Lord Jackson States LASPO Insolvency Exemption Should End
Lord Jackson has announced that the insolvency exemption to the changes introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 ("LASPO"), which removed the recovery of "no win no fee" legal cost agreements with lawyers in legal proceedings, should end.
This will also mean that insurance premiums payable to cover opponents' legal costs will also not be recoverable in legal proceedings, meaning that the likely recoveries made by Liquidators, administrators and Trustees in Bankruptcy will be greatly diminished such that creditors may not get any return, or alternatively the risk of proceedings to the appointed Insolvency Practitioner is greatly increased.
If Lord Jackson's recommendation is implemented, this will likely lead to very little ability for Insolvency Practitioners to recover sums from Directors or their associates in insolvency proceedings, and thus effectively sanction pre-insolvency breaches of fiduciary duties and transfers of assets away from the reach of creditors.
Alternatively, if an Insolvency Practitioner is able to assign rights of action to third party funders (who will not have the same rights or access to information to support such claims) the return to the insolvency estate will be greatly reduced and in most cases will only cover professional fees incurred by the Insolvency Practitioners.