Insolvency litigation will be subject to the costs regime imposed by the Legal Aid, Sentencing and Punishment of Offenders Act (LASPO) from April 2016, the government has confirmed.
The exemption applying to insolvency will be lifted as the government addresses the ‘high costs of civil litigation’ in England and Wales.
This exemption allows certain costs – for example, the uplift in a conditional fee agreement – to be recovered from the losing defendant. In non-insolvency related proceedings, the provisions of LASPO meant that such costs are no longer recoverable from the defendant, leaving the successful claimant having to fund those costs themselves.
From April 2016, the same rules will apply in insolvency proceedings.
Trade body R3, the Association of Business Recovery Professionals, slammed the government’s decision as a ‘half-a-billion payday’ for rogue directors, citing research showing that the exemption helps retrieve about £480m owed to creditors from rogue directors and others every year.