Lawyers are now in a brave new world thanks to the combination of the Jackson reforms and cuts to legal aid. From 1 April 2013, the remaining parts of the civil legal aid scheme have been closed to new claimants (with a few exceptions such as divorce with a proved domestic violence issue), and in most civil cases, parties can no longer claim from the losing side their lawyer’s success fee from a conditional fee arrangement (“no win no fee”) or the insurance premium purchased in case things went wrong with their case. This means that these costs will be deducted from the damages paid, making the claim worth less, if the solicitor is prepared to take the case on at all.
Insolvency is excluded from the time being from the Jackson reforms (though it is to be reviewed in two years’ time), so you might reasonable ask why should I, an insolvency lawyer, care? Apart from concerns about access to justice (even lawyers do care about justice), the following is now likely to occur and affect most of us:
1. More people will have to represent themselves in court. As courts list matters for a hearing in the expectation professional lawyers will attend, it is likely too little time will now be set aside for such hearings, meaning the workload will take longer to clear and everyone will have to wait longer to get a hearing. Given the budgetary constraints, it is most unlikely new judges will be appointed to help. Expect to wait twice as long for a hearing.
2. If you are a normal person with an average income, if you need legal assistance, where will you get it? Not from the CAB which is overwhelmed (if they have not closed due to lack of funding), nor from legal aid. Will lawyers become more innovative in order to offer cheaper advice? The reality is that our regulators have made it clear that even if we advise for free, we could still be exposed to the costs of dealing with any complaints (reasonable or not) or sued for negligence. There are costs incurred by lawyers giving advice, such as our overheads, and no business can trade at a loss. What about offering a fixed price for a piece of work e.g. drafting a claim form? Some do that, but the difficulty is that clients then want advice on strategy for free, and before you know it you’re advising on the whole case at a loss. Consequently, few solicitors are offering such a service and options are further limited for the public.
3. As a result, insolvency practitioners who are officers of the court, are often dealing with more unrepresented people. They cannot advise on the law and help the other side. However, they will incur increased costs as a result of the delays and difficulties caused by the other side being unrepresented, which means the creditors in essence suffer an increased loss.
4. The workload for individual firms of solicitors will drop, leading to some becoming loss-making and shutting down. I fully expect to see another 5 firms shut down or restructure within the next 3 months, following the highly publicised closures of Cobbetts and Blakemores.
5. More people will be declared bankrupt – either through being unable to pay for a lawyer to defend claims against them or because they are lawyers now out of work.
Insolvency as a practice area is not as immune to the brave new world faced by all in society as a result of these changes, and perhaps those of us who specialise in it would do well to remember that.”
For further information, please contact Claire Sharp on 0117 9453 044 or email@example.com
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