23 November 2015Print This Post

Bar Council and ABI join calls for permanent exemption from LASPO for insolvency cases

Michael Gove

Gove: due to make announcement by end of year

The Bar Council and the Association of British Insurers (ABI) have added their voices to calls from business organisations for a permanent exemption for insolvency cases from the provisions of LASPO.

The exemption from the abolition of recovery of success fees and after-the-event insurance premiums in conditional fee cases was due to end in April this year, but was indefinitely extended in February.

Lord Justice Jackson called last month for the exemption to end, describing it as “an instrument of oppression, which is liable to crush defendants who have a good defence”.

Insolvency trade body R3 hit back, saying that abolishing the exemption from LASPO for insolvency cases would create a “windfall” for third-party funders.

A spokesman for R3 said last week that the Bar Council, ABI and Insolvency Practitioners Association had joined forces with seven other business organisations, including accountancy bodies the ICAEW and ACCA, in writing a letter to the justice secretary.

In the letter, the groups called for the exemption to be made permanent, ahead of an announcement from Michael Gove expected by the end of the year.

“Without this exemption, directors who commit fraud, are negligent or wrongly take money out of business could be able to walk away with £160m a year: money that is owed to creditors, including small businesses and HMRC.

“This will undermine the good work the government has been doing on tackling tax avoidance, evasion, director misconduct, fraud and improving financial redress for creditors.”

The groups went on: “A permanent exemption for insolvency litigation would protect the public interest and public money – the two objectives the LASPO Act sought to address. It would deter white collar crime and put money back in the hands of creditors.”

The spokesman for R3 said the letter coincided with an early day motion tabled last week by MP Greg Mulholland, calling for a government review of plans to end the insolvency exemption. An early day motion in the last parliament was signed by 69 MPs.

Philip Sykes, president of R3, said a commitment by the Ministry of Justice to keep the exemption would be in the public interest.

“The exemption is used to return millions of pounds to creditors every year following business failures, including money owed to high street businesses and the taxpayer.

“If the exemption ends, it will be unaffordable in most cases to pursue ‘rogue directors’. There will be no money in insolvent estates to fund cases, and costs won’t be able to be claimed back from those who have taken the money either.”

By Nick Hilborne

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