Funding Your Legal Case

May 15, 2014 tags: Legal Articles

Starting or defending legal proceedings can be daunting, and can have a significant impact on your finances. Before taking any step that will expose you to any risk your barrister will consider and advise you on the following options for you in funding your case, bearing in mind that your costs risks are both to your own lawyers and your opponent’s.

  1. Insurance. You may already have legal expenses insurance for bringing or defending claims, as a free-standing policy or under home or business insurances, which may cover you for some or all of your legal costs of both sides. If not, we can arrange to incept a policy of insurance against the other party’s costs. (It is commonly referred to as ATE insurance, standing for ‘after the event’, whereas existing policies are BTE, ‘before the event’) The premium is not payable unless you win the case, as it is self-insuring, and only falls due at that point. The availability of such cover is not guaranteed, and depends on the insurer’s view of the case. Counsel would always advise to apply for the cover before you launch a case. You cannot recover this premium from the other side, so you would need to judge whether it is worth taking the risk of not having such a policy. Most people will take it up if it is available, and it is tactically beneficial, to show the other side you are not under financial pressure.
  2. Litigation funding. This is available from investors who will fund both sides of the case in return for a share of the proceeds of success. It is generally only available for high-value claims, and will only be worthwhile when no other funding source is available. It removes the risk of you having to pay either side’s costs, but means you will not get the full amount of damages if you win.
  3. Conditional fee agreements “CFA”, for your own barrister’s fees. A CFA is an agreement between you and your barrister under which you agree to pay his fee at less than standard rates if the case is not successful, and at standard rates (sometimes with a "success fee" expressed as a percentage of the difference between the discounted rates and the standard rates) if your case is successful.

There are three main advantages to CFA’s:

  1. Improved cash flow. You will be offered a discount on counsel’s standard fixed rates throughout the life of the litigation.
  2. Improved certainty on costs. You will be better placed to budget for your legal costs, knowing that if the case is lost you will only have to pay counsel’s discounted fee (plus expenses).
  3. We share the risk of litigation with you, backing our judgement of the case.

Funding Your Legal CaseFor example, counsel might agree with you to discount his standard fees by 50% and there is a success fee of 100% of the 'deferred fees' (i.e. the difference between the standard rates and the discounted rates) if we win. Through the various stages, you pay his fee at the discounted rate of 50% (plus disbursements). If success in not achieved, that is all you have to pay him. If success is achieved, you pay him the remaining 50% of our standard rates plus a success fee of 100% of our deferred fees. The total amount due to him if you win is therefore 150% of our standard rates. Putting it bluntly, this is counsel’s incentive and reward for the win. The success fee is calculated as a percentage of the deferred fees. In order to set the level of success fee, counsel will quantify the prospects of success in percentage terms. The success fee cannot exceed 100% of the deferred fees. If your case is successful you will normally be able to recover these fees from the other side, including the deferred fees, which become payable on success, but not the success fee. If you are a claimant, the success fee will in effect come out of the damages. Success will be defined by reference to the likely remedies/outcomes of your dispute, often the recovery of money whether achieved through a court order or compromise, but there are many other possibilities. The definition is something that we will discuss and agree with you in advance, so you always know where you stand during negotiations or trial. Your barrister will decide if he can offer to continue your claim on a standard fee basis, or a discounted CFA basis with or without a success fee, and will always offer you a choice from two or more options if possible. Because of the nature of our practice areas CB does not carry out no-win no-fee casework, but is willing to share the risks of litigation where judgement of counsel justifies this approach. [gravityform id="1" name="Contact Us:" title="true"]

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