The Funding and Management of Civil Litigation Cases a Guide for Clients

Published on 18 Nov 2008 under category: article

1. Introduction

Civil litigation is predominantly concerned with recovering money or value. Most claims, and certainly the types which we deal with at Cubism Law, are concerned with the recovery of money debts, or compensation or specific property or with the adjustment of property rights. (These notes are not intended as any guide in the following types of claims: prosecutions over criminal law matters, matrimonial and children matters and claims against public bodies for judicial review.)

Any civil claim can be seen as a business enterprise in which a claimant - and sometimes his/her legal representative as well - makes an investment in the hope of achieving a profit. As in any other investment decision, the claimant party has to assess the risks and the rewards with the best information available at any time. It is inevitable that the information available regarding risks and rewards changes over the trajectory of any case. In the well-chosen words of one textbook:-

Informing and advising both the client and the insurer of the changing risks and the decisions which need to be made in the light of the risks is the key to effective litigating.

David Chalk: “Risk Assessment in Litigation” (Butterworths, 2001)

Any client naturally wants and needs to know the full picture at every stage of their case so that there are no unwelcome surprises lying in wait. Fore-warned is fore-armed, as the saying goes. The solicitor’s job is to get that information across in accordance at the very least with professional standards and then to as high a degree of perceptiveness and accuracy as he or she can muster.

2. Questions for Potential Litigants to Consider

A potential claimant has a lot of questions to consider all at once. In most situations these questions can be pondered over in good time. (Defendants have similar questions to consider but usually less time in which to do so.)

Questions which any potential claimant must confront at the outset of the case include the following:-

- the value of the claim

- the chances of success, or the quality of the evidence

- how the case is broken down into questions of fact, law and technical or expert opinion

- surrounding events, such as the possibilities of changes in legal and technical learning between now and trial

- identity of the proper defendant/s

- preservation of any property or rights in dispute pending trial

- the date of accrual of the cause of action

- the expiry date of the relevant limitation period

- the effect of any delay under rules of equity

- the opponent’s present and potential answers to the claim

- the solvency of defendant both now and in the future

- whether your opponent is insured or “deep-pocket”

- the forum for conduct of the claim

- the costs regime in that forum

- whether you may be required to put up security for your opponent’s costs

- whether your opponent may be required to put up security for your costs

- how the case can be funded

- how much the case may cost

- any possibility of going to appeal/s and its possible cost consequences

- the size of any fighting fund

- the opponent’s likely costs in meeting your case

- whether you could afford to pay your opponent’s costs if you lose

- alternatives to litigation, such as negotiation or mediation.

You are in something of a chicken-and-egg situation at the beginning of your case, before you seek a solicitor’s help. You want first of all to understand your case and, second, if it is available to you, a positive result from it, and if it is not going to be worthwhile you want to know as soon as possible. But you cannot know these things without detailed and authoritative advice - and that can cost money, which you do not want to spend until you know where it will lead. In any complicated or valuable case it is going to be necessary to invest fees for obtaining a reliable initial assessment.

3. “No Costs” and “Reduced Costs” Forums

Certain forums, including the Small Claims Court and the Leasehold Valuation Tribunal, have general rules that a losing party is not liable to pay costs. This makes the risk of litigating far less but it also renders any success in the litigation less profitable if you have to spend money on it.

In these “no costs” forums you should always consider going ahead as a litigant in person - perhaps using solicitors to help you in preparing key documents such as your statement of case, witness statement and written argument, at the cost of a fixed amount in fees. Please do not be surprised therefore in these situations when one of the first questions we ask is how much you are expecting to spend in legal costs.

When a case is allocated to the Fast Track - typically because the claim value is between £5,000 and £15,000 and no exceptional issues arise - it is effectively in a “reduced costs” forum. In particular, the recoverable costs from the losing party (assuming that costs are awarded) in respect of the successful party’s lawyer’s attendance at the trial is much lower than the going rate for any solicitor of the standing otherwise merited by such a case. Again, in such a forum the case needs to be marshalled with economy and there is costs pressure on all claimants to settle - even those with very strong claims. Avoiding going to trial is clearly a key way to avoid having irrecoverable costs.

4. Public Funding

Public funding is only available through franchised solicitors firms to pay for costs of various levels of legal help, advice and representation in particular categories of disputes, subject obviously to a stringent means test.

If you think that you and your dispute might qualify for public funding you should go directly to a suitable franchised firm, who will conduct an assessment of whether you qualify. Cubism Law is not franchised to deliver publicly funded legal help. We may advise whether your case is outside the categories for which public funding is available but we will not advise on the relevant means test. We can sometimes recommend firms which can carry out publicly funded work.

Due to its great advantages any potential litigant in doubt of their public funding entitlement should check this fully with a franchised firm as soon as possible.

5. Your Choice of Solicitors

Your best course, when confronted with all the difficulties of being a party to litigation, is to seek advice and representation from the best solicitors available to you.

All solicitors have to pitch themselves on two scales: the first is quality of expertise and office resources and the second is price. Clients naturally prefer high on the first and low on the second, but in reality the two are very closely related so that a higher grade of lawyering generally has to be supported through higher hourly fees. Higher hourly fees sometimes result in better results and overall savings because more expert lawyers can solve your problems more effectively. But there is always a point or a band of price when you will have gone high enough and at any given band of price there will always be a range of firms of solicitors to choose between.

6. Normal Solicitor/Client Fee Terms

These vary from firm to firm and from case to case. Any litigant is free to shop around to find the firm which provides the best overall value for money.

Normal solicitor/client fee terms usually involve the client paying money in advance for work about to be done or at least for disbursements about to be incurred. This is a burden for any client, but at least it concentrates the mind on how much the case is worth and it often prompts the client to review the value of the claim, their approach to possible settlement negotiations and the alternatives to full litigation, such as mediation.

Cubism Law fee terms are available on request for any specific new case that we are able and willing in principle to take on. These terms will be tailored to each case, according to a list of factors including:-

- which partner will work on it

- what hourly rate we apply

- what budget we may offer you

- the involvement of any expert witness and Counsel, and so on.

7. Obtaining the best value for money

It would be ideal if your opponent in your dispute would agree to give you what you want without the need for you to go court at all. Unfortunately, this is often unobtainable.

When it becomes necessary to litigate, the best value is obtained if your legal representative can safely present the case as one that hinges upon some clearly defined question, such as one of fact, law or expert opinion. The most expensive litigation arises where the issue are not clearly defined at the beginning, where they change as the case progresses and where they are complex and interdependent and they involve difficult questions of law and technical knowledge. Deep pocket defendants, such as insurance companies, often try to complicate a case so that it has to go to trial on the basis of complicated pleadings and lengthy evidence, as a way of wearing down a claimant party.

A good litigation lawyer on a claimant’s side is therefore one who can manage a dispute so as to reduce it to its critical points of disagreement as cheaply as possible and who can then find and marshal the team of witnesses and counsel which can win in court on those critical points.

8. Conditional Fee Agreements (or “CFAs”)

These are often called “no win, no fee” agreements although that can be misleading for a number reasons that will be obvious from what follows.

Again, the availability of these agreements and the variety of terms on which they can be offered means that a potential party to litigation can do well to shop around and compare the different deals offered by different firms of solicitors.

There is now no statutory prescribed wording for CFAs but the great majority of them will make the client responsible for payment of disbursements as the case progresses - unless an insured loan is obtained to cover these. Disbursements include expenses such as:

- Court fees;

- Search and investigation fees;

- Barrister’s fees, if they arise and unless the barrister is willing to act under a CFA; and

- Expert witness fees.

CFAs typically do not protect a client party against the risk of insolvency of the eventual judgment debtor. Indeed, in that event a CFA can leave a party worse rather than better placed, because the success fee element will still be payable regardless of whether the debtor ever pays. Thus, the “success” which triggers payment under a CFA is success in the trial or settlement, rather than in eventual recovery of the judgment sum.

Unless there is specific wording to prevent this, a CFA still leaves the successful party with a proportion of its costs that cannot be recovered from the losing/paying party, and moreover not every successful party is awarded costs - which are in the Court’s discretion.

For the client’s protection, a CFA should give an assurance that if the Court orders a reduction in the success fee percentage or if such a reduction is agreed with the paying party before any assessment hearing, then that reduction will be passed on to the client.

CFAs do not give any protection on their own against the risk of losing your case and being ordered to pay costs to the other side.

9. Discounted Conditional Fee Agreements

Some firms of Solicitors will consider acting under a CFA of the “discounted” variety.

Under a discounted CFA the Solicitors agree to take a reduced fee on failure of the case in return for taking an enhanced fee on its success, and possibly a standard rate fee in the event of a middle outcome such as a settlement or result whereby each party is to bear their owns costs.

By way of an example, a discounted CFA in the case of medium risks would see a standard fee rate of say £300 per hour, reduced on losing to say £150 per hour and increased on success to say £450 per hour. The Solicitors would then issue interim bills throughout the case based on the lower of those rates with a substantial final bill in the event of success.

10. Before the Event Insurance Cover

This should not be overlooked in case you have it. You should check your home insurance policy to see if it covers legal expenses in litigation: many policies do.

Any claim should be lodged with insurers before you take any other steps, so as not to prejudice the insurers’ position.

We can advise you on any doubt over the meaning of words in your policy document.

11. After the Event Insurance Cover

This type of insurance will cover you against the risk of liability for an opposing party’s costs in case your claim - or defence - fails.

Many of the insurers and brokers charge hundreds of pounds in fees before they will look at and consider your case for such cover. These fees are non-recoverable, and in any event have to be borne by you, the client.

It can be time-consuming for your solicitor to apply to brokers and insurers for such cover, and expensive in the provision of voluminous disclosure of papers to the insurers - who rightly demand to know everything there is to know about your case. We will normally charge clients for time spent in this way, and for photocopying and postage charges incurred.

Premium amounts are high for this type of cover in those cases where it is offered. A typical premium will be at least 20% of the sum insured against, and so cover against a costs liability of up to £50,000 might cost £10,000 or more.

Some insurers may lend you the premium on terms whereby the loan is only repayable if you win your claim. Also they may, for an extra premium, give cover against the risk that less than the entire premium is later allowed by a Costs Judge to be recovered from the paying party.

12. Disclosure of Funding and Costs

The Civil Procedure Rules require the fact of any of the above CFA or insurance arrangements to be made known to your opponent as soon as it is entered into. This will obviously have an effect on their risk and value assessments for the case.

The rules also require estimates of costs for the case to be made at various interim stages: at the beginning - i.e. to you before the case is brought; in the middle - i.e. with the allocation questionnaire and listing questionnaire to be filed and disclosed during the case; and at the end - both before and after the trial. The amounts will always reflect the number and complexity of the issues in the case but they should be proportional to the value of the claim. Nonetheless, in cases of low and medium value costs on one side can often match or exceed the value of the dispute. You should always closely monitor this costs information.

13. Security for Costs

The immediate expense of funding your litigation is doubled if you have to put up security for your opponent’s costs. This security would typically take the form of a payment to the Court Funds Office which then stands charged with your potential liability for those costs, but it can also take other forms.

The two types of claimant, or counter-claiming party, who are most potentially liable to give security for costs are limited companies and individuals ordinarily resident overseas and beyond the scope of the European Judgments Convention. Also, if a claimant party has - prior to commencing a claim - taken steps to place his/her assets beyond the reach of any future judgment creditor, this is a ground for the Court to order security for costs. In each case there are a number of rules and guidelines to be considered, which are too many and detailed for summary here.

14. Third Party Funders

Sometimes parties in litigation obtain financial assistance from their friends or supporters, for personal or commercial reasons. As a general rule, if such support is given for commercial gain of any sort the party giving it will be potentially liable to pay opposing party’s costs if the case.

15. Representative Claims and Group Litigation

If a class of people all have the same basic case to pursue against one opponent, although details of their separate losses may differ, there is scope for a saving in costs to be made by following either the Representative Claim or the Group Litigation procedure, under the Civil Procedure Rules.

16. Recoverability of Costs

Once you have overcome the major hurdle of funding your litigation while it is pending, you will also look to the prospect of getting your costs outlay back from your opponent. This assumes that you will be litigating or about to litigate in a forum where costs are awarded, that you are substantially successful in your case, that your opponent must pay costs, that the amount of those costs is either assessed by the court or agreed with your opponent and that the opponent has the means to pay - hopefully in addition to doing whatever else is required following the case’s outcome such as paying compensation or returning property.

17. Recovering Costs for Pre-Action Settlements

There is nothing to stop you from stipulating in any pre-action settlement negotiations that you require, as a term of settlement, your opponent to pay your costs - to be assessed by the court in “costs only” proceedings if not later agreed. If your proposed claim is before a forum where costs are awardable and if your opponent cannot tender a legally binding amount or perform some action which then disentitles you from suing then it is available to you to negotiate in this way. However, a claim for costs alone when there is no agreement to pay those costs and the substantive grievance has somehow or other gone away is not provided for under the Civil Procedure Rules and therefore, probably, cannot be brought - especially in any County Court matter. It would be a brave litigant who brings one, relying on the High Court’s inherent jurisdiction to regulate its procedure.