Litigation Funding: Civil/Comercial Litigation
The mistake most people make is to focus only on the legal merits of a litigation case and not issues of funding and recovering any money from an opponent. This is especially the case as there are now a lot more options for funding litigation and each has it’s own criteria and pros and cons. So what are the options ?
Legal Aid
This is means tested and usually if you are employed, own a house, or have savings in excess of £16,000 (this figure is subject to change), you will not qualify for such public funding. Also, many cases such as contractual or business disputes, boundary and Partnership Disputes are not covered by Legal Aid/Legal Funding. This option is slowly being phased out as public funds are restricted.
Home Insurance Policy
Check your home insurance policy to see whether you have Legal Expenses Insurance. Again, many types of cases are not covered, but it is worth asking, nevertheless. If successful, you will be presented with a panel lawyer, but it is your prerogative as to whom you choose to represent you and if you are persistent with a Solicitor of your choice, the Insurer will usually permit you using whomsoever you wish. The possible pitfalls of going through such an Insurance Policy are that they may not pay out until the end of a case. Most Solicitors who are not panel lawyers will require payment on account of services provided to you. This means that you will initially pay out, and at some point, the Insurer may reimburse something by way of a figure they consider to be reasonable other than what you may have paid to your Solicitor. Also, they may only pay a certain percentage of an hourly rate, which is usually less than the Solicitor’s hourly rate, so you will be expected to pay any shortfall in difference between those figures.
Other Insurance Policies
You may have a Credit Card, or other Insurance Policy that has a Legal Expenses Insurance Clause. Check whether you have such a policy in place, and then apply the same criteria as referred to above at Home Insurance Policy.
Bank Loan/Commercial Loan
Perhaps approach your Bank or a Loan Company. Perhaps consult a Solicitor in the first instance to ascertain the likely amount you will need to cover not only your legal costs, but the possibility of you paying out legal costs to your opponent if you should lose. The usual practice in any case is that the losing party pays the legal costs of the winning side. Even if a case is considered to be a small claim (ie. a Claim up to the value of £5,000), the Court always has discretion to award costs, and you should not take it as a given, that no costs will ever be awarded in small claims cases. The general advice is whatever the estimate, try and take out a loan for double the figure. You do not want to be half-way through a case and find that you have exhausted the proverbial financial litigation pot.
No Win, No Fee/Conditional Fee Arrangements
This option does not currently apply to Matrimonial cases or Criminal cases. Such arrangements can work well for certain cases where a solicitor can be confident of success such as standard road traffic accidents or payment protection insurance misspelling, but you may still wish to be cautious as many Personal Injury Solicitors have over-geared themselves to such arrangements which have a direct impact on their business cashflow, and in time, many such Companies and Firms have gone out of business. Most Law firms will not enter into such arrangements unless they are sure of at least 4 things:
1. The possibility of settling the claim quickly, or being able to get into Court quickly
2. The likelihood of successfully bringing or defending a claim, usually considered by way of a Costs/Risks analysis
3. The ability for you to pay, if you suddenly wish to discontinue the arrangement or wish to discontinue proceedings
4. The ability of the other side being able to pay fees and success fees if you do win.
Make sure that if you do enter into such an arrangement, that your Solicitor serves a Notice of Funding at the appropriate time. If they do not do so, there is good argument to say that the opponent need not honour or pay your solicitor’s success fee.
Be aware that in such arrangements, if you suddenly decide to end your case or wish to move Solicitors, that their normal costs will become payable by you to them. If, however, the Solicitor does not proceed or wish to proceed with the case, they will usually be contractually bound to charge you nothing other than disbursements (i.e Court fees incurred).
Citizens Advice Bureau
In most towns, there exists a Citizen’s Advice Bureau. Do not underestimate the sagacity of their advice. They can be very useful sources of information and advice. That advice is free. The CAB is usually attended by experienced business people. Listen to their advice, and if they feel it is something which is too complicated, they will suggest a Solicitor or refer you to the Law Society who will suggest an appropriate Solicitor for you, depending upon what criteria you give.
Pro Bono Units
Increasingly there are Solicitors and Universities who offer advice for free to represent you in a number of cases. They will not charge you, but usually their advice will be limited. In other cases, however, they may well represent you in Court for free. Such units are usually attended by experienced Solicitors or academics who wish to give something back to the Community. For a list of Units, seek information from the Law Society, the Solicitors’ Regulation Authority, or from LawWorks in Chancery Lane, London, EC4.
Law Society incentives
Many Solicitors offer the first 30 minutes or first hour, free. Check with the individual Solicitor you go to, before attending such a meeting, to avoid embarrassment of not being able to pay. Be up front, and ask the Solicitor to be clear before they begin such a meeting. The Law Society usually holds a record of Law firms who offer such a service particularly in Commercial Law and advice for small businesses.
Charities and Charitable Foundations
There are a number of Charities and Charitable Foundations and organisations who offer free advice for those wishing not to be evicted from their homes, human rights, and abused children and mothers. Again, search the Internet and in particular the websites of the Law Society, LawWorks, the Solicitors’ Regulation Authority.
After the Event Insurance
This does not cover your own legal costs but does cover costs you may be ordered to pay if you lose your case. This is something you should actively pursue with your Solicitor. Currently you can not obtain after the event insurance in matrimonial or criminal cases. There are a number of Insurers who offer such Insurance, and premiums to be paid are usually based on the likely costs and risk of proceeding or defending, and the likelihood of your opponent being able to pay in the event that they lose. Generally speaking, the greater the risk, the greater the premium in comparison to the likely costs of losing, and the value and complexity of the individual claim. It is also a useful exercise to apply for such Insurance because the costs and risks are usually considered independently by other Legal advisors, and if they decline to offer such Insurance, you should question and review why not.
Solicitors should consider your financial options for Litigation funding with you.