Financing Civil Litigation

Question 1

It is the legal representative’s duty to-

Answer 1

Explain to the client who pays for what, how much the work will cost and when payments have to be made

Question 2

Whose responsibility are the disbursements?

Answer 2

Always the client’s

Question 3

Two fundamental principles that underpin costs within the litigation framework

Answer 3

The payment of costs by one party to another is at the discretion of courts; the loser should pay the winner’s costs

Question 4

What should the client be made aware of in relation to costs orders

Answer 4

That even if they win, the court may not order the other party to pay all of their costs, as well as that should the party fail to pay they’ll still be responsible for their own costs so will have to pay that and then try to recover

Question 5

Qualified one way costs shifting

Answer 5

Applies to PI - if the claim fails, the claimant doesn’t have to pay the defendant’s costs

Question 6

Methods of funding the claim (7)

Answer 6

Before the event insurance, union funding, private funding, CFAs, DBAs, litigation funding and ATE

Question 7

DBA

Answer 7

An agreement for litigation services under which the client must make a payment to the person providing the services if the client receives a financial benefit and the amount of payment is to be determined by reference to the amount of the financial benefit

Question 8

Limit on costs in PI claims

Answer 8

25% of general damages

Question 9

Limit on costs in all claims bar PI and employment

Answer 9

50% of general damages

Question 10

Under DBAR, does any information have to be given to the client?

Answer 10

No

Question 11

Things that it is prudent to explain to the client in relation to DBA (5)

Answer 11

Claim it relates to; circumstances in which they’ll have to pay; how much the client will be liable to pay; where the client can seek assessment of costs; alternative methods of funding

Question 12

If the client represented on a DBA wins the case

Answer 12

The loser pays the winner’s reasonable costs and the client will be liable for any shortfall between the costs recovered and the DBA fee

Question 13

If the client represented on a DBA loses the case

Answer 13

They have to pay their opponent’s costs (unless QOCS applies) and dibs and their own dibs but not solicitor’s costs

Question 14

CFA

Answer 14

Essentially an agreement where the lawyer’s fees and expenses, or part of them, are payable only in particular circumstances

Question 15

Basic principles of CFAs (4)

Answer 15

The client pays no legal costs to their representative throughout the case; if they win the representative is entitled to charge an agreed percentage uplift to the base costs; if they lose there is no charge for the base costs or success fee; in both cases the legal representative is entitled to payment of disbursements

Question 16

How much can the success fee be?

Answer 16

Up to 100% of the base costs (PI different as cannot be more than 25% of damages and 100% of costs)

Question 17

Mandatory requirements that need to be brought to client’s attention re CFAs (6)

Answer 17

Must be in writing; maximum amount of success fee must be expressly stated; must not relate to proceedings where CFAs are prohibited (criminal and family); when the client may be liable for their/their opponent’s costs; the client’s entitlement to a costs assessment; whether you have any interest in any funding policy

Question 18

If the requirements are not adhered to-

Answer 18

The CFA is likely to be unenforceable

Question 19

Hollins v Russell 2003

Answer 19

If there was a material breach which had an adverse effect on the client, the CFA would be unenforceable

Question 20

Jones v Caradon Catnic 2006

Answer 20

Even if the breach had no material adverse effect on the client, CFA held to be unenforceable

Question 21

Herbert v HH Law 2018

Answer 21

If the law firm could produce evidence that the client gave their informed approval to the percentage identified in the CFA, the deduction is likely to be upheld

Question 22

What does the success fee represent?

Answer 22

The risk factor to the legal representative of taking on the litigation and the fact that the legal representative is in effect postponing being paid the legal costs until the resolution of the claim

Question 23

If a CFA-represented client wins?

Answer 23

The loser pays the winner’s reasonable costs including VAT and dibs but the client is liable for the agreed success fee of their solicitor subject to their right to apply for assessment of it by the court

Question 24

If a CFA-represented client loses?

Answer 24

They are liable for their opponent’s costs, VAT and dibs and their own dibs but not their solicitor’s costs

Question 25

ATE

Answer 25

Specialist insurance cover taken upon payment of an initial premium protecting against losing the case

Question 26

ATE’s most popular use

Answer 26

To supplement a CFA or support a DBA

Question 27

When can and should ATE be obtained?

Answer 27

Only after the dispute has arisen and only if there is no other insurance or funding option available to the client

Question 28

What is the level of ATE premium dependent on?

Answer 28

The strength of the client’s case

Question 29

Is the ATE premium recoverable?

Answer 29

No except for insolvency, defamation, mesothelioma and clinical negligence