Funding for Litigation – A Guide

Once upon a time there was only one way by which you could pay for legal advice and that was by the hour. Over the years a variety of methods of funding litigation have sprung up. Below is a useful guide to those currently available.

Hourly Rate

The original – and still the preferred method for many clients. Added to that, in litigation cases clients have the comfort of knowing that the Supreme Court Costs Office (part of the High Court) has assessed the appropriate hourly rates for solicitors to charge in every town in England and Wales where a County Court is located. Those rates are broken down for every level of lawyer, based on experience for each location.

If you instruct us on this basis then we will provide you with a costs estimate for each stage of the case so that you can make an informed decision on how far to take the case. Whether you’re pursuing a claim or defending one, you can make a decision based on what you can afford and take into account commercial considerations that might apply to your business.

Legal Expenses Insurance (LEI)

Many people have LEI, often referred to as ‘before the event’ insurance without realising it. It’s a common add-on benefit to motor insurance and is also often added to home insurance policies and to the benefits which come as part of a package with e.g. road side assistance, a bank account or a credit card. You should check your documentation and if in doubt contact your provider.

Do bear in mind that there is often a time limit within which you have to notify the insurer and you must do that before you instruct a lawyer. Many insurers will also want you to use one of their firms of solicitors with whom they have arranged discounted rates, rather than your preferred choice of solicitor. The insurance company solicitors are unlikely to be based near to where you live and due to the fact that they are working at reduced rates they won’t take on your case unless they consider it to be very strong. It is therefore worth insisting that you be allowed to instruct a solicitor of your choice.

Conditional Fee Agreements (CFA)

The claims companies who advertise on the television will describe these as ‘no win, no fee’ agreements. However what they don’t tell you is that this strapline is limited to your solicitors’ costs. If you don’t win the case you will still be liable for your solicitors’ disbursement eg court fees, barrister’s fees etc. and if court proceedings have commenced you may also be liable for the whole of your opponent’s legal costs. 

If you are able to afford insurance to cover these liabilities then a CFA may still be attractive to you, as you know that your lawyer has a vested interest in the outcome of the case. Bear in mind however, that in return for taking the risk of not being paid at all, your lawyer is entitled to charge a success fee at the conclusion of the case based on a percentage of your lawyer’s costs (up to a maximum of 100%). This fee will be payable by you, even though the rest of your costs can be recovered from your opponent. This therefore reduces the damages that you receive. You should also bear in mind that if you win your lawyer’s costs and the success fee are payable by you whether or not you actually get paid by your opponent.

Damages Based Agreement (DBA)

From 1 April 2013 it has become permissible to enter into an agreement with your lawyer whereby if you win the case your lawyer takes a cut of the damages. This can be up to 50% in cases not involving personal injury or employment law claims. If you lose you pay your lawyer nothing, although as with all funding types you will still be responsible for your lawyer’s disbursements and, if court proceedings have been commenced, your opponent’s costs. 

With a DBA in place your lawyer only gets paid if you win and you actually get paid by your opponent. This creates an additional layer of risk for your lawyer hence the potential reward is greater than with a CFA. For obvious reasons this form of funding is only available if you are pursuing a claim for damages. 

Unfortunately the regulations bringing DBA’s into force have caused significant confusion amongst the legal profession and the Government has acknowledged that they require amendment. It is unlikely that the necessary amendments will be in place before Autumn 2013 and therefore as matters stand we are not offering this funding option to clients.

After The Event (ATE) Insurance

As the name suggests this is a form of insurance taken out specifically to cover the legal expenses arising from a particular event that has already occurred. Although insurers are flexible, the cover is usually restricted to your lawyer’s disbursements and your opponent’s legal costs. For that reason it is an insurance product which goes hand in hand with a CFA so that if you lose the case then your liabilities are covered. Historically the premium for the policy could also be recovered from you opponent as part of your legal costs if you won. However from 1st April 2013 this will no longer be possible. The premium is therefore a cost which you will have to bear if you think the risk of losing justifies the expense. If you would like to look into ATE insurance please let us know and we can approach the marketplace on your behalf.

Third Party Funding

This is an agreement between you and an investment company whereby they will pay all or part of your legal costs in return for a share of your damages if you win. They would normally expect to receive a return on their investment in the region of at least 2:1 so your claim will have to be of significant value to make this a viable option. They may also include a contribution to your opponent’s legal costs if you lose, limited to an agreed provision for those. If your claim is of significant value and you would like to explore this option then we can approach the marketplace on your behalf. For obvious reasons this form of funding is only available if you are pursuing a claim for damages.

Combination Funding

It may be possible to combine the above funding methods into a package of funding that will provide you with cover for the various legal costs that will need to be incurred and provide you with protection from liabilities which may be incurred in the event of your case not succeeding. This would realistically only be viable if your case is particularly complex or of high value, such that either the costs or the damages (or both) are likely to be exceptionally high. If you wish to explore this avenue then please let us know.

Legal Assistance Scheme

If you are a member of an organisation such as professional or trade organisation e.g a trade union or a professional body, you may be eligible for free or discounted legal advice and representation through that organisation. You will need to contact that organisation in the first instance to find out if you are eligible under the scheme and what the conditions of using the scheme are.

NFU Legal Assistant Scheme

Napthens is an accredited NFU legal panel firm. Under the NFU Legal Assistance Scheme our first diagnostic telephone conversation with you is free of charge. However, subsequent advice and correspondence will be charged to you on an hourly rate basis. Please note that if you are an NFU full farming member, you are entitled to make an application to the NFU for a contribution towards costs. The way this scheme operates is that you remain a client of Napthens and will be asked to pay our fees and expenses on an hourly rate basis. The NFU will then pay the amount of any agreed contribution to you on production of our receipted invoice. The NFU will be happy to provide you with the necessary application forms for the scheme if you wish to explore this further.

Legal Aid

Please note that Napthens does not provide Legal Aid services.

Public funding may be available to you but please note:
(1) It is subject to strict financial eligibility criteria;
(2) It is only available for a limited range of legal issues;
(3) Only solicitors firms with a franchise from the Government can offer Legal Aid.

For more information please visit the Government website at www.gov.uk/civil-legal-advice or telephone an advisor on 0845 345 4 345 or email a query to emailhelp@civillegaladvice.org.uk