Archived News

Costs in Civil Litigation

7 November 2005

Legal costs in civil litigation has become a highly contentious area over the past few years.

The starting point for the client is that they have primary liability for the legal costs incurred in pursuing their claim against the Defendant. This principle is at the centre of legal costs as a whole but to some extent the principle has become outdated because there are now a number of ways in which claims are financed which often mean that the client is not asked to pay any money up front in order for the case to be progressed by his or her Solicitor. It can therefore become confusing for clients when their case is being operated under such an arrangement when at the same time they are told by their Solicitor that they do nevertheless still have responsibility for the fees incurred on their behalf.

Private Funding, Legal Aid and Trade Union Funding

It is now rare for a client, certainly in the personal injury field, to instruct a Solicitor on the basis of a private funding arrangement. As the process is inherently uncertain and nobody can guarantee the time frame, the client is naturally wary of spending potentially a large amount of money to fund their claim if there is an alternative arrangement which the Solicitor is willing to set up. The reality is that the majority of Claimants do not have sufficient financial resources to fund their claim privately.

Legal aid has now effectively been withdrawn from general civil litigation although it should be noted that in some circumstances it is still available for clinical negligence claims which are a specialist area.

Sometimes it is the case that a client may be a member of a trade union and one of the benefits of membership can sometimes be that the trade union will arrange for the client to be legally represented in their claim, normally on the basis that the claim will be dealt with by a panel Solicitor appointed by the trade union. This arrangement operates on the basis that the trade union will indemnify the client for the legal fees incurred to pursue their claim for as long as that claim has reasonable prospects of success. The effect of this is that the client is able to pursue their claim without having to fund it themselves.

Other Forms of Legal Expenses Insurance

Your Solicitor will nowadays routinely be asking for information regarding pre accident legal expenses insurance (LEI). In the field of road traffic accidents for example, it is very common for the insured party to have legal expenses insurance attached to their motor insurance policy and this insurance will often attach to passengers in the car as well. If this is available, the advantage to the client is the same as with trade union insurance in that there will often be a panel Solicitor who will be appointed to pursue the claim for the client and the client again is indemnified against the legal fees incurred subject to reasonable prospects of success.

It is now increasingly the case that householders with buildings and contents insurance have the benefit of legal expenses insurance attached to that policy. Often the question of whether or not insurance under this method is available is rather obscure but if it is available, it tends to apply to all accidents in which the householder or family member is involved, not just accidents which might happen at home.

The effect of this is that in appropriate circumstances we now have to insist upon a new client providing us with copy insurance documents so as to enable us to establish whether or not there is some form of insurance available. This can cause practical difficulties because for example, we find that a potential client will inform us that they have examined the documents themselves and that there is no insurance available. The problem for the Solicitor is that we are not able to rely on the client for this information and we do have to insist upon production of the documents. Quite understandably clients find this initial funding process very frustrating but a body of litigation has grown up in this area and absolute adherence to the rules by the Solicitor is essential. The consequence of failing to adhere to the rules is that the Courts may strike down the funding arrangement which in turn means that a successful Claimant is not entitled to recover his or her costs from the losing Defendant and also the Solicitor is not entitled to recover his own fees from the client.

Conditional Fee Agreements (CFAs)

These agreements are sometimes inaccurately referred to as “no win, no fee” agreements. This funding arrangement is generally relevant only after other funding arrangements, described above, have been investigated and found to be inapplicable. If the case has reasonable prospects of success, the Solicitor may be willing to act under a CFA. The CFA is a contract between the client and the law firm which states in general terms that if the case is pursued and lost, the client will not be responsible for the fees incurred by his Solicitor. However, if the client has lost the case then there may well be a liability for costs which have been incurred by the successful Defendant and for this reason it is essential that at the outset the client is protected by having insurance arranged to pay out in the event of that unsuccessful outcome. Fortunately there are schemes available to provide this insurance, notably the Accident Line Protect scheme which is endorsed by the Law Society.

There are further aspects to this particular funding arrangement which we need not go into here.

Conclusion

It can be seen that the area of litigation funding is a complex one and Defendant insurers are constantly seeking to run arguments to “defeat” funding arrangements set up on behalf of the Claimant in an attempt to minimise or avoid the payment of legal costs at the conclusion of the case. It is for this reason that we do now have to undertake extensive enquiries at the outset of the claim as to the possible funding arrangement. As long as the client is in a position to deal with those enquiries then their position will be protected.