Insolvency Throughout the Years in Scotland
We had the pleasure to gain insights into the changing scope of insolvency law with Steven Jansch. He begins by stating: “as a practising solicitor advocate, I have had the privilege of appearing in the Court of Session on several occasions now, but the commerciality of Courts is something that is finding more focus particularly from professional clients, such as those that my firm acts for. My commercial role experience has been hugely positive to date. It can entirely alleviate wasted time, which used to be the constant concern of some of my fellow Court practitioners. The revamp of the Court system, including new Court rules, is in my view a massively positive step forward for all Court users; but that of course is not the full story, as how we get from point A to B is only part of the story. Where the client approaches any professional adviser at point A looking to get to point B, the real challenge that I have, and the one that I relish, is to bring the client along with me as their adviser on that journey. It is sometimes impossible to foresee at the outset, the route that needs to be taken to get there, however, with the myriad of insolvency regulations and with the changes happening throughout the Courts systems, and with the changing landscape, I find my job on a day to day basis massively challenging and rewarding.”
Throughout your years of practice how has Insolvency law changed over time? Have you seen an increase in cases and if so what do you think accounts towards this?
Insolvency law has significantly changed during the course of my years in practice. When I first started the 1986 Insolvency Act and the 1985 Bankruptcy (Scotland) Act were the 2 cornerstones of the insolvency regime. However, albeit cornerstones are clear to identify, there were then a myriad of various statutory instruments, Court rules, practice notes, and guidance notes that were then put in place to trip up even the savviest of Court practitioners. That says nothing about the various changes to the statements of insolvency practice guidance notes (SIPs) that are also applicable to the insolvency practitioners in addition! The recent consolidation of the bankruptcy legislation is a welcome albeit imperfect solution to some of those problems. It used to be that there was very little in the way of case law to give practical guidance on what the legislation actually meant however. That has significantly changed, principally towards the end of the 2000s with the brilliant Lord Glennie becoming very vocal in the insolvency cases he handled. That was partly because insolvency cases were treated as commercial actions, so they were filtered effectively to him (or 2 or 3 other judges that were on the commercial bench in the Court of Session), but also because as more experienced senior judges became aware of the issues the lack of guidance was causing, they took active steps to ensure that the decisions being taking were published. That is a very helpful tool in the armoury of the Court practitioner working in insolvency. Again however, there appear to be different decisions on the same issues – that makes my job advising insolvency practitioners clients even more difficult!
I suppose it is because of the inherent uncertainty with the trickier cases in insolvency law in Scotland, and partly because of the significant costs associated with the formal insolvency processes available to an individual or company, that the number of cases has significantly decreased over the last few years. On the face of it the number of insolvency appointments is on the increase. However, the published numbers include personal insolvencies where things like the Debt Arrangement Scheme or Trust Deeds are included within the statistics. The insolvency lawyer simply does not get involved in those cases in the main, and it is only if problems arise after appointment that somebody like me gets involved.
Nevertheless, the wider the options, the more advice that needs to be given by the insolvency lawyer or insolvency practitioner before the most appropriate option for the company can be identified. There is also an inherent problem with the directors seeking advice for their company, and separately seeking advice for themselves as individuals. An individual director who has not dealt with insolvency before will not necessarily be able to make that distinction, a crucial one from the lawyer’s perspective.
What further considerations must be applied when disputes involve other issues (such as employment or contractual issues)?
Very often disputes involving employment or contractual issues are dealt with just as that. What I mean is that it is often the case that the fact of insolvency can be forgotten where even very experienced lawyers are dealing with such separate litigation or tribunal proceedings. To give an example, proceedings being raised against an entity or group of entities alleging professional negligence where one of the defender companies is in a form of insolvency necessitates either the administrator’s or the Court’s permission before such proceedings can be raised. Even the most experienced litigators can forget that, which leads to questions of competency of the whole proceeding. There is also a sharp reality both in terms of the statutory available moratorium where insolvency is then the backdrop to any such dispute, but also practicalities of whether a recovery could ever be made if an insolvency event happens during the course of a dispute. Each case is of course very fact specific but again even for well versed practitioners getting good advice from a specialist early is crucial in the management of client expectations, particularly insofar as the achievability of the objective given to any professional by the client is concerned.
