Q&As

If a solicitor acting under a conditional fee agreement suspects that their client is soon to be made bankrupt, would it be a preference if the solicitor was paid following a hearing/mediation and following an agreement between the parties, such that the fees would have to be repaid to the trustee in bankruptcy (trustee)?

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Produced in partnership with Caroline Clark
Published on LexisPSL on 19/01/2018

The following Restructuring & Insolvency Q&A produced in partnership with Caroline Clark provides comprehensive and up to date legal information covering:

  • If a solicitor acting under a conditional fee agreement suspects that their client is soon to be made bankrupt, would it be a preference if the solicitor was paid following a hearing/mediation and following an agreement between the parties, such that the fees would have to be repaid to the trustee in bankruptcy (trustee)?
  • Definition of a preference
  • Application of the Insolvency Act 1986
  • Conclusion

If a solicitor acting under a conditional fee agreement suspects that their client is soon to be made bankrupt, would it be a preference if the solicitor was paid following a hearing/mediation and following an agreement between the parties, such that the fees would have to be repaid to the trustee in bankruptcy (trustee)?

Definition of a preference

A preference regarding an individual is defined in section 340 of the Insolvency Act 1986 (IA 1986) as where 'a person is one of the individual's creditors or a surety or guarantor for any of his debts or other liabilities, and the individual does anything or suffers anything to be done which has the effect of putting that person into a position which, in the event of the individual's bankruptcy, will be better than the position he would have been if that thing had not been done'.

A preference claim only becomes relevant where the individual has been adjudged bankrupt. The claim is brought by

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