Funding and Costs of Litigation for Businesses

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Litigation can be a complex and time consuming process. It is therefore important to consider the costs of litigation and how to fund these at the very outset.

We will give you an overview of the likely overall costs of litigation, before proceedings are started and give you an estimate of costs at every stage. Costs of litigation consist of solicitors’ fees, disbursements and expenses, such as fees payable to counsel (barrister), court fees, expert fees, travel expenses and photocopying costs. They may also include fees relating to mediation or arbitration. Unless we expressly agree fixed costs with you, estimates are never intended to be fixed and due to the unpredictable nature of litigation, a degree of flexibility is always required.

You need to consider how you will fund your case as it progresses. Whilst as a general rule you can expect to recover a proportion of your legal costs, if you successfully bring or defend a claim, you will usually only make this recovery at the end of the litigation process.

It also important to bear in mind, that you are likely to be ordered to pay your opponent’s fees, if your claim or defence is unsuccessful. It may be possible to take out after the event insurance, which will cover payment of the disbursements and which protects you against the risk of having to pay your opponent’s costs, in the event that your case is unsuccessful.

Legal Expenses Insurance

You should always check your existing property, car or business insurance policies to ascertain if you have legal expenses cover in place, which may cover your dispute.

If you have legal expenses cover, then it is important that you contact your insurer to provide details of your claim, so that they are able to tell you if your dispute is covered. We would be happy to guide you through this process.

Your insurer is likely to have a panel of preferred firms, but that does not mean that we cannot act for you. By law you are entitled to choose your own solicitor. If you would like us to act for your, then we are happy to contact your insurer on your behalf to discuss this.

Funding Options

If you don’t have existing legal expenses insurance, then in addition to a standard retainer (under which you will be asked to pay our fees and the disbursements on the production of monthly invoices), various funding options may be available, depending on the nature, strength and value of your case.

Risk Sharing Agreements

Depending on the nature, strength and value of your case, we may be willing to share the risk of litigation with you and act for you under a Conditional Fee or a Damages Based Agreement. Under those types agreements we will be rewarded for sharing the litigation risk by either receiving a success fee or taking a percentage share of your damages.

Conditional Fee Agreements (“CFA”)

When entering into a CFA, we will record the time we spend dealing with your case at our standard hourly rates (the “standard fees”), but will agree that payment of (part of) the standard fees is conditional upon you “winning” your case (as defined by the CFA). If you win, then you will also be asked to pay a success fee.

Damages Based Agreements (DBA”)

When entering into a DBA, we agree that payment of our fees is contingent upon your claim being successful (as defined by the DBA); and upon you receiving a payment of damages, which may include the transfer of an asset to you.

Pre-agreement costs

In order that we are able to properly assess your case and its chances of success, we will need to investigate your claim or defence and in most cases obtain advice from a barrister on the merits of your case. In some cases we will also need expert advice. Unless we agree otherwise, you will be liable to pay for the costs of the investigation and obtaining the advice.

Litigation Funding

Depending on the nature, strength and value of your case, it may be possible to source funding from a litigation funder, who will invest in the litigation for a funding fee, which fee will be payable if the claim is successful, typically a multiple of cash advanced or a percentage of your damages.

You will remain primarily liable for our fees and the disbursements, albeit that the funder will agree to indemnify you for such costs. You will have to discuss with the funder, who bears the risk of having to pay your opponent’s costs, if you claim is unsuccessful and consider whether it may be advisable for you to take out after the event insurance.

The funders will require evidence that your claim has a good chance of success and that your opponent will be “good for the money”. We will hand details of your case to the funder, who may get their own advice on the merits of success. Unless we agree otherwise, you will be liable to pay for the cost of investigating your claim.

After the event insurance

After the event insurance covers payment of the disbursements and which protects against the risk of having to pay your opponent’s costs, in the event that your case is unsuccessful.

Typically, after the event insurance will provide cover to claimants, although it may also be possible for defendants to obtain after the event cover. The insurers require applications to be accompanied by evidence that your claim or defence has a good chance of success, so that they may assess the strength of your case.

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