Litigation can be expensive and can often deter an agent from bringing a claim against his principal. In the event of an agent losing his claim, not only would he have to pay his own solicitor’s costs, but he would also normally have to pay the majority of his opponent’s costs as well.
However, there are ways to fund the litigation which can reduce the excessive financial burden which it can otherwise entail.
Are you a member of a trade body?
If an agent is a member of a trade body, it may be possible to arrange for the trade body to be responsible for the payment of his solicitor’s costs. Some agents are members of the Professional Sales Association (“PSA”). The PSA commonly provides free legal advice and representation to its members on a variety of legal matters and can help agents who wish to claim against their principal.
Do you have insurance?
Many people now have the benefit of a “before the event” insurance policy which might fund the litigation. Many everyday insurance policies such as household or motor insurance now provide legal expenses cover and should be checked to see what types of claim are covered and the limitations on it.
An insurer is obliged to allow you to use your own solicitor when court proceedings have actually started. Before that, the insurer might request that a solicitor of its own choice be used. However, if you are unhappy with their choice, the insurer may be prepared to allow you to use your own solicitor.
Conditional Fee Arrangements
The use of Conditional Fee Arrangements (CFA) is a rapidly growing area. CFAs are crucial because they allow access to the legal system for those who cannot pay their solicitors outright.
A CFA works where a solicitor agrees with his client that the client will be liable to pay his costs only if the claim is successful. It is often known as “no win, no fee”. If the client is successful with his claim, the solicitor will be entitled to charge his usual rate (the “base costs”) plus a “success fee” calculated as a percentage uplift on those usual costs. The success fee cannot exceed 100% of the solicitor’s normal charges.
An agent who is successful will usually be awarded costs against the unsuccessful principal. If the successful agent has the benefit of a CFA, the usual costs order includes not only the lawyer’s base costs, but also part of the success fee and any “before the event” insurance or “after the event” insurance (see below). The part of the success fee that can be recovered is the uplift relating to the risks of the litigation.
There are strict requirements which must be complied with in order to create a valid CFA. If these are not complied with, then it will be unenforceable. One of the most important requirements is that the existence of the CFA must be notified to other potential parties to the dispute as soon as it is in place and at the commencement of the action. If this information is not provided in this way and at that time, the client will not be able to claim the “success fee” element of his costs from his opponent if he wins the case.
“After the event” insurance
If the CFA funded agent loses the case, he will not only usually have to pay his own solicitor’s fees, but will nevertheless be liable for his opponent’s costs. In addition, the agent will, during the course of the litigation, have to fund disbursements such as the fees of counsel and expert witnesses, as well as items such as travelling expenses. Many CFA funded agents are not in the position to pay these disbursements and/or may be concerned by the fact that they will not know until the end of the litigation whether they are liable to their opponent for costs and, if so, for how much.
In such circumstances, the agent may benefit from the purchasing of “after the event” insurance which provides cover for the other side’s costs and his own disbursements in the event of losing the case. The premium payable depends on the strength of the agent’s case and the level of cover required. If the agent wins, the premium, like the success fee, is recoverable from his principal to the extent that it is reasonable.
Obtaining after the event insurance to cover the agent’s disbursements in the event that he loses, does not solve the problem of how those disbursements are to be paid for during the course of the litigation. If necessary, many after the event insurers will arrange a loan to the agent or his solicitors to fund both the disbursements and the cost of the after the event insurance premium. The loan may even be on terms that it is not repayable in the event that the client loses. If he wins, the interest on the loan is not recoverable from his principal. It is usually deducted from the damages recovered.