PRACTICE DIRECTION – INSOLVENCY PROCEEDINGS

Insolvency Rule 4.11(2)(b) is mandatory, and designed to ensure that the class remedy of winding up by the court is made available to all creditors, and is not used as a means of putting pressure on the company to pay the petitioner's debt. Failure to comply with the rule, without good reason accepted by the court, may lead to the summary dismissal of the petition on the return date (Insolvency Rule 4.11(5)). If the court, in its discretion, grants an adjournment, this will be on condition that the petition is advertised in due time for the adjourned hearing. No further adjournment for the purpose of advertisement will normally be granted.

Copies of every advertisement published in connection with a winding up petition must be lodged with the Court as soon as possible after publication and in any event not later than the day specified in Insolvency Rule 4.14 of the Insolvency Rules 1986. This direction applies even if the advertisement is defective in any way (e.g. is published at a date not in accordance with the Insolvency Rules, or omits or misprints some important words) or if the petitioner decides not to pursue the petition (e.g. on receiving payment).

In the High Court in order to assist practitioners and the Court the time laid down by Insolvency Rule 4.14 of the Insolvency Rules 1986, for filing a certificate of compliance and a copy of the advertisement, is hereby extended to not later than 4.30 p.m. on the Friday preceding the day on which the petition is to be heard. Applications to file the certificate and the copy advertisement after 4.30 p.m. on the Friday will only be allowed if some good reason is shown for the delay.

Applications for leave to amend errors in petitions which are discovered subsequent to a winding up order being made should be made to the Court Manager in the High Court and to the District Judge in the county court.

Where the error is an error in the name of the company, the Court Manager in the High Court and the District Judge in the county court may make any necessary amendments to ensure that the winding up order is drawn with the correct name of the company inserted. If there is any doubt, e.g. where there might be another company in existence which could be confused with the company to be wound up, the Court Manager will refer the application to the Registrar and the District Judge may refer it to the Judge.

Where an error is an error in the registered office of the company and any director or member of the company claims that the company was unaware of the petition by reason of it having been served at the wrong registered office, it will be open to them to apply to rescind the winding up order in the usual way.

Where it is discovered that the company had been struck off the Register of Companies prior to the winding up order being made, the matter must be restored to the list before the order is entered to enable an order for the restoration of the name to be made as well as the order to wind up.

The following applications shall be made direct to the Judge and, unless otherwise ordered, shall be heard in public:

(1)	Applications to commit any person to prison for contempt;

(2)	Applications for urgent interim relief (e.g. applications pursuant to s.127 of the Act prior to any winding up order being made);

(3)	Applications to restrain the presentation or advertisement of a petition to wind up; or

(4)	Applications for the appointment of a provisional liquidator;

(5)	Petitions for administration orders or an interim order upon such a Petition;

(6)	Applications after an administration order has been made pursuant to s.14(3) of the Act (for directions) or s.18(3) of the Act (to vary or discharge the order);

(7)	Petitions to discharge administration orders and to wind up;

(8)	Applications pursuant to s.5(3) of the Act (to stay a winding up or discharge an administration order or for directions) where a voluntary arrangement has been approved;

(9)	Appeals from a decision made by a County Court or by a Registrar of the High Court.

Subject to paragraph 5.4 below all other applications shall be made to the Registrar or the District Judge in the first instance who may give any necessary directions and may, in the exercise of his discretion, either hear and determine it himself or refer it to the Judge.

The following matters will also be heard in public:

(1)	Petitions to wind up;

(2)	Public examinations;

(3)	All matters and applications heard by the Judge, except those referred by the Registrar or the District Judge to be heard in private or so directed by the Judge to be heard.

In accordance with directions given by the Lord Chancellor the Registrar has authorised certain applications in the High Court to be dealt with by the Court Manager of the Companies Court, pursuant to Insolvency Rule 13.2(2). The applications are:

(1)	To extend or abridge time prescribed by the Insolvency Rules in connection with winding up (Insolvency Rules 4.3 and 12.9);

(2)	For substituted service of winding up petitions (Insolvency Rule 4.8(6));

(3)	To withdraw petitions (Insolvency Rule 4.15);

(4)	For the substitution of a petitioner (Insolvency Rule 4.19);

(5)	By the Official Receiver for limited disclosure of a statement of affairs (Insolvency Rule 4.35);

(6)	By the Official Receiver for relief from duties imposed upon him by the rules (Insolvency Rule 4.47);

(7)	By the Official Receiver for permission to give notice of a meeting by advertisement only (Insolvency Rule 4.59);

(8)	To transfer proceedings from the High Court to a County Court (Insolvency Rule 7.11);

(9)	For permission to amend any originating application.

[N.B. In District Registries all such applications must be made to the District Judge.]

The Court will draw up all orders except orders on the application of the Official Receiver or for which the Treasury Solicitor is responsible under the existing practice.

Any application for the rescission of a winding up order shall be made within seven days after the date on which the order was made (Insolvency Rule 7.47(4)). Notice of any such application must be given to the Official Receiver.

Applications will only be entertained if made (a) by a creditor, or (b) by a contributory, or (c) by the company jointly with a creditor or with a contributory. The application must be supported by written evidence of assets and liabilities.

In the case of an unsuccessful application the costs of the petitioning creditor, the supporting creditors and of the Official Receiver will normally be ordered to be paid by the creditor or the contributory making or joining in the application. The reason for this is that if the costs of an unsuccessful application are made payable by the company, they fall unfairly on the general body of creditors.

Cases in which the making of the winding up order has not been opposed may, if the application is made promptly, be dealt with on a statement by the applicant’s legal representative of the circumstances; but apart from such cases, the court will normally require any application to be supported by written evidence.

There is no need to issue a form of application (Form 7.2) as the petition is restored before the Court.

An application to restrain presentation of a Winding-up petition must be made to the Judge by the issue of an Originating Application (Form 7.1).

The following applications shall be made direct to the Judge and unless otherwise ordered shall be heard in public:

(1)	Applications for the committal of any person to prison for contempt;

(2)	Application for injunctions or for the modification or discharge of injunctions;

(3)	Applications for interlocutory relief or directions after the matter has been referred to the Judge.

All other applications shall be made to the Registrar or the District Judge in the first instance. He shall give any necessary directions and may, if the application is within his jurisdiction to determine, in his discretion either hear and determine it himself or refer it to the Judge.

The following matters shall be heard in public:

(1)	The public examination of debtors;

(2)	Opposed applications for discharge or for the suspension or lifting of the suspension of discharge;

(3)	Opposed applications for permission to be a director;

(4)	In any case where the petition was presented or the receiving order or order for adjudication was made before the appointed day, those matters and applications specified in Rule 8 of the Bankruptcy Rules 1952;

(5)	All matters and applications heard by the Judge, except matters and applications referred by the Registrar or the District Judge to be heard by the Judge in private or directed by the Judge to be so heard.

All petitions presented will be listed under the name of the debtor.

In accordance with Directions given by the Lord Chancellor the Registrar has authorised certain applications in the High Court to be dealt with by the Court Manager of the Bankruptcy Court pursuant to Insolvency Rule 13.2(2). The applications are:

(1)	by petitioning creditors: to extend time for hearing petitions (s.376 of the Act).

(2)	by the Official Receiver: (a)     To transfer proceedings from the High Court to a County Court (Insolvency Rule 7.13); (b)     to amend the full title of the proceedings (Insolvency Rules 6.35 and 6.47).

[N.B. In District Registries all such applications must be made to the District Judge.]

A statutory demand is not a document issued by the Court. Leave to serve out of the jurisdiction is not, therefore, required.

Insolvency Rule 6.3(2) (‘Requirements as to service’) applies to service of the statutory demand whether outside or within the jurisdiction.

A creditor wishing to serve a statutory demand outside the jurisdiction in a foreign country with which a civil procedure convention has been made (including the Hague Convention) may and, if the assistance of a British Consul is desired, must adopt the procedure prescribed by CPR Part 6.25. In the case of any doubt whether the country is a ‘convention country’, enquiries should be made of the Queen's Bench Masters' Secretary Department, Room E216, Royal Courts of Justice.

In all other cases, service of the demand must be effected by private arrangement in accordance with Insolvency Rule 6.3(2) and local foreign law.

When a statutory demand is to be served out of the jurisdiction, the time limits of 21 days and 18 days respectively referred to in the demand must be amended. For this purpose reference should be made to the table set out in the practice direction supplementing Section III of CPR Part 6.

A creditor should amend the statutory demand as follows:

(1)	For any reference to 18 days there must be substituted the appropriate number of days set out in the table plus 4 days, and

(2)	for any reference to 21 days there must be substituted the appropriate number of days in the table plus 7 days.

Attention is drawn to the fact that in all forms of the statutory demand the figure 18 and the figure 21 occur in more than one place.

The creditor is under an obligation to do all that is reasonable to bring the statutory demand to the debtor's attention and, if practicable, to cause personal service to be effected. Where it is not possible to effect prompt personal service, service may be effected by other means such as first class post or by insertion through a letter box.

Advertisement can only be used as a means of substituted service where:

(1)	The demand is based on a judgment or order of any Court;

(2)	The debtor has absconded or is keeping out of the way with a view to avoiding service and,

(3)	There is no real prospect of the sum due being recovered by execution or other process.

As there is no statutory form of advertisement, the Court will accept an advertisement in the following form:

STATUTORY DEMAND

(Debt for liquidated sum payable immediately following a judgment or order of the Court)

To (Block letters)

of

TAKE NOTICE that a statutory demand has been issued by:

Name of Creditor:

Address:

The creditor demands payment of £      the amount now due on a judgment or order of the (High Court of Justice          Division)(…………County Court) dated the      day of 199      .

The statutory demand is an important document and it is deemed to have been served on you on the date of the first appearance of this advertisement. You must deal with this demand within 21 days of the service upon you or you could be made bankrupt and your property and goods taken away from you. If you are in any doubt as to your position, you should seek advice immediately from a solicitor or your nearest Citizens’ Advice Bureau. The statutory demand can be obtained or is available for inspection and collection from:

Name:

Address:

(Solicitor for) the Creditor

Tel. No.                        Reference:

You have only 21 days from the date of the first appearance of this advertisement before the creditor may present a Bankruptcy Petition. You have only 18 days from that date within which to apply to the Court to set aside the demand.

In all cases where substituted service is effected, the creditor must have taken all those steps which would justify the Court making an order for substituted service of a petition. The steps to be taken to obtain an order for substituted service of a petition are set out below. Failure to comply with these requirements may result in the Court declining to file the petition: Insolvency Rule 6.11(9).

In most cases, evidence of the following steps will suffice to justify an order for substituted service:

(1)	One personal call at the residence and place of business of the debtor where both are known or at either of such places as is known. Where it is known that the debtor has more than one residential or business address, personal calls should be made at all the addresses.

(2)

Should the creditor fail to effect service, a first class prepaid letter should be written to the debtor referring to the call(s), the purpose of the same and the failure to meet with the debtor, adding that a further call will be made for the same purpose on the      day of            19      at      hours at                        (place). At least two business days notice should be given of the appointment and copies of the letter sent to all known addresses of the debtor. The appointment letter should also state that (a)     in the event of the time and place not being convenient, the debtor is to name some other time and place reasonably convenient for the purpose; (b)     (Statutory Demands) if the debtor fails to keep the appointment the creditor proposes to serve the debtor by [advertisement] [post] [insertion through a letter box] or as the case may be, and that, in the event of a bankruptcy petition being presented, the Court will be asked to treat such service as service of the demand on the debtor; (c)     (Petitions) if the debtor fails to keep the appointment, application will be made to the Court for an order for substituted service either by advertisement, or in such other manner as the Court may think fit.

(3)	In attending any appointment made by letter, inquiry should be made as to whether the debtor has received all letters left for him. If the debtor is away, inquiry should also be made as to whether or not letters are being forwarded to an address within the jurisdiction (England and Wales) or elsewhere.

(4)	If the debtor is represented by a Solicitor, an attempt should be made to arrange an appointment for personal service through such Solicitor. The Insolvency Rules enable a Solicitor to accept service of a statutory demand on behalf of his client but there is no similar provision in respect of service of a bankruptcy petition.

(5)	The written evidence filed pursuant to Insolvency Rule 6.11 should deal with all the above matters including all relevant facts as to the debtor’s whereabouts and whether the appointment letter(s) have been returned.

Where the Court makes an order for service by first class ordinary post, the order will normally provide that service be deemed to be effected on the seventh day after posting. The same method of calculating service may be applied to calculating the date of service of a statutory demand.

The application ( Form 6.4) and written evidence in support (Form 6.5) exhibiting a copy of the statutory demand must be filed in Court within 18 days of service of the statutory demand on the debtor. Where service is effected by advertisement in a newspaper the period of 18 days is calculated from the date of the first appearance of the advertisement. Three copies of each document must be lodged with the application to enable the Court to serve notice of the hearing date on the applicant, the creditor and the person named in Part B of the statutory demand.

Where, to avoid expense, copies of the documents are not lodged with the application in the High Court, any order of the Registrar fixing a venue is conditional upon copies of the documents being lodged on the next business day after the Registrar's order otherwise the application will be deemed to have been dismissed.

Where the statutory demand is based on a judgment or order, the Court will not at this stage go behind the judgment or order and inquire into the validity of the debt nor, as a general rule, will it adjourn the application to await the result of an application to set aside the judgment or order.

Where the debtor (a) claims to have a counterclaim, set off or cross demand (whether or not he could have raised it in the action in which the judgment or order was obtained) which equals or exceeds the amount of the debt or debts specified in the statutory demand or (b) disputes the debt (not being a debt subject to a judgment or order) the Court will normally set aside the statutory demand if, in its opinion, on the evidence there is a genuine triable issue.

A debtor who wishes to apply to set aside a statutory demand after the expiration of 18 days from the date of service of the statutory demand must apply for an extension of time within which to apply. If the applicant wishes to apply for an injunction to restrain presentation of a petition the application must be made to the Judge. Paragraphs 1 and 2 of Form 6.5 (Affidavit in Support of Application to set Aside Statutory Demand) should be used in support of the application for an extension of time with the following additional paragraphs:

If application is made to restrain presentation of a bankruptcy petition the following additional paragraph should be added:

Insolvency Rule 6.11(3) provides that, if the Statutory Demand has been served personally, the written evidence must be provided by the person who effected that service. Insolvency Rule 6.11(4) provides that, if service of the demand (however effected) has been acknowledged in writing, the evidence of service must be provided by the creditor or by a person acting on his behalf. Insolvency Rule 6.11(5) provides that, if neither paragraphs (3) or (4) apply, the written evidence must be provided by a person having direct knowledge of the means adopted for serving the demand.

Form 6.11 (Evidence of personal service of the statutory demand): this form should only be used where the demand has been served personally and acknowledged in writing (see Insolvency Rule 6.11(4)). If the demand has not been acknowledged in writing, the written evidence should be provided by the Process Server and Paragraphs 2 and 3 (part of Form 6.11) should be omitted (See Insolvency Rule 6.11(3)).

Form 6.12 (Evidence of Substituted Service of the Statutory Demand): this form can be used whether or not service of the demand has been acknowledged in writing. Paragraphs 4 and 5 (part) provide for the alternatives. Practitioners are reminded, however, that the appropriate person to provide the written evidence may not be the same in both cases. If the demand has been acknowledged in writing, the appropriate person is the creditor or a person acting on his behalf. If the demand has not been acknowledged, that person must be someone having direct knowledge of the means adopted for serving the demand.

Practitioners may find it more convenient to allow process servers to carry out the necessary investigation whilst reserving to themselves the service of the demand. In these circumstances Paragraph 1 should be deleted and the following paragraph substituted:

‘Written evidence’ means an affidavit or a witness statement.

Late applications for extension of hearing dates under Insolvency Rule 6.28, and failure to attend on the listed hearing of a petition, will be dealt with as follows:

(1)	If an application is submitted less than two clear working days before the hearing date (for example, later than Monday for Thursday, or Wednesday for Monday) the costs of the application will not be allowed under Insolvency Rule 6.28(3).

(2)

If the petition has not been served and no extension has been granted by the time fixed for the hearing of the petition, and if no one attends for the hearing, the petition will be re-listed for hearing about 21 days later. The Court will notify the petitioning creditor’s solicitors (or the petitioning creditor in person), and any known supporting or opposing creditors or their solicitors, of the new date and times. Written evidence should then be filed on behalf of the petitioning creditor explaining fully the reasons for the failure to apply for an extension or to appear at the hearing, and (if appropriate) giving reasons why the petition should not be dismissed.

(3)	On the re-listed hearing the Court may dismiss the petition if not satisfied it should be adjourned or a further extension granted.

All applications for extension should include a statement of the date fixed for the hearing of the petition.

The petitioning creditor should attend (by solicitors or in person) on or before the hearing date to ascertain whether the application has reached the file and been dealt with. It should not be assumed that an extension will be granted.