A short summary on legal funding options

In England and Wales, the general rule is that the loser of the court case pays the costs of the winner. These costs are separate from the damages or compensation awarded by the court. This means that at the outset, it is vital to consider the risks of the case, how it is to be paid for, and just as important, how you can with the assistance of your Solicitor, ensure that at the end of the day the legal action does not end up causing you financial difficulty.

Developments in the funding of cases over recent years mean that those pursuing legal action have a number of options to consider for funding a legal case or claim.

Conditional Fee Agreements

This method is the most modern way of funding a case for compensation such as for monies for injuries, losses and expenses following a road traffic accident. They are complicated agreements and your solicitor must explain the terms carefully to you. They are often called "No Win, No Fee" agreements. This means that if you do not win your case you are not liable for your own legal costs. If you win you are liable for your costs but the costs should almost all be paid by your opponent. It is crucial to realise that if you lose your case it is highly likely that you will be made liable for your opponent's legal costs.

If you win your case the law allows your Solicitor to charge a "success fee" calculated as a percentage of the basic costs. Your opponent is liable to pay at least the majority of the success fee, in addition to paying your damages (the money you recover in compensation). If you enter into a conditional fee agreement you will need to buy an accompanying policy of insurance to protect you from an adverse costs order in the event that your case was lost and in turn, you were ordered to pay your opponents legal costs and it should also indemnify you for any expenses your own solicitor has incurred on your behalf.

Public Funding

Public funding, previously known as Legal Aid, is still available for some legal action such as clinical negligence, but it's not available for straightforward personal injury litigation any more. A certificate of public funding acts as an insurance policy if you lose your case and provides funding for legal expenses along the way. The Legal Services Commission must authorise all work undertaken under the scheme. You may be required to pay a monthly amount on account for the work being done on your behalf, but this is repaid when the case finishes. Public funding is only available to clients with a limited amount of money, and where the case seems likely to be successful.

It is probably unlikely that Legal Aid will be available for your case but your Solicitor should always consider this and advise you accordingly.

Trade Union Funding

Some trade unions have a legal advice and assistance scheme, which allows you to obtain advice from an approved solicitor. If you are a member of a trade union, you could be entitled to free legal advice to decide whether you have a case, which is likely to succeed, and your union may then fund the whole of the case for you and there will be no risk that you will have to pay the costs.

Sometimes the union will act as ‘insurance’ if your case is not successful. Usually, this method of funding means that the claimant gets all of their compensation at the end of the case and has no risks of paying the legal costs. Always check if you are a member of a Union to see if you have access to any form of legal service.

Legal expenses insurance

This kind of insurance policy is purchased before the accident happens and is usually attached to other insurance policies such as household, travel or motor insurance, for a small annual fee. There will be limits on what the policy covers you for and there may be restrictions on the extent of the legal advice or service that you can receive under the terms of the policy.

Private Funding

This is the most straightforward method of funding legal action but also the least attractive for most claimants! Under this sort of arrangement, your Solicitor will undertake the work, you pay for all of your Solicitors charges and if your case is successful, then your Solicitor will seek to recoup as much of his or her charges as possible against the losing party. Not all those charges will necessarily be recoverable. There may be particular reasons why private funding is the best or perhaps the only option that your Solicitor is prepared to consider and you should as with all funding options, make sure that your Solicitor has explained to you why the other alternatives are not best suited or available to you and that you are satisfied, that you have been advised fully regarding the proposed funding option and that it is in your best interests, to follow that recommendation.