Insolvency exemption in latest no win, no fee U-turn
Insolvency cases will be exempt from no win, no fee reforms until April 2015, the government has revealed in its second climb-down in its struggle to overhaul the civil justice system.
Justice minister Jonathan Djanogly said today that insolvency practitioners need longer to adjust to civil justice reforms included in the Legal Aid, Sentencing and Punishment of Offenders Act. Another factor is that reform would cost the government significant tax income, with HM Revenue and Customs often the biggest creditor in insolvency cases.
The legislation, given royal assent earlier this month, removes the recoverability of success fee and after-the-event insurance premiums from losing defendants, with effect from April 2013. The government has already performed a U-turn on mesothelioma claims, exempting them from reform until an impact assessment has been made.
In a written statement made in the House of Commons today, Djanogly said: ‘Insolvency cases bring substantial revenue to the taxpayer, as well as other creditors, and encourage good business practice which can be seen as an important part of the growth agenda with wider benefits for the economy.
‘These features merit a delayed implementation to allow time for those involved to adjust and implement such alternative arrangements as they consider will allow these cases to continue to be pursued.’
Campaigners had argued in favour of an exemption for insolvency cases throughout debates on in both houses of parliament. Opposition members had laid down an amendment in favour of an exemption, though Lord Justice Jackson had recommended the abolition of recoverability for insolvency cases in his original report on civil justice.
The government has also confirmed it has asked the Civil Justice Council for further advice by the end of June on implementing qualified one-way costs shifting.
Details will be announced before the summer recess, with suggested changes to the civil procedure rules necessary by the autumn for them to come into effect by April 2013, the government’s intended target.
Desmond Hudson, chief executive of the Law Society, said: 'Following the case made by the Law Society and others, the government has accepted that more time is needed to evaluate the effect of the new civil proceedings arrangements on insolvency cases and to allow the legal sector time to adjust. We would like to see this logic applied to other types of cases, where a similar implementation delay, until 2015, would help to avoid unwelcome impacts on ordinary people’s right to secure legal redress.'