Funding arrangements – interesting new case

For the average person or small business, having what appears on the face of it to be a strong legal case is one thing, being able to pursue it is another. Not only do many cases involve situations where a prospective claimant can’t afford his, her or it’s own legal costs, but there are other expenses, in legal terms called disbursements, which will need to be paid. These can typically include :-

1. Court fees
2. Expert fees
3. Barrister’s fees
4. After the event insurance costs protecting against a costs order in favour of the defendant

There are some types of claims where the above issues do not cause a problem, typically personal injury claims as solicitors not only agree to deal with the case on a no win no fee basis but they also subsidise the other costs and recover these at the conclusion of the case. Why do they do this ? Simply because the prospects of success, on a pure “numbers game” basis are good enough.

But what happens where, for one reason or another, either after the event insurance against the opponent’s costs is either not available or not taken out ? In other words, what happens if the claimant loses without cover against the defendant’s costs where it appears the claimant’s solicitor has otherwise financially supported the case ?

In the above type of situation, the defendant’s may apply for an order that the solicitors pay their costs on the basis of being a 3^rd party funder of the claimant with a potential financial benefit from the litigation.

This is all particularly relevant given a recent High Court Order on this issue which went to appeal. In this case, the High Court has ordered the solicitors in question to provide disclosure of the funding of their clients unsuccessful case

This ruling has proved quite controversial.  In the lower court the Judge thought that such orders “could be to undermine or perhaps even to destroy the workings of the CFA system”, but the upper court disagreed.

Ultimately, the ruling was based on public policy and we think it is logical that if a case is being funded by a 3^rd party behind the scenes, whether  as solicitor firm or otherwise, in circumstances where the case would not otherwise go ahead, they should accept the risk if it all goes wrong.