Litigation funders are eyeing up the insolvency market, with the LASPO exemption set to expire tomorrow, with one company saying their product was now the best option for insolvency practitioners looking to bring legal action.
Despite opposition from the insolvency industry, the government is bringing to an end the recoverability of additional liabilities from 6 April.
Augusta Ventures described litigation funding as a “cleaner, risk-free option” where the cost of the funding is correlated to the damages, rather than the lawyer’s fees.
Jeunesse Edwards, Augusta’s strategic engagement director, said: “Litigation funding has always been a viable option for insolvency practitioners, but this change in the law shines a spotlight on their decision making and the best way to secure the biggest sum for creditors. Litigation funding now provides a clear way forward.
“The new law was strongly opposed by the insolvency profession, amid widespread concerns that it will make it uneconomic for IPs to run sub-£1m cases. But we are confident that they can continue to do the best for creditors.”
Further, Augusta said, a recent High Court decision has given solid support to liquidators using funding even when a majority of creditors oppose it.
In Allen & Anor, Re Longmeade Ltd (In Liquidation) (Rev 1)  EWHC 356 (Ch), Mr Justice Snowden said that the opposition of the two main creditors to using risk-free funding was for “extraneous” reasons and could be discounted.
So long as at least one creditor, however small, was either in favour of the claim being brought, or even just neutral, he said “it will be for the liquidators to take a commercial decision in the interests of the creditors as a whole as to whether to commence the claim and, if so, how to fund it”.
As we reported last month, the judge said that a decision to use litigation funding to pursue the claim at no financial risk – even though the flipside was a reduction in the damages recovered – was a reasonable one in the circumstances.
Meanwhile, also from tomorrow, people seeking to make themselves bankrupt will no longer need to apply to the court. Instead they will complete an online application which will be submitted to an adjudicator employed by the Insolvency Service (IS).
The IS said online applications would be less expensive – £130 rather than £180 when going to court – and, for the first time, could be paid for in instalments.
IS chief executive Sarah Albon said: “Seeking help to deal with problem personal debt is the key step to being able to move forward. Online bankruptcy applications will be easier for people to complete and will remove the perceived stigma of going to court, which we know stops some people from applying.
Creditor petitions will still have to go through the courts.
Finally, a two-year pilot of insolvency express trials started on 1 April, providing litigants in the Bankruptcy and Companies Court with a quick, more streamlined procedure, and an early date for trial of disposal of simple applications.