When it comes to costs and funding in business disputes, there are several key points to consider which we have outlined in this article.
Costs
Costs can be a deciding factor on whether to advance a business dispute, enter early into negotiations, or concede to the demands of the other party.
It is important that you get a clear estimate at the outset from your solicitor on the likely costs involved in running the dispute (whether defending or claiming) to trial. It is important to realise that this estimate may change and there may be issues that arise from disclosure or witness statements that the parties were not expecting. Your solicitor should provide you with a cost update, if it looks like they are going to exceed the original estimate.
The usual practice is that the loser pays. Therefore, if you are successful and win at trial the losing party will most likely be ordered to pay your reasonable costs. This may not account for all of your costs and is more likely to be a portion of your incurred costs. This will usually apply to particularly complex cases or claims that are valued at over £100,000 and allocated to the multi-track.
In terms of claims with a value of £100,000 or less, a new fixed recovery costs (FRC) regime recently came in to force and applies to these claims.
The Courts will allocate a claim to either the intermediate track or to the fast track. On allocation, the Court will also decide the complexity of a case and allocate it to one of 4 bands of complexity.
The level of costs you will be able to recover will be dependent on which track and complexity band you have been allocated. These costs are fixed, and you will not be able to recover anything above these costs.
Funding
There are a variety of ways in which the costs of dealing with a business dispute may be funded. Depending on the circumstances of your case, your solicitor may offer one of the following:
1. Fees to be paid on an hourly rate – fees will be paid directly by the business or indemnified by an insurer.
2. Conditional Fee Arrangement/Discounted Conditional Fee Arrangement – Your solicitors/counsel may agree that if your claim is unsuccessful you will pay no solicitors costs, or a reduced amount if you are unsuccessful. It is very likely you will still have to pay for other disbursements, such as expert fees, account fees, Court fees, and your opponent’s costs if you have lost. There is also usually an uplift to be paid under the agreement if you are successful and this is not recoverable from your opponent.
3. After the event insurance – it may be possible to take out insurance to cover the legal costs of the other party if you are unsuccessful. Sometimes an insurer will be willing to insure the business’s disbursements and legal costs (less common). The business will be responsible for the insurance premium and will not be able to recover it from the other side upon success. Whether an insurer is willing to insure the dispute is usually based on an opinion provided by counsel and/or your solicitor and whether the opinion concludes that the prospects of the claim are good.
Read our other business disputes articles:
How Nelsons can help
Anika Zahid is an Associate in our Dispute Resolution team, specialising in commercial litigation and professional negligence claims.
This is not an exhaustive list of costs and funding options in business disputes, if you would like advice in relation to the points raised in this article, please contact Anika or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online form.