INFORMATION FOR CLIENTS ON FUNDING OF DISPUTE
RESOLUTION AND LITIGATION
Cases which involve court proceedings are known as “litigation”. You
will be primarily responsible for paying your solicitor’s costs incurred
in your litigation. It is often the case that the losing party will pay
for the winning party’s reasonable costs and disbursements of pursuing
the claim. Please note however, that you may not recover the entirety of
your legal fees from the losing party. Estimating the likely costs of
litigation is not an easy matter. There are many risks and
uncertainties. For example:
- Might the dispute be settled early?
- Will the other side fight all the way?
- Will expensive expert evidence be required?
These are questions that cannot be answered when you first instruct a
solicitor. However, at the outset of your case, a good solicitor ought
to make you aware of some of the probable or possible outcomes of any
legal action you might be contemplating. A good solicitor will also
explain your liability for paying the legal costs of your action. They
will discuss with you your various funding options.
Funding Options
In legal matters it is normal for clients to be expected to meet the
legal charges and expenses of their own case. To most people, however,
there are a number of options available. These include:
- Community Legal Service Funding (previously known as “Legal
Aid”). Now only available on a very limited basis in litigation
cases. If you wish us to advise you on your eligibility for public
funding you need to be prepared to disclose certain personal
financial details
- Private Retainer. This involves you paying your solicitor at an
agreed hourly rate for the number of hours your solicitor has worked
on your case
- Funding from Third Parties such as Trade Unions, family or
employers. (Please tell your solicitor if you think this may be
available to you.)
- Risk Sharing. Those who offer a risk sharing arrangement include
Insurance Companies and Lawyers.
Some cases will simply not be suitable for risk sharing. It is also
worth remembering that third parties who offer to fund you will normally
expect to share the rewards of your action.
Risk Sharing with Legal Expenses Insurers
“Before the Event Policies”
These are legal expenses insurance policies which can be taken out,
usually with an annual premium, to provide cover for a possible future
legal problem. Private individuals often have one, for example, as an
“add-on” to a home contents or car insurance policy. Increasingly,
companies are encouraged by their brokers to add legal expenses
insurance to their normal commercial policy. It is important to be aware
that these policies are frequently very limited in what they cover and
may include restrictions on your choice of solicitor and may not provide
full cover for hourly rates and other charges. If you think that you may
have any such policy it is very important that you provide your
solicitor with details of the same.
“After the Event Policies”
These are policies that help to cover the cost of litigation once the
dispute has arisen. If the premium is affordable, then it can provide
some peace of mind against the possibility of the total litigation costs
if you lose the case.
Insurance cover can be purchased to protect against:
- Your opponents’ legal charges
- Your own “disbursements” (expenses such as court fees and
experts fees)
- Your own legal charges (insurers are increasingly reluctant to
provide this cover.)
The usual basis if such policies is that payment is only made where
your case fails completely.
Paying the Premium
The downside to any insurance is that you must pay the premium. Some
points to consider are:
- The money has to be found for the premium. Sometimes the insurer
will agree to defer payment until the end of the case in return for
a higher premium
- The Access to Justice Act 1999 makes possible for the court to
order your opponent to repay you the premium if you win, but you are
not guaranteed complete recovery of the same
- Premiums for accident cases are modest. For other types of
litigation, for example, they may be about 20% to 30% of the total
legal charges against which you want to protect yourself
- In substantial commercial litigation, the premiums may be even
higher.
Risk Sharing with Lawyers
Until recently, solicitors were not permitted by law to offer clients
any such arrangements. However, there are now various possibilities:
- Conditional Fee Agreements
– inaccurately but regularly called “no win – no fee” arrangements.
If this is offered, your solicitor makes no charge if the case is
lost but you have to pay your disbursements and your opponents’
legal charges. If you win, your solicitor charges a “success fee” on
top of the normal hourly rate. Your opponents may be ordered to pay
at least part of these charges, including the success fee
- Contingency fees – where again you are not charged if you
lose but the fee if you are successful is a percentage of what is
recovered. However, this arrangement cannot be used for cases which
require court proceedings
- Discount Conditional Fee – an hourly rate is agreed as
being payable if the case is won but the rate is reduced if the
outcome is unsuccessful. Such an agreement could also provide for a
success fee.
