Save the Pennies: Fund a Legal Case without Breaking the Bank

by Darwin on January 30, 2013

Going to court can be expensive and time-consuming. The litigation process can be complex and lengthy. Cases may stretch out as long as five-years which means the financial implications for businesses can be pricey.

The question is this; if the mere concept of pursuing a case to resolve a legal grievance is so costly, how can you achieve justice if you do not have the monies?

Save the pennies and fund a case, without breaking the bank, with this expert guide.

There are five ways to fund a case…

  • Pay by the hour

There used to be a time when you paid your lawyer by the hour and took a hit if you lost, but money doesn’t grow on trees and this is no longer the case.

You can still pay a lawyer like this if you want to, and most will likely still take you on as a client, however they are under a professional obligation to discuss the other routes you can go down.

  • No win, no fee

Otherwise called a conditional fee arrangement (CFA), this is another viable option for businesses. Fundamentally, it works via three stages;

  1. The lawyer has a basic fee for his/her work.
  2. There is a success fee which is the fee uplifted up to 100% payable on winning the case. This compensates the solicitor for taking the risk of not winning.
  3. Legal expenses insurance called ‘after the event’ (ATE) insurance. This covers the risk of having to pay the other side’s costs.

By no means is it actually free though as there will be other costs involved, such as court or witness fees. However, these can be insured by the ATE insurance and repaid by the insurer if the case is lost. If you win, the losing party will foot the bill.

So if you win; your solicitor will recover their basic fee, the success fee and the insurance premium from the losing party. If they don’t get everything back that they are owed, you will have to make up for the shortfall.

If you lose; your insurance will pay the other party’s costs.

  • Partial or discounted CFA

This is an alternate agreement for cases in which the solicitor cannot afford to carry the full overheads for the length of the case. It may be unreasonable for your solicitor to take the huge risk of working for years, and not getting paid anything until right at the end.

What it means is that you pay part of the lawyer’s costs, but they get paid more if you win. Please note that as of April 2013, the law is changing and even if you win a case, you will have to pay a lawyer’s success fee and insurance premium.

So if you are contemplating making a claim, do it sooner rather than later.

  • Damages-based agreements (DBAs)

This is a relatively new funding option that will come into place later this year. It is hoped that solicitors will become much more consumer concerned.

The process works by you paying the solicitor a portion of the damages if you win. How much the lawyer takes is still under discussion.

  • Third party litigation funding

This is fast becoming the popular option due to the simple reason that a third party, completely unconnected to the parties in question, foots the entire legal bill. If the claim is unsuccessful, it is the funder that loses their money but if you win the claim, they take a share of the proceeds.

It is also a viable option because either the funder or ATE insurance can cover the other side’s costs if the case is lost. As you can see, this route is very appealing. It takes the risk off companies and gives individuals peace of mind.

But there is a but…

Because this option is so attractive, third party funders will not just take any case on. They only invest in viable, risk-free cases, and up to 85% of applications are rejected on a daily basis. The point is, if a third party does invest in your case, they obviously deem it a sound one.

They typically charge between 25-45% of the damages and most don’t take on cases less than £1million.

So there you have it; five funding options that will help you to take a case to court. Your lawyer should advise you of all the above funding options and failure to do so, is in breach of the Solicitors’ Code of Conduct.

This article was written by Lauren Grice on behalf of Vannin Capital, a specialist litigation funding provider. Visit today for expert advice and assistance.

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