These notes set out some issues in relation to costs of litigation claims and the funding options of litigation claims.
I considered these are important points to discuss because potential clients are always worried about legal costs. Cost funding issues need to be overcome before instructions can be provided.
Time Costs and Fixed Prices
Lawyers normally charge on a time spent basis and provide an hourly charge rate. For some commercial/conveyance
Time costs can be very expensive on the part of opposing solicitors.
Ways of keeping costs within reasonable limits.
- Junior Lawyers
There are a number of ways to keep the price of litigation down. The first way is to instruct newly qualified lawyers/trainee barristers to undertake the relevant work at an agreed daily/half day charge rates. Relevant work includes preparation of trial bundles or disclosure lists which may take quite a number of hours to undertake. The indexing and numbering of documents can be particularly time-consuming, and hence the usual delegation of such work to junior lawyers to save costs. The use of this method can seriously reduce costs, but should be used only in relevant cases where the junior lawyer can be properly supervised.
The use of junior lawyers may save considerable legal costs.
The second method to keep costs down is to have a budget. Prior to starting litigation we always provide an estimate of costs which will be our estimated budget for the proceedings. The budget will always be discussed with the clients and if the proposed budget is too high it is possible to agree how to undertake the case within the clients own required budget.
However if the client suggests a figure which is too low to run the case properly, we reserve the right to turn away the instructions.
It is important to realize that participating in litigation can be a worthwhile exercise if reasonable budgets are agreed.
It may be possible to endeavor to meet required budgets, again, through the use of junior lawyers to undertake part or parts of the work.
As a comfort measure, it is possible to
- Adverse Costs
If a litigation case is lost this is very bad news as it can lead to an adverse cost order. This means the other side can claim their costs from you. It is fairly easy for the other side’s legal costs to have run
It is possible to protect a client against an adverse costs order by three devices;-
- Small claims jurisdiction - By initially limiting the claim to the small claims jurisdiction. The small claims track has a limit for claims to a maximum of £10,000 and within this
jurisdictiononly limited costs are generally recoverable. Such limited costs include court fees, expert fees and the costs of witnesses attending the hearing to give evidence.
Accordingly if you are only claiming a small amount under £10,000 you can largely avoid adverse risk exposure.
However, I will add a word of warning: if a party conducts a case unreasonably then costs can be awarded against the unreasonable party even in the small claims jurisdiction.
A claim will be considered unreasonable by the courts if the claim has no merits or the
- Legal Cost Insurance – A person can also protect him/herself from legal costs by taking out insurance. Insurance can be taken out pre or post-litigation.
A person can take out insurance pre-litigation usually under
Alternatively a person can acquire an insurance policy after or at the commencement of litigation. This is known as an after the event insurance policy. ATE policies can be relatively expensive, normally a third of the cost insured. They also generally require that the opponent is credit worthy or is covered by their own insurance policy and that you have a written Counsels opinion that you have a 60 percent plus
Nowin no fee - There are two types of no win no fee agreements, the Conditional Fee Agreement (CFA) and the Damages BasedAgreement (DBA).
A CFA is where there is a successful uplift. Only the basic costs may be recovered from the other party under the current rules of costs. If the case is lost, there are no solicitor’s fees – only out of pocket
A DBA is when we agree a percentage of the damages will be taken in legal costs; this is usually about a third. Like with a CFA basic costs are recoverable under an adverse cost order and the percentage of damages we receive is an extra on top of that.
Settling a Case
The various litigation risks and the cost of litigation
Mediation is a common method of settling proceedings. It involves an independent person, normally a lawyer trying to procure a resolution of a case at a meeting. There are normally joint and separate sessions with the mediator at the appointment.
Pre-Action Protocol Procedure
This is mandatory prior to issuing proceedings. This involves a letter of claim sent in a prescribed format to the opponent. This usually requires a fairly detailed letter setting out the basis of the claim and the remedy/ remedies sought, along with other supporting documentation. The opponent will need to reply with a letter of response setting out in detail why they dispute the