Funding Litigation Notes

FUNDING LITIGATION

TWO TYPES OF COSTS

• solicitor-client costs

• inter partes costs

DUTY TO ADVISE CLIENTS ON FUNDING

• solicitor under duty to tell + explain to client funding options (solicitors fees + liabilities between parties)

• solicitor must give best possible info about overall cost of case (SRA code of conduct)

• funding arrangement must: be legal + meet client's needs (SRA code of conduct)

• usually send letter containing: above, name + status of fee earner and who fee earner reports to

• breach of code of conduct does NOT render retainer illegal, BUT taken into account when assessing costs

TRADITIONAL RETAINER

• = contractual relationship between:

  • law firm + client; and

  • barrister + instructing solicitor

• client pays for:

1. solicitor at hourly rate

   • = salary of staff + fee earner + profit

   • several approaches:

     • set fee for each fee earner; or

     • regional rates for different grades of fee earner based on guideline rates published by Senior Courts Costs Office; or

     • quote lower hourly rate + add mark up of variable percentage

2. disbursements

   • court fees

   • experts' fees

   • counsel's fees

   • photocopies etc.

• solicitor should send client care letter: confirming rates, estimating costs + including arrangements for billing

• time for payment

  • usually pay:

    • sum on account when first retained; +

    • periodically during litigation

LEGAL EXPENSES INSURANCE (BTE INSURANCE)

• often included with car, home insurance etc.

• insurer pays costs

• usually, BTE insurer should be used in preference to other methods of funding (Sarwar v Alam) checking if client has = first task of solicitor on new instructions

• insurer often requires periodical updates on merits of claim to assess whether continuing litigation justifiable under insurance terms

AFTER THE EVENT INSURANCE

• usual rule: costs follow the event (r44.3(2))

• ATE insurance = covers other side's costs - premium tied to risk of losing + likely level of costs

• (before April 2013, ATE premiums recoverable against loser BUT revoked by LASPO)

• all / some ATE premiums ARE recoverable against loser for expert reports on liability + causation in clin neg disputes with a financial value exceeding 1000

CHAMPERTY, THE INDEMNITY PRINCIPLE + JACKSON

• contracts savouring of maintenance (meddling in litigation without just cause) or champerty (meddler seeks to obtain share of proceeds of suit) = illegal

• consequence if winner has illegal funding arrangement = CANNOT recover costs from losing party due to the indemnity principle (paying party cannot be liable to pay more in costs than winner is liable to pay own lawyers)

• 1 April 2000 legal aid reforms

  • public funding of civil claims cut

  • to compensate, CFAs encouraged

  • indemnity principle abrogated for certain type of CFA: client liable to pay legal rep's costs only to extent recovered from other side

• Jackson legal aid reforms - 1 April 2013

  • recommended abolition of indemnity principle (NOT implemented)

  • implemented following changes

    1. abolished recoverability of success fees from unsuccessful parties; and

    2. capped success fees recoverable from client for PI at 25% of damages (excluding future loss)

    3. legalised contingency fees

    4. increased general damages for personal injuries + suffering by 10% (many causes of action, NOT just PI)

    5. enhanced damages by further 10% as reward for effective C Part 36 ooffer

    6. banned referral fees

    7. introduced costs protection for Cs in PI claims (QOCS)

CFAs

• CFA =

  • solicitor agrees client liable to pay firm's expenses only if claim successful

  • BUT if claim successful, solicitor entitled to charge:

    • usual rate ('base costs'); AND

    • % uplift of usual rate - related to risks of litigation - CANNOT exceed 100% of solicitor's base costs ('success fee')

  • if claim UNsuccessful, client pays other side's costs (can get ATE insurance to cover)

  • does NOT cover disbursements (makes express provision for who liable)

• if counsel instructed, usually 2 CFAs: client-solicitor AND client-counsel

• CFAs must:

1. be in writing

2. relate to a type of case where CFAs permitted (all civil except family)

3. specify success fee, if any

   1. must NOT exceed 100% base costs; AND

   2. PI proceedings at first instance only: must NOT exceed 25% of damages recoverable for PSLA + past pecuniary loss, excluding sums recoverable by Compensation Recovery Unit (CFU) under Social Security (Recovery of Benefits) Act 1997

• level of the success fee

  • the higher the chance of success, the lower the success fee, so evens out over appropriate number of claims:

    • 50% chance of success = 100% success fee

    • 75% chance of success = 33% success fee

DAMAGES-BASED AGREEMENT (DBA)

• DBA =

  • solicitor agrees client liable to pay firm's expenses only if claim successful

  • BUT if claim successful, solicitor entitled to % of damages recovered

  • introduced 1 April 2013

• DBA enforceable if:

1. it is in writing

2. does NOT relate to proceedings:

1. which CANNOT be subject of CFA (family proceedings)

2. of a description prescribed by Lord Chancellor (currently none)

3. does NOT relate to payment above prescribed amount

   • prescribed amount to be paid by client

     • only applies to first instance matters, which fall into 2 categories in non-employment proceedings:

       1. non-PI claims:

       • can only require client to pay costs + expenses (including disbursements) which are net of any costs + expenses paid by another party

       • amount must NOT exceed 50% of sums ultimately recovered by client

       2. PI:

       • NOT more than 25% of combination of following (excluding recoverable CFU payments) recovered by client:

         • general PSLA damages; AND

         • damages for past pecuniary loss

4. T&Cs comply with prescribed requirements + specify:

1. claim or proceedings / part to which DBA relates

2. circumstances in which reps payment, expenses + costs / part payable

3. reason for setting payment at level agreed

5. person providing services under DBA complied with prescribed requirements re: provision of information

• award of costs (r44.18)

  • fact party has entered DBA does NOT affect costs orders which can be made in...

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