Case Highlights Importance Of IPs Using CFA Designed For Insolvency Sector

A High Court ruling in the case of Stevensdrake Ltd v Hunt & Others highlights the importance for Insolvency Practitioners of using Conditional Fee Arrangements (CFA) specifically designed for their needs - says law firm Irwin Mitchell.

The on-going case between Stevensdrake Ltd (“Stevensdrake”) and insolvency practitioner, Stephen Hunt, focuses on whether as the liquidator of Sunbow Ltd, Mr Hunt is personally responsible for paying his solicitors (Stevensdrake) and barristers’ fees under the CFA.

Mr Hunt may be personally liable to pay his own solicitor’s costs, success fee, and disbursements in the sum of approximately £1m.

The costs related to a claim brought by Mr Hunt against Sunbow Limited’s former administrators. A settlement was agreed with the former administrators, however one of the former administrators,  Mr Papanicola failed to pay the sum agreed. Stevensdrake argued that under the terms of the CFA the agreed settlement was a ‘win’ and as a consequence Mr Hunt was liable to pay their fees, success fee and all disbursements.

Mr Hunt argues that both Stevensdrake’s fees and counsel’s fees are only payable if a recovery had been made from the former administrators.

In his judgment, which was delivered last month, Judge Purle upheld the lower court’s decision to allow Mr Hunt to defend the claim brought by Stevensdrake but only on terms that he paid £100,000 into court and that he paid the disbursements. 

For more information on insolvency law, contact our business insolvency solicitors on 0370 1500 100, or visit our Insolvency Law page for more details.

Expert Opinion

“This case illustrates the dangers for insolvency practitioners of entering a CFA which doesn’t include an express term that the insolvency practitioner’s liability to pay his solicitor’s costs, success fee and disbursements (including any ATE insurance premium) will only arise if a recovery is made from the opponent to the proceedings.

“Our Support4Dispute CFA and ATE Insurance product is designed specifically for Insolvency Practitioners and includes express terms which provide that the Insolvency Practitioner only becomes liable for costs, success fee and disbursements if a recovery is made.”
John Vickery - Partner