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Dispute Resolution > DR - Costs and Funding > Flashcards

DR - Costs and Funding Flashcards

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1
Q

What are disbursements?

A

Payments that are made to third parties as part of the case. These might include expert’s fees and court fees.

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2
Q

Overriding objective

A

Cases should be dealt with justly and at proportionate cost

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3
Q

Proportionate cost

A

costs allowed by the court should be proportionate to the dispute - court considers whether it was proportionate for a party to have incurred the costs claimed

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4
Q

What is Before-the-Event Insurance (BEI)?

A

Provides the policy holder with an indemnity (up to the financial limit specified) for their legal fees if they become involved in litigation

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5
Q

What must a solicitor do when advising on funding?

A

Follow SRA Principles 4, 5, 7:

Act with honesty ✅
Act with integrity ✅
Act in client’s best interests ✅
Also:

❌ Don’t exploit (Code 1.2)
🧩 Consider client’s needs (Code 3.4)
💷 Give full cost info early + as case progresses (Code 8.7)

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6
Q

What should be established at the start of a case re: funding?

A

How the case is funded
How you’ll be paid
Who pays opponent’s costs if your client loses

🔍 Tailor funding method to client’s circumstances

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7
Q

What is After-the-Event Insurance (AEI) and when is it used?

A

Bought after claim arises.
AEI can cover a potential costs liability. Often (but not always) used in conjunction with a CFA or DBA

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8
Q

What is Legal Expenses Insurance (LEI), and when is it available?

A

LEI may fund litigation via:

Before-the-Event Insurance (BEI)
After-the-Event Insurance (AEI)

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9
Q

What is Trade Union Funding and when is it used?

A

Available to union or professional body members
Common in workplace injury claims
Union may fund claim against employer
Always check if client has cover through membership

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10
Q

What are contingency fee arrangements?

A

“No win, no fee” type agreements
Common types:
Conditional Fee Agreements (CFAs)
Damages-Based Agreements (DBAs)

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11
Q

What is a CFA under s.58(2)(a) CLSA 1990?

A

Client only pays solicitor in specific circumstances (usually if successful)
Often includes a success fee (% uplift on base costs)
Base costs = standard chargeable fees
Success fee is not recoverable from losing party—client pays it from damages

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12
Q

What are the financial consequences of a CFA?

A

**If client wins:
**
Opponent pays base costs
Client pays success fee from damages
Client pays shortfall if costs not fully recovered

**If client loses:
**
Client may be liable for opponent’s costs
AEI can cover this
Client also pays own disbursements unless insured

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13
Q

How is the success fee under a CFA calculated?

A

Formula:
Risk of loss ÷ Chance of success × 100 = Success Fee %

Statutory Caps:
Max 100% of base costs
In PI: max 25% of damages (excl. future losses)

Must:
Define ‘success’ in CFA (if difficult to define or could exist in a variety of situations –> do not enter into a CFA
Assess risk level to justify % increase

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14
Q

How are base costs caculated?

A

How much time each fee earner has spent on the case × their hourly charge-out rate = base cost

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15
Q

What is a DBA under s.58AA(3) CLSA 1990?

A

Solicitor is paid % of damages if client wins
If client loses: pays nothing (except disbursements unless insured)
Caps:
PI claims: max 25% (excl. future losses)
Others: max 50%

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16
Q

When can DBAs be used?

A

Only by claimants. Can’t be used for non-money claims. Counterclaiming defendants can use DBAs for their counterclaims.

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17
Q

What is a staged DBA?

A

A DBA where the percentage fee depends on the stage at which the case settles or on the damages recovered.

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18
Q

What makes DBAs less attractive to solicitors?

A

Risk of receiving no fee if claim fails. Payment is contingent on outcome, making them risky and less common.

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19
Q

What does the court consider when assessing costs?

A

Whether the costs are reasonable and proportionate, based on value, complexity, importance, and financial position of the parties.

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20
Q

What happens if legal costs exceed fixed recoverable costs?

A

The successful party must cover the excess. Only the fixed amount is recoverable from the opponent.

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21
Q

What are fixed recoverable costs?

A

Set amounts recoverable for certain claims up to £100,000, limiting what a winning party can recover.

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22
Q

What are the three eligibility tests for civil CLS funding?

A

Means, Merits, Scope (MMS)

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23
Q

Who can usually access civil CLS funding – individuals or companies?

A

Individuals. It’s very rare for a company or LLP to qualify.

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24
Q

What types of claims are usually eligible for CLS funding?

A

Children/family disputes, homelessness, domestic violence claims

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25
What does CLS stand for in civil legal funding?
Community Legal Service
26
What does the merits test assess for CLS funding?
Whether the client’s claim has sufficient legal merit
27
What fees can a solicitor receive under a CFA if successful?
The normal (basic) fee plus a success fee (uplift)
28
What is the maximum success fee in personal injury cases?
25% of general damages + past pecuniary losses (not future ones)
29
What happens if a CFA doesn't meet required legal conditions?
A: It is not lawful or enforceable
30
Can the success fee be recovered from the opposing party?
No – the success fee must be paid by the client, usually from their damages
31
In a CFA-funded PI case, who pays the solicitor if the case is won?
The client – from their damages – pays the basic fee and the success fee.
32
What is the key difference between a CFA and a DBA?
CFA pays fees + success uplift; DBA pays a % of damages only
33
What is the general cap for DBA recovery?
25% of damages (excluding future care and loss)
34
What is the DBA cap in employment tribunal cases?
35%
35
What is the DBA cap in non-PI civil cases?
50%
36
What is third party funding in civil litigation?
Funding provided by a third party (e.g. bank or hedge fund) to pay for legal costs in return for repayment + uplift if the claim succeeds.
37
Who might provide third party funding?
Banks, private equity firms, hedge funds, or other commercial funders
38
What does the funder receive if the case is successful?
Their investment back plus an agreed uplift
39
Can funders control the litigation they fund?
No – funders must not interfere with control of the case (per the code of conduct)
40
What is the Association of Litigation Funders?
A body that promotes standards for third-party funders through a voluntary code of conduct
41
Are funders required to be members of the Association of Litigation Funders?
No – membership is voluntary
42
What does the Association of Litigation Funders code of conduct require?
1. Clear and not misleading promotional materials 2. No interference with conduct of the case 3. Funders must have enough capital to meet commitments
43
What types of claims are typically suitable for third party funding?
High-value commercial claims
44
Is third-party funding normally used for PI or consumer claims?
No – these claims typically don't involve high enough damages to attract funders
45
What is the traditional method of charging clients in legal practice?
Hourly charging – client pays based on time spent on the matter
46
What is fixed fee charging?
A set fee agreed for a particular item of work, regardless of time spent
47
Give examples of legal work where fixed fees are common.
Residential conveyancing, drafting a will, small disputes
48
What are unbundled legal services?
Client pays solicitor for a specific task (e.g. drafting a document), not for full representation
49
What is a key advantage of unbundled legal services?
Helps keep legal costs down by limiting solicitor involvement
50
What is a downside of hourly charging for clients?
Costs can increase unpredictably based on time spent
51
If a party wins their case and had ATE insurance, can they recover the premium from the losing party?
No – ATE insurance premiums are not recoverable (since April 2013 reforms)
52
When can the court make a costs order?
At the end of any interim hearing and at the end of trial
53
What happens if the court makes no order as to costs?
Each party pays its own costs
54
What is the default rule if the judge says nothing about costs?
No order as to costs = each side bears its own costs
55
Can a winning party recover all its solicitor–client costs from the losing party?
No – usually there is a shortfall between solicitor–client costs and inter-party costs recovered
56
What is the “shortfall” in legal costs?
The difference between what the client owes their solicitor and what is recoverable from the opponent
57
What is the indemnity principle in costs?
A party cannot recover from the opponent more than it owes its own solicitor
58
Are non-party cost orders common?
No – they are considered exceptional and used sparingly
59
What is the key test for whether a non-party costs order should be made?
Whether it is just to make the order
60
In what situation will the court likely make a non-party costs order?
Where the non-party both funds and substantially controls or benefits from the proceedings
61
What 3 decisions does the court have discretion over in relation to costs?
(a) Whether costs are payable (b) The amount of costs (c) When they are to be paid
62
What are the two bases of costs assessment?
Standard basis and Indemnity basis
63
What is the standard basis of costs assessment under CPR 44.3?
Costs must be proportionate, reasonably incurred, and reasonable in amount Any doubt = resolved in favour of the paying party Common recovery: Only around 60% of legal costs Proportionality test means even reasonable costs might be disallowed Default basis unless court specifies otherwise
64
What is the indemnity basis of costs assessment under CPR 44.3?
Costs must be reasonably incurred and reasonable in amount No proportionality test Any doubt = resolved in favour of the receiving party Common recovery: 70–80% of legal costs Used when a party’s conduct deserves disapproval (e.g. unreasonable litigation behaviour)
65
What does “proportionate” mean in costs assessment under CPR 44.3(5)?
Costs are proportionate if they bear a reasonable relationship to the following: The sums in issue in the proceedings The value of any non-monetary relief in issue The complexity of the litigation Any additional work caused by the conduct of the paying party Wider factors, e.g. reputation or public importance ✨ This applies only to the standard basis – not to indemnity basis, which does not require proportionality.
66
Time for complying with an order for costs
Within 14 days, unless the court orders otherwise, from: The date of judgment or order (if it states the amount); OR The date of the costs certificate (if costs are decided later)
67
From when did the fixed costs regime expand to all small claims, fast track, and intermediate track cases?
1 October 2023
68
What determines the level of fixed costs recoverable in fast and intermediate track cases?
The complexity band (1 to 4) under CPR 26.15 & 26.16 The stage at which the case concludes
69
Where are the fixed cost amounts set out for fast and intermediate track claims?
Fast track: Table 12 in PD45 Intermediate track: Table 14 in PD45
70
How do fixed costs work in small claims, fast track, and intermediate track?
Small claims: Fixed costs are set in CPR 27.14 (e.g. filing fees, witness expenses) No bands or stages — it's a fixed menu of recoverable items Fast & Intermediate tracks: Fixed costs apply under CPR 45 (Sections VI & VII) The amount recoverable depends on: The complexity band (1 to 4), assigned at allocation The stage the case is resolved (pre-issue, post-issue, pre-trial, trial etc) Specific figures are in PD45 Table 12 (fast) and Table 14 (intermediate)
71
When are costs assessed rather than fixed?
When costs don’t fall under the fixed costs regime, the court must assess what costs are payable Assessment usually happens when parties can’t agree on the amount Applies most often in multi-track cases The amount is determined by the court using either: Standard basis (CPR 44.3(2)) Indemnity basis (CPR 44.3(3)) Assessment can be done by one of two procedures: Summary assessment Detailed assessment
72
What is summary assessment of costs, and when is it used?
Summary assessment = the court decides costs immediately at the end of a hearing Statement of costs must be filed (preferably using Form N260) Must be served at least 24 hours before the hearing (PD 44 para 9.5(4)(b)) 🔹 Used in two key situations: Fast track cases → Costs of the whole case assessed at end of trial Interim hearings lasting 1 day or less → Only costs of the interim application assessed 🔸 Court uses a broad brush approach unless there’s a good reason not to
73
What is summary assessment?
The court determines the amount of costs payable immediately at the end of a hearing
74
When must N260 be filed and served?
At least 24 hours before the hearing (PD 44 9.5(4)(b))
75
In which track is summary assessment usually done at the end of trial?
fast track
76
When is summary assessment used in interim apps?
At the end of an interim hearing that has not lasted more than a day
77
What triggers the detailed assessment procedure?
The court orders one party to pay the other's costs but does not determine the amount – the costs must be assessed unless agreed.
78
What does the receiving party serve to commence detailed assessment?
A Notice of Commencement and a Bill of Costs (a detailed breakdown of costs claimed).
79
Who receives the Notice of Commencement and Bill of Costs?
The paying party.
80
What must the paying party serve in response to the Bill of Costs?
Points of Dispute — objections to specific items in the Bill of Costs.
81
What is the deadline for the paying party to serve Points of Dispute?
21 days from service of the Notice of Commencement.
82
What happens if the parties cannot agree on costs after Points of Dispute?
The receiving party requests a detailed assessment hearing, where a costs officer will determine the amount payable.
83
What does a "Costs in any event" order mean?
The party in whose favour the order is made gets its costs of the interim hearing, regardless of who wins at trial.
84
What does a "Costs in the case" order mean?
The party who ultimately wins at trial will recover the costs of the interim hearing — usually the winner of the case.
85
What does "Costs reserved" mean?
The decision on costs is postponed. If no later decision is made, the costs will be treated as costs in the case.
86
What does "Claimant’s or Defendant’s costs in the case" mean?
Only the named party (e.g. claimant or defendant) can recover the interim costs if they win at trial. If they lose, they cannot recover, but don’t pay the other side’s interim costs either.
87
What does a "Costs thrown away" order mean?
The party affected by a judgment or order being set aside can claim costs for that process. It includes preparation and attendance at both hearings. The losing party pays for costs they "threw away" by causing the error.
88
What does a "Costs of and caused by" order mean?
A party must pay costs caused by their own action, e.g. if a claimant amends particulars of claim, they pay the resulting extra costs.
89
What does a “Costs here and below” order mean?
The party awarded costs gets: Their costs in the current court and Their costs from earlier proceedings in any lower court Exception: Does not include lower court costs if the appeal is from the Divisional Court.
90
What is the effect of “No order for costs”?
Each party must bear its own costs of the hearing — no one pays the other.
91

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