How long is a piece of string? Both questions are equally meaningless and therefore impossible to answer.
Of the court case there are just too many variables: take for instance the type of court. It might be the Small Claims Court, the Patents County Court, the County Court, the Defamation Court, the Mercantile Court, the Technology and Construction Court, the High Court, the Commercial Court, the Supreme Court or the Court of Appeal. (This is considering only cases in civil courts. Criminal cases would need a separate list and additional consideration for costing.) Generally the higher the court’s jurisdiction, then the more costly the case will be. Another rule-of-thumb is that London courts will be more expensive than provincial ones. A case which needs hearings in several courts will also be more protracted, and therefore more expensive than one which is decided at the first hearing. Equally a case which settles before trial will be cheaper still. Not surprisingly mediation and alternative methods of dispute resolution are increasingly popular, as a way of avoiding court costs altogether.
Equally divergent will be type of case and the degree of complexity. A cut-and-dried claim for damages between two individual litigants will cost nothing like as much as a major breach of a commercial contract. The latter might involve hundreds of litigants and years of legal wrangling. Degree of legal complexity links to lawyers’ fees. Complex cases will need more experienced lawyers. At solicitor level an equity partner’s work will be more expensive than a legal trainee or recently qualified lawyer. If the case needs the opinion of counsel, then a QC’s opinion will cost more than a junior barrister’s. Expert witnesses may be needed for complex medical or technological claims, and will be another variable expense.
So given that calculation of legal costs at the outset of a case is virtually impossible, what can be done to minimise and control these? Firstly, a case will need accurate and fine budgeting. An experienced solicitor will not only advise on the legal merits of a case, but will advise on projected costs of running the case. Gone are the bad, old days when a retainer might mention a hourly billing fee and little else. Such laxity often resulted in horrendous bills, years later which the hapless client received with shock. Indeed recent governmental concern with controlling the costs of litigation has led to new legislation and tighter controls. Since April 1, 2013 new Civil Procedure Rules lay down stringent requirements for case budgets to be drawn up by both sides at the initial stage of a dispute. These require approval of the judge and court managing the case. Rules for amending agreed budgets are equally demanding and a driving factor in agreeing any budget is that it must be proportionate to the claim. All this is to help control costs and to ensure more uniformity and accurate predictability of costs. Such reforms not only help standardise good practise and control costs; they also aid transparency, especially for a client from the outset of the case.
A further aid to calculating the likely cost of a case, is that it now a professional obligation for solicitors to discuss ways of funding cases with their clients. For such discussion to be meaningful an accurate budget must have been prepared. In the past most clients, whether individuals or companies , would have financed their own litigation. A few might have qualified for legal aid, but in the present climate this has all but disappeared. However, to help companies and individuals finance legislation, there are now new options. Foremost of these has been the growth of third party funding. This is an arrangement whereby a commercial funder or investor (who is not a party to the legal proceedings) finances all or some of the legal costs, in return for an agreed share of the damages, in the event of success. Although the client foregoes a share of his award, there are advantages. Third party funders reject 90% of applications for funding, so acceptance is indication that the claim is a strong one. Without funding the client might not be able to bring the case at all, so to give up some of the winnings is a small price to pay. Where a company secures funding, it often releases resources for investment in options other than a risky law case. For it is this risk which is the unknown expense. If a case does fail, then a third party funder receives nothing and loses the investment, possibly having to pay costs. The average winning case would probably recover 80% of damages. Reducing these to say 50% for a funded case is not bad, since the risk has been diverted. Again careful costing options would have to consider insurance premiums. These might be Before the Event or After the Event. The new CPR’s have changed the guidelines here; for example, After the Event insurance premiums are no longer a recoverable cost from a losing party. Contingency fees (no win, no fee) are now permitted as a way of paying the legal bill, but these alongside Damage Based Awards are all part of the complex web of calculating the real costs of the litigation.
So clearly calculation of the cost of a court case is complicated and open to many variables. In stark monetary terms a fairly average bill for a run-of-the-mill dispute in the High Court has been calculated at £50,000 as a minimum. But remember the variables and funding options. The best advice is to choose a good law firm and one that is up to speed on all the recent costs legislation and rules since April 2013. At least these make budgeting compulsory!
Guest post provided by Anne Evans, a legal consultant for Vannin Capital. For more information visit litigationfunding.com.