Solving the Problems of Funding Disputes

Traditionally if you had a dispute with another person or company you went to see a solicitor and paid him his fees up front, and if you won the dispute you could recover some of the costs and damages. If you lost you had to pay the other sides costs.

There have been numerous attempts through legislation and commercial realities to change this model. Why? Because legal fees are expensive and the risks of litigating, even in the most simple case, are frankly scary.

The first attempt was the Conditional Fee Agreement. This enabled lawyers to work on a NO WIN NO FEE basis for the first time. The compensation if the lawyers had a losing case was the ability to recover from the losing party an uplift on their usual fees of up to 100% and the cost of After the Event Insurance (ATE) – of which more below.

For various reasons CFA’s were considered inappropriate and were swept away, except in some very limited cases – such as insolvency. They were replaced by DBA’s, Damages Based Agreements. A lawyer can now charge their client a proportion of the damages as fees on a NO WIN NO FEE basis. However they cannot recover this from the other side, the ordinary non-uplifted fees for time spent only can be recovered. The ATE premium cannot be recovered.

ATE insurance has become one of the corner stones of funding legal claims. This market arose directly from the introduction of CFA’s. The ATE cover remains. This is a policy which covers the client against an award of costs should he lose the claim (adverse costs). This protection together with a NO WIN NO FEE DBA insulates the client from risk in litigation.

This of course sounds fantastic. The reality is however a little different. ATE cover is expensive at approximately 20% of the likely costs exposure and insurers require an opinion that the prospects of success are over 70%, and a target who can pay. DBA’s have not been popular with lawyers as the risks are too high in low to medium value claims.
Enter the Litigation Funders. Lawyers often work with funders who will provide not just ATE cover but also cover in relation to the lawyers fees – whether under a DBA or hourly rate.

This support is often considered relatively expensive by client’s, as their dividend at a successful conclusion will be reduced, BUT if it enables them to bring a claim which otherwise could not have been pursued for no risk surely it is surely worth the price.

A client might chose to fund a simple or low value case, equally in difficult cases the client will have to determine if he wishes to take the risk and fund it himself. But there are a huge number of cases in the middle ground where funding is available which are not being pursued.

The type of case which is attractive includes shareholder and commercial contract claims, claims against financial institutions or public bodies and mis-selling.

If you wish to discuss this case, or any other matter, please call Gary Player on 01403 711869

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