You need the actual accounts. Get all the stuff necessary to keep things running without interruption. The cat litter clause : I just listed nine very generic categories. Learn and move on. More innocent misunderstandings happen over unique work. You might also trade ownership for a lower cost. Maybe you decided to let your marketing agency own the custom e-commerce package they wrote so they could re-use it. Nothing in this post is about law or contracts. I got a C- in Contracts, so if I do give legal advice, you should run screaming. Forget written rules and think about what a good business relationship looks like.
As such, post 1 April , disclosure is not required unless the CFA falls within the "pre-commencement funding arrangement" exception. Commercial clients instructing a City law firm are more likely to use a discounted CFA. From a practical point of view, it would work along the following lines. Below is an example of how this would work in practice. It assumes that only one lawyer is working on the matter and provides for a success fee of 50 per cent. However, the client would expect to recover a substantial portion of his base costs but not the success fee unless the exceptions to recoverability apply from the unsuccessful party.
The key advantage is the fact that CFAs can assist in reducing costs in an unsuccessful case. However, the additional cost of the success fee and the front loading of costs may deter use. Lawyers will only be prepared to act under a CFA where there are good prospects of success. As such, the lawyers will need to consider in detail the strengths and weaknesses of a case and will often seek an opinion from counsel before they agree to act under a CFA. Although these costs will be incurred in any event, the front-loading of costs required may not be attractive to a client.
Post-Jackson, CFAs have become less attractive. However, it is possible to agree a CFA without a success fee, and they continue to be used in high value commercial litigation as a means of risk-sharing between the client and the solicitor.
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Prior to 1 April , DBAs were only allowed in contentious employment matters. From 1 April , DBAs can be used in all contentious business except for criminal or family proceedings or opt-out collective actions in the Competition Appeal Tribunal. This Quickguide looks at DBAs in general commercial disputes. It does not cover the use of DBAs in employment or personal injury matters, where different rules apply. A DBA is a contingency-fee agreement. It is similar to a CFA in that what the lawyer is paid depends on the outcome of the case.
However, unlike a CFA, the lawyer's fee is not calculated by reference to the work carried out, but is calculated by reference to the compensation recovered by the client. If the client wins the lawyer will receive a percentage of the client's damages.
If the client loses, the lawyer receives nothing. In commercial cases, the maximum cap that can be applied is 50 per cent of the sums recovered. The fact that a claimant has entered into a DBA should not affect the costs recovered from any unsuccessful defendant, subject to one important exception. The claimant's recoverable costs will be assessed in the normal way by reference to hourly rates and the number of hours spent on a matter.
However, by virtue of the indemnity principle which still applies to DBAs , any claimant funded by way of a DBA may not recover more by way of costs from the other side than the total amount payable under the DBA. There is no requirement for a party entering into a DBA to disclose that fact to the other side.
However, there may be tactical reasons for doing so as the fact that a solicitor is prepared to act under a DBA is indicative of their belief in the merits of the case and could therefore assist in persuading the other side to settle.
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A DBA is a contingency arrangement whereby the lawyer will be able to take a share of the damages if the client is successful. If the client is unsuccessful, the lawyer will not be paid. The client will still be liable for expenses unless otherwise agreed and adverse costs unless covered by ATE insurance.
In general commercial litigation, the contingency fee is capped at 50 per cent of the sums ultimately recovered by the client. Where counsel is not prepared to act under a DBA, a separate agreement may be required between counsel and the client regarding payment of their fees. It was originally envisaged that DBAs would work on a similar basis to CFAs in that they could be entered into at any stage in the litigation and on a discounted basis.
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So, if a client decided half way through a matter to enter into a DBA, that would be possible. Equally, where solicitors are not prepared to take the risk of a full "no win, no fee" agreement, they could agree to be paid a lesser sum in exchange for a percentage of the damages should the client succeed.
However, the Government has ruled out the possibility of hybrid or partial DBAs. The DBA Regulations have also been heavily criticised as being unfit for purpose. Given that failure to comply with the Regulations means that a DBA is unenforceable, and therefore costs cannot even be recovered from the unsuccessful defendant let alone the client, take-up of DBAs has been slow.
The Law Society and Bar Council have cautioned against their use until this issue, and other areas of uncertainty arising under the DBA Regulations, are clarified. Consequently, the DBA Regulations are currently under review. Certain funders are prepared to offer hybrid-DBA funding packages.
These operate on the basis of the lawyer entering into a DBA with the client, but then entering into a separate arrangement with the funder to off-set some of the risk in exchange for a share in the lawyer's reward. We may therefore see an increase in the use of DBAs. As with CFAs, after the event insurance ATE was introduced in response to the erosion of legal aid and concerns about access to justice. A CFA addresses a potential claimant's liability for its own legal costs.
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There remained the question of potential liability for the other side's legal costs adverse costs. The Government therefore approached the insurance industry and asked if there was insurance protection available to protect potential claimants against the risk of losing a case.
The result was the introduction of ATE insurance. ATE insurance is a type of legal expenses insurance that provides cover for the legal costs incurred in the pursuit or defence of litigation and arbitration. The policy is purchased after a legal dispute has arisen. ATE insurance can be purchased for nearly all areas of litigation with the exception of matrimonial and criminal law. ATE insurers offer a variety of cover, tailored to the specific needs of the client.
Broadly speaking, the insurance will typically cover the client's liability for the expenses and disbursements of the client's own lawyers although can extend to cover own legal fees for an increased premium and opponent's legal costs in the event that the opponent wins.
Therefore, a client which has a discounted CFA and an ATE policy and which loses litigation will only be liable for its own lawyers' fees at an agreed discounted rate unless own legal fees are also insured. When first introduced ATE insurance was not widely used because claimants were not prepared to pay the large premiums required at the beginning of a case. The market has since evolved and other methods of payment of the premium have been introduced to make it more attractive. While the terms of the premiums offered vary from provider to provider, there are four main types:.
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The market post-Jackson has evolved with more products now available. New pricing models — including models which offer a combination of the above — are being used and generally, ATE insurance has been re-positioned as a funding option. Whereas pre-Jackson ATE was considered wedded to CFAs, it is now regarded as a stand-alone funding option, and is often included as part of a funding package.
In high value commercial litigation, the abolition of recoverability has not reduced the demand for ATE insurance. Unless the ATE insurance policy was entered before 1 April , or falls within one of the "pre-commencement funding arrangement" exceptions publication and privacy or insolvency-related proceedings , the ATE premium will not be recoverable from the other side. For ATE policies which do fall within the exception, the Court will not assess any issue of recoverability until the conclusion of the proceedings, or the part of the proceedings to which the insurance relates. At that stage, it is open to the losing party to challenge the reasonableness of the premium.
To the extent the Court finds that the premium is unreasonable, the insured the successful party will be liable for the shortfall. This is also the case if the insurer is unable to recover the premium from the losing party, e. A party entering into an ATE insurance policy where the premium is recoverable must notify the Court and the other parties of its existence and the level of cover provided.
Failure to notify could have an impact on the recoverability of the premium. Where the premium is not recoverable, there is no obligation to disclose. Not all cases will be appropriate for ATE insurance.
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Unlike third party funding see below , ATE insurance is not reliant on a damages outcome; ATE insurers are more concerned with recoverability of the premium from the insured. ATE insurance is therefore:. The underlying justification for this was to avoid third parties profiting from litigation in which they had no legitimate interest. As part of the desire to improve access to justice, the judiciary has adopted a more pragmatic approach to third party funding and has recognised the role it has to play in civil litigation.