The options considered below are the main methods of funding a case in the civil courts. They are an alternative to the traditional private client retainer between client and solicitor, where the client generally pays for work carried out on their behalf on an agreed fee rate basis, regardless of the outcome of the litigation.
The litigation funding options include:
1. Damages-Based Agreement (DBA) - A DBA is a type of contingency fee agreement between a lawyer and a client. The client will pay the lawyer, if the client obtains a specified financial benefit, which is generally damages paid by the losing side, if the case is won. The amount of the payment will be a percentage of the compensation received. However if the case is lost then there is generally no obligation to pay, and the lawyer will receive nothing. Since 1 April 2013, DBAs can be used in almost all contentious business proceedings.
2. Conditional Fee Agreement (CFA) - A CFA is an agreement with a solicitor which provides for their fees and expenses, to be payable in certain defined circumstances and which are specified in the CFA. It is important to ensure that the drafting of the fee determination and also trigger for payment are watertight and not open to misinterpretation, thereby leading to confusion. Generally, if the client loses the case, it will not be liable to pay for the fees and any expenses that are subject to the CFA (the conditional fees). It should be noted however that court fees can be excluded from the CFA and that the client shall be liable to pay them directly. If the client wins the case, it will be liable to pay all fees and expenses governed by the CFA to the solicitor, including the conditional fees, and a "success fee", if included in the CFA.
A success fee is an additional amount payable for the legal services, over and above the amount that would normally be payable if there was no CFA. Since 1 April 2013, the success fee is no longer recoverable from the losing side and it must be paid by the client.
3. Legal Expenses Insurance - After the event (ATE) insurance is taken out after a legal dispute has arisen. ATE insurance generally covers a party's potential liability in the event of losing its case. This can include that party’s disbursements and also the other party’s award of costs and disbursements, if the other party wins the case. ATE insurance is often taken out with other forms of funding arrangements, such as a CFA or third party funding, to cover that party's own legal costs, should it lose.
Before the event (BTE) insurance which is often included as part of a household or motor insurance policy, is taken out before a dispute arises. BTE can cover legal fees and disbursements, but is generally capped at a specified limit.
4. Third party funding - Third party funding usually involves a commercial funder agreeing to pay some or all of the claimant's legal fees and expenses in return for a fee which is payable out of the proceeds recovered from the resolution of the claim (whether by judgement or settlement).
If the claim is unsuccessful, the funder loses its investment and is not entitled to receive any payment.
Summerfield Browne Solicitors have offices in London, Birmingham, Oxford, Cambridge, Northampton and Market Harborough, Leicester.
