Litigation Funding
Despite the reforms to the Civil Procedure Rules, litigation is still viewed as an expensive process. Not only does each party have to fund its own legal representation, but the risk of having to pay the other side’s costs if you lose also has to be factored into the economics of litigating.
There are a number of options available to finance the conduct of litigation. Tollers will be as flexible as circumstances allow in its approach to funding issues. The main options are as follows.
Hourly Rates
This is the traditional approach based on the amount of time spent on the case. However we recognise clients’ concerns as to the open ended commitment this may represent. We always strive to provide you with a realistic estimate of the costs of each stage of the proceedings. Where appropriate, we are prepared to negotiate a fixed fee for a defined piece of work or to a particular stage in the proceedings.
Before the Event Insurance (BTE)
BTE is a common form of insurance policy which usually provides for legal costs up to a defined maximum providing the chances of success are at least 51%. The cover is often included in household and motor policies and through professional bodies and trade organisations. Before consulting a solicitor, it is always worth checking whether you have the benefit of such cover. If so, you should contact your insurer immediately.
It should be noted that if you choose to issue proceedings, an insurer cannot insist that you use the solicitor designated by the insurer. However if you decide to use a different solicitor, you will have to pay any difference between the rates payable under your policy and the rates charged by the solicitor you instruct.
Conditional Fee Agreements (CFA)
A CFA is where we agree to discount our standard hourly rates during the case. The level of discount depends on our view of the merits of the claim. In order to reach a view on the merits we generally agree a fixed fee for our initial review prior to discussing the terms of the CFA.
Once a CFA is concluded, if you win the case then we have the right to charge the balance of our standard fees together with a success fee based on a percentage uplift on our standard fees. If you lose, you do not pay anything beyond the discounted fees already charged. The arrangement is always clearly set out in a binding written agreement between you and Tollers.
The CFA does not usually include disbursements such as Counsels’ fees although we are happy to discuss equivalent CFA arrangements with Counsels’ clerks.
Notice must be given to the other side of the CFA (but not its specific terms). You are then entitled to claim the conditional element of the fees (i.e. the additional amount triggered by the success), subject to the overriding discretion of the Court.
In general CFA’s are only viable where you have a strong claim, but the terms can be adapted to reflect our view of the merits.
CFA’s are also open to Defendants as well as Claimants, where “success” will be defined by the extent to which the Defendant successfully resists the claim either at trial or by an out of Court settlement.
After the Event Insurance (ATE)
Whilst a CFA may help to mitigate your own costs, it does not address the risk that you will have to pay the other side’s costs if you lose. This risk can be managed via an ATE insurance policy. The policy is designed to pay the other side’s costs if you lose. If you win, the cost of the insurance premium is recoverable from the losing party as part of your overall costs (but this is under review by the Government and may change). There are also mechanisms by which you can avoid paying the premium if you lose and have to claim under the policy.
Tollers has established relationships with a number of ATE providers and we are happy to discuss ATE requirements on a case by case basis.
Third Party Funding
This is a more recent innovation whereby third parties agree to pay your legal costs in return for a share of any financial recovery. Funders usually ask for between 25% and 40% of damages awarded. Given the need for the funder to achieve a sufficient financial return, it is generally only an option for claims running into six figures and where the chances of success are high. However, it can be an option worth considering where a Claimant has a strong claim for a substantial amount but lacks the financial resources to pursue it.
Contingent Arrangements
A contingent fee arrangement is where legal fees are paid out of any financial recovery. Where legal proceedings are involved, save in relation to certain Employment Tribunal claims, it is unlawful for a solicitor to act on this basis. However, in relation to disputes and claims which do not involve legal proceedings, then it may be possible for Tollers to agree an arrangement whereby we receive an agreed percentage of any compensation in payment for our services.
