Guide To Litigation Costs And Funding

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1 Guide To Litigation Costs And Funding This Guide provides a summary of how to fund litigation in the courts of England and Wales, i.e. bringing or defending a claim, before and after the issue of court proceedings. The question of how to fund the costs of your claim, or defending the claim against you, is one to ask at an early stage. Litigation can be expensive, and even if you are reimbursed most of your costs from the losing party at the end of the case, you will still have to pay them as the case goes on. What Are Costs? In litigation, costs are the fees you pay to your solicitor for representing you in a claim, and includes disbursements such as court fees, barrister and expert witness fees, and other expenses incurred in bringing or defending a claim. The word costs does not include any damages or compensation claimed or received. You may have incurred costs and expenses due to your opponent s actions, but in litigation these are classed as damages. Basic Principle Of Costs In Litigation The rule in litigation is that the loser of a case pays the winner s costs. It does not guarantee 100% reimbursement of costs to the winner, because there are limitations on what can be recovered. But it does mean that if you win your case, your opponent will usually have to pay you the majority of the costs you have paid. If you lose your case, you will have to pay your own costs and probably the majority of your opponent s costs too. (An exception is personal injury claims, where a Claimant who loses does not usually have to pay a winning Defendant s costs.) The amount of costs payable by the loser to the winner at the end of the case (or part-way through a case, e.g. for an interim court hearing), will be either (1) This guide is for reference purposes only, and does not provide advice for any particular set of circumstances. Feakes & Co, Riverside Court, Beaufort Park, Chepstow NP16 5UH ( ), Authorised and regulated by the Solicitors Regulation Authority (SRA) number

2 agreed between the parties, or (2) decided by the court. If it is decided by the court, the process is called assessment of costs. The court has a discretion about whether to order the loser to pay the winner s costs. There is no guarantee that this will occur, although it is the general rule. However the court might not make this order if, for instance, the winner has behaved poorly or has failed to beat the loser s settlement offer. Getting Help With The Cost of Your Claim Or Defence There are a number of ways of obtaining help to fund litigation. Legal Aid And Help With Fees Legal Aid is available in very limited circumstances for civil (non-criminal) litigation disputes. It is generally available only in family/divorce, housing and immigration cases. To enquire if you are entitled to Legal Aid for for your dispute, contact the Citizens Advice Bureau ( and the Civil Legal Advice Service ( Even if you are not entitled to Legal Aid, if you receive certain benefits or have a low income you may be entitled to a discount on court fees, e.g. to issue proceedings. This is under the Help With Fees scheme. You claim this at the time you issue proceedings or an application. Before The Event Insurance You may have the benefit of an insurance policy which covers you for legal fees for certain types of dispute both as Claimant and Defendant. This is known as Before The Event (BTE) or legal expenses insurance. It is often included with other insurance policies, such as household or car insurance. You should go through your insurance policies carefully to check. Some trade unions and professional bodies provide legal expenses for members. You should investigate this if you belong to a relevant organisation. 2

3 If you do have legal expenses insurance, your own solicitor may be able to act for you under the policy, or alternatively the insurance company can provide a solicitor from their panel. The solicitor will need to agree the basis for charging with the insurance company. There are some common features to note of this sort of policy: - It may not cover every sort of claim. - There is a financial maximum limit to the cover offered, so if costs rise above the limit the insurance company will not meet the extra. - The contribution to costs is commonly paid at the end of the case, and you will have to pay costs in the meantime. - The cover is often limited to a certain hourly rate, and if you agree a higher hourly rate with your solicitor, you will have to meet the difference. Funding By A Third Party Commercial third party funding is available for some types of dispute. A third party funder is a company or individual investor which finances all or part of your costs as the case progresses. In return, they receive an agreed share of the money recovered if you win your claim. If you lose, the funder loses its investment. Third party funding is usually suitable only for larger cases or commercial litigation. Paying For The Claim Yourself If you are not eligible for legal aid, and you do not have BTE cover or any other suitable alternative, you must consider funding the dispute yourself, or alternatively using one of the other ways of funding litigation below. If you use a solicitor, you will have to pay their fees. There may also be disbursements, such as the fees of an expert witness. If you issue court proceedings, you will also have to pay court fees and possibly the fees of a barrister. 3

4 Other Ways Of Funding Litigation Fixed And Capped Fees Your solicitor may agree a fixed or capped fee for a case or a specific part of a case. It is common with particular types of claim, such as debt, property possession, small claims and enforcement of judgments. It is also used where you are conducting the litigation yourself, and your solicitor is assisting in the background by carrying out limited tasks such as drafting documents. Conditional Fee Agreements No Win No Fee Under a typical Conditional Fee Agreement (CFA), you have to pay your solicitor s fees only if you win the case. If you lose the case, the solicitor gets nothing. But if you win, the solicitor will be entitled to their normal fees plus a success fee of 100% of their fees paid from the damages you receive. The success fee compensates your solicitor for the risk of not being paid if the case is lost. CFAs are used most commonly by Claimants, but sometimes also by Defendants. Points to note about CFAs: - There are a good way of avoiding having to pay large legal bills, but you would lose part of your damages. - If you lose the case, you are likely still to have to pay your opponent s costs (although you can insure against that with After the Event insurance see below). - You will still have to pay some costs, e.g. court fees, barrister and expert witness fees. Conditional Fee Agreements No Win Low Fee This is a variant on the above CFA. You pay your solicitor s standard fees in the normal way but at a discounted rate. If you lose, that is all you pay them (plus your opponent s costs). If you win, you top up your solicitor s fees to the standard rate and also pay a success fee. Again, this is a way of compensating the solicitor for the risk of not being paid the full rate. 4

5 Contingency Fees No Win No Fee A contingency fee arrangement is similar to a CFA: your solicitor s fees are payable only if you win the case, and if you lose the solicitor gets nothing. The difference with a contingency fee is that the fees are a percentage of the damages you recover. Points to note about contingency fee arrangements: - You can avoid having to pay large legal bills, but you lose part of your damages if you win. - If you lose the case, you are likely still to have to pay your opponent s costs (although you can insure against that with After the Event insurance see below). - You will still have to pay some costs, e.g. court fees, barrister and expert witness fees. - If there are no court proceedings, you can agree the structure and percentage payable with your solicitor. - If proceedings are anticipated, the contingency fee is known as a damages based agreement, and there are complex court rules about the structure. After The Event Insurance An After The Event (ATE) insurance policy is taken out after an incident/loss has occurred, to insure you against the risk of having to pay an opponent s costs and your own disbursements if you lose the claim. An ATE policy is often used in conjunction with a CFA, so that you will never have to pay your own or your opponent s costs, whatever the outcome. An ATE is therefore a valuable addition to the litigation strategy. Points to note about ATE policies: - They are usually used only by Claimants, but in limited circumstances are available for Defendants. - The insurance is up to a defined level. 5

6 - The insurance premium cannot be recovered from an opponent as part of a costs order if you win, but must be paid out of the damages received. 6