Fund a claim

As an alternative to a full retainer, where we undertake all steps required to progress or defend a professional negligence claim, you can instruct us to undertake certain specific tasks only, while undertaking others yourself. Some of the tasks you may instruct us to undertake are:

• Review a file and provide a written opinion
• Draft / review a pre-action protocol letter of claim
• Prepare and issue legal proceedings
• Advise on disclosure obligations
• Draft a witness statement
• Comment on the terms of a settlement agreement or consent order

The advantage of this approach is that it can limit the legal fees you incur. However, it also means that you will be responsible for undertaking all other aspects of a claim, including complying with any court orders or directions.

Statutory provision for CFAs was first made in 1990. However, with effect from 1 April 2013, important changes were made to the way in which CFAs operate. As a consequence, and while they remain a popular method of funding litigation, they are a less attractive option for claimants than they once were.

CFAs comprise two elements, a basic fee and a success fee. While the basic fee is calculated by multiplying the total time spent by the solicitor on the claim by the agreed hourly rate, the success fee is a secondary fee, calculated by applying a pre-agreed percentage to the basic fee.

As a claimant, and where your claim is successful, you become liable to pay both the basic fee and the success fee. However, while the basic fee may then be claimed from your opponent, the success fee may not. This means that the total amount you recover is likely to be less than if your claim was funded under a private retainer, where only the equivalent of a basic fee would apply.

As the level of the success fee depends on the amount of time spent dealing with the claim, the amount due in respect of it is not fixed. For this reason, you should treat any offers to apply the lowest level of success fee with some caution: if the amount of time spent on the claim is higher than it could be and/or the compensation recovered is lower than it could be, the net outcome may be disappointing.

You should also be aware that standard CFAs are not ‘no recover, no fee’ agreements. This means that as a claimant you remain liable for your own legal costs, even if these cannot be physically recovered from your opponent. However, this is rarely an issue in professional negligence claims where the majority of opponents are insured.

Finally, you should note that, more often than not, CFAs cover only the solicitor’s own fees: they do not generally cover disbursements, such as court fees and expert’s fees. However, these can often be covered separately by way of an after-the-event (ATE) insurance policy.

The big advantage of CFAs over other forms of funding, such as a private retainer or a Discounted Fee Arrangement (DFA), is that if your claim fails you have no liability for your own solicitor’s fees.

DFAs operate as a half-way house between a private retainer and a standard CFA.

As a claimant, you pay a fixed hourly rate for the time we spend working on your claim, as you would under a private retainer. However, the hourly rate that you pay is much lower than the standard rate we usually charge. This means that if your claim is unsuccessful, your legal fees will be considerably lower than they would be under a private retainer.

If, on the other hand, your claim is successful, you will need to pay the basic fee (at our standard hourly rate) and a success fee, as you would under a standard CFA. However:

1. The basic fee can usually be claimed from your opponent; and
2. While the success fee cannot be claimed from your opponent, it will usually be much lower than under a traditional CFA, meaning that the total amount you recover from your claim is much greater.

DFAs can also be entered into alongside an after-the-event (ATE) insurance policy, which itself is intended to cover the costs of any disbursements or adverse cost awards.

DBAs are a relatively new funding option in the UK, having been authorised for use in most civil proceedings from 1 April 2013. They operate as an alternative form of “no win, no fee” arrangement, whereby the solicitor’s fee is dependent upon the success of the claim and is calculated as a pre-agreed percentage of the compensation recovered by you as the client.

Like traditional CFAs, the main advantage of a DBA is that if the claim fails, there is no liability for your own solicitor’s fees. However, this will need to be balanced against a number of potential disadvantages, including the potential, if the claim settles at an early stage, for the contingency fee payable to significantly exceed the fee that would have been incurred under a private retainer, CFA or DFA.

DBAs are currently a funding option for claimants only and because of the multitude of legal uncertainties that still surround them we, like many solicitors, will only consider them in very exceptional cases.

TPF providers offer funding for all or part of the legal costs associated with pursuing a claim, in return for a fee payable out of any compensation recovered. When combined with ATE insurance, this can transfer risk away from a claimant and, for companies, take the costs of funding litigation off the balance sheet completely.

In recent years the TPF market in the UK has grown significantly, both in terms of the capacity of the providers and the number of participating providers. As a result, such funding is becoming more accessible and more competitively priced.

However, the criteria applied by TPF providers remains stringent and so the number of cases they will support remains relatively limited. Broadly, a claim will have to be for a significant sum and have good prospects of success in order to qualify for support from a TPF provider.

The process of securing TPF support is relatively involved and for this reason, it is likely to incur an element of cost irrespective of the funding decision made.

Although not common-place, it is possible that an existing BTE insurance policy, such as a commercial combined or home insurance policy, will cover some or all of the costs of pursuing a professional negligence claim. This may be either in accordance with the standard wording of the policy or as an add-on to it. Therefore, you should always investigate the scope of such policies as a first step and before selecting any other form of funding.

When determining the suitability of any BTE policy, you should consider:

• Whether the events giving rise to the claim pre-date the inception of the policy and are thereby excluded from cover
• Whether cover extends to a professional negligence claim, which may or may not be contractual in nature
• The requirements to notify a claim under the policy and whether these have been complied with
• Whether it covers not only your own legal costs, but also any adverse costs you may have to pay your opponent
• Any restriction placed on your freedom to instruct a solicitor of your choice
• Any qualifications or conditions placed on the insurer’s obligation to meet any legal costs incurred
• The level of cover provided by the policy, which may be relatively low

The cover provided by ATE insurance is arranged after the events giving rise to a professional negligence claim have come to light. It is litigation specific and placed on a case by case basis. Such policies are designed to cover any costs awarded against a party to litigation and offer additional peace of mind to litigants. Such policies can also cover the costs of any disbursements that need to be incurred, such as court or expert witness fees.

Many ATE policies are self-insuring, so that if the related claim fails there is no premium payable by the policyholder. However, where the claim succeeds, an agreed premium will then become payable.

There are a number of ATE insurance providers and premiums can vary according to the amount of cover purchased and the stage at which the claim is resolved. Further, ATE cover is often available regardless of whether a claim is funded under a private retainer, a CFA, a DFA or a DBA.