FUNDING OF LEGAL SERVICES Flashcards
FUNDING OF NON-LITIGATION MATTERS
- In non-litigation matters, such as advice on mergers or on
property sales and purchases, the most common form of
funding is private funding, or self-funding, which means the
client meets the costs of the legal services themselves.
The fee arrangement forms
part of the contract, or retainer, between the client and the
solicitor. For certainty, the retainer should be in writing, contain all relevant terms, and be signed by the client.
In such private funding cases, a solicitor will normally ask for a sum up front ‘on account’ of costs. This will enable the solicitor to fund any disbursements for costs of things
needed to support the client’s claim. Generally, the solicitor
will then invoice costs and disbursements on a monthly basis.
- Fixed Fee Financing
Fixed Fee Financing
Another way which a solicitor can agree to be paid is by
fxed fee which is agreed with the client at the outset
FUNDING OF LITIGATION
Exam Tip
To comply with the SRA Standards and Regulations, a solicitor must provide clear and transparent advice on costs. This could translate into a question in which, for example, the solicitor encourages a client to enter into one method of funding without explaining fully how it works or that there are other methods available which may be more in the client’s interests.
a.Private Funding
b.Conditional Fee Arrangement
c.Damages Based Agreements
d.Third-Party Funding
e.Other Forms of Funding
Private Funding
Litigation matters may be privately funded, though this is less common than in a non-litigation context.
Conditional Fee Arrangement
- A conditional fee arrangement, colloquially known as a** ‘no
win, no fee agreement**’, provides that if the claim is unsuccessful, the client will not have to pay the solicitor any fees (though the claimant may have to pay the defendant’s costs and expenses as well as their solicitor’s disbursementsin some cases). - If the claim is successful, the solicitor is entitled to their usual fees (costs), which the solicitor can recover from the losing party along with amounts paid as disbursements whilst litigating the case.
- Additionally, the solicitor is entitled to recover** a success fee** from their client expressed as an agreed-upon percentage of the solicitor’s normal fee.
Limitations on Conditional Fee Agreement
- The success fee recoverable from the client under a conditional fee agreement cannot exceed 100% of the normal fees charged (that is, the solicitor cannot make an agreement in which they will receive more than twice
their normal fees if successful). - Note that conditional fee agreements may not be used in family proceedings.
Exam Tip
If you are asked to consider a conditional fee agreement, check that the solicitor is not proposing an exces-
sive success fee and has made it clear to the client that if they are unsuccessful, they will be responsible for the successful party’s costs.**
Damages Based Agreements
- Under a damages based agreement, the solicitor agrees that if the client’s claim is successful, the solicitor will be entitled to **a specifed percentage of the client’s damages award **
(though the solicitor’s standard time costs can be recovered from the losing party along with disbursements). - If the other side is ordered to pay costs, any amount the other side pays will be deducted from what the client owes the solicitor under the damages based agreement
- If the claim is unsuc-cessful, the solicitor is not entitled to any fee or repayment of disbursements.
- In a personal injury case, the legal costs payable under a damages based agreement can be no more than** 25%** of the sum recoverable, excluding future losses. The sum payable can be no more than** 50%** in a non-person-al injury case.
Defnition of Success
Damage Based Agreement
- The damages based agreement should include a defnition of success.
- It should also state what happens in the event **adverse costs **(costs payable to the opponent) are awarded and explain how the parties can terminate the agreement.
Third-Party Funding
- Third-party funding (also known as ‘litigation funding’) iswhen a third party covers the cost of the legal fees and dis bursements, including barristers’ fees, court fees, and ‘after the event’ insurance, but not the other side’s costs.
- It is usual that the funder will expect to make a proftfrom funding (usually between 15% and 45% more thanthe actual costs). It generally will be agreed between the funder and the party being funded that the funder will bepaid from awards made to the party and that
- if the party is not successful, the funder will bear the costs it has agreed to fund.
Other Forms of Funding
- Legal Expenses Insurance
- Union Cover
- Civil Legal Aid
- Criminal Legal Aid
5.
Legal Expenses Insurance
- Before the Event Insurance
- After the Event Insurance
Before the Event Insurance
- A solicitor should check to see if the client has before
the event insurance to cover legal costs. - With before the event insurance, the insurer pays the solicitor’s legal costs.
- Policies Often Require Use of a Designated Solicitor
Note that before the event policies will often require the insured party to use a designated solicitor (that is, not the solicitor whom the client came to instruct and who is doing the checking). A solicitor nevertheless has a duty to do what is best for the client and look into this–even if it means the solicitor ultimately cannot take the case.
After the Event Insurance
- An after the event insurance policy is taken out after an accident or event giving rise to a claim has occurred.
- In exchange for the insurance premiums, the insurance
company will pay the cost of disbursements (that is, expenses incurred by the solicitor to progress the claim), such as experts’ reports, court fees, medical records, and so on. - Most after the event policies also cover the risk of having to pay costs to the other side if the claimant is unsuccessful.
Exam Tip
On the exam, be clear as to the diference between be-
fore the event insurance and after the event insurance.
Just remember the before and after in the name to keep them straight in your mind. After the event insurance is often associated with a conditional fee agreement, as it protects the claimant from the risk of having to pay their own disbursements and the other side’s legal costs if
they are unsuccessful at trial.
Union Cover
If the client is a member of a union, they may have en-
titlement to legal expenses cover as part of their union
subscription.
Civil Legal Aid
**1. A solicitor must consider whether a low-income client is eligible to fund litigation through Legal Aid (otherwise known as ‘public funding’).
2. However, if the client is eligible, the solicitor might not be able to accept the claim because public funding is available only through frms contracted with the Legal Aid Agency.
