Litigation Funding Flashcards
What are the different ways of funding litigation?
- Private funds.
- Insurance policies (Before the Event Insurance) such as home insurance/car insurance that includes legal expense cover.
- Union/Association Funding.
- Damages based Agreement (DBA)
- Conditional Fee Agreement (CFA)
What is a DBA?
A DBA is a form of “no win, no fee” arrangement between solicitor and client which provides that the client will make a payment to the representative if the client obtains “a specified financial benefit” (usually damages paid by the losing side).
The amount of the payment will be determined as a percentage of the compensation received by the client
Is a client liable for costs under a DBA?
If the client is unsuccessful, the solicitor will not be paid for the work done under the DBA.
The client will still be potentially liable for adverse costs, and these may be covered by after the event (ATE) insurance.
What does the client pay under a DBA?
Any sum payable to the solicitor must be net of disbursements.
Is there a cap on what is payable under a DBA?
- In personal injury claims, the sum payable to the solicitor is capped at 25% of damages.
- Employment claims is 35%.
- In all other claims, the sum payable is capped at 50% of damages.
The caps are inclusive of VAT.
What can be recovered in personal injury claims?
In personal injury claims, the relevant sums recovered are:
- General damages for pain, suffering, and loss of amenity.
- Damages for pecuniary loss, other than future pecuniary loss.
These must be net of any sums recoverable by the Compensation Recovery Unit of the Department for Work and Pensions
DBAs are subject to the indemnity costs principle - what does this mean?
If the claimant’s solicitor is entitled to a contingency fee under the DBA that is less than the amount of recoverable costs, the recoverable costs from the losing defendant will be limited to the amount of the contingency fee.
What is a Conditional fee Agreement (CFA)?
An agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances
What is a client likely to pay under a CFA?
- Losing the Claim
Generally, if the client loses the case, the client will not be liable to pay for the fees and any expenses that are subject to the CFA (the conditional fees).
- Winning the claim
If the client wins the case, the client will be liable to pay all fees and expenses, including the conditional fees, and the success fee, if a success fee is provided for in the CFA.
What is a “success fee” in a CFA?
A success fee is an additional amount payable for the legal services, over and above the amount which would normally be payable if there was no CFA, in specified circumstances (usually if the client wins the case).
A success fee must be expressed as a percentage uplift on the amount that would be payable if there was no CFA.
Under the Conditional Fee Agreements Order 2013 (SI 2013/689) (CFA Order 2013), the maximum uplift is 100%
Is there a limit on fees payable under a CFA in personal injury claims?
In a claim for personal injury, the success fee is subject to a further cap of 25% of damages recovered at first instance (where damages exclude future pecuniary loss and are net of any sums recoverable by the Compensation Recovery Unit)
How and who calculates the success fee?
The solicitor calculates the success fee.
This is done by assessing:
a) The risk of losing the litigation (the risk element).
b) The cost of funding the litigation (the postponement element).
What are the formalities of a CFA?
The CFA must be in writing.
The maximum amount of the success fee must be expressly stated, and must not exceed 100% of base costs for non-personal injury claims.
For personal injury claims, the maximum is whichever of 100% of the base costs or 25% of the damages awarded, whichever is lower.
The CFA must not relate to proceedings which cannot be the subject of an enforceable CFA (criminal and family proceedings).
When the client may be liable to pay their own costs and their opponent’s costs.
The client’s entitlement to an assessment of costs when you intend to seek payment of costs from your client.
Whether you have any interest in any funding policy.
What does the client pay under a CFA if they lose?
- They are liable for their opponent’s costs (incl VAT and disbursements).
- They are not liable for their own legal costs, but would be liable for disbursements.
What is After the Event Insurance (ATE)?
Specialist insurance taken out upon the client paying an initial premium. The insurance cover protects against the risk of losing
What does ATE insure against?
ATE cover insures adverse costs orders if a party loses, but not damages.
Can you recover the cost of the ATE premium from the other side?
Generally no save for certain exceptions.
Damages are now increased by 10% to cater for the fact that ATE costs cannot be recovered.
