Are you contemplating dispute resolution of some kind, whether because you want to make a claim or are facing a claim, in or out of Court, but are not sure how you can fund the matter? Have you already been named as a party to Court proceedings so that you are involved in litigation now? Are you concerned that dispute resolution is a black hole into which money will disappear, never to be seen again?
This note provides an overview of the insurance and funding options open to the parties to civil proceedings or dispute resolution procedures and that could be available to you too. Should any of them be of interest to you, please contact the team who will be pleased to assist you.
How is Dispute Resolution Work Charged?
Generally, all our work will be billed on a time charge basis by reference to our team members’ hourly rates. Your solicitor will either estimate costs by reference to their own hourly rate alone, or by reference to a blend of the hourly rates of the team of solicitors they will assemble to best meet your needs and objectives.
In addition to our fees, you may incur “disbursement charges”. Disbursements are costs that we incur with third parties on your behalf, including a barrister’s fees, administrative costs, Court fees, meeting venue costs, expert witness fees and travel costs.
As a general rule, the costs incurred by us as time charges and disbursement charges are payable by you as our client. However, that is no longer the end of the story.
Making Dispute Resolution Pay Its Own Way
Since the 1990s, it has become possible to fund litigation with the assistance of insurers and funders. This is because of the relaxation of rules regarding third-party litigation funding and the marketization of finance products aimed at commercial litigation in particular.
There are two main sources of dispute resolution finance: through insurance or funding, or through fee arrangements directly with your solicitor.
Both work to meet the costs your solicitor will charge you and/or the costs you may be ordered to pay your opponent, but they work in different ways that you should consider carefully according to the type of claim to which you are a party, your risk profile and all the circumstances you face as a result.
There are three main types of insurance and funding options:
- Before the Event Insurance (BTE).
- After the Event Insurance (ATE).
- Disbursement-Only or Third Party Funding.
In addition, there are a variety of formats of fee arrangements your solicitor may consider: the standard charging basis is on an hourly rate by reference to time spent. A solicitor may also offer to work on a fixed fee basis, which may generally result in a higher estimate than if working on an hourly rate because your solicitor will buy the risk from you that the matter may require more of their time.
In addition, “no win, no fee” agreements may also be available in some circumstances, whether on their own or in addition to some forms of funding that do not cover all your costs and disbursements.
Insurance Products
BTE insurance may already be available to you without your knowledge, whether as part of your household, car, credit card of other policy of insurance. Generally, these policies cover a wide spectrum of claims and are not designed for any particular eventualities.
You should check for “legal expenses” cover or similar sections in relevant policies to confirm whether you already have the benefit of this cover.
By contrast, ATE insurance is bespoke litigation insurance, taken out usually after a potential claim or an actual claim has arisen. Policies come in all different kinds and coverage will differ. Generally, ATE insurance will not cover all of your solicitor-client costs; it will be available to cover disbursement charges.
Funding Products
Funding is an addition or an alternative to insurance products.
Funders will meet a percentage of your costs with us. As with insurers, funders will assess the prospects of success of your claim, or of defending a claim, and decide what percentage of your costs to cover.
If you have several claims, it may be possible to obtain a book of funding for all of them, so that the funder can spread its risk across the claims made/defended and assist you meeting your legal costs in the process.
As with insurance products, it may be necessary with some funding products for you still to pay your legal bills initially and then periodically to reclaim form your insurer or funder costs you have incurred. Some insurers and funders only settle costs at the end of a matter, and you should consider how to meet those obligations.
Fee Arrangements
At appropriate junctures, we will estimate costs of each phase of work and seek to agree those with you where the pace of developments permits us the time adequately to do so. After the event, the estimate may be maintained or exceeded depending on the intervening events following the estimate being given.
You should always be aware when instructing on a time-charge basis all work your solicitor carries out will be charged by reference to the time spent unless you agree otherwise.
It can on occasion be appropriate to agree a fixed-fee estimate for a portion or whole or you matter. You should ask us about this possibility if it is of interest. However, fixed fee charging requires that we take on the risk that your matter will require substantially more time than accounted for by the fixed fee, so a fixed fee will often exceed a time charge estimate, sometimes substantially.
It is sometimes in exceptional circumstances be willing to agree to enter into a CFA with you (commonly known as a “no win; no fee agreement”). In practice the CFA can be a full or partial CFA. A partial CFA is where you agree to a reduced hourly fee if the claim is lost or alternatively a lump sum payment but then no further payment unless the claim succeeds.
The core point in a CFA is that if the claim succeeds you agree to pay an enhanced fee to us. This is usually a percentage increase of our standard hourly rates.
