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Solicitors acting for clients in insolvency matters should be aware of the recent clarification in McGann v Eldonian Community Trust Ltd EWHC 66 (Ch) that the insolvency courts have authority to make a pro bono costs order.
Ordinarily, CPR 46.7, governs costs orders in respect of pro bono representation, however, the court in McGann has applied this to insolvency proceedings through rule 12.1 of the Insolvency (England and Wales) Rules 2016 (IR 2016).
What is a Pro Bono Costs Order?
A pro bono costs order requires a party to pay an amount equivalent to legal costs to the pro bono party and, in the case of McGann, an additional payment to the Access to Justice Foundation. The court’s premise on this occasion was to ensure that parties facing pro bono representation are exposed to similar costs risks as if the opponent had paid for legal representation.
Practice Points for Solicitors
The decision in McGann highlights a number of key considerations for solicitors involved in insolvency proceedings where one party is represented on a pro bono basis. I will summarise these as follows and welcome the thoughts of practitioners in this space.
Do Not Assume No Costs Liability:
If your client’s opponent is represented on a pro bono basis, your client may still be ordered to pay costs which in recent cases have been significant i.e. £85,000 and £117,000. In the McGann case; £20,325.
Statutory Powers Apply in Insolvency:
The court’s power arises under section 194 of the Legal Services Act 2007 and applies to civil proceedings, including insolvency proceedings.
Relevant Rules and Procedures:
- CPR 46.7 and Practice Direction 46 set out the procedure for pro bono costs order; and
- the party with pro bono representation must file a written statement of the costs that would have been claimed if representation had not been free.
Assessment of Costs
The court may make a summary assessment or order a detailed assessment of the sum paid to the party providing pro bono representation.
No need for Retainer Evidence
The court does not require evidence of a written retainer for pro bono counsel; confirmation that the services were provided ‘free of charge’ is sufficient.
Practical Implications
Advising clients that opposing pro bono representation does not shield them from adverse costs orders.
Preparing for Hearings
Be ready to challenge or respond to pro bono costs statements and advise clients on potential exposure.
For a more detailed reading of the facts of McGann click here
Femi offers a free 30-minute consultation to help you explore your options and protect your business. Reach out on 07867 795 439 or email [email protected] or [email protected]
Femi Ogunshakin – Solicitor & Tax Adviser