Funding Of Litigation - UK

Author:Mrs Julie Smith

Court Of Appeal Tackles Issues In "No Win, No Fee" Litigation

The Court of Appeal in England, presided over by Lord Woolf, has recently issued a two-part judgment in Callery v Gray and Russell v Pal Pak, concerning success fees payable under conditional fee arrangements and the recovery of "after the event" insurance premiums. The rulings have been eagerly awaited by the legal profession and the insurance industry alike, as to date there has been no clear judicial guidance on these issues.

The success or failure of conditional fee arrangements will have significant impact on the future of product liability litigation in the UK. As legal aid funding for personal injury claims has all but dried up (except for "public interest" cases), these arrangements represent the primary means by which injured claimants (whether individually, or as part of a group action) might be able to bring their claims.

Both cases involved straightforward motor accident claims. The questions of law raised, however, are considered to be very important to the development of "no win, no fee" litigation in England generally. Given the potentially widespread consequences of the decisions in these cases, the Court agreed to consider submissions from a number of interested third parties, including the Law Society of England and Wales.

Unlike most of Europe, in England the unsuccessful party is responsible for the winner's costs. This has been a major stumbling block to the introduction of no win, no fee litigation in this country through the chosen mechanism of the conditional fee arrangement. Under this arrangement, the lawyer acting for the successful party can claim his usual fees and an uplift of up to 100%. While such an arrangement relieves the claimant of the burden of funding the litigation, it still leaves the claimant with the risk of having to pay the defendant's costs if the claim fails.

The solution to this problem has been for the claimant to take out insurance to cover the defendant's costs if the claim fails. The Government has made conditional fee arrangements even more attractive by allowing the claimant to recover from the defendant the costs of the insurance premium and the contingency fee "uplift", if the claimant makes a successful recovery either as a result of a settlement or judgment. Insurers have become increasingly concerned about the size of both the premiums for after the event insurance and the size of the uplift being agreed between...

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