Ordinarily, we will bill our clients on the traditional, hourly, basis, based on the time that we spend on a case.
However, there are a range of alternative payment and funding options that we can consider, subject to the profile, merits and metrics of any given case, to help our clients reduce and manage their risk.
Discounted Conditional Fee Arrangement (“CFA”)
One option is a CFA. With a CFA, we charge a percentage of our standard hourly rate (typically a minimum of 50%) and defer the balance, pending the outcome of the case, either at trial or a prior settlement.
In the event of a “success” (the scope of which is agreed between us in our retainer), we receive the balance of our fees, together with a pre-agreed uplift on our charges. In this way, we share in the risk of the case and allow our clients to manage their cashflow.
Damages Based Agreement (“DBA”)
Another option is a DBA, which is a form of “contingency fee”.
With a DBA, a client agrees to pay the solicitor by reference to a percentage of the sums recovered from a defendant.
In the case of a full DBA, the client does not pay the solicitor until after the trial or prior settlement.
With a hybrid or “partial” DBA, the burden of funding a case on an ongoing basis is substantially reduced or passed in whole or part to a third-party litigation funder, until recovery of damages is made.
Litigation funding is a rapidly growing area of the law with an increasing number of providers entering the market offering a range of options and funding structures.
At a basic level, a funder who is satisfied with the merits and metrics of a case will offer to fund a party’s legal costs, working alongside a solicitor on some form of risk-sharing basis (be it a discounted CFA or a DBA), in exchange for taking a percentage of the recoveries or a multiple return on the cost of their investment.
“Before The Event” (“BTE”) and “After The Event” (“ATE”) insurance
Finally, funders will frequently also offer to insure or else meet the costs of insuring a client’s adverse costs exposure.
There are two types of legal expenses insurance: before the event and after the event.
BTE is a pre-existing policy which pays the fees and disbursements that the client incurs in bringing or defending legal proceedings. The policy will also cover the opponent’s costs in the event that the insured is ordered to pay them. BTE insurance can be bought as a stand-alone product and is often sold or given away alongside other products such as home contents insurance and credit card agreements.
ATE insurance is a policy that is taken out after the claim has arisen and will usually cover the opponent’s costs and the client’s own disbursements in the event the client’s case is unsuccessful.
It may also be possible to obtain cover for some or all of the client’s own solicitors’ fees.
Usually, the ATE insurance premium is deferred until the conclusion of the claim and contingent upon success. In the event of a loss, the insurer pays out and the premium does not fall to be paid.