16th February 2017

New Bankruptcy Court Rules Come Into Force

The Bankruptcy (Scotland) Act 2016 came into force on 30 November 2016 and with it the new Act of Sederunt (Sheriff Court Bankruptcy Rules) 2016. These rules apply to any sequestrations for which the petition is presented, or the debtor application is made, on or after that date.

The new legislation aims to codify and consolidate all of the existing bankruptcy legislation rather than revolutionise the area and the new court rules have largely the same purpose in attempting to make the process more user friendly and accessible in its expression and processes. Many of the 2008 Rules reappear, albeit in an improved order, in the new rules.

One particularly useful addition to the Rules is a dispensing power of the court under Chapter 2 to relieve a party from the consequences of a failure to comply with a provision in the Rules in the event of mistake, oversight or other excusable cause. The Sheriff may use this dispensing power to enable proceedings to progress as if such a failure had not occurred. This will be a welcome relief to many practitioners who are more than aware that the smallest error in procedure can result in the entire court process needing to be recommenced. However, practitioners should not presume that the Court will always make allowances for procedural failings as under Chapter 3 of the Rules the Sheriff may also use their discretion to dispose of the proceedings where such a failure does occur.

The Rules also seek to make the process more accessible to those unable to obtain legal representation. Chapter 4 of the Rules, in addition to permitting suitable lay supporters, also allows for lay representation. However, this is not an automatic entitlement and the Sheriff may only grant an application if they consider that it would assist the Sheriff’s consideration of the case to grant it.

The 2016 Act will likely facilitate a considerable number of AIB sequestrations out with the traditional court process. However, Chapter 9 of the Rules provides that an appeal may be made to the Sheriff where the extra judicial process has been utilised. Meanwhile Chapter 10 provides for the appeal of traditional court process sequestrations to the new Sheriff Appeal Court via Chapter 6 of the Sheriff Appeal Court Rules.

Chapter 13 of the Rules provide that expenses may either be as taxed, in which case such taxation must take place before decree is granted, or alternatively the Sheriff may modify the expenses to a fixed sum. This latter option may be more attractive in instances where expediency is vital.

The rules concerning intimation are largely unchanged and in particular still do not provide for email intimation, as is becoming more commonplace in other forms of procedure. Whilst provision for intimation by email may be lacking from the Rules, they do allow applications to make a submission in support of a motion or to give evidence via a live link (e.g. a television link). It should be noted that such a “live link” does not have to be a television link but that the method must allow the person using the live link to be heard in the courtroom and hear the proceedings in the courtroom. If a live link, other than a television link, is to be used then an application must be made to the Sheriff for this link to be permitted.

Fresh statutory court forms, including the eagerly anticipated “Form of application for direction”, are now available and may be found at: https://www.scotcourts.gov.uk/rules-and-practice/forms/sheriff-court-forms/bankruptcy-forms—2016-rules

We hope this briefing is useful but if you would like to discuss how either the Act or the Rules affect you or your clients please contact our Insolvency and Corporate Recovery Team.

Alastair Johnston
Solicitor – Dispute Resolution

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