Some important changes to costs in legal proceedings take effect from 1 April 2013. One such change affects the operation of Conditional Fee Agreements (CFAs). In most cases, where a CFA is entered into from 1 April 2013 onwards, successful litigants will no longer be able to recover the success fee from an unsuccessful defendant, making such arrangements far less attractive to enter into.
The good news is that the new provisions do not apply as yet to most insolvency litigation. The Government listened to the insolvency industry's strong representations made to its consultation paper. In many cases, the only hope of recovery for creditors has been through litigation, which could not be pursued without a CFA being available with a recoverable success fee. It is interesting to note that HMRC has become the largest creditor to benefit from the ability of insolvency practitioners to use CFAs to pursue claims.
At present it is proposed that the ability for insolvency practitioners to be able to recover success fees, where their lawyers are acting under a CFA, will continue until 2015. This applies to proceedings by liquidators, administrators and trustees in bankruptcy and companies in liquidation or administration. The exception does not however apply to receiverships or voluntary arrangements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
