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Half of insolvency practitioners say litigation has decreased since LASPO change

Power: creditors are receiving less money post LASPO

Almost half of insolvency practitioners (IPs) believe that litigation work has declined since removal of the exemption from LASPO in April 2016, a survey has found.

Until then, IPs who had signed conditional fee agreements (CFAs) were able to recover success fees and after-the-event (ATE) insurance premiums from the other side if they won.

The remaining half of the 225 insolvency practitioners who took part in the survey by Ferguson Litigation Funding said there had been “no noticeable difference”. A small group of 4% said there had not been any cases.

Perhaps not surprisingly, the same proportion of respondents (49%) said it had been harder to find a law firm willing to work on a full CFA since April 2016.

Three-quarters of practitioners (77%) said the removal of the exemption had decreased the amount of money being recovered for creditors, with the rest saying there had been no change.

However, 44% said they were more likely to seek third-party litigation funding as encouraged by guidance in the Statement of Insolvency Practitioners 2 (SIP). Almost all of the rest said there had been no change.

Ferguson managing director Maurice Power said: “It is clear there is an increase in interest in the use of third-party litigation funding in the insolvency sector.

“SIPs are issued as guidance to IPs to maintain standards and harmonise approaches. SIP 2 paragraph 11 explicitly urges IPs to consider external sources of funding when investigating litigation.

“This is to be encouraged as the most worrying aspect of the survey is that creditors are receiving less money post LASPO and, that many are slow to adopt or are fully aware of the alternative means of funding litigation.”

The survey also found that three times as many practitioners (21%) believed that use of ATE had gone down since April 2016 as gone up (7%), with 60% saying it had stayed the same and 12% never using it.

Use of litigation funding followed the same pattern, with 21% saying it had declined, 7% gone up, 47% stayed the same and 25% having never used it.