funding options Flashcards
Understand and be able to explain funding options in a dispute resolution matter
available funding options
- Private funding
- Conditional Fee Agreements (CFAs)
- Damages Based Agreements (DBAs)
- Legal Expenses Insurance
- Third-Party Funding
- Public Funding (i.e., Legal Aid)
private funding
where the client pays the solicitor directly for their services
two main ways:
1. hourly rates > will need to add on VAT
2. fixed fees > the solicitor must complete the work for this fee, even if it has become unremunerative (Inventors Friend Ltd v Leathes Prior (a firm) [2011])
Conditional Fee Agreements
aka no win, no fee > fee is payable depending on the outcome of the case
fees and expenses [are] payable only in specified circumstances (s 58(2)(a) of the Courts and Legal Services Act 1990)
if the client wins, they will still have to pay:
- disbursements (counsel’s fees, fees for expert witnesses); and
- the opponent’s costs
- likely parts of their own solicitor’s costs (opponent is rarely ordered to pay 100% of the client’s costs)
success fee
an additional fee the client will normally have to pay to reflect the success of a case in CFAs
can be a max of:
- 100% of the solicitor’s normal charges (s5, Conditional Fee Agreements Order 2013); or
- in a personal injury matter, 25% of the general damages awarded, whichever is lower
- success fee is unrecoverable from the opponent (s44, the Legal Aid, Sentencing and Punishment of Offenders Act 2012)
formalities for CFA
enforceable only if it meets the requirements of s58 and s58A Courts and Legal Services Act 1990
CLSA provides that a CFA:
- may be entered into in relation to any civil litigation matter, except family proceedings;
- must be in writing; and
- must state the percentage of the success fee.
risk assessment of CFA
firms won’t get paid unless the client wins, must conduct a risk assessment based on the following:
- the merits of the case
- the likely sum of damages
- the time it will take for the case to reach trial
- the number of hours the case would require
professional conduct - success fees
if the client proposes a success fee that is in excess of what the solicitor would otherwise set, the solicitor shouldn’t accept this
relevant Code of Conduct provisions:
- principle 2 > upholding public trust
- principle 4 > act with honesty
- principle 5 > act with integrity
principle 7 > act in the best interests of the client
- par 1.2. Code for Solicitors / Firms > can’t take unfiar advantage of the client
- par 8.7. Code for Solicitors / par 7.1.(c) Firms > client needs to receive the best possible information about how their matter will be pursued
Damages Based Agreements (DBAs)
if the client succeeds and recovers damages, their solicitor will be entitled to an amount equal to an agreed percentage of those damages (a “contingency fee”)
contingency fee > will cover solicitor’s costs + CAT + counsel’s fees (not any disbursements)
costs payable by the opponent will offset this fee
formalities for a DBA
must meet the requirements of s58AA(4) of the Courts and Legal Services Act 1990:
- can’t provide for a payment above the “prescribed amount” > solicitor’s costs + VAT + counsel’s fees can be a max of 50% of the damages award (reg 4(3) DBA Regulations 2013) (not including disbursements)
- other limits: max 25% in personal injury, max 35% in employment cases
Comply with such other terms and conditions as are prescribed by the Damages-Based Agreements Regulations 2013 (must say which claim the DBA relates to, the circumstances in which the payment is payable)
legal expenses insurance
insurance designed to cover the insured person against the potential costs of litigation brought by / against them
can cover:
- Solicitors’ fees
- Court fees;
- Expenses for expert witnesses; and
- Opponents’ costs (if the insured person is ordered to pay them)
types:
- before the event insurance (taken in advance of legal disputes)
- after-the-event insurance (taken after the legal dispute has arisen to cover potential future liabilities associated with that dispute, can only be taken if the insurer is confident in the success of the case, premium is not recoverable from the opponent)
third party funding
aka litigation funding
can be from:
- trade union
- litigation funding company
- legal aid (available only in limited circumstances > depends on the type of case, the merits of the case, and the financial eligibility test)
third party funding agreements that entitle the funder to a percentage of the client’s damages are capable of being DBAs so must comply with the formal requirements of DBAs
General rules on costs
- CPR 44.2(2)(a) – unsuccessful party pays successful parties costs
- CPR 44.2(1) – court has discretion
- CPR 44.2(4) factors the court take into account when the other side has to pay
- Shortfall always paid by client - There are always costs involved in litigation that will not be recoverable
