Since April 2016 insolvency practitioners have not been able to recover either success fees or uplift fees in conditional fee agreements or any adverse costs insurance premium, as insolvency practitioners' exemption from the Legal Aid, Sentencing and Punishment of Offenders Act 2012 came to an end.
Civil Procedure Rule 44, giving general rules about the recovery of costs in legal proceedings, has been effective since 6 April 2015. The costs that may be recovered in legal proceedings include the costs of proceedings before a tribunal or other statutory body, costs payable by a client to their legal representative and costs payable by one party to another under the terms of a contract, where the court makes an order for an assessment of those costs.
Regardless of consideration of uplift fees when deciding the amount of costs to be awarded in any case the court will have regard to the efforts made by the parties in order to try to resolve the dispute. Insolvency practitioners should of course initiate attempts to settle but other options should be considered as well. Alternative dispute resolution such as mediation, managed by a qualified independent mediator, is very low cost compared to the cost of legal action and is typically completed in a matter of hours.
Insolvency practitioners who do not recover costs because of a failure to consider alternative dispute resolution could be seen to be prejudicing the interests of creditors. The consideration and use of alternative dispute resolution techniques such as mediation should therefore be part of the standard procedure of all insolvency practitioners when planning their strategy for legal action. Using mediation to come to an out of court settlement is highly likely to result in reduced costs, to be faster than going to court and even if court action results it should be easier to recover costs if settlement has previously been attempted by using mediation.
Some firms of solicitors provide mediation services or independent mediators can be asked to advise.
Caroline Clark's insolvency career started over 30 years ago and since 1994 she has specialised in insolvency compliance and regulation.