INSOLVENCY MATTERS: Winding up the High Court


INSOLVENCY Service proposals to change the current court process to an online service for petitioning for bankruptcy and winding-up have come under some criticism by no less than the High Court’s chief bankruptcy registrar Stephen Baister. Speaking at the Insolvency Practitioners Association’s annual


lecture back in January, Mr. Baister blasted the new proposal as preposterous.


The IS, during a public consultation on the 7th November 2011, have sought to drive reforms through to simplify and streamline the administrative route arguing that the vast majority of creditor petitions are not actually contested at court. In cases where there was no dispute they argued that their proposals would help to alleviate the overstretched court system, allowing the court more time to focus on complex cases. Mr. Baister argued that an online system for non disputers would not actually take into account ‘ostrich’ debtors, ie, those debtors who chose to ignore any form of communication sent by a creditor or adjudicator preferring to ‘bury their heads in the sand’. The result, he said, would result in: “even more bankruptcies and company liquidations”.


Ostrich debtors


He commented that Ostrich debtors often left it until they received a court appearance request before taking any action, at which time it is then in the creditor’s interest to give them a chance at a court hearing. Mr. Baister stated that:


“Currently many winding-up petitions result in settlement of the debt, often very late in the process – in the ‘last chance saloon’, perhaps after a court adjournment and that many of these cases could, in the future, end up with businesses being shut and employees dismissed.” With proposals that the new online service would be ‘manned’ by civil servants Mr. Baister also questioned whether a government employee would have the necessary experience, knowledge and competence to adjudicate on the validity of disputes in what could be potentially complex areas of law. He also commented on the inherent confl ict which would exist in placing the adjudicator


in the same government agency as the Offi cial Receiver. He went on to say: “The fact that a petition is not in dispute, doesn’t mean you make a bankruptcy order. There are lots of cases where the debt hasn’t been disputed but the order is refused. Deciding when to adjourn really is quite tricky. “Since 1986, making an order always involved discretion and in all cases, that discretion should only be exercised by a judge.”


In cases of dispute, he said that the only way to stop the civil servant adjudicator processing the case would be to apply to the court – which he felt was absurd!


“The only way would be to make an application to the court to get it out of the adjudicator’s hands and pay £80 for the privilege. This is the fi rst time that anyone has ever had to pay to defend themselves as far as I am aware.”


He added that: “Everyone is entitled to a fair and


By Amanda Ireland, MFW Partner and Insolvency Practitioner


public hearing. The lack of public scrutiny bothers me. It may be inconvenient to the government… but there is a practical value in a hearing.” In operating with a purely administrative ‘automatic’ mechanism to obtain a bankruptcy order, this he felt may well be the ‘thin end of the wedge’ and asked whether setting such a precedent which could in turn lead to matters such as ‘undisputed’ divorces, amongst other issues being potentially processed without any court involvement?


‘ ’


Discretion should be exercised by a judge


VERY SMART THINKING!


HMRC have announced that it has changed its interpretation of the legal defi nition of ‘telephone apparatus’ to now include mobile phones and smartphones. The announcement, which was made public in Customs & Revenue Brief 02/12 means that BlackBerrys, iPhones and other smartphones will no longer be viewed as benefi ts in kind.


Under the department’s interpretation of s316 of the Income Taxes (Earning and Pensions) Act 2003 there will be no assessment of a benefi t in kind if the employer provides a single device whose sole purpose is to allow an employee to perform their job, on the condition that private use is not signifi cant. As a result, employers will no longer need to record use of smartphones on P11Ds, nor pay Class 1A NICs on the supposed benefi ts of these.


Employers and employees alike can also seek refunds on amounts paid going back to 2007-2008. This ruling does not apply to PDAs, sat nav devices, tablet/laptop computers and devices which use voice over internet protocol (VoIP) to make calls. Contact your MFW offi ce for more information or for further assistance on making a claim.


Business Matters 7


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