Litigation can be expensive. It takes a long time and needs a number of players to be involved: you, your solicitor, your solicitor’s team, a barrister (usually), cost’s lawyers, experts and a Court. Sometimes this is added to with the inclusion of mediation. Every person in this chain needs paying.
Cases can often be funded as follows:
1. Pay fixed fees and/or hourly billing rates;
2. Agree a conditional fee agreement;
3. Agree a contingency fee agreement;
4. Agree a damages based agreement;
5. Find a litigation funder who will find the case.
History to No Win No Fee
When the Labour Government came to power in 1997 they realised that the UK’s legal aid bill was simply out of control. They looked at ways of decreasing the costs’ burden on the state whilst still enabling people to pursue their claims through the Courts. Justice may not be denied. One way was to finally allow a system used by the Americans where a client will pay the lawyer in the event they win. Law is about the only service where you only pay if successful. The downside for law firms and barristers is that where a case loses, they do not get paid.
In order to balance the loss of income from losing cases (because had this not been the case no lawyer would ever offer a fee arrangement unless they were absolutely certain of winning) a system was created where the lawyers get paid an extra payment in the event of a win – known as an uplift. This covers cases where the law firm or barrister received no income from a case they took that ultimately was decided against them.
A Conditional Fee Agreement
A Conditional Fee Agreement (“CFA”) was created. In cases where the Courts are not used (for instance, if you use the Financial Ombudsman Service) a lawyer can use a contingency fee agreement, within which the lawyer takes a percentage of the damages awarded.
A CFA works differently and may only be used for litigation. If the case succeeds, the client gets 100% of the damages awarded to them. The lawyers will have their costs assessed and will be awarded a sum in respect of costs. They then apply an uplift. That is a % of the costs awarded. So, if a CFA has a 100% uplift and the Court awards costs of £100,000 then the law firm gets that £100,000 plus another £100,000 as their uplift. This uplift used to be payable by the other side in the litigation.
Damages Based Agreement
The coalition government of 2010 re-looked at litigation funding. Insurers did not like having to pay the uplift (or the ATE insurance premia). For reasons best left to the Conservative Government, it was decided that the up-lift and the ATE premium must be paid by the client and not the opponent in litigation. This makes a CFA less attractive. The uplift and ATE insurance could in many cases cancel out an entire award of damages. This can make cases worth a few tens of thousands of pounds uneconomic to pursue through the Courts. The Government also introduced a Damages Based Agreement. In this damages are increased by 10% and the lawyers take a percentage of the damages awarded. It was supposed to be fair. It is not. The ATE premia and the % paid to the lawyers is not recoverable. That makes (again) litigation too expensive for some people who cannot understand why they cannot go to Court.
Is Your Case Going To Get An Agreement?
Every case is different. A law firm must still pay its employees and its bills. As such, every law firm and every barrister can only take so many cases per year, after which it is not possible to take more. That is because of the risk of losing. If too many cases are lost and the law firm has relied almost entirely on CFA/DBA work, then the law firm can genuinely suffer solvency issues.
In many cases, a law firm will charge you a fee for reviewing your case on a standard hourly rate. Sometimes, if they are unsure of the viability of the case, you may also get charged to send the letter of claim and a decision on funding be made when the other-side respond. You have to appreciate that the losses a firm can make have to be carefully managed and mitigated. Gone are the days of “I want a no win no fee”. These days you have to have as much “skin in the game” as the law firm.
Muldoon Britton will assist you as best we can. However, we have to be certain that your case has greater than 60% chances of survival. That means the case must be reviewed in detail and an advice produced for you. If the case is not an obvious successful case then it is possible you may have to pay for a review. Call us today to discsus this further.
So, the options available, as outlined in this section, currently are as follows:-
6. Pay fixed fees and/or hourly billing rates;
7. Agree a conditional fee agreement;
8. Agree a contingency fee agreement;
9. Agree a damages based agreement;
10. Find a litigation funder who will find the case.
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