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As part of this evaluation we would like to hear your thoughts, opinions and suggestions on the topics being discussed.

Read last published minutes - 12 May 2010

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COMMENTS

Posted by Alan McIntosh at 14:52, 29/04/2010

New thread: re minutes 21 April 2010, paragraph 24 Action Point 10
I am happy that the Working Group has welcomed my suggestions that IPOs are extended to protected trust deeds. Can I further suggest that legal advice be sought regarding extending lay representation to IPO hearings. This legislative amendment could be implemented at the same time.

IPO hearings are ideally suited for lay representation as they usually only deal with the substantive facts of a case and rarely any complex legal point of law. Where they do, it could be left to the sheriff discretion as to whether lay representation is appropriate.

Currently lay representation is allowed in relation to creditor or trustee petitions for sequestration; it would seem sensible, therefore, to allow it for IPO hearings. It is also allowed for time to pay direction and time order hearing, which are very similar in that they look at the debtor's ability to pay..

This will ensure clients can avoid incurring legal costs whilst insolvent (which would be a post trust deed/sequestration debt). In addition to this where debtors seek lay representation, the intervention of a money adviser may avoid the need for a hearing and save court time and public funds. It will also increase a debtor's right to access justice.

Posted by Alan McIntosh at 16:10, 20/04/2010

New thread: re minutes 31 March 2010 paragraph 16-25

There is a danger in arguing that as IVAs in England operate for five years that protected trust deeds should run for the same duration. Clearly the purpose of such a change would be to allow more time for the debtor's estate to be swollen for the benefit of the creditors, but developing Scot's law simply by referencing it to what exists in English law is not necessarily the best way to develop our legal system. Clearly creditors may be attracted to increased dividends and as we can see from the ICAS paper, the insolvency industry may be lured by the prospect of increased fees, but it is important to remember the options available for debtors in both legal systems, not just in relation to personal insolvency, but all remedies, are completely different and various factors will determine the impact of any change... Read full post.

Posted by Alan McIntosh at 17:25, 13/04/2010

New thread: Contribution Order Practices and Remedies in Protected Trust Deeds

I would like to make one suggestion, which the Working Group may wish to consider and suggest the system of income payment agreements and orders be extended to protected trust deeds.

At present where a debtor is refusing to cooperate with their trustee in a protected trust deed, the trustee's only option is either to refuse to discharge the debtor and seek a discharge themselves, leaving the debtor undischarged (this may result in the trustee not recovering their costs in setting up the case, administering it and applying for their own discharge). Alternatively they must sequestrate the debtor and then abandon the case to the AIB or be appointed trustee and apply for an income payment order (the petition for sequestration may cost several hundred pounds for the trustee). This is an expensive process and the costs could be avoided by allowing a trustee in a protected trust deed to apply for an income payment order under S32 of the 1985 Act... Read full post

Posted by Mike Norris of JP Morgan at 12:58, 13/04/2010

Re: minutes 31 March 2010 paragraphs 5-10

I would be interested to know how the fee of £500-£700 has been arrived at, as I agree Nick's point re the extent that statutory fees would eat into this. Creditors will be concerned that the level of the fee could be decreased to such a level that there is little meaningful verifcation on a TD case. Creditors are not against paying a fair price for proper verification. It could be that the point about limited access could be addressed by following the Protocol IVA model of "set-up" fees being taken out of the early realisations post-acceptance, thereby with the IPs taking the risk of non-acceptance. This is in turn might encourage viable TD proposals being put forward. I am not particularly enamoured by the prospect of removing simple TDs from IPs, it is after all a regulated industry (albeit much-maligned) with a particular skill set. If the proposal is that money advisors could take up the slack, are we sure that they have the necessary resources and skills to do the job?

Posted by Mike Norris of JP Morgan at 12:58, 13/04/2010

Re: minutes 31 March 2010 paragraphs 11-15

I agree that it is not practical for the debtor to be required to attend every meeting, although in Australia the trustee can excuse the debtor's attendance. I would caution that care is taken in respect of incorporating financial counselling as part of the statutory process. In the US it has spawned an industry, that is not particularly effective, that has added considerable cost to the process. I would suggest researching the work of Karen Gross in the US in this regard.

Posted by Mike Norris of JP Morgan at 12:58, 13/04/2010

Re: minutes 31 March 2010 paragraphs 16-25

On the use of a standard front sheet, if it is being used to "tell" creditors that the TD in question is somehow compliant with a code or protocol, then in my view it is very much a regulatory matter. This is because creditors are being asked to accept that a certain amount of due diligence has been undertaken by the IP, and to an agreed standard. Because of this, if creditors' confidence is to be maintained, then a certain amount of "testing" is required to root out abuse. I would absolutely support the facility to vary a TD. This will strengthen the TD process and ensure that, where viable, sensible proposals are maintained. In respect of the fees to be charged on the extension of TDs from 3 to 5 years, if we moved to a % on distributions model the discussion becomes otiose as any distribution is "charged" at the appropriate % irrespective of the time period involved.

Posted by Mike Norris of JP Morgan at 12:58, 13/04/2010

Re: paper by Nick Robinson - Improving the Process

I take Nick's points generally about fees, however, they do miss the fundamental point that, from a creditor's perspective, the TD process does not stack up very well against the IVA process. On Nick's point about the creditors not claiming cash, it is not as straightforward as he makes out. This is illustrated by the increase in consigned funds, for which one of the biggest drivers is the requirement to vouch within 14 days that the creditor wants a dividend, irrespective of the fact that the creditor has already proved in the case. Lastly, I am intrigued (and sceptical about) why Nick is of the view that (as per his last sentence) Scottish debtors will be so different to those in England, Wales and Northern Ireland.