefore, court users could be forgiven for not quite knowing whether the 2020 IPD was supposed to be relied upon without the temporary Covid-modifications or what the situation was. On 2 October 2020 a new TIPD was issued, which effectively revised and prolonged the April TIPD (although technically the latter had by this time ceased to be of any effect). The October TIPD is stated to have “come into force on 1 October 2020” and that it will “remain in force until 31 March 2021 unless amended or revoked by a further insolvency practice direction in the meantime”. As with its predecessor, the October TIPD anticipates that it would be supplemented by judicial guidance from the Chief ICCJ or the relevant Supervising Judge. The previous versions of those guidance notes having now lapsed (along with the April TIPD), replacement guidance notes have now also been issued by Chief ICCJ Briggs (dated 1 October 2020) and Snowden J (dated 5 October 2020).

So that is where we now stand.

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Sally Wollaston
Sally Wollaston
Business Development and Marketing Director