No win, no fee move set to protect ‘millions for creditors’

The government has announced that it will allow no win, no fee agreements in insolvency litigation to continue.

The exemption means that insolvency practitioners can continue to use the arrangements – also known as conditional fee agreements – to pursue directors and third parties for creditors’ money.

Changes to no win, no fee agreements introduced under the Legal Aid, Sentencing, and Punishment of Offenders (LASPO) Act came into effect generally in April 2013 but had been delayed until April 2015 for insolvency proceedings.

R3, the insolvency trade body, campaigned for the exemption to be extended or made permanent, arguing that without it insolvency litigation would be uneconomical. It said the government’s decision would protect £160 million of creditors’ money a year.

Giles Frampton, president of R3, said: “We are absolutely delighted by the government’s decision. Insolvency litigation brings back millions of pounds every year to small businesses and taxpayers owed money by negligent or fraudulent directors.

“This money would have been put at risk if insolvency practitioners lost their ability to use ‘no-win, no-fee’ funding from April. The decision is a big boost for the fight against business fraud and malpractice, and will help keep smaller creditors on a level playing field with those determined to withhold money from them.”

The extension of the exemption was announced in a written ministerial statement on 26 February by Justice Minister Lord Faulks. He said: “No win no fee agreements in insolvency proceedings will continue for the time being to operate on a pre-LASPO Act basis with any conditional fee agreement success fees and after the event insurance premiums [insurance that covers legal costs and expenses involved in litigation] remaining recoverable from the losing party.

“We will consider the appropriate way forward for insolvency proceedings and will set out further details later in the year.”

Palmers partner Andrew Skinner said: “This is a welcome move by the government, which will assist insolvency professionals and creditors in recovering money owed to them through the courts, while reducing financial risk and uncertainty. At Palmers, we recognise the value of conditional fee agreements and are willing to work on this basis on insolvency-related assignments, on a case by case basis. For more information on our debt and insolvency services, please contact us.”