1.    Distress for the Council Tax

The Council Tax (Administration and Enforcement) Regulations 1992 allow local authorities to levy distress for unpaid Council Tax, and you will be aware that, by virtue of section 347(8) of the Insolvency Act 1986, the right to distrain remains even after a bankruptcy order has been made.

However, under the Council Tax (Administration and Enforcement) (Amendment) (No.2) Regulations 1993, which came into force on 1 April 1993, local authorities will not be able to levy distress on property which, under section 283(2) of the Insolvency Act, would not comprise part of a bankrupt's estate, ie -

1. such tools, books, vehicles and other items of equipment as are necessary to the bankrupt for use personally by him in his employment, business or vocation;
2. such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying the basic domestic needs of the bankrupt and his family.

Practitioners will be aware that the council tax replaced the community charge in April 1993. Where a qualifying property (as defined by section 6 & 7 of the Local Government Finance Act 1992 and including caravans and boats) forms part of the bankruptcy estate and continues to be occupied after the date of the bankruptcy order, liability for the council tax accruing after the date of the order falls on the person(s) resident in the property. However, the Council Tax (Exempt dwellings) (Amendment) Order 1993 prescribes that no council tax is payable on "an unoccupied dwelling in relation to which a person is a qualifying person in his capacity as a trustee under the Bankruptcy Act 1914 or the Insolvency Act 1986". In those circumstances, all such unoccupied properties would be exempt from Council Tax, regardless of whether the property is owned solely by the bankrupt or jointly owned with another.

Individuals and companies in financial difficulty are occasionally given a misleading impression of bankruptcy and compulsory liquidation procedures. The Official Receiver (OR), has been represented as asking trick questions and generally treating people badly. It is hoped that insolvency practitioners will be able to correct any such misconceptions by giving balanced and accurate advice.

ORs ask bankrupts and directors of companies in compulsory liquidation to provide the basic information necessary for dealing with the insolvency by completing questionnaires set out in a standard booklet. These booklets are Crown copyright, and should not be reproduced without the approval of the Service. If a person completes a questionnaire before the bankruptcy or winding-up order he or she will be required by the OR to complete another one under section 235 or 291 of the Insolvency Act 1986.

The Insolvency Practitioners Compliance Unit (IPCU), based at 2^nd Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ, is responsible for carrying out various functions on behalf of the Secretary of State (SoS). It has become apparent, from feedback from both Official Receivers (ORs) and insolvency practitioners (IPs), that there is some confusion as to whom IPs should address their applications, and what information they are required to provide. This article provides guidance on the main SoS functions carried out by the IPCU, together with details of the procedures and the information required. Other functions are carried out by the OR acting for the SoS in lieu of a Creditors' Committee or Liquidation Committee. Details of the ORs functions, and the information he will need to process the application, are detailed below. All applications regarding the following matters should be addressed to IPCU at the above address.

1. Exemption certificates under the provisions of section 332(2)(c) of the Insolvency Act 1986

Applications for an exemption certificate should be made in writing to IPCU. Practitioners should not send their own certificates, as official certificates will be issued by IPCU as appropriate.

Before an exemption certificate under the above provision can be issued, the following conditions must be satisfied:-

1. If the property is unregistered, the trustee must ensure that a bankruptcy notice or inhibition has been registered with the Land Charges Registry to protect the trustee's interest in the property.
2. If the property is registered, the trustee must have registered a caution with HM Land Registry to protect the trustee's interest in the property.
3. The trustee should confirm that he has offered the bankrupt's beneficial interest in the property to the bankrupt's spouse/partner, joint owner, other family members, and others, as the case may be, regardless of any negative equity. It should be demonstrated that the trustee has made every effort to realise this asset, and to have given the bankrupt's family every opportunity to secure the property in the family interest.
4. The trustee must provide a current valuation of the property, and details of the current amount of any loan outstanding on the property.
   
   Where there is significant equity in the property, an exemption certificate will not be issued, and the trustee will be advised to obtain a charging order or to realise the asset for the benefit of the estate.
   
   If any of these issues have not been dealt with, or the trustee has not provided appropriate details, then IPCU will not consider any requests for an exemption certificate.

2. Extension of time for holding annual meeting of creditors and members under the provisions of section 105 of the Insolvency Act 1986

If an office holder needs to delay holding an annual meeting, he should apply to the SoS for a time extension. The application should be submitted in writing before the expiry of the time in which a meeting would otherwise have been held. The office holder should provide a full written explanation of the reasons for the application.

The SoS can only extend the time for holding the meeting and cannot give consent to dispense with the meeting altogether.

3. Authorisation to operate a local bank account

Generally, trustees in bankruptcy and liquidators of companies in compulsory liquidation are required to pay all funds they receive into the Insolvency Services Account. However, if it is decided to continue the debtor’s/company's business, the office holder may need to operate a local bank account.

In requesting authorisation to operate a local bank account, an office holder should provide the following details to enable prompt processing of the application:-

1. Confirmation that the office holder is carrying on the business of the debtor/company, and that the relevant sanction has been obtained.
2. The name and full address of the bank the office holder proposes to use.
3. The maximum amount needed to be retained in the account.
4. The maximum withdrawal to be made from the account at any one time.
5. Details of the likely expenses to be settled by the account, which must be reasonable with regard to the size and nature of the business.

4. Remuneration

IPCU deals only with remuneration in cases administered under the Bankruptcy Act 1914, and can only fix remuneration of practitioners who have been appointed by the SoS under Rule 337 of the Bankruptcy Rules 1952. Practitioners should apply in writing to have their remuneration agreed. An application should include a time/costs schedule showing the number of hours worked by each grade of staff and the hourly rate applicable.

5. Releases

IPCU also has responsibility for processing applications for release by IPs under the following provisions:-

The relevant form must accompany each application.

5.    Settlement of Official Receiver Costs

Following the appointment of a practitioner as trustee or liquidator, the balance (debit or credit) on the estate account is transferred to the practitioner, as evidenced by the receipt of the estate cash book. As a result, control of the estate account passes from the Official Receiver (OR) to the Service’s Central Accounting Unit (CAU). The practitioner is required by the Insolvency Rules (4.107 and 6.125) to discharge any balance due to the OR at hand-over, or alternatively (and more usual in practice) to give an undertaking to discharge any such debit balance from the first assets realised. Settlement of any debit balance on the estate account can only be made by payment into the Insolvency Services Account (ISA) and not to the OR.

Where a bankruptcy order is converted to an individual voluntary arrangement after the appointment of a practitioner as trustee, a debit balance is cleared by payment to the ISA. The SoS fee will not be chargeable in those circumstances.

However, when a bankruptcy order is converted into an individual voluntary arrangement, and there has been no prior appointment of a practitioner as trustee, the OR will calculate the sum required to settle his costs. The supervisor will either pay this sum to the OR or give an undertaking to discharge it from the first monies realised, and pay the OR at a later stage. Again the SoS fee is not chargeable on the payment.

The same principles apply regarding the estate account in corporate voluntary arrangements.

Where an order is annulled or stayed following handover to a trustee or liquidator, the OR has no responsibility to calculate the amount required for payment, and practitioners should not ask the OR to make that calculation. Where additional costs become payable, for instance because of the OR’s attendance at an annulment hearing, he will notify both the practitioner and CAU of any adjusted debit balance, which may be cleared by a payment into the ISA.

6.    Examination of Lists of Creditors

There have been a number of occasions in the past where practitioners have approached Official Receivers (ORs) and claimed a right to inspect the list of creditors in bankruptcies or compulsory liquidations. In some cases they have been armed with what is purported to be a general authority from a major company or national organisation (which might or might not have been a creditor in the particular case).

ORs are not obliged to allow anyone, including a practitioner instructed generally or in a specific case, to inspect lists of creditors, and may only provide a list of creditors prior to the filing of the statement of affairs (as in Rule 12.17) on payment of the appropriate fee – currently 15p per A4 or A5 page and 30p per A3 page.

The definition of a creditor is interpreted for this purpose as including a creditor’s representative acting in that specific case, at the time the request is made.

7.    Insolvency Practitioners’ Change of Circumstances

IPCU maintains the Service’s database of insolvency practitioners (IPs), and in order to ensure that this is accurately maintained, practitioners are requested to notify IPCU in writing of any changes in their business address or telephone numbers. Similarly, practitioners are also requested to advise IPCU where there is any change in the name of their practice, and when they move between practices.

The written notifications should be addressed to Intikhab Mushtaq, IPCU, 5^th Floor, Ladywood House, 45-46 Stephenson Street, Birmingham, B2 4UP, or Practitioners Compliance Unit, DX 713897, Birmingham 37.

Inaccuracies in the database may lead directly to delays in the processing of payments, and to the appointment of IPs by IPCU on behalf of the SoS.

If cases are moved to another office address, the practitioner should immediately give written notice of the move, and details of the files involved and the new office address, to both IPCU and the relevant OR.

Contact: Pat Christopher, IPCU
Tel: 0121 698 4104

8.   Carrying on Business Using Goods Vehicle Operator's Licenses

The Traffic Commissioners have asked the Service to remind practitioners that anyone who uses a goods vehicle above 3.5 tonnes gross vehicle weight in the course of a trade or business has to hold an operator's license. This includes both those who carry goods for hire and reward, and those who use lorries to carry their own goods. Similar provisions apply to operators of passenger services vehicles.

Licenses are granted by Traffic Commissioners based at six Traffic Area Offices (TAO). Holders of operator's licenses have to meet certain criteria including having sufficient financial resources to maintain the vehicles and being of "appropriate financial standing". An insolvent company or a bankrupt individual is unlikely to meet these requirements but the Traffic Commissioner has discretion to allow such a business to continue to operate.

The TAO that issued the license should be informed of any such business going into receivership, liquidation or bankruptcy. If the business is continuing to operate under an administrative receiver, liquidator or trustee, that person must seek the agreement of the Traffic Commissioner. If not, the license document and associated vehicle discs should be returned to the TAO - there may be a refund of fees payable. Addresses can be obtained from the telephone directory, or by telephoning 0117 975 5000.

9.    Enforcement Concordat

Insolvency Practitioners Section, London (IP Section) and Insolvency Practitioners Compliance Unit, Birmingham (IPCU) have responsibility for undertaking the Service's enforcement functions in respect of insolvency practitioners authorised by the Secretary of State. Enforcement in this context relates not only to authorisation, statutory compliance and related matters, but also to advisory and monitoring visits.

The Cabinet Office has developed a code of practice on enforcement, which all central government and local authority departments with enforcement functions have been encouraged to adopt. On 8 July 1999 the Service formally adopted the code of practice, although it was already applying the underlying principles.

The code of practice is embodied in the Enforcement Concordat, which sets out the principles of good enforcement, which are:

• Standards - IP Section and IPCU have drawn up clear standards setting out the level of service and performance that can be expected;
• Openness - IP Section and IPCU will be open about the way they work and will discuss general issues, specific compliance failures or problems. They will also provide information and assistance, although they are unable to give legal advice;
• Helpfulness - IP Section and IPCU will provide a courteous and efficient service. In addition, prevention is better than cure, and IPCU will work with practitioners to advise on and assist with compliance, particularly through monitoring visits and guidance visits on disqualification issues;
• Complaints about service - there is an effective and timely procedure for making and dealing with complaints where it is necessary to complain about IP Section and IPCU;
• Proportionality - if there is non-compliance by a practitioner, the regulatory action taken will depend on, and be proportionate, to the nature and seriousness of the breach; and
• Consistency - IP Section and IPCU will carry out their duties in a fair and consistent manner.

While the Enforcement Concordat only applies to insolvency practitioners authorised by the Secretary of State, officials in IP Section and IPCU will also strive to apply the Concordat's principles to all insolvency practitioners with whom they deal.

The Service is also encouraging the Recognised Professional Bodies to apply the Concordat's principles in their dealings with the insolvency practitioners they respectively authorise.

An explanatory leaflet is available from IP Section, and can be obtained by telephoning 020 7291 6771/2.

10.    Maintaining the Central Index Database

Part of the function of the Insolvency Practitioners Compliance Unit (IPCU) is to ensure that the Service database of insolvencies, the Central Index, is accurate. The information recorded about a case on the Central Index includes the name and address of the office holder. This information is in turn used by Central Accounting Unit (CAU) when processing requests by practitioners for cheques drawn on the ISA, and the issue of statements of receipts and payments. Consequently, in order to ensure that CAU provide a service that is as effective and efficient as possible it is imperative that the name and address of the office holder appointed in respect of a particular case is accurate and up to date.

Some practitioners currently write to IPCU when they transfer the administration of a case from one office holder within their practice to another, and this helps us keep the Central Index up to date. All practitioners are encouraged to adopt this approach, and IPCU are willing to accept written notification of any changes on a case by case basis, weekly or monthly, to suit the circumstances of each particular practitioner.

Practitioners are also reminded that they should notify IPCU of any change of address for their practice, eg when an office is permanently closed or relocated, or a new office is opened. Where an office is closed or relocated, practitioners should provide details of any cases moved as a result of the closure or relocation.

Contact: Gareth Limb, Insolvency Practitioners Compliance Unit, the Insolvency Service, 5^th Floor, Ladywood House, 45/46 Stephenson Street, Birmingham B2 4UZ (telephone 0121 698 4105)

11.    Redirection of a Bankrupt’s Post: Section 371 of the Insolvency Act 1986

The Service has recently issued guidance to ORs about applications for redirection of post, which is reproduced in part below.

Section 371 of the Insolvency Act 1986 permits the court to make an order, on the application of the OR or the Trustee, for the redirection of a bankrupt’s post to an address specified in the order. An application may be made without notice to the bankrupt, (see rule 7.5 of the Insolvency Rules 1986).

When seeking redirection orders, ORs have not usually provided the court with a substantial amount of information and have dealt with the matter in a summary way, largely relying on evidence of the bankrupt’s non-cooperation.

This approach was questioned by the Vice-Chancellor in a case reported as Singh v The Official Receiver [1997] BPIR 530. He said:-

"…in my view all applications to the court ought to be supported by something more substantial than merely a letter informing the courts that the order was being sought on the grounds of non-cooperation or whatever. The material ought to give chapter and verse of the non-cooperation relied on."

and

"I think that it is unreasonable for an application to be made in circumstances where the substantive allegation on which the application is based are not set out in some written form available to be provided to the bankrupt respondent".

Following these comments, and from observations made by courts in other cases, ORs now lodge a report, which explains in some detail why the redirection order is being sought. This gives the bankrupt an opportunity to see the case made against him/her so that he/she, can seek a review or rescission of the order if desired.

The Service has decided that an OR’s application for a redirection order should normally be made without notice to the bankrupt.

ORs have been informed that they should operate within the terms of a redirection order at all times. If, for example, post is redirected by the Post Office in error after the expiry of the order, ORs have been instructed to forward it unopened to the bankrupt. Any error by the Post Office should be drawn to its attention in writing. Items which are clearly of a personal nature should also be forwarded to the bankrupt, without delay, and without being copied. This is especially important when, for example, the bankrupt has sought legal advice, and his/her solicitor’s letter is redirected under the order. Similarly, payments of state benefits must be forwarded to the addressee without delay.

If redirection is necessary in a case where the bankrupt has co-operated, for example, where it is likely that remittances from customers might be sent to a former trading address, the bankrupt may consent to the redirection of his/her post from that address. If the redirection order is proving worthless – in the Singh case nothing was actually redirected – the arrangement may be ended.

12.    Application for Redirection of Mail by IPs

Royal Mail has confirmed that it will accept written applications from Insolvency Practitioners for the redirection of post, rather than requiring personal attendance at a post office. However, for security purposes the applications should be accompanied by:-

1. Where appropriate a sealed copy of the relevant court order made under s.371 Insolvency Act 1986;
2. a copy of the resolution, notice or other evidence of appointment as liquidator, receiver or trustee, which should be certified by a solicitor, and
3. the application form, signed as confirmation of authority to redirect the mail.

A list of Redirection Centre addresses is set out below:-

Anglia Redirection Centre Colnebank House 30 St Peters Street COLCHESTER CO1 1HY	London Redirection Centre 5 Almeida Street LONDON N1 1AA
Midlands Redirection Centre Royal Mail 2-3 Lakeside Festival Way STOKE ON TRENT ST1 5ST	North East Redirection Centre Royal Mail House 3rd Floor Forth Street NEWCASTLE UPON TYNE NE1 1AA
North West Redirection Centre Royal Mail 2nd Floor Castle Forgate SHREWSBURY	Scotland Redirection Centre 7 Strothers Lane INVERNESS 1V1 1AA SY1 1AA
Northern Ireland Redirection Centre Royal Mail 20 Donegal Quay BELFAST BT1 1AA	South Central Redirection Centre Surrey Street PORTSMOUTH PO1 1AR
South East Redirection Centre Royal Mail 2nd Floor Redstone Hill REDHILL RH1 1GG	South West Redirection Centre Royal Mail House 21 Oxford Street BOURNEMOUTH BH8 8AE

(First Published in Dear IP no.49, March 2000)

13.    Transfer of Scottish Widows Business to Lloyds TSB

In February the Court of Sessions in Scotland sanctioned the demutualisation of Scottish Widows and its sale to Lloyds TSB Group. As a result of the demutualisation, compensation will be payable at the end of June 2000 to qualifying members of Scottish Widows.

‘Qualifying members’ of Scottish Widows will receive £500 as fixed compensation (subject to minor exceptions, qualifying members are those with Scottish Widows policy at 22 June 1999 or those that had sent in a proposal for one by that date and in both cases keep up the policy.) In addition, qualifying members with ‘qualifying with profits policies’ will also be entitled to receive variable compensation based upon:

1. the nature of the policy;
2. when it was started; and
3. it’s length.

(Qualifying with profits policies are those that were taken out before 1 January 1999).

Insurance policies are property (as defined by section 436 of the Insolvency Act 1986) which vest in the trustee in bankruptcy (under Section 306 of that Act). The only exception to this is that any protected rights in pensions will not pass to the trustee in bankruptcy. In addition, if an occupational pension scheme’s rule, which are applicable at the date of the bankruptcy order, contain a valid forfeiture clause that forfeits the pension benefits on the making of such an order, then the trustee in bankruptcy will be unable to claim them for the benefit of the bankrupt’s creditors. It is the view of the Insolvency Service that any compensation payable ‘arises out of or is incidental to the property’, for the purposes of section 436 and, therefore, also vests in the trustee.

Solicitors acting for Scottish Widows have informed the Insolvency Service that when making the compensation payments it may not always be possible for Scottish Widows to identify bankruptcy situations. Insolvency practitioners may, therefore, wish to enter into correspondence in all cases where a bankrupt or former bankrupt has a policy with Scottish Widows to ensure that, where appropriate, the compensation is paid to the bankruptcy estate.

Enquiries should be addressed to Shona Manson, The Insolvency Service, Technical Section, 21 Bloomsbury Street, London, WC1B 3QW (Telephone 020 72916778).

14.   Individual Insolvency Registers

The rules governing the Individual Insolvency Register are now placed in new Part 6A, including those relating to Individual Voluntary Arrangements (IVAs) (omission of rule 5.28).

Details will be maintained of Bankruptcy Orders, Individual Voluntary Arrangements, Bankruptcy Restrictions Orders, Interim Bankruptcy Restrictions Orders and Bankruptcy Restrictions Undertakings.

The registers will be maintained by the Secretary of State and made available to the public for inspection within office opening hours. The Secretary of State has an obligation to enter and remove such information as soon as reasonably practicable (new rule 6A.1)

Rectification of inaccuracies on any register to be made as soon as reasonably possible and the date of death of a bankrupt is to be recorded on the register on receipt of notice to that effect (new rule 6A.8).

Information relating to all existing and new IVAs and fast-track IVAs (see Article 17, Chapter 24 of this issue) is to be entered on receipt of the appropriate notice.

Those details are to be deleted immediately on notice of the completion, termination or revocation of the IVA (new rules 6A.2 to 6A.3).

Information is to be entered relating to all existing bankruptcies and to new bankruptcy orders on receipt of the order from the court.  Such details are to be deleted immediately on notice of the bankruptcy order having been annulled or rescinded and after three months from the date of discharge (new rules 6A.4 to 6A.5).

Information relating to Bankruptcy Restrictions Orders, Interim Bankruptcy Restrictions Orders and Bankruptcy Restrictions Undertakings to be entered when made or accepted.  Such details to be deleted immediately on expiry or ceasing to have effect (new rules 6A.6 to 6A.7).

The new rules above replace existing rules 6.223A to 6.223C, which are omitted.

General enquiries may be directed to Policy.unit@insolvency.gsi.gov.uk
Telephone: 0207 291 6740  

15.  Proof of Debt forms in bankruptcy and company liquidation 

From 1 April 2004 it will no longer be necessary for a proof of debt form to be sent to all creditors in every bankruptcy case.  Rule 6.97 has been amended to provide that a creditor must be sent a proof of debt form upon request but other than that the trustee will be able to send out proof of debt forms at his/her discretion. 

Official receivers will issue proof of debt forms to creditors where a creditors’ meeting is convened for the appointment of a trustee, and insolvency practitioners should, following appointment as trustee, continue to receive the proofs from the official receiver after handover of the estate.  However, there may be cases where a trustee is appointed and where the official receiver has not issued proof of debt forms. 

The proof of debt form (form 6.37) has been simplified and is now a one‑page document. 

Rule 6.146(2) has been deleted.  It will no longer be necessary for a trustee to file proof of debt forms at court when he/she has completed the administration of the bankrupt’s estate. 

Equivalent changes have been made for compulsory liquidation (rule 4.74, form 4.25 and rule 4.138(2)).  No changes have been made to the current procedure for voluntary liquidations.  

General enquiries may be directed to Policy.unit@insolvency.gsi.gov.uk
Telephone: 0207 291 6740

16.   Guidance to Official Receivers (ORs) on case administration 

Some IPs have asked if they can be informed of changes in the guidance given to ORs on the case administration of bankruptcies and compulsory liquidations as a result of the Enterprise Act. 

Guidance on case administration generally is made available to ORs and their staff in the form of a Technical Manual (Volume 1) and a Case Help Manual.  The Technical Manual is likely to be of most interest to IPs and contains full legislative references.  The Case Help Manual explains the processes to be adopted within the ORs’ offices, e.g. which statutory and internal forms and computer screens need to be completed, in order to give effect to the guidance contained in the Technical Manual. 

The manuals are published on The Insolvency Service’s website under The Service’s Freedom of Information Act 2000 publication scheme at: www.insolvency.gov.uk/pubsscheme/main.htm .  Both manuals are being updated to take account of the changes provided by the Enterprise Act 2002 and related secondary legislation and the revisions should be available from 1 April 2004. Hard copies of the Manuals are not available.

17.   Information to Official Receivers following the Court of Appeal decision in Spectrum Plus Limited 

Following the decision of the Court of Appeal in the matter of National Westminster Bank plc v Spectrum Plus Limited and others  [2004] All ER (D) 390 (May) the case will be referred to the House of Lords.  Until that hearing it is difficult for the Insolvency Service to provide definitive guidance on this issue.  However, insolvency practitioners may be interested to read the advice recently prepared for Official Receivers, an extract of which is set out below.  

Sir Andrew Morritt gave judgment in the High Court in the matter of National Westminster Bank plc v Spectrum Plus Limited and others [2004] 2 WLR 783.  The Vice-Chancellor, in giving judgment, followed the position of the Privy Council in the matter of Agnew v The Commissioners of Inland Revenue (Brumark).

The Bank appealed the decision of the Vice Chancellor.  On 26 May 2004 the Court of Appeal gave a unanimous decision and allowed the appeal. 

The Court of Appeal was comprised of the Master of the Rolls, Lord Philips, Lord Justice Jonathan Parker and Lord Justice Jacob.  In allowing the appeal they upheld the decision in Siebe Gorman & Co Limited v Barclays Bank Ltd [1979] 2 Lloyds Rep 142, (Siebe Gorman). 

As a consequence the position of fixed charges over book debts remains confused.  HM Customs & Excise, the Commissioners of Inland Revenue and the Secretary of State for Trade and Industry, who are joint respondents in this matter, will seek permission to appeal to the House of Lords. 

The Court of Appeal found that the debenture held by the National Westminster Bank plc (the Bank) over the assets of Spectrum Plus Limited (Spectrum) did create a fixed charge over book debts.  The debenture followed a standard form used over the last 25 years by all major clearing banks.  The terms of the debenture, essentially, follow the clauses which had been approved as creating an effective fixed charge over present and future book debts by Mr Justice Slade in the case of Siebe Gorman. 

Official Receivers may recall that in the Spectrum case in the High Court the Vice Chancellor had drawn heavily on the decision of the Privy Council in the case of Brumark and Lord Millett's three-staged process in deciding whether a charge was a fixed charge or a floating charge.  Applying those conclusions, the Vice Chancellor determined that a restriction within the debenture, which nevertheless allows the collection and free use of the proceeds of the book debts, is inconsistent with the nature of a fixed charge.  The Vice Chancellor "very reluctantly" concluded that Siebe Gorman was wrong. 

The Court of Appeal overturned this decision and concluded that Siebe Gorman should be upheld.  A prohibition on disposing of book debts prior to collection, together with an obligation to pay the proceeds into an account, in the judgment of the Court of Appeal was sufficient to give rise to a fixed charge on book debts.  If the bank is in a position to exercise control over the book debts, then this is sufficient, whether or not the bank does exercise that control. 

The Court also considered that, notwithstanding that Siebe Gorman was upheld on legal grounds, Siebe Gorman should be upheld on public policy grounds.  Over the last 25 years banks, borrowers and guarantors have proceeded on the basis that debentures based on the Siebe Gorman decision will create a fixed charge over book debts.  The need for commercial certainty requires that Siebe Gorman be followed. 

Conclusion 

It is anticipated that leave to appeal to the House of Lords will be granted.  Whilst it is hoped that the matter might be dealt with expeditiously, there is still some time to go before the matter is determined conclusively. 

Official Receivers should therefore continue to follow advice previously given in relation to book debts where the charge is considered to be a floating charge as the elements of control, as described in Brumark, over the collection and disposition of the debts are absent.  That advice was to agree a way forward with the debenture holder so that the collection of debts is not imperilled, and to deposit the realisations in a suspense or other appropriately named account and held until the legal position becomes clearer. 

Offers by debenture holders, for example, to divide (disputed) book debt realisations equally to enable a case to be closed pending further appeal in the Spectrum case should still be refused but if, in the unlikely event that creditors, including creditors for liquidation expenses, are willing to consent to such an arrangement in an individual case, without setting a precedent, to progress it, such an offer might be accepted.  

Note: Leave to appeal to the House of Lords has been granted since the guidance was provided to Official Receivers.  

General enquiries may be directed to IP Policy Section Email: IPPolicy.Section@insolvency.gsi.gov.uk
Telephone: 020 7291 6772

18. Guidance issued to Insolvency Service staff regarding allowable expenses when considering an income payments agreement (IPA) or income payments order (IPO) 

In response to queries raised, IPs may be interested in the following guidance issued to Official Receivers. 

In order to achieve as consistent a policy as possible when dealing with IPAs and/or IPOs, an internal notice was issued to Insolvency Service staff setting out guidance on what may be regarded as acceptable family expenditure before an IPA or IPO should be considered. This guidance has now been incorporated into Chapter 31.7 of the Insolvency Service’s Technical Manual, which is general guidance to staff on the administration of bankruptcy and compulsory liquidation cases and is available on‑line through the Freedom of Information Publications Scheme (www.insolvency.gov.uk/pubsscheme). It should be remembered that the guidance is exactly that – ie guidance.  Individual cases and circumstances will always be considered on their own merits. 

In addition to the Technical Manual, Insolvency Service staff are guided towards the Family Expenditure survey, which is carried out each year by the Office of National Statistics. A link to the family Spending Review for 2002/03 is: www.statistics.gov.uk/StatBase/Product.asp?vlnk=361.  

Once a person’s real disposable income has been assessed, ie the income remaining after all expenditure necessary to finance the reasonable domestic needs of the bankrupt and his/her family, the Service guide is that between 50 and 70% of this should be sought by way of monthly payments under an IPA or, if necessary, an IPO. As a general rule, the higher the real disposable income, the higher the percentage which should be sought.  Guidance as to what amount is appropriate is contained in the table attached. Again, it should be stressed, this is a guide to staff only; all cases should be judged on their own merits and circumstances. 

General enquiries may be directed to oros@insolvency.gsi.gov.uk;
telephone: 020 7291 6824

19.   Joint Insolvency Committee’s response to the Insolvency Practices Council’s recommendations 

In their 2003 Annual Report the Insolvency Practices Council (IPC) made four recommendations to the bodies involved in the insolvency profession.  The Annual Report can be viewed in full on the IPC’s website at www.insolvencypractices.co.uk. 

The Joint Insolvency Committee (JIC) has recently responded to the IPC on their recommendations, and practitioners may be interested to read a summary of both recommendations and the responses, which are given below: 

Recommendation 1 

Individual Voluntary Arrangements (IVA) 

The IVA as currently structured is too complex and, therefore too expensive for cases of personal indebtedness.  Consideration should be given by the profession in conjunction with the Insolvency Service to designing a simpler product, which would suit many more cases. 

JIC response 

The JIC fully support the comments made within your first recommendation.  This issue has been debated in many forums recently and we hope that your comments will assist the debate, which must be channelled towards the development of an alternative procedure.

We have written in these terms to the Insolvency Service and look forward to contributing to the progress of this issue in future. 

Recommendation 2 

Regulation and monitoring 

The Recognised Professional Bodies (RPBs) need to adopt a more pro-active approach to regulation and not just when a complaint is made.  This may well require an enhancement of the number and quality of monitoring staff. 

JIC response 

The JIC is extremely concerned at the comments made within your second recommendation and in the body of the report concerning regulation and monitoring.  The comments are made without reference to any substantive supporting evidence and without identifying clearly how regulation and monitoring is not working.  

Although the substance of your report identifies the Joint Insolvency Monitoring Unit (JIMU) in particular, the JIC considers that the criticisms may be taken to apply across all monitors and considers it important to express its support for the monitors, both as to their quality and what they do; they are, after all, doing no more (and no less) than is required by the licensing bodies by which they are employed!

The monitoring system satisfies the Insolvency Service’s Principles for Monitoring Insolvency Practitioners.  Regular reviews are undertaken by the Insolvency Service and no suggestions for substantive change have been made. 

The monitors meet on a regular basis to exchange views and to ensure consistency of approach. All monitors are aware of the importance of distinguishing between significant issues such as remuneration, bonding, accuracy of information and disclosure against less significant details. However, even some areas which could be regarded as minutiae must be drawn to the attention of the IP as these are invariably statutory requirements. They are likely to contribute to an overall assessment of how the IP is performing.  The significance of the issue raised will be a factor in considering whether regulatory action is necessary. 

If the IPC does in fact have evidence to support its assertions, the JIC would ask that details of the evidence are now provided to it, or to the licensing bodies individually, if this is more appropriate.  That would provide a better and clearer basis for discussion about the comments and recommendations. 

Recommendation 3 

Joint Disciplinary Body 

The RPBs could consider creating a joint disciplinary body in a similar way to that created by the Actuaries or at least a joint fact-finding and investigation unit. 

JIC response  

The Report does not indicate why the insolvency profession would be better served by the creation of a joint disciplinary body or fact-finding and investigation unit.  Without further persuasive arguments, the JIC cannot see any merit in taking this recommendation forward.  

Recommendation 4 

Aged Bankruptcy Cases 

The large number of old bankruptcy cases being passed out by the Protracted Realisations Unit of the Insolvency Service are being dealt with in many different ways by IPs.  There does not appear to be a standard approach and we recommend that the Insolvency Service issue some form of guidance. 

JIC response 

The Insolvency Service has now issued a protocol for IPs handling cases which have been passed to them from the Protracted Realisations Unit.  This will alleviate concerns that practitioners are handling these cases in a variety of different ways.  The JIC noted that the Insolvency Service required practitioners to “sign up” to the protocol and would refer any cases where practitioners did not follow the protocol to their licensing body. 

General enquiries may be directed to IP Policy Section Email:
IPPolicy.Section@insolvency.gsi.gov.uk
Telephone: 020 7291 6740

20.   New chairman appointed for the Insolvency Practices Council (IPC) 

IPR Services Ltd, the company that funds the IPC, has appointed Geoffrey Fitchew to succeed Graham Kentfield, the first chairman of the IPC who retires in December 2004. 

Geoffrey Fitchew was Chairman of the Building Societies Commission and Chief Registrar of Friendly Societies until 2002.  He was formerly a senior civil servant in the Cabinet Office and H M Treasury.   

The IPC is an independent advisory body formed in 2000 that examines the professional and ethical standards of the insolvency profession.  Further information about the IPC is available from www.insolvencypractices.co.uk. 

General enquiries may be directed to IP Policy Section Email:
IPPolicy.Section@insolvency.gsi.gov.uk
Telephone: 020 7291 6740

21. Joint Insolvency Committee 

The 2004 Annual Report of the Joint Insolvency Committee (JIC) has been available on the Insolvency Service Website http://www.insolvency.gov.uk/information/iparea/jic.htm  since April 2005. As insolvency practitioners will be aware the JIC was formed in 1999 and two of its most important functions remains the promotion of standards amongst insolvency practitioners and the provision of guidance of a regulatory, ethical or best practice nature. 

With the aim of clarifying the status of Statements of Insolvency Practice (SIPs) during the past year the JIC has revised the introduction common to all SIPs. A revised SIP 9 on the remuneration of office holders was issued together with a new SIP 15  (Reporting and providing information to Committees).  The JIC has also been instrumental in drafting guidance papers on different aspects of insolvency which are  not covered by SIPs and, although not prescriptive, will provide practical solutions to the type of problems that insolvency practitioners encounter. The first two papers on the “Control of cases” and “Succession planning” were issued by the Authorising Bodies in early April 2005. 

As part of its efforts to promote good communication and consistency between the regulatory bodies the JIC also held a Regulatory Forum on 12 May 2005. This considered regulation from the view of not only the regulatory authorities but also other interested groups. Selected speakers representing the views of bond providers, government departments as creditors in insolvency proceedings and the Insolvency Practices Council (representing the public interest) were in attendance. Following the morning speakers, delegates were invited to submit written questions which were then used to form the basis of the discussion led by JIC members in the afternoon. The JIC panel selected four topics, Industry Intelligence, Value for money, Consistency, and Monitoring which were felt to be of most interest to the forum and the discussions on these topics were wide ranging. The JIC has agreed to consider further the issues raised as part of its working agenda. 

The JIC has continued its work on a revised version of the Ethical Guide which began in 2004 and this is expected to continue through 2005. The Committee also continued to develop its relationship with such bodies as R3 and the IPC and engaged in reviews of aspects of insolvency law.

General enquiries may be directed to IP Policy Section Email:
IPPolicy.Section@insolvency.gsi.gov.uk
Telephone: 020 7291 6740

22. Practice Note on the Hearing of Insolvency Proceedings 

1. The following statement was issued by the Vice-Chancellor on 23 May 2005.  

2. This Practice Note supersedes all previous Practice Statements of the Bankruptcy Registrars dealing with jurisdiction and work distribution and the Guidelines issued by the Insolvency Court Users’ Committee in November 1988. 

3. As a general rule all petitions, claims and applications (except for those listed in paragraph 4 below) should be listed for initial hearing before a registrar or district judge in accordance with rule 7.6(2) Insolvency Rules 1986. 

4. The following applications should always be listed before a judge: 

Proceedings relating to insolvent companies 

• applications for committal for contempt
• applications for an administration order
• applications for an injunction
• applications for the appointment of a provisional liquidator
• interim applications and applications for directions or case management after any proceedings have been referred or adjourned to the judge (except where liberty to apply to the registrar or district judge has been given);

Proceedings relating to insolvent individuals 

• applications for committal for contempt
• applications for an injunction

• interim applications and applications for directions or case management after any proceedings have been referred or adjourned to the judge (except where liberty to apply to the registrar or district judge has been given). 

5. When deciding whether to hear proceedings themselves or refer or adjourn them to the judge, the registrar or district judge should have regard to the following factors: 

• the complexity of the proceedings
• whether the proceedings raise new or controversial points of law
• the likely date and length of the hearing
• public interest in the proceedings
• the availability in the court which is likely to hear the proceedings of relevant specialist expertise.

6. Litigants and their advisors are reminded that paragraph 17 of the Practice Direction on Insolvency Proceedings applies to appeals and that an appeal from a registrar, district judge or County Court judge lies, in the first instance and without permission, to a single judge of the High Court. 

General enquiries may be directed to Policy.unit@insolvency.gsi.gov.uk;

Telephone: 020 7291 6740

23. Relief for the Indebted –An Alternative to Bankruptcy? 

This Insolvency Service consultation concerning a proposed non-court based debt relief procedure for individuals who owe relatively little, have no means to pay their debts and are not able to access any of the currently available debt resolution procedures closed on 30^th June. 

We are in the process of analysing responses and will be issuing a report on the findings of the consultation in due course. 

General enquiries may be directed to Policy.unit@insolvency.gsi.gov.uk;

Telephone: 020 7291 6740

24. Update on the evaluation of the Enterprise Act 2002 and prescribed part returns

The latest Interim Evaluation report is available on the Insolvency Service website, please click the link 

We expect to issue a final report towards the end of next year.

As part of the evaluation we wish to determine whether the prescribed part has been set at an appropriate level but unfortunately the number of prescribed part returns being submitted have decreased markedly and we would like to take this opportunity to request that insolvency practitioners continue to provide returns for all cases involving a floating charge where the proceedings commence up to April 2006.

A copy of the return is available from our website, please see the link below.

http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/legislation/prescribedpartreturn1.doc

Please return completed forms to insolvency.reform@insolvency.gsi.gov.uk, or to Prescribed Part Evaluation, Policy Unit, The Insolvency Service, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW.

General enquiries may be directed to Policy.unit@insolvency.gsi.gov.uk;

Telephone: 020 7291 6740

25. Meeting with Compliance Managers

In Dear IP Issue No 22, March 2005, expressions of interest were sought for a meeting between compliance managers and monitors of the RPBs and the Secretary of State.

Two meetings were subsequently held in September 2005. The first was attended by 11 compliance managers of the larger Insolvency Practitioner firms and the second by 11 compliance managers of medium sized Insolvency Practitioner firms.

Several topics were discussed, including monitoring visits where practitioners were authorised by different authorising bodies; continuity between monitoring visits; qualitative value; compliance implications of a paperless office; the Leyland Daf decision and Money Laundering.

It is considered that the meetings were a success and will pave the way for more and better communication between those involved in compliance within the Insolvency Profession and the monitors. Consideration will be given to holding similar meetings in the future.

I would like to thank all of those who expressed an interest in these meetings, and who took part. If anyone wishes to obtain a copy of the notes of either meeting they should e-mail me.

General enquiries may be directed to IPU.Email@insolvency.gsi.gov.uk

26. JIEB Examiner vacancies

JIEB has a vacancy for an examiner on the Administrations, Company Voluntary Arrangements and Receiverships papers. A job description, details of the individual responsibilities of examiners and how to apply are given in an annex attached to this chapter. The closing date is 20 January 2006.

Any enquiries arising from this article should be directed towards Mike Chapman of Insolvency Practitioner Policy Section, tel: 020 7291 6765, email mike.chapman@insolvency.gsi.gov.uk

27. Responding to correspondence 

Insolvency practitioners are reminded that in late 2001 / early 2002 the authorising bodies urged their practitioners to respond to correspondence in a timely manner (a period of ten working days was suggested by some bodies), where appropriate by sending an acknowledgement if a substantive response could not be provided within that timescale.  Insolvency practitioners are also reminded that in accordance with the Ethical Guide they should conduct themselves with courtesy and consideration towards all with whom they come into contact during the course of performing their work and that failure to follow that guidance could constitute misconduct. 

Complaints about a breakdown in communications or a failure by some insolvency practitioners to communicate continue to form a significant proportion of complaints to the authorising bodies (16% to 18% in 2003 and 2004).  It is appreciated that the nature of the work of insolvency practitioners is such that they may occasionally encounter individuals whose expectations they are unable to meet, but a clear explanation of the facts at an early stage, together with details of the practitioner’s internal complaints procedure (if any) or contact details of the practitioner’s authorising body should help to resolve differences.

General enquiries may be directed to IP Policy Section Email:

IPPolicy.Section@insolvency.gsi.gov.uk

Telephone: 020 7291 6772      

28. Insolvency Practitioner’s details 

Practitioners will be aware that one of the responsibilities of the Insolvency Practitioner Unit (IPU) is to ensure the accuracy of Insolvency Practitioner’s details held on The Service’s database. The information is required by Official Receivers to ensure accurate production of Secretary of State applications, by IP Banking when dealing with cheque requisitions from office holders and, where appropriate, for publication on The Insolvency Service website. 

An exercise recently carried out by IPU to update insolvency practitioner’s details canvassed all practitioners and resulted in some 900 amendments being made to the database including the removal of 123 entries.

As insolvency practitioners become increasingly transient, the onus on them to

ensure the Unit is kept up to date is even greater.   

General enquiries may be directed to IPU.Email@insolvency.gsi.gov.uk   

29. Update on research projects commissioned by The Insolvency Service.

As part of our commitment to evaluate the provisions of the Enterprise Act 2002, The Insolvency Service has commissioned several research projects. On the Corporate side, these are: 

(1)   ‘Report on Insolvency Outcomes’ by Dr Sandra Frisby from the University of Nottingham. This report is based on the findings of research conducted between November 2004 and May 2006 and consisted of the construction of a database of 2063 companies, which entered into administration or administrative receivership between September 2001 and September 2004. Additionally a series of interviews with insolvency practitionerss and bankers was carried out in order to amplify and explain the trends recorded in the database. 

(2)   ‘Study of Administration Cases’ by Alan Katz and Michael Mumford, Research Fellows at the International Centre for Research in Accounting at Lancaster University. This paper considers changes in the use of administration relative to other corporate insolvency procedures and focuses on whether there may have been some substitution of administration for liquidation. The study also assesses the extent to which cases that went into administration during 2004 could be shown to meet the statutory purpose of administration. 

(3)   ‘The Impact of the Enterprise Act 2002 on Realisations and Costs in Corporate Rescue Proceedings’ by John Armour, Audrey Hsu and Adrian Walters, Research Fellows at the Centre for Business Research, Cambridge University, Department of Accounting, National Taiwan University and Nottingham Trent University respectively. In particular, this study compares the operation of the new streamlined administration procedure to that of administrative receivership. 

Full copies of their reports can be found on our website, along with other research papers and can be accessed here. 

The Insolvency Service has hosted seminars for the authors to present their findings, which have resulted in informative discussion amongst those present. We are sure you will find these papers of equal interest. 

The Insolvency Service is committed to developing evidence-based policy and to support this, it undertakes research and evaluation to: 

• Ensure the delivery of outcomes that both fit within Departmental objectives and Governmental policies, and meet the requirements of ‘the market’; and
• Utilise its unique position of having responsibility for both policy development and operational delivery for the benefit, and with the involvement, of its stakeholders.

Details of evaluation work undertaken by The Insolvency Service can also be found on our website and can be accessed here. 

Final evaluation reports of the Enterprise Act 2002 will be published later this year. 

Telephone: 0207 291 6740

30. UNCITRAL CLOUT Correspondent 

The means for collecting and disseminating court judgments and arbitral awards that relate to legal texts emanating from the work of the UNCITRAL (United Nations Commission on International Trade Law) Commission is known as ‘Case Law on UNCITRAL Texts’ (CLOUT).  

The collection of court judgements and arbitral awards and the preparation of abstracts thereon is done by National Correspondents designated by States who are party to an UNCITRAL Convention, or States that have enacted legislation based on an UNCITAL Model Law. 

As the UNCITRAL Model Law on Cross-Border Insolvency has been enacted within Great Britain (The Cross-Border Insolvency Regulations 2006 (SI 2006/1030) came into force on 4th April 2006), we have deemed it appropriate to appoint a National Correspondent in respect of cross border insolvency matters. 

Professor Ian F. Fletcher, Professor of International Commercial Law, University College London and a Barrister at 3-4 South Square, Gray’s Inn, London has kindly accepted our invitation to take on this role. 

The primary task of the National Correspondent is to collect judgments issued by the courts in Great Britain and to prepare abstracts and forward them to the Secretariat of the UNCITRAL Commission. The abstracts submitted are then translated and published in all six UN Languages, and available on the CLOUT website at:

http://www.uncitral.org/uncitral/en/case_law.html 

To assist Professor Fletcher, in his role as the designated reporter for Great Britain, it is important that he becomes aware of any cases where the Model Law is used (including possibly some which do not reach court, e.g. because a party from whom information is required realises that the Model Law makes it inevitable that they will have to comply in the end).  

To this end, if you or any of your colleagues were involved in a Model Law application, it would be very much appreciated if you could supply the following information to Professor Fletcher: 

1)     Full name of the case and any identifying reference numbers, such as court listing number;

2)     Neutral citation where allocated;

3)     Names of the court and of the judge;

4)     Date(s) of hearing and decision;

5)     If possible, some information about the subject matter of the application, details of the articles of the Model Law that are invoked for the purposes of the application/decision – and (where available) any transcript of the case;

6)     If the case is reported in a citable series of reports, those details should be included. 

In addition, it would be helpful if the names of the parties’ legal representatives were also provided. 

Could you please send details to Professor I.F. Fletcher, Faculty of Laws, University College London, Bentham House, Endsleigh Gardens, London WC1H 0EG. If using electronic communication, the following address should be used: i.f.fletcher@ucl.ac.uk

Any enquiries regarding this article should be directed towards Muhunthan Vaithianathar, Policy Unit, Area 5.7, 21 Bloomsbury Street, London, WC1B 3QW; telephone: 020 7637 6515, email: muhunthan.vaithianathar@insolvency.gsi.gov.uk

General enquiries may be addressed to Policy.unit@insolvency.gsi.gov.uk; Telephone: 0207 291 6740

31. Proposals for the reform of the debtor petition process 

In 2006, over 80% of bankruptcy orders made in England and Wales were from debtors petitioning for their own bankruptcy.  The increase in the number of bankruptcy orders made in the last four to five years, particularly debtors own petitions, has undoubtedly contributed to the strain on HM Court Services’ resources. 

In some parts of England and Wales debtors face a wait of up to four months from initial contact with the courts to obtaining debt relief via a bankruptcy order. Other court users also face lengthy delays as court staff deal with non-contentious debtor petitions.  If one considers that the role of the court is to resolve disputes, it can be argued that as there is no dispute in a debtor’s petition case, there is no need for the debtor to go through the court system in this first instance. 

Proposal 

The Insolvency Service is therefore proposing to remove the requirement that the debtor must file a petition for bankruptcy at court.  Instead, the Official Receiver could make the bankruptcy order administratively, thus freeing up the court’s time to deal with creditor’s petitions, public examinations, bankruptcy restriction orders, income payment orders, and other contentious matters and civil processes. 

Consultation

Since 22 October 2007 we have been inviting all interested parties to take part in the consultation on the above proposals.  The consultation document, entitled ‘Bankruptcy:  proposals for reform of the debtor petition process’ can be accessed at The Insolvency Service website in the live consultation register, or at the following address: 

http://www.insolvency.gov.uk/insolvencyprofessionandlegislation/con_doc_register/registerindex.htm 

The consultation closes on 11 January 2008. 

Any enquiries regarding the consultation or requests for hard copies of the proposal document should be directed to Maria Isanzu, Policy Unit, Area 5.7, 21 Bloomsbury Street, London WC1B 3QW; telephone: 020 7291 6733 email: maria.isanzu@insolvency.gsi.gov.uk.   

General enquiries may be directed to