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Guide to funding a litigation claim

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Posted by Susan Hopcraft on 09 February 2016

Susan Hopcraft Partner

Before you can decide whether to pursue or defend a claim, you need to know how much the process will cost, when the fees will need to be paid and what the options are for funding those costs.

There are various ways in which the costs of litigation can be managed, budgeted or funded.

What fees will I have to pay?

Litigation typically involves three main types of expense:

  • your own solicitor’s fees;
  • barrister’s fees, expert witness fees and court fees; and
  • your opponent’s costs in defending or pursuing a claim, which you may agree or be ordered to pay if you lose.

In addition, you may choose to pay for insurance against your risk of paying all or some of the expenses described above.

What are my options to deal with solicitor’s fees?

Solicitor’s fees are often the first type of expense to be incurred and if a case runs until the end of a trial they are usually the lion’s share.

The types of funding that may be available and suitable for you will depend on several factors: the merits of your claim, the remedy you are seeking, the value of your claim and whether you are bringing or defending a claim. The potential different types of funding options that may be available are:

Hourly rates

Under this type of agreement, you will pay an hourly rate for the solicitor’s work. The amount that you will pay for your fees will be the same whether you win or lose. If you are successful, you will often be able to recover some of the fees that you have paid from your opponent.

Fixed Fees

In low value and straightforward cases, we may be able to offer fixed fees for the whole or stages of the litigation.

Conditional Fee Agreements (‘no win, no fee’)

These are often referred to as ‘no win, no fee’ agreements, although this is somewhat misleading as this type of arrangement usually only covers liability for solicitors’ fees and not the other likely expenses to be incurred. With this type of agreement the amount that you will have to pay for your own solicitors’ costs depends on the outcome of the case.

One of the benefits of this type of arrangement is that it transfers some of the risk of pursuing litigation to your solicitors. In exchange for the solicitors agreeing that they will not seek recovery of some or all of their fees if a case is unsuccessful, you agree to pay the solicitors a success fee in addition to their normal fees if the case is successful. The success fee charged by solicitors under this type of agreement cannot be recovered from an opponent.

We offer a myriad of Conditional Fee Agreements including Discounted Conditional Fee Agreements, Capped Conditional Fee Agreements and ‘No Win, No Fee’ Agreements.

Purchasing insurance

Insurance can be purchased to cover the risk of paying some of the expenses of litigation. This is known as After the Event insurance or ATE. An ATE insurance policy can be purchased to cover your risk of paying your opponent’s fees and/ or your opponents’ fees and your own disbursements should you be unsuccessful in the litigation. ATE insurers commonly prefer to insure cases where the solicitor is acting on some type of CFA arrangement as ATE policies will not normally provide insurance cover for your own solicitors’ fees.

The premium paid for an ATE insurance policy is not recoverable from your opponent if the litigation is successful. However, payment of the premium for an ATE policy is often deferred until the conclusion of the litigation.  The premium is also often ‘self-insured’ which means that it is not payable if the litigation is unsuccessful.

Whilst we are not insurance brokers, we can assist you with making an application to an insurance broker and/ or ATE insurer and advise you upon the suitability of the terms of any insurance policy.

If an ATE insurance policy is purchased, it is important to comply with the terms of the policy which will include providing reports to the insurer on the progress of the case, any offers that are made during the litigation and the prospects of the litigation.

Third party funding

Third party funders invest in the litigation by funding the legal fees in exchange for a fee. Third party funders’ fees are typically calculated as a multiple of the cash invested or a percentage of monies recoveredIf litigation is lost a third party funder will lose their investment and no sums will be repayable.

In assessing any potential investment in litigation a third party funder will have regard to the value of any claim, the prospects of the claim resulting in a successful outcome and the prospects of recovering any monies awarded as a result of the litigation.

If the prospects of a claim are strong enough, we will work with you to find a suitable funding arrangement to enable you to seek redress and manage the costs of litigation. 

About the author

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

Susan Hopcraft

Susan is a disputes and professional negligence lawyer, mainly in the financial services sector.

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