QUANTUM - no win no fee litigation funding
Is risk-free litigation possible?
QUANTUM is our "no win, no fee" package for clients looking to explore alternative ways of funding their litigation. So called “no win, no fee” agreements are becoming an increasingly popular way for claimants and defendants to manage their costs in legal disputes. They can allow you to pursue litigation on a risk-free basis, so that it will cost you nothing if you ultimately lose the case.
However, the phrase “no win, no fee” covers a wide range of potential funding arrangements, and it is important to understand the options available to you. To explain how QUANTUM could assist you in managing the costs and risks involved in litigation, here are some of the frequently asked questions and answers about “no win, no fee” agreements and how we can help you.
What does “no win, no fee” mean?
The label “no win, no fee” generally refers to a funding arrangement where you don’t have to pay any fees if you lose the case. This is normally because you have an insurance policy (known as After The Event, or ATE, insurance) which pays your opponent’s costs if you lose, so that you don’t have to. The ATE insurance can also potentially cover your own expenses, such as fees for an expert or barrister.
As part of the funding arrangement, you will have entered into a Conditional Fee Agreement (or CFA) with your solicitors, which will set out how your solicitors’ costs are dealt with.
How does a Conditional Fee Agreement work?
A CFA can take a number of forms, ranging from “full CFAs” where the solicitor is paid nothing at all during the course of the proceedings or if you lose, to “discounted CFAs” or “partial CFAs” where the solicitor is paid some fees at a discounted rate during the course of the proceedings but is not paid anything further if you lose the case (meaning that you can pursue a case to conclusion without having to pay the solicitors’ full/normal fees).
In what sort of cases are CFAs appropriate?
CFAs are potentially suitable in most litigation cases.
However, in order for a CFA to really be effective, it is best to also have ATE insurance (otherwise if you lose the case, you will still have to pay your opponent’s costs, even if the CFA means that you do not need to pay your solicitors anything further). ATE Insurers will normally only insure a case if an independent barrister has confirmed that the prospects of success are good. It is also important to assess whether the other side will be able to satisfy any judgment made against them.
What happens if I lose the case?
If you lose the case, under the CFA you will not have to pay your solicitors anything (or, if it is a “discounted CFA”, you will not have to pay them anything over and above the discounted rates you have already paid).
The ATE insurance will pay your opponent’s costs, and may also pay some of your expenses (although you may need to pay any third party expenses not covered by the ATE insurance or CFA).
What happens if I win the case?
If you win, the Court will normally order your opponent to pay the majority of your legal costs and other expenses, as well as any damages awarded.
Under a CFA, these legal costs will include a “Success Fee”, which is an uplift on your solicitors’ fees to compensate them for having taken the risk of not getting paid, or of only getting paid at a discounted rate.
Under a “discounted CFA”, your solicitors’ fees will also be calculated at their normal rates (not the discounted rates). You may still have to pay your solicitors some fees if the sums recovered from your opponent are not enough to cover all of the fees due to your solicitors.
What are the advantages of having a CFA?
The most obvious benefit is that a CFA will reduce the solicitors’ costs you have to pay if you lose the case. Under a “full CFA” you will pay your solicitor nothing at all, and with a “discounted CFA” you will only be paying the solicitors’ discounted rates, rather than their full rates.
The second benefit is that a CFA will increase the pressure on your opponent to settle the case sooner rather than later, in order to limit the level of legal costs it has to pay you (including the Success Fee uplift and, in the case of a “discounted CFA”, the difference between the discounted fees and the full fees).
As CFAs and ATE insurance are normally only available in cases where an independent barrister has confirmed that the prospects of success are good, it also may cause your opponent to doubt the strength of its position.
What other funding arrangements might be available?
CFAs and ATE insurance are not the only alternative funding arrangements that might be available. In some cases, it is possible to find an independent funder who will pay all of your litigation costs for you, in return for a share of any damages you recover.
What happens if I already have legal expenses insurance?
You may find that you already have existing legal expenses insurance (also known as Before The Event insurance), for example as part of your house insurance. This should be investigated, as it may mean that you do not need ATE insurance in relation to your opponent’s costs and/or that your insurers will pay your chosen solicitor (which doesn’t have to be the insurers’ preferred choice of solicitor) directly, so that you don’t have to.
How can I find out more?
These FAQs only summarise some of the funding options that may be available to you. If you would like to discuss how we might be able to assist you in managing the cost of litigation using our QUANTUM product, please contact Stuart Evans by emailing Stuart or by calling him on 08450 990045, or speak to your usual contact in the Commercial Disputes Team.
December 2011
