Jackson reforms to apply to insolvency proceedings from April 2015

According to press reports this week, the insolvency exception to the Jackson reforms will end next April, meaning that CFA success fees and ATE insurance premiums will no longer be recoverable in proceedings brought by liquidators, administrators, trustees in bankruptcy, or companies in liquidation or administration. Recoverability in all other claims was abolished from April 2013 (subject to exceptions for defamation and privacy proceedings, mesothelioma claims and expert reports in clinical negligence claims).

As the government announced at the time, the delay was because insolvency claims bring substantial revenue to the taxpayer, as well as other creditors, and so the government wanted to allow some time to consider how such cases could be pursued within the changed regime. The delay was initially stated to be for two years, but the statutory instrument exempting insolvency proceedings from the reforms did not state an end date. There was some speculation that the exception might be permanent and, unsurprisingly, insolvency professionals lobbied government to that effect. It seems however that insolvency proceedings will in fact be brought into line from April next year.

This will put an end to the somewhat arbitrary position we have currently, where defendants are liable for success fees / ATE premiums in claims brought by companies that happen to be in liquidation or administration – even if the liquidation or administration has nothing to do with the cause of action against the defendant – but not where an identical claim is brought by a solvent company.