Litigation funding

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Litigation costs

Litigation costs are particularly important as not only must you think about how your own legal costs but also what your exposure might be to pay your opponent’s legal costs.

Prior to a claim being issued, whether you are the prospective claimant or defendant, legal costs can usually be kept to a minimum.  You can negotiate with your opponent yourself, either alone or with advice from professionals (accountants, lawyers or anyone with business expertise).

However, dealing with a claim yourself can produce risks such as

• disclosing a position you may want to later withdraw from,
• making offers which are later relied on to indicate liability and
• acknowledgement matters you may later regret.

These are just a handful of the problems we see when clients have attempted to resolve a dispute themselves.

Ultimately this may escalate the onset of proceedings and cost you more. For the best of intentions, dealing with a claim yourself early on can actually worsen your position. But what can you do if you cannot afford to get legal advice? One answer is to obtain Litigation Funding.

What is litigation funding?

Litigation Funding is a way of getting your legal costs (or those of the other side if you lose) paid by a separate third party rather than pay them yourself. It also takes much of the persona risk out of continuing with a legal case.  

Whilst legal proceedings can be concluded quickly with the correct advice, for various reasons, they can also be a long process over months or even years. 

• The most common reason for litigation to persist is where both parties are convinced of the strength of their case and/or they are unwilling to back down;
•  it is often far less expensive to reach an agreement through Alternate Dispute Resolution (“ADR”) (which the Court strongly encourages).

But if you are unable to resolve matters and Court proceedings are unavoidable, consideration will need to be given as to the cost v benefit.  For well-resourced claimants and defendants, the least expensive route (well, other than dealing with matters yourself with the associated risks we have briefly touched on above) is to employ a solicitor with expertise in the relevant field and pay them their standard costs. 

• However, where such resources are more limited, both a claimant and a defendant need to consider from the outset as to how their claim or defence can be funded sustainably. 
• This is where litigation funding and funding for legal claims can provide assistance.  Whilst considerably more limited for defendants, for a claimant there are a wide variety of options meaning that their claim does not necessarily require the up-front costs before they get the judgment they may be entitled to.

Funding by your solicitor

If you decide to instruct a solicitor, the most common form of funding is by way of paying their fees recorded at an hourly rate and billed regularly.  Disbursements, such as court issue fees or barrister’s fees, are expenses that you need to additionally bear in addition to the solicitor’s fees.

This is clearly the most inexpensive way of conducting litigation, whether as a claimant or as a defendant.  There are other alternatives that you can agree with your solicitor, which we summarise as follows:

1. Fixed fees and caps

Fixed fees refer to a specific piece of work and caps denote a maximum price for the work undertaken.  These should be more expensive to conventional time rates, as they provide for uncertainties in the anticipated work required to provide the service.

2. Deferred payment

This comprises arrangements where the fees will not be payable until conclusion or a fixed point in the future.  Again, they are likely more expensive, as the solicitor is not being paid now, but can be useful in enabling a return at the end of the matter (if successful, although it is not success-based)

3. Fixed rate retainers

These are more appropriate for ad hoc or regular advice sought, mainly by commercial clients.  They can be of great use to have a solicitor at the end of the phone to deal with queries arising during your business or otherwise.

4. Conditional fee agreements (“CFAs”)

With a Conditional Fee Agreement, the solicitors fees are only payable upon success, in which case they will be uplifted by a certain %, or success fee.  Disbursements (which could include the barrister’s costs and any application fee) are not included within a CFA.

5. Damages based agreement (“DBA”)

A Damages Based Agreement is an agreement that the solicitors’ fees will be based upon a % of the final judgment sum, subject to certain limitations.  A DBA is contingent on the outcome of a claim (they do not apply to defences).

Third party funding

Third Party Funding is a form of financing your case via a third-party financier, usually set up specifically to acquire an interest in claims and seek assignment of such claims which they will then run as if they were the original claimant.

This can be an expensive route but is a great option where the costs of proceedings are too high, or the merits make solicitor funding unavailable.

Litigation insurance

Insurance against legal costs, including litigation costs, is available in a variety of circumstances.  However, as regards bespoke litigation insurance, the most common are After The Event insurances (“ATE”) and Directors and Officers Insurance (DnO).

Both provide cover against a solicitor’s litigation costs and ATE will provide cover against the opponent’s costs (i.e., protecting you against the risk of losing the claim).  There are some policies which can offer similar protection to defendants, but they can be quite limited as the ATE premium cannot be recovered from your opponent as a legal cost and therefore can act as a disincentive to defendants.

Contact Us

Please see our Litigation Funding pages for a more detailed overview.

Litigation funding: an overview

When you realise that you have a claim or that someone is proposing to issue a claim against you, the first thing to think about is whether you have a significant risk (i.e., are you or they correct) and secondly (perhaps a little later) the mind must turn to the possible legal costs.

Litigation is often used as a threat – not all threats of issuing a claim are seen through.  It is easier to set out a case in writing (without any costs risk) than it is to go to Court where as soon as you issue and then serve a claim you are then vulnerable to your opponent’s legal costs if you would then like to exit.

It is also the case that each side to a dispute must first deal with the relevant pre-action requirements – failure to do so can lead to even more serious costs risks.

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At Francis Wilks & Jones we regularly work with litigation funders or act via a funding agreement, brief details of which are above and on our website. Please contact us if you have any questions though.

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I was greatly impressed with FWJ. Their commercial approach combined with specialist knowledge and tactical expertise was pivotal in the claim being dropped and costs recovered in full.

A director we defended in disqualification proceedings

I was greatly impressed with the commercial, tactical and technical ability of the team at FWJ. They quickly got to grips with a complex set of facts and, through their hard work, had the proceedings against me dropped and a significant proportion of my legal fees repaid. I couldn’t recommend them highly enough

A company director