Currently, if a conditional fee agreement (or ‘no win, no fee’ arrangement as they are often known) is entered into, in most cases you will not be able to recover the success fee from the other party. This means that usually if a success fee (an uplift on the basic costs that you are charged) is applied, then this will have to be paid for by the person who entered into the conditional fee agreement. These rules came in a few years ago, and apply to the vast majority of litigation conducted under such agreements.
However, there was an exemption to this rule for insolvency litigation. Insolvency practitioners acting as liquidators, for example, were able to make a claim on a ‘no win, no fee’ type basis, and the losing party would still have to pay the success fee.
This exemption is due to be lifted from April 2016. In practice, this may mean that there is less litigation taken, as insolvency practitioners weigh up the pros and cons of taking legal action against errant company directors. In cases where litigation is commenced, the fact that a conditional fee agreement may result in a significant sum being paid by the insolvent estate will certainly result in less money ultimately being available for the creditors than would otherwise be the case. As insolvency practitioners have a duty to do the best that they can by the creditors, they will need to carefully consider the likely costs implications of taking proceedings, to ensure that the benefit of any such litigation outweighs the costs.
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