How do people fund Commercial or civil legal proceedings?
Legal costs are expensive – whether they comprise conventional advice and assistances through to negotiating exit strategies or bringing a claim in respect of any civil remedy arising from your general rights, be that consumer credit rights, contractual rights or any claims against a company related to your business or rights as a customer.
It is also expensive to defend claims and a majority of legal claims tend be settled for these reasons, namely that it is too expensive to go to Court.
Legal costs, including (where Court proceedings are or may be issued) legal proceedings, are most commonly funded by payments of the time costs of each and every solicitor, legal and other assistant working on your matter.
Law firms will commonly ask for clients to pay money on account of their legal services. The reason is quite simple, such that without this model the law firm could not continue to operate (as it has its own business needs to address, including running costs and tax liabilities) and there is always the risk of collection once the legal services have been provided to the client and the matter is concluded (which is not guaranteed to be in the client’s favour).
Maintaining a regular monthly payment for such legal services (which can range from a matter of weeks, but more usually months or years) can be incredibly onerous, particularly for a small business or other type of client who may be suing on financial losses. The funding of solicitors is not welcome where money has already gone unpaid or losses have been suffered.
“Time costs” comprise the time spent on any matter related directly or indirectly to the law firm’s instruction, at the hourly rate of that fee earning individual. The more senior the fee earner the more expensive the time cost will be per minute or hour.
At agreed stages, the law firm will provide an update to the client on the level of such fees and the time spent and seek to issue an invoice (to be paid from monies held in their client account).
In smaller firms, the time costs may be predominantly at partner level. The advantage here is that the client gets the attention they require. The disadvantage is that this is at a higher cost, although in practice a senior solicitor will only be involved on the complex aspects and will likely take less time to produce advice on such matters than a more junior solicitor would be able to do.
In a larger firm, the legal work will usually be dealt with in a larger team, with more solicitors at a junior to mid-level (dependant on the work required and complexity), and are more appropriate for larger more complex matters where legal funding is not of such concern.
Payment of Legal costs
The benefits of legal proceedings are usually obvious – if you are claiming for damages and are successful, you will get a Court Order stating that the person(s) or companies you are pursuing must pay such damages awarded.
If your claim is for a non-money remedy or you are defending the proceedings, if you are successful you get the remedy or the claim is dealt with (and cannot again be reissued on the basis of the same evidence) and the threat lifted.
In almost all cases (except for the Small Claims Court) the Court will additionally award the successful party (be that the Claimant or Defendant) their legal costs.
In summary, if you are successful in litigation proceedings then a majority of your standard legal costs are paid. However, where such legal costs are not incurred in Court proceedings, there is no such right to recover your legal costs and therefore the benefit of the legal advice received must outweigh these professional costs.
However, for litigation proceedings, if you lose your claim or defence then you face risks that your opponent will additionally seek their legal costs.
In either scenario, if you have agreed to a funding arrangement with your solicitor or a third party then your risk of losing may be protected by insurance but, as a cost, your recovery upon success may be less.
This likely “cost” can serve to mitigate the risk of losing and the obligation (and ongoing cost out of your own pocket) to pay solicitors fees to fund your legal costs.
At Francis Wilks & Jones we can discuss all aspects of legal funding and what is appropriate for you, given your personal circumstances and resources. Please visit our webpage which deals with types of Litigation funding arrangements.
Please call a member of our commercial litigation funding team for your consultation now on 020 7841 0390. Alternatively e mail us with your enquiry and we will call you back at a time convenient to you.