New report from R3 provides an update on the Jackson reforms and what what they mean for insolvency litigation.
In 2013, the Jackson Reforms came into force and made significant changes to how civil litigation is conducted in the UK. However, the government recognised that there were specific types of litigation whose characteristics made them different from typical civil litigation. Due to this recognition, insolvency litigation was granted an exemption from the Reforms.
Professor Peter Walton has conducted a review, on behalf of R3, and you can read his full report now. The key findings are summarised below:
CFA-backed insolvency litigation was used in 2014 to pursue claims whose value was likely to be in excess of £1bn - up from £300m in 2010
approximately £240m of these claims relate to money owed to HMRC – up from £50-70m in 2010
CFA use in insolvency litigation (in compulsory liquidation cases) rose 39% from 2010 to 2014, while the total number of compulsory liquidations fell 22%
the median average value of the insolvent estate (in compulsory liquidation cases in 2014), where CFA-backed litigation was pursued, was a debit balance of £598
CFA-backed insolvency litigation realised approximately £500m per year for insolvent estates (up from £160m in 2013), with around £120m of this owed to HMRC (based upon a survey of R3 members)
third party funding is a relatively small part of the insolvency litigation market: approximately 160 cases per year use third party funding, realising £50m – compared to a total of approximately 2,300 cases per year and around £500m of realisations in cases using CFAs
without the insolvency litigation exemption from the LASPO Act, 51% of appointment takers say none of their cases would have gone ahead
impact of the end of the exemption: • 86% of respondents to the survey believe that less money will be returned to creditors • 63% will take on fewer ‘no asset’ cases • 49% will stop or decrease litigation • 54% will seek to use third party funders; 52% of survey respondents have never used third party funding • 22% will seek to use Damages Based Agreements; 90% of survey respondents have never used a Damages Based Agreement.