Contact one of our advisors now Call 0800 088 6004

Eliminating the Insolvency Litigation exemption – What’s happens next?

As of April 2016, the right to claim any uplift on a conditional fee agreement (“CFA”) or premiums payable for after-the-event insurance from the losing defendant was removed from legislation following the introduction of the Jackson Reforms in 2013.

The original Walton report highlighted a number of concerns but the most important was glaringly obvious: no exemption = less litigation and consequently fewer funds available to the creditors of an insolvent estate.
The key findings of the updated Walton report showed:

  • 86% of IPs who took part in the survey believed that less money will be returned to creditors
  • 63% intend to take on fewer ‘no asset’ cases
  • 49% plan to stop or decrease litigation

So, what are the options?

  1. Funding from the estate
  2. Creditor funding
  3. Assignment of a right of action
  4. A right of action can be assigned as property. Accordingly, the Insolvency Practitioner (“IP”) can assign the action for value.
  5. Third-party funding
  6. Third-party funders provide financial support for litigation on the basis that they receive a percentage of the sums recovered if the action succeeds but nothing if this action fails.
  7. No Win, No Fee agreements (also known as ‘CFAs’)

The loss of the insolvency litigation exemption should not stop IPs moving forward with litigation.
Wilson Browne is proud to hold the oldest Delegated Authority Schemes issued by Temple Legal Protection Limited. Subject to meeting certain criteria the Commercial Litigation team can issue cover directly, without the need for any application fee or insurers approval – speak to us for more information.
The Way Forward
The assignment of a right of action is worthwhile if the party acquiring the action has the funding to pursue it and thereby increase the possibility of some return to creditors. There are limitations, so please contact us for advice.
It is rare that an IP finds a third party willing to take on the risk of funding – if you can get it, it is worth the consideration but is potentially costly and risky and should only be used in certain circumstances.
No Win, No Fee agreements provide IPs with the security that if the case does not go to plan that the estate will not be liable for the costs of the action. The removal of the ‘insolvency carve out’ should not deter IPs from using this method of funding in appropriate cases.
For further advice or assistance please call 0800 088 6004