Can unaffordable litigation be affordable?
We are currently in an era where Court fees have risen to such high levels that there is a real danger of preventing access to justice. There are people that simply cannot afford to pursue their claims, even those claims where winning the case ought to be a formality. There are businesses prepared to let things go, where they would once fight.
In April 2013 the small claims threshold went up to £10,000. That in itself has caused issues to some, where previously you would be entitled to a contribution to your costs from the opponent if you won a claim over £5,000. These days, unless a claim is more than £10,000 in value, you generally have no entitlement to recover any of your costs at all, even if you win.
To bring a claim over £200,000 in value will incur a chunky court fee of £10,000. A claim worth £50,000 will cost you £2,500 to issue. The economics of the action you are intending to take has always been a key factor in your decision making, but the changes we have seen now to the cost of taking court proceedings makes this ‘cost-benefit’ analysis all the more important.
It is just as important, of course, for those defending claims to think carefully about the prospects of success because, lose the battle, and you could end up paying that £10,000, or £2,500 court fee.
With this in mind, it is good to know what options you might have to help fund your case and make even the most unaffordable litigation, affordable.
Legal Expenses Insurance
Many people are unaware that when they pay their buildings and contents insurance each month, they are making a small contribution each time towards what is called ‘legal expenses’ cover. Like any insurance, there are obviously exclusions and exemptions under each policy and one should check the policy terms and conditions carefully to see. Don’t just assume the insurer is right either – sometimes they are not right and if you question the insurer’s reasoning for rejecting your claim, they can sometimes be persuaded otherwise – rarely is a legal argument black and white. Typically the insurer will need to see prospects of success in excess of 51% – that you are more likely to win your case than not. That could lead to a £50,000 to £100,000 fighting pot for your claim.
No Win No Fee
A no win no fee agreement (known as a ‘conditional fee agreement’) allows the client and solicitor to agree terms so that the solicitor will only be entitled to a fee if they win the case, but to claim a ‘success fee’ on top of their conventional hourly rate to reflect the risk they are taking on i.e. lose and they do not get paid at all for their work. They are less attractive to solicitors these days because, in April 2013, a new regime came into force which capped the level of success fee in certain cases and abolished the ability to recover it from the opponent. The success fee is important to the solicitor because it is their reward for the risk they have taken in the case.
Reduced Rate CFA
There is a type of no win no fee agreement commonly known as a ‘reduced rate CFA’. This mitigates some of the solicitor’s risk because under this arrangement the solicitor charges a reduced hourly rate throughout the case and will only get the balance of their hourly rate and any success fee at the end of the case and only if they win.
Fixed Fees and Other Fee arrangements
There are other fee arrangements that may be considered, from fixed fees to damages based agreements, where the solicitor takes a percentage of the damages recovered in settlement of their fees.
There are a plethora of insurance products available today, with insurers responding to the rise in court fees by packaging together products which pay your disbursements for you, including Court Fees, and also cover your risks of losing the claim by providing cover for any adverse costs order.
The premium level can vary depending on the insurer and some products allow for a deferred premium, only payable at the end of the case, and for different levels of premium to be payable based on the different stages in the case e.g. a lower premium is payable if the case ends before issue than if the case goes to trial. Again, this is to reflect the risk of the insurer – the longer the investment takes to bear fruit, the greater the expected return. The premium of the product offered is normally variable depending on the size of the claim, risks involved and how long the case takes to finish.
I am currently looking into one such product for a client. If the case ends within one year of the insurance being taken, a lower premium is payable than if the case ends in years two or three. There are even products where the premium is based on the amount of costs incurred, rather than the value of the claim. The disadvantage of these types of product is that you can no longer recover the premium you pay from the opponent, but it can often be proportionate to get this in place in any event.
Third Party Funding
Further to the above, there are also funders who will agree to fund your case for you and pay all your legal fees and expenses along the way, in return for a percentage of your damages.
Conclusion – Litigation can be affordable
Yes, court fees have reached a record high and accordingly the cost of litigation has risen. However, it need not be all doom and gloom: taking a case to Court can be affordable. As can be seen from the above, there are options when deciding how your case is going to be funded. If you have a claim that you are in two minds about bringing to court because of the costs involved, it is worthwhile considering these options carefully.