Claiming Against Insolvent Defendants

Published on 13 April 2010 by admin in Legal News


Personal Injury – Claiming against Insolvent Defendants

A bill making it easier to claim compensation from Insolvent Defendants, became an Act of Parliament on the 25th March 2010.

The Third Parties (Rights against Insurers) Bill has completed its progress through parliament in only 4 months.

Prior to the implementation of this new bill it was necessary to restore an Insolvent Company to the Companies Register.  This was an expensive procedure necessary in order to bring proceedings and necessary to claim against an Insolvent Defendant’s Insurance Policy.

It is now the case that a Claimant can bring a claim directly against the insurer without first commencing proceedings against the Insolvent Insured.  All issues including the liability of the insured and the amount of compensation can be dealt with in the same proceedings.  It is still open for a Claimant to bring a claim against the Insolvent Defendant and then seek to enforce against the Insurer.

The new legislation doesn’t substantially change the law but will provide significant time and cost advantages for all parties.

Money Laundering Litigation

The Law Society has issued new advice for Practitioners involved in litigation.  The provision of legal advice and the conduct of litigation are not covered by the Money Laundering Regulation 2007.  The Law Society has identified an increase in the risk of running fraud in litigation.   The perception that many law firms involved in litigation are more relaxed as to money laundering, they suspect has led to a shift in criminal activity.

An area of concern is debt recovery.

The criminal sets up cash intensive business.  Those criminal monies are mingled with legitimate monies and then make their way into a business bank account without raising suspicion.

To transfer the funds from a current business back to other parts a document is created to suggest a debt is owing.  The business then instructs a solicitor who is instructed to recover the debt by way of proceedings.   The funds then pass through the solicitors account and then back to the client.

The Law Society has identified warning signs.

*          Not meeting the client and the client living some distance from the firm

*          Scant paperwork for the debt

*          The debt settled very quickly after the issue of proceedings

*          The client being very willing to pay fees even though you have done very little work

*          The fees are overpaid and paid in advance

*          The client requesting that funds be paid to a third party

*          The Law Society advises that litigators should consider:-

(1)  Asking the client why they instructed the firm and why those funds are to be paid to a third party

(2)  Protecting client account by limiting provision to clients

*          Undertaking due diligence on litigation clients on a risk assessment basis making searches for ownership or other connection between a debtor and the client.

*          Only making payments against cleared funds.

Success Fees and Defamation cases

The government is to reduce the maximum for success fee in defamation cases to 10%.  This is an interim measure prior to consideration of Jackson LJ’s recommendation that success fees and ATE premiums will no longer be recoverable from successful parties.

Court of Appeal decision on limitation

The Court of Appeal has held that a £50 million pound claim against Accountants Ernest & Young is out of time.  The reason being that the claim was brought more than 6 years after the Claimant first suffered damage.

The question faced by the Court of Appeal was when did the Claimant first suffer damage.

The Court of Appeal held that the moment the Claimant entered into the first transaction was when the 6 year time limit would have run.   That decision follows a recent trend in finding that the limitation period will start to run when the advice is acted upon rather than at any later point when financial loss is suffered.

Budget announcements

*          Stamp Duty has been suspended on homes worth up to £250k for first time buyers for a further two tax years.

*          If you have lost your job and struggling to pay your mortgage then the support for mortgage interest scheme will continue at its higher rate for another 6 months.

If you have an ISA the new annual limit will now increase annually in line with inflation.

Winter fuel payments to pensioners continue at £250 and for those over 80, £400.

Income Personal Tax Allowances are static at £6,475.  Personal Allowances for those aged between 65 and 74 remain at £9,490, for those 75 and over £9,640.

There is a new 50% tax rate for those with taxable incomes over £150K and the 40% tax threshold has been frozen at £43,875.

The Inheritance Tax threshold is frozen at £325k.

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