With the disputes funding market developing at the speed of knots, and with clients becoming ever more price-sensitive, lawyers can find it difficult to be confident in discussing how the client might pay for, or manage, the cost of their legal action. Such advice is vital not only for lawyers to win new business, but also to fulfil the broad duties within The Solicitors Regulatory Authority’s (SRA’s) Code of Conduct.

There is now an extensive array of products that can be used separately or combined to provide tailored solutions for clients whatever their liquidity or appetite for risk. Understanding how the products can fit together is a crucial element of ensuring that the client identifies the most commercial arrangement on the best possible terms. For example, funding is an excellent product to obtain if you require cash to help pay the bills, but is an expensive choice if you are simply looking to reduce the risk. Insurance, on the other hand, can be obtained for own fees and disbursements as well as adverse costs and is usually available for good cases at a fraction of the cost. Alternatively, it can be used alongside funding to protect the funder in the event of a loss and, therefore, reduce the level of success fee the funder seeks to take in a win.

Failing to provide the client with information on the products available to assist them in managing their legal spend represents a significant reputational risk for the lawyer. Few clients would be happy to find out that their wasted fees in a lost case could have been minimised or reimbursed if only they had been aware of the existence of funding or insurance. Moreover, the client may have a legal basis to seek a negligence claim against their lawyer for failing to comply with the SRA’s Code of Conduct broad principles, which set out how solicitors should put their client in a position to make informed decisions about how best to manage their fees. The code specifically refers to the need to discuss how the client will pay its lawyer’s fees and explaining any arrangements, such as fee sharing agreements, which are relevant to the client’s case.

In order to put clients in an informed position, solicitors either need to have a sound understanding of the market and be fully conversant in the latest developments, which can incur significant unbillable time, or they need to introduce the client to an independent advisor that can provide a detailed explanation of the options. However, even those lawyers with good knowledge and experience of the market are still at risk of falling foul of their SRA obligations because many allow their previous experience of working with a specific funder on a particular case to form the basis for their decision regarding which funder to use going forward. Such a process needs to be accompanied by careful advice or risk contravening the SRA’s Code of Conduct, which states that a solicitor must advise their client of the limitations of approaching a third party, such as a funder, if that third party can only offer products from one source. By having a preferred relationship with a single funder without regularly undertaking a review of the market, the client is unlikely to benefit from the effect the competition in the market has on the price offered. Moreover, if the preferred funder declines to fund the claim, the client’s ability to obtain funding from elsewhere is likely to be prejudiced because the reason for the funder’s decision not to fund the case will have to be disclosed. Accordingly, while close relationships can be beneficial, they ought to be balanced by a wider eye on market developments and ensuring the client’s position is considered first and foremost.

If they are to put their client in the position to make an informed decision on how best to manage legal spend, it is fundamental for lawyers to understand the funding and insurance options available and, importantly, for this understanding to continually evolve with market developments – a more realistic alternative is to involve a specialist that will discuss the options with you and your client and can structure a funding or insurance arrangement with your specific needs in mind. Advice of this nature is usually available at no cost to the client or the lawyer, as the advisor is usually paid by the funder or insurer only in the event that the case wins. The duty can, therefore, be met quickly and cheaply, leaving no excuse for failure.






Verity Jackson-Grant

Director of Business Development

+44 (0) 203 965 5333

Email Verity here