Litigation Funding Solicitors
Significant reforms of civil litigation costs and funding came into force on 1 April 2013.
The reforms follow many of the recommendations made by Lord Justice Jackson following his comprehensive review of costs and funding in England and Wales.
Below we describe some of the key reforms, including the introduction of US style contingency fees which in England and Wales are referred to as “damages-based agreements”.
We also set out details of Summit Law LLP’s approach to litigation funding.
A truly modern and flexible approach to funding
Legal costs can be a complicated area but with our assistance, we can discuss the various fee structure options to suit your case.
We believe that the preparation of a cost estimate at the outset of a case is key and at Summit Law LLP we do this as part of our Law Society Lexcel Accreditation and client care procedure not just initially but at regular intervals throughout our client’s cases.
Instead of running the risk of a Costs Order against you, we can also help with insurance.
In addition, we can assist you in choosing any one of:-
- Conditional Fee Agreements (“CFA”s).
- After the Event Insurance (“ATE”)
- Damages-Based Agreements (“DBAs”)
- Third Party Funding Agreements.
Each case will vary depending on its facts but generally we will break the case down, into segment parts from the initial stages of your case running up to and including trial.
Before we do this we need to understand the factual matrix of your case and then identify the legal issues involved.
As part of the process we need to read the documentation and we may have to interview the witnesses.
This will also help us to try and assess the merits of your case. We might not be able to advise you straight away perhaps because you may need the assistance of an expert witness.
Following the above steps we will prepare a detailed written estimate of each stage of your case which will include the costs of the proceedings, namely our fee costs, Counsel’s fees and any other substantial disbursements such as an expert’s fees or for document production.
This will serve a useful purpose as litigation funders and insurers will need to know the quantum of the costs required and they will use our estimate to assist them. It has also now become a necessary measure as the rules of court require detailed cost estimates.
Whatever funding model is used, in accordance with our Lexcel Accreditation, regular estimates and budgets are an essential feature of a modern approach to the conduct of litigation.
We also fully appreciate that you need to know what costs are likely to be incurred and at what stage so that you can budget accordingly.
Are you a business?
If you are a business once we have undertaken a case assessment and prepared a costs estimate we can then work with you to help try and identify the litigation risks.
As far as the costs are concerned, we can try and reduce your exposure by a combination of Conditional Fee Agreements, After the Event Insurance Policies or Third Party Litigation funding.
Conditional Fee Agreements (“CFAs”)
There are several variations of how a CFA can be formulated but in simple terms, a CFA is an agreement between a lawyer and a client to share the risk of litigation by combining the outcome of the case to the legal fees payable to the lawyer.
One such example applies where we agree to reduce our standard fees by a discounted percentage (say 35%) for the duration of the case. Should the outcome of the case not be successful, the discounted amount of our fees is the only amount payable. Using the above example, would mean that you only pay 65% of our fees if the outcome of your case is not successful.
Whichever variation is used, the use of a CFA generally means that payment of whole or part of the lawyer’s fees is contingent upon the success of your case and in the event of success, an uplift is paid on the lawyer’s standard rates.
The latter is designed to reward the lawyer for the risk of not getting paid. If the claim is successful then our hourly base rate becomes payable together with the pre-agreed success fee. The success fee is defined by reference to a percentage uplift on our standard base rates.
Accordingly, CFAs can help reduce the pressures of litigation by giving funding options that share the financial burden of the process with us.
We always think that litigation is very much a team effort between solicitor, client and Counsel and experts if relevant.
Discussions in relation to CFAs usually take place at the outset, typically when we are carrying out an examination of your case.
Advantages of CFAs
- As costs are linked to the outcome of a case there is potential for reduced, or even low, costs to be payable by you if the case is unsuccessful.
- Further, there is improved certainty on costs on the basis that you know if you lose the case you will only have to pay the reduced fee and disbursements as provided for in the CFA.
- Disclosure of a CFA to your opponent in insolvency cases may encourage earlier settlement as the other party’s potential liabilities will increase in accordance with the level of the success fee.
- In insolvency cases, the success fee will be payable by the losing side, therefore, any damages awarded will not be consumed by the success fee.
- We will always have a stake in the litigation and as such, as ever our incentive is to achieve a successful outcome.
- One of the further advantages of a CFA is that it sends a clear message to your opponent that you or at least your legal team are confident of winning. In addition, your opponent would be advised that by entering into a CFA, your exposure to your costs has been reduced.
Disadvantages of CFAs
- As a CFA gives a lawyer a financial interest in the case, your lawyer will have greater control over the overall strategy and resolution of the litigation.
- Unless you purchase ATE to cover your opponent’s costs you still risk being liable to pay these costs if the litigation is unsuccessful.
- Unless your claim comes under the insolvency exception, your damages will be reduced by the uplift.
After the Event Insurance (“ATE”)
What is ATE?
Basically an ATE policy is a form of legal expenses cover which provides insurance that is intended to cover the risk of being ordered to pay your opponent’s legal costs, in the event that your claim is unsuccessful.
In terms of your opponent’s legal costs, what if you are not successful. The usual order made is that the loser pays the winner’s costs. ATE insurance can help reduce this financial risk.
Some products can also cover disbursements and we will be happy to discuss this with you.
Examples of these disbursements include Counsel and experts’ fees which can be substantial.
We work with the leading brokers but we have not tied ourselves to any one broker or insurer and we are truly independent as we do not receive a commission or referral fee.
Although the ATE insurers will make their own assessment, they will usually ask us to provide a summary of your case and possibly also Counsel who will have to give an opinion on merits.
The timing of payment of the premium can also be delayed in some circumstances.
Again under the current law the insurance premium itself can be recovered from your opponent but only where the insolvency exception applies. We will be happy to discuss this with you if requested in writing to do so.
Advantages of ATE
- Often the levels of ATE premiums are staged so that these rise as the case progresses. Where the premiums are staged in such a manner, this puts pressure on your opponent to settle at an earlier stage before the premium increases.
- You will not be intimidated by the projected high level of your opponent’s costs as, in the event of the case being unsuccessful, the insurer will meet these liabilities.
- Your opponent will be aware that the merits of the case have been independently assessed by the insurer who has determined that the litigation has a good chance of success.
- Also, having ATE signals to the other party that you are serious about fully pursuing the litigation having already minimised your exposure to your opponent’s costs.
Disadvantages of ATE
- The cost of the insurance premium itself is also a consideration although the extent of the liability will be apparent as soon as you receive the insurer’s quote.
- Although ATE policies can be obtained at any stage, they may be more difficult and expensive if obtained later in the case.
- Most insurers will conduct a separate assessment of your case in order to determine whether the litigation has a good chance of success. The cost of the assessment will initially be paid by you, however, this will usually then be absorbed by the premium if ATE is provided.
Any Existing Policies?
You should also check your own existing policies with your broker or insurer to see if you have cover for this particular risk.
Damages-based agreements (DBA)
A damages-based agreement (DBA) is a form of “no-win, no fee” agreement between a lawyer and client under which the lawyer is paid an agreed proportion of the sums the client recovers in litigation. This kind of arrangement is perhaps more often described as a “contingency fee”, but in England and Wales that term would also cover a “conditional fee agreement” (see above).
Until recently, English law only permitted DBAs in relation to non-contentious transactional matters and proceedings before employment tribunals but, from 1 April 2013, they are now permissible in relation to proceedings before the English courts. In commercial cases, the payment a lawyer may agree to receive under a DBA will be subject to a cap of 50% of the sums recovered by the client. Different caps apply to other types of cases.
The liability of an unsuccessful party to pay the costs of an opponent, which has entered into a DBA, will continue to be calculated in the usual way i.e. based on the lawyer’s hourly rates. If the recoverable costs so calculated are lower than the amount that the successful party owes its lawyers under the DBA, the successful party will have to fund the shortfall. However, if the costs calculated on an hourly rate basis are higher than the amount due under the DBA, the recoverable costs will be limited to the amount due under the DBA.
Third Party Litigation Funding
Third Party Funding is becoming increasingly popular as the legal market develops.
In essence Third Party Funding is the payment of your legal costs by a third party.
However the funding is provided in return for a share of the litigation recoveries (being either a settlement with your opponent or through an award) or an agreed multiple of the costs advanced.
Such funding arrangements used to be considered illegal in the United Kingdom but are now accepted by the Courts and there has been an emergence in the market with several highly respected funders operating in the marketplace.
Again the funder will probably require an assessment of the merits of your case and also a detailed costs estimate.
Once funding has been provided, funders are not permitted to exert any pressure or control on how the case is progressed.