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UK Supreme Court

Supreme Court ruling a ‘victory’ for creditors

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24th Jul 2015
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A decision by the UK’s Supreme Court about legal aid will help creditors get money they are owed after insolvencies but a government review of insolvency litigation may protect “rogue directors”, an association of business recovery professionals has said.

In Coventry v Lawrence [2015] UKSC 50, the Supreme Court ruled that a claim for legal costs for noise nuisance caused by a speedway track does not breach contravene the defendant’s human rights under the European Convention on Human Rights).

R3, which represents insolvency professionals, said the court’s decision was a “victory for creditors” and will help them get back money that they are owed after insolvencies.

The case has big implications for creditors in insolvencies where money is being withheld from them by directors or third parties, R3 said.

“A decision the other way would have made legal action by insolvency practitioners to retrieve the money unaffordable in most cases,” said Frances Coulson, chair of the R3’s fraud group. “This would have risked as much as £160m per year not getting back to creditors from rogue directors and others.”

But the threat to creditors’ money is not over, R3 says.

The Ministry of Justice is set to review how insolvency litigation is funded by the end of the year. 

In 2009 Lord Justice Jackson recommended that two types of legal cost (Conditional Fee Arrangements uplift and After the Event insurance premiums) should no longer be recoverable from the defendant in civil litigation cases.

The aim of the reforms was to crackdown on a growing compensation culture and better protect public funds and the public interest. But business groups including Federation of Small Businesses, British Property Federation, Chartered Institute of Credit Management, ACCA, ICAEW, ICAS and R3, said the government policy would stop businesses and taxpayers getting money they're owed.

Insolvency has been given a temporary exemption.

Ross Clark of Burford, which provides litigation finance, blogged the Supreme Court’s decision was “heartening” as it confirmed rules for claimants although as the judgment said, under the new rules “it would be impossible for any claimant who was not of significant means to bring this case.”

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