Guide to Legal Costs the mystery explained

Transcription

1 Guide to Legal Costs the mystery explained Let s be honest - No-one really wants to go and see a Solicitor. Like the emergency services, we are only welcome when things have gone wrong or in other cases you are being forced to spend money to dot the i s and cross the t s. Whether it be as a consequence of a need to get the legals done on a house purchase, or in later life perhaps the need to make plans for the future by commissioning a Will, or in circumstances where one is losing their job, or experiencing family/relationship breakdown issues, or if you have suffered an injury as a result of someone else s negligence, you may need to consult a Solicitor and you will most certainly be worried about the cost to you of the advice you obtain even more so in a litigation dispute where the costs will carry on accruing during the life of the case. There are a number of ways in which Solicitors will charge for their legal fees, depending on the requirement of the service and the costs recoverability which means that costs can be reclaimed in court cases from the losing party. The various means of funding relevant to the types of matter are listed below; 1. Private Fee Paying on hourly rates there isn t a Solicitor in the land who won t accept hard cash (or cheque/bank transfer depending on Money Laundering Requirements) for the private cost of carrying out their legal work under a standard retainer on an hourly rate basis. This is the least attractive option to consumers as the amount that they will have to pay is unlimited (although Solicitors are obliged to provide an estimate of the likely fees at the outset of the case and regularly update clients every 6 months unless otherwise agreed). In litigation cases where costs follow the event the conclusion of a court case can lead to an order for the losing

2 party to refund all or some of the successful party s legal fees, but this will only apply to certain types of litigation (not including divorce or employment in all but the rarest circumstances) and in cases involving court action/litigation No Win No Fee is much preferable as a means of funding a case (see below) 2. Fixed Fees don t be afraid to ask your Solicitor if they work on a Fixed Fee this won t be appropriate in every case but often the work is of a standard type and the Solicitor will be able to gauge at the outset the likely extent of their input and so most firms will be able to offer a fixed fee service for example in respect of a divorce, preparing a Will, preparing Powers of Attorney, Conveyancing services to name but a few. You should ask if it is an appropriate method of funding cases in the particular circumstances of your enquiry 3. Legal Aid much maligned because of stories of individuals milking the State for payment of their legal fees, and much reduced in recent times, but State Legal Aid is still available in rare circumstances e.g. There is a risk of abuse or serious harm, eg domestic violence or forced marriage A risk of homelessness or losing your home You ve been accused of a crime, face prison or detention You re being discriminated against You need family mediation You re adding legal arguments or bringing a case under the Human Rights Act Usually in Civil cases like debt, family or housing problems, in order to obtain legal aid funding you need to show you can t afford to pay for legal costs and your problem is serious. However there is no consideration of means (ability to pay) in cases involving mental health tribunals, children in care or child abduction. 4. Conditional Fee Agreements (CFAs) otherwise known as No Win No Fee under this type of funding the Solicitor (and in some cases the Barrister) doesn t charge for their fees unless the case succeeds. By its nature this lends itself to litigation cases (where success can be measured) and more often than not in Personal Injury

3 (although sometimes also Defamation) cases. It is important to note that the Solicitor cannot promise to work for free as otherwise he/she will have difficulty reclaiming his/her costs from the losing party if the case succeeds, which means that there must be in place a properly worded CFA (Conditional Fee Agreement). The reason why Solicitors might be keen to enter into this type of arrangement (and this will very much depend upon their risk profile and expertise is that apart from fees that they will recover from the losing party they are also entitled to claim a success fee for winning the case. It is important to note that in CFA cases post April 2013 unless the claim is for defamation, breach of privacy, diffuse mesothelioma, or is in respect of insolvency proceedings the success fee cannot be claimed from the other side. The success fee in personal injury proceedings is however limited to 25% of the compensation awarded or agreed for pain, suffering and loss of amenity and past losses. In addition the cost of an After the Event Insurance policy (see below) is also payable out of the compensation as well. 5. Insurance policies more commonly known as Legal Expense Insurance ( LEI ) this is either Before the Event (usually through e.g. car insurance, home insurance, credit cards) or After the Event Insurance ( ATE ). Before the Event Insurance is the most common type of LEI and the basis of the insurance funding is that the product is usually purchased as an add-on with some other product, usually car or home insurance. Then in the event of a need for the funding of legal fees in respect of litigation the LEI provider will effectively fund the claim by paying the legal fees. Whilst the LEI provider may attempt to push their own Panel Solicitor it is important to note that the person who has purchased the LEI cover has a right to choose their own Solicitor once court proceedings are in contemplation. It is always worth checking with your insurers to see if you have legal cover if you are considering litigation. After the Event Insurance is rare and basically serves as a safety net in circumstances where an incident leading to potential litigation has already occurred. Usually the most common requirement of ATE is in cases

4 involving personal injury, and the policy is taken out (usually with the help of the Solicitor instructed under a CFA) to protect you against the disbursements and potential costs in the vent that the case does not win. Remember although under a CFA the Solicitor (and sometimes barrister) are willing to work on a No Win No Fee basis, there are other costs which will be incurred such as medical experts and court fees (called disbursements ) and it is these costs (often running into hundred or even thousands of pounds) which are protected by the ATE insurance. If the case doesn t win, the disbursements are effectively paid by the insurance (as is the cost of the policy itself). 6. Litigation Loans or Client Credit there are now a few providers of litigation funding who will provide credit for the cost of legal fees (often in Family law/divorce cases) and these work in the same way as a credit card although the time for repayment of the litigation or solicitor s fees can be much longer and in most cases deferred until the end of the legal action which necessitates the loan. The way it works is that the funds are effectively drawn down upon to meet fees as they arise. Obviously the loan provider will charge interest upon the loan and this must be considered, but if the other option is paying on a credit card with hefty interest and less beneficial repayment terms, and you don t have a rich uncle or aunt to draw down funds from then this is a viable way of paying legal fees. The Solicitor who takes your case will be able to assist 7. Damages-Based Agreements (DBAs) these are a type of contingency fee where the Solicitor takes a share of the winnings akin to the system better known in the U.S. There is a maximum percentage that can be claimed. In Employment claims the solicitors and barristers' fees are limited to 35% of the client's damages. However in personal injury cases the maximum deduction is 25% of the damages plus Counsel s fees and in other cases the fees can vary although capped at 50% of clients damages (including Counsel s fees).

5 8. Trade Union Funding - Although trade union membership is far less common than was previously the case it is worth bearing in mind that if you are a member of a Trade Union or Friendly Society they may have a legal advice and assistance scheme which allows you to obtain advice from one of their panel solicitors. It is worth checking but bear in mind that the Trade Union might not give you the freedom you require to run your case. As you can see from the above whistle-stop tour of funding options it is still something of a minefield in terms of the best way to fund your case. The main thing is there needs to be transparency you are entitled to know how you are to be charged and given a guide as to how much. Then at least you can budget for your fees knowing there won t be any nasty surprises at the end. Please feel free to discuss the best way forward with us and we will do our best to answer any questions you have.