Health Warning: This Blog may not be historically accurate

If, like me, you have recently attended one of the many St Patrick’s Day parades that have taken place across the UK and worldwide, you are no doubt acutely aware that St Patrick was a polyester clad leprechaun with a penchant for drinking Guinness and turning rivers green. However, it may come as a shock to learn that St Patrick was also a dyed-in-the-wool insolvency litigator.

It is widely accepted and acknowledged that St Patrick banished all of the snakes from Ireland. It is lesser known that these snakes included delinquent directors, corrupt bankrupts and fraudulent shareholders.

As a result of literally minutes of historical research*, it has been established that St Patrick used the Irish symbol of the shamrock to illustrate the doctrine of the Holy Trinity of Insolvency Litigation.

*conducted by me with no reference to any real facts or historical records

The Holy Trinity can be summarised as follows:

1. Strong Arguable Case

Whilst obvious, every claim brought by an insolvency practitioner must have good prospects of success. Without this, you put yourself and/or the estate at risk of adverse costs.

2. Financially Viable Opponent

Once you have established that there is a claim worth pursuing, it is imperative that you ascertain the financial viability of your prospective opponent.

All too often litigation is commenced in haste with the attendant cost consequences without having carried out the necessary due diligence to ensure that any subsequent judgment and costs order can be satisfied.

Establishing the financial viability of the target is often also a pre-requisite to obtaining litigation funding.

3. Funding Options Available

When an office-holder is considering issuing a claim or continuing litigation, it has to be established whether there are sufficient assets to meet:

• The office holder’s own costs

• The other side’s costs if the claim is unsuccessful

Options available:

Conditional Fee Agreement (CFA)

This is an agreement that the office holder’s own legal costs (or part of them) will only be payable in the event that the case is successful.

Thankfully, the Ministry of Justice has recently extended the exemption for insolvency litigation from the Legal Aid Sentencing and Punishment of Offenders Act (LASPO) 2012. Office holders can still recover the costs of an ATE premium and any uplift applicable under a CFA from the opponent in addition to any Judgment awarded, which means CFAs are here to stay.

CFAs are an option if the claim is strong enough and there is a financially viable target.

Creditor Funding

Interested creditors or third parties may fund litigation or indemnify the office holder against adverse costs. However, you are more likely to find a pot of gold at the end of the rainbow than a creditor (however aggrieved) who is willing to put his hand in his pocket to fund litigation.

Third Party Litigation Funding

The last 10 years have seen a burgeoning of specialist insolvency litigation funders who are willing to provide assistance to those office holders whose cases merit funding.

Applying the Trinity Today

St Patrick, in one of his rare breaks from consuming Guinness and sitting at the end of rainbows, acknowledged that but for his dogged reliance on the doctrine of the Holy Trinity of Insolvency Litigation, banishing all those snakes would have been virtually impossible.

The doctrine remains highly relevant today and should be considered in advance of the commencement of all insolvency litigation. 

In the meantime, raise a glass of the black stuff and have a Happy St Patrick’s Day!