How To: take a case to court without getting into debt

By | June 27, 2010

The process of litigation can be costly and drawn-out.

If you find yourself with a strong case but with no means by which to support it through court, there are a number of options to secure funds. However, it’s imperative to familiarise yourself with the options to ensure the most astute choice is made for your particular case.

‘No Win No Fee’ & Damages-Based Agreements (DBAs)
‘No win no fee’ arrangements have enjoyed popularity in recent years. The premise of such an agreement is that a solicitor takes on the litigation case on the proviso that they will not receive payment unless the case is won.

Usually, the arrangement will dictate that the client does not pay any fees in the event of a courtroom loss, but if successful, will pay a percentage in uplift on top of the standard fees.
However, the client will usually have some form of outlay to pay during the case, in the form of court or expert witness fees. Also, if the amount owed from the other side cannot be recovered, then depending on the initial agreement made with the solicitor, the client could be liable to pay the shortfall.

In April 2013, a new funding option is expected to become effective. A ‘DBA’ is a new form of agreement where the client simply pays the solicitor a proportion of the damages won, directly aligning the lawyer’s interests with the client. It’s hoped that this form of agreement will inspire a more competitive marketplace. However, a growing number law firms are turning to an intermediary.

Third-Party Funding
Companies providing litigation funding to clients in return for an agreed percentage of the damages awarded, are an increasingly common phenomena.
However, for a third party to agree to fund a case, there needs to be a strong likelihood of success. Likewise, for them to agree to tie money up for a prolonged period of time, there needs to be a decent return. For this reason, low-value cases, where the value of the claim is less than £1m, are unlikely to be attractive to the provider.
With such large sums at stake, the funder must have confidence that the case will be won, and at present, only around 15% of applications are accepted by funders. In addition, it’s likely to expect the funder to take a weighty proportion of the damages (commonly between 30 – 40%).
The obvious advantage to the client is that if the case isn’t successful, they walk away, having made no cash commitment and incurred no legal costs.
In the UK, solicitors are duty-bound to advise their client of all possible options for funding their case, so it’s a good idea to always seek the advice of a professional before proceeding with any funding option.

This article was contributed by Laura Moulden on behalf of Vannin Capital, a specialist litigation funding provider.

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