Whether our client is a business or an individual we not only understand the importance of sticking to an agreed legal budget, we proactively work to reduce the legal spend.

MISHCON PROTECT^® is a unique package of products expertly designed to assist the client in obtaining funding for their own fees in a litigation matter and to provide protection against the client’s risk of having to pay their opponent’s costs and their own disbursements should their action be unsuccessful. In practical terms, MISHCON PROTECT^®, can reduce the cost implications of bringing an unsuccessful case by up to 70%.

What’s more, in the majority of cases, the peace of mind offered by MISHCON PROTECT^® is available at no cost to our client. This is because the insurance premium is typically deferred until the conclusion of the case and only becomes payable if the case is successful, i.e. there is nothing to pay upfront and nothing to pay in the event of a loss. If the case is successful, we will endeavour to recover the premium from the losing opponent along with our fees and disbursements.

MISHCON PROTECT^® utilises a variety of funders and insurers and caters for a wide range of contentious matters including those relating to:-

• Finance and Banking 
• Bullying and harassment actions
• Contractual and Commercial Disputes
• Defamation and Privacy
• Employment litigation
• Insolvency and Recoveries
• Intellectual Property
• Contentious Trust and Probate disputes – including Charity litigation

Giving clients' confidence with After-the-Event insurance and litigation funding products

The ability to pursue even a strong claim to court is dependent on the claimant being able to afford the legal costs and financial risks of doing so. Litigation funding and After-the-Event insurance are both products that enhance claimants’ chances of reaching a successful conclusion to their claims, whilst also reducing pressure on their legal budgets and minimising costs.

What is Litigation Funding?

Litigation funding is the term used to describe the arrangement where a bank, hedge fund or insurance company invests in a claimant's claim with a view to receiving a good return on its investment at the end of the case. In return for a share of any damages recovered, a funder provides money upfront to pay a claimant's costs including solicitor's costs, Counsel's fees, the experts' charges, court fees and the cost of complying with a security for costs order.

What is After-the-Event (ATE) Insurance?

ATE Insurance is a form of legal expenses insurance obtained by the claimant ‘after the event’ in time that brought about his entitlement to bring the claim. The insurance policy covers the claimant's liability to pay his own disbursements and his defendant’s costs in the event that his case is unsuccessful. It, therefore, potentially provides a degree of reassurance to a claimant because it reduces the overall costs risks associated with the claim.

The premium payment terms of many ATE insurance policies are unusual because the premium is often not payable when the insurance is taken out, but instead at the conclusion of the case. This will only happen if the claimant’s case is successful, whereupon the defendant becomes liable to pay the premium. If the claimant is unsuccessful, no premium is payable.

Why are these products more widely used now?

Three reasons.

Firstly, there have been recent changes in law, the effect of which is to promote such products in order to create greater access to justice for all. This has made these types of products more accessible to claimants.

Secondly, the recession has seen litigation budgets being reduced, and has therefore encouraged a more cautious attitude to litigation. ATE insurance and litigation funding products can assist in minimising costs whilst enabling claimants to enforce their rights legitimately.

And finally, there have been important changes in the insurance market, whereby the products are more attractive because premiums are not payable upfront and are not payable in the event the case is unsuccessful.

What is Mishcon de Reya’s approach?

We understand the commercial pressure that the recession is putting on our clients: The pressure on budgets has never been greater. We also hold the belief that a client with a legitimate claim should be able to pursue it. For these reasons we have created partnerships with Funders and Insurers, so that we can offer bespoke funding and insurance products for a wide variety of different clients. The reality is that once a client has one or both of these products in place, they can be used to great effect within the negotiation process: indeed, they validate the claim itself.

The products we offer are all part of MISHCON PROTECT®, our ATE insurance and litigation funding facility. The sole purpose of MISHCON PROTECT® is to give our clients confidence throughout the litigation process.

How does it work?

We offer bespoke MISHCON PROTECT® products in many areas of litigation including:

• Banking and Finance
• Charities
• Commercial and contractual disputes
• Defamation and Privacy  
• Employment
• Harassment and Bullying
• Insolvency and Recoveries
• Intellectual Property
• Trusts and Probate

MISHCON PROTECT® consists of a three stage process:

1. Risk assessment. We will investigate the merits of your claim and assess the level of risk. We will look at the potential hazards, and for each hazard look at how likely the risk is to occur, as well as the interrelationship between each of the risks.
2. Policy placement. Mishcon de Reya works closely with independent broker, TheJudge, to secure the best value and most appropriate policy on the market for the client
3. Once in place, MISHCON PROTECT® products are used to strengthen our negotiating position for you.

Who can take advantage of MISHCON PROTECT®?

There are three simple criteria that need to be met:

• A client who has a good prospect of winning his or her claim
• A client with a substantial claim of at least £75,000
• A client whose claim is against a defendant who can afford to pay the potential damages

Who should I contact?

For more information or to answer any questions you may have, please contact Neville Illingworth-Law, on +44 (0)20 7440 7272 or at neville.illingworth-law@mishcon.com
 

FAQs

By clicking on the links below you will be provided with information on litigation funding and after-the-event insurance. This will give you an initial indication of the general types of product that are sometimes available to claimants who have good prospects of being successful in their claim against a creditworthy defendant.

The rights and obligations applicable in practice to any specific product or insurance policy will of course depend on the wording of the terms and conditions of the particular product or policy and upon the circumstances of the case. Before signing up to any such agreement it is important that you read the terms and conditions very carefully and satisfy yourself that you are entirely happy with them. An after-the-event insurer will usually also provide a 'key facts' document or a policyholder guide summarising the policy terms.

1. Litigation Funding

   1.1 What is the purpose of obtaining litigation funding?

   Litigation funding is the term used to describe the arrangement where a bank, hedge fund or insurance company invests in a claimant's claim with a view to receiving a good return on its investment at the end of the case… Read More

   Put very simply, a litigation funder provides money upfront to pay a claimant's own ongoing legal costs and disbursements of bringing a claim, such as the solicitor’s costs, Counsel’s fees, the expert’s charge, court fees etc.  In return, if the claimant is ultimately successful in his claim, the funder will be entitled to receive from the claimant a cut of the winnings or damages that are awarded against, or recovered from, the losing defendant.  The funder’s share is usually a percentage agreed in advance of between 20% and 30% of the monies received from the defendant.

   Alternatively a funder sometimes agrees upfront with the claimant to receive from the claimant a multiple of the funds it advances in the event that the claim is successful.  The multiple is usually between two and seven times the total amount the funder provides for the claimant’s costs to enable the claim to proceed.

   If the claimant is successful, the funder will usually also be entitled to seek reimbursement from the losing defendant for the majority of the costs the funder has invested in the claim.  However, the separate cut of the winnings that the funder receives (referred to above) is not recoverable from the defendant.

   If the claimant is unsuccessful in his claim, in principle he would not be required to repay the funding that the funder would by then have paid out in legal costs to have enabled the claimant to pursue the claim.  Nor would any interest on such funding be payable by the claimant. Close

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   1.2 What criteria will a litigation funder apply to decide whether or not to invest in a claimant’s claim?

   A litigation funder will usually only invest in a claim if the following criteria are satisfied, which if fulfilled would tend to indicate that the claim is likely to be a good investment for the funder… Read More

   1. The claim is realistically worth at least £200,000;
   2. The claim has good prospects of success (the funder will not pay the claimant’s initial legal costs associated with investigating whether or not the claim does have good prospects of success); and
   3. The defendant can afford to pay any damages that it might ultimately be ordered to pay to the claimant.

   
   If the claimant’s claim is not simply for a sum of money to be paid by the defendant but is instead a claim for a non-monetary objective such as, say, a house that the claimant intends to live in, litigation funding might not be an appropriate way forward for the claimant.  This is because (if his claim succeeds and the funder thereby becomes entitled to be paid out from the fruits of the claim) the house might have to be sold to pay the funder at the end of the case.  Having said that, many claimants would prefer to enter into a litigation funding agreement with a funder, even though it could result in the house claimed having to be sold at the end of the case if successful, rather than face the alternative of not being able to pursue the claim at all. Close

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   1.3 What are some of the risks associated with litigation funding?

   Risks associated with entering into a litigation funding agreement include that its terms and conditions may allow the funder to stop providing funding in certain circumstances, for example… Read More

   1. If it later transpires that in fact the merits of the claimant’s claim are less than 51% (rather than the claim having good prospects of success).  Indeed if it turns out that the claimant has failed to disclose all material information about the claim, the funder would usually be entitled to look to the claimant to reimburse the funder for the monies it has paid out.
   2. If the costs of pursuing the claim turn out to be considerably higher than was envisaged when the funder and the claimant entered into the litigation funding agreement.

   However, a funder will seldom be keen to terminate a funding agreement because doing so can result in the funder losing the monies it has invested in the claimant’s claim up to the point when the funding is stopped.

   The detailed terms and conditions of any particular litigation funding agreement are usually set out in a formal litigation funding agreement entered into between the funder and the claimant.  Before signing up, it is important the claimant reads, fully understands and is happy to accept and comply with the terms and conditions.  Most funding agreements will require the claimant to instruct his solicitor to keep the funder fully informed of developments throughout the case. Close

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   1.4 What is the relationship between litigation funding and ATE insurance?

   Litigation funding and after the event insurance are not mutually exclusive and are complimentary.  In cases where a litigation funding agreement is entered into between the claimant and the funder, the claimant will often also have entered into an after the event insurance policy with an insurer… Read More

   A defendant who unsuccessfully defends a claim against a claimant that has the benefit of an after the event insurance policy will, in addition to the value of the claim, usually be held liable to pay the cost of the insurance premium.  However, a defendant who unsuccessfully defends a claim against a claimant that is being funded by a funder will not in addition be liable to pay the cut of the winnings that the funder receives.  This is a fundamental difference between litigation funding and after the event insurance, which in part (together with the fact that litigation funding is not cheap) explains why many more claimants obtain after the event insurance policies than litigation funding.  It is also often more difficult to obtain litigation funding than it is to obtain after the event insurance.

   However, litigation funding is usually obtained to pay a claimant’s own costs and sometimes to comply with a court's security for costs order requiring money to be paid into court as security for the defendant's costs in case the claimant's claim ultimately fails.  Whilst after the event insurance can provide substantial benefits to a claimant, it is usually not possible to obtain after the event insurance to pay a claimant’s own costs or to enable a claimant to satisfy a security for costs order. Close

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2. After the Event Insurance

   2.1 Why obtain ATE insurance?

   Almost everyone who issues a court claim inherently runs the risk, should the claim fail, of ultimately being ordered to pay the defendant's legal costs and disbursements. This is of course in addition to the claimant having to pay his own solicitors' costs and disbursements associated with pursuing the claim… Read More

   After the event insurance (also known as ATE Insurance) can potentially provide a degree of reassurance to a claimant because it reduces his overall costs risks associated with the claim.  ATE Insurance is a form of legal expenses insurance obtained by the claimant 'after the event' in time that brought about his entitlement to bring the claim. Close

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   2.2 What risk does an ATE insurance policy insure against?

   Unlike litigation funders, ATE insurers do not provide cash flow or funding for a claimant's ongoing solicitors' bills and disbursements associated with pursuing the claim.  Accordingly, even where ATE insurance is in place, the claimant still has to pay interim legal bills as the claim progresses… Read More

   ATE Insurance insures the claimant against the risk that he might be ordered to pay the defendant's costs and disbursements if the claimant's claim is ultimately unsuccessful.  In such circumstances, subject to the terms of the policy, the ATE insurer usually becomes liable to pay (on behalf of the claimant) both of the following:

   1. The defendant's legal costs and disbursements; and
   2. The claimant's own disbursements

   In rare cases, the ATE Insurance market might also consider providing cover for a claimant's own solicitors' fees. Close

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   2.3 Who is liable to pay the ATE insurance premium?

   As with any insurance policy, the person insured (i.e. the claimant) is responsible for payment of the premium.  However, the premium payment terms of many ATE Insurance policies are unusual in that the premium is often payable not when the insurance is taken out but instead at the conclusion of the case.  This is called a ‘deferred premium’ arrangement..… Read More

   Even more importantly, the terms of the policy are often such that the premium only becomes payable if the claimant’s claim is successful.  This is called a ‘contingent premium’ arrangement (i.e. contingent on the claimant winning the case).  In such circumstances, at the end of the case, the claimant would seek to recover the cost of the ATE Insurance premium from the losing defendant.  This is in the same way as any successful claimant would seek to recover from the defendant his other costs and disbursements associated with bringing his claim.

   Usually the ATE insurer will await payment of the premium from the defendant rather than request payment of the premium from the claimant as soon as success in the claim is achieved.  This is beneficial to the claimant because it can sometimes take several months for a claimant to receive payment for his costs from the defendant.

   In this way there is a good chance that the claimant can obtain the benefits of having in place an ATE Insurance policy without him ever having to pay the premium for having the policy.

   For the avoidance of any doubt, in a case where the claimant’s claim is unsuccessful, the ATE Insurance policy is designed still to pay out even though the insurer does not receive any premium for the policy in such circumstances.  This is providing the claimant has not breached the terms of the policy.

   This can often be difficult to understand when first introduced to the premium payment arrangements associated with ATE Insurance.  In essence, the level of the premiums that the insurer does receive in successful cases are priced by the insurer to take into account the fact that (i) the insurer will not be paid a premium in unsuccessful cases and (ii) the insurer will have to pay out in such losing cases. Close

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   2.4 How is the price of an ATE insurance premium calculated?

   The price of the ATE Insurance premium is usually calculated based on a percentage of the amount of cover the claimant requires.  The percentage reflects the prospects of the claimant's claim succeeding.  Therefore ATE Insurance policies on cases which need a lot of cover, because the level of costs are likely to be high, and are high risk will have a higher premium than cases which need less cover and are lower risk. However, bear in mind of course that the ATE insurer will only usually take on a case if it has good prospects of success; and, like a funder, the ATE insurer will not pay the claimant’s initial legal costs associated with investigating whether or not the claim does have good prospects of success… Read More

   The cost of the ATE Insurance premium is potentially recoverable from the losing defendant in a similar way to any other disbursement.  With this in mind, premium price structures are designed with a view to demonstrating to a Costs Judge at the end of a case that the level of the premium is reasonable and should therefore be paid in full by the defendant.  In this way premiums are lower if the case settles early, when the potential exposure for the ATE insurer is smaller.  Some premiums are discounted or stepped to achieve this result.  Such stepped increases can provide a tactical benefit for the claimant, who can use the threat of future increases in the level of the, recoverable, premium as a financial inducement to persuade the defendant to settle early. Close

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   2.5 What are some of the potential risks associated with ATE insurance policies?

   2.5.1 Recovery of the premium fee from the losing defendant:

   One risk in taking out an ATE Insurance policy is that, if the claimant obtains judgment in his favour (such that the premium becomes payable), there could nonetheless be circumstances whereby the claimant might not be able to recover the ATE Insurance premium in full from the losing defendant.  This might happen, for example, (i) because the Costs Judge at a detailed assessment of costs hearing decides not to order the defendant to pay the full cost of the premium and/or (ii) because the defendant cannot afford what he is ordered to pay to the claimant.… Read More

   In such circumstances the claimant would still remain legally responsible to ensure the cost of the ATE Insurance premium is paid to the insurer.  The insurer could potentially seek payment of the premium from the claimant.  This is because, by having obtained judgment in the claimant's favour, the case would usually be deemed to have been a success as defined under the terms of most ATE Insurance policies.

   Also, for the avoidance of doubt, if the defendant cannot afford what he is ordered to pay to the claimant (in terms of damages and/or costs), the ATE insurer would not step into the defendant's shoes and pay the claimant on the defendant's behalf.  In other words ATE Insurance is not a form of credit risk cover. Close

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   2.5.2 The claim fails to proceed:

   ATE insurers do not provide cash flow or funding for a claimant's own ongoing solicitors' costs and disbursements incurred in pursuing the claim.  Accordingly the claimant needs to be able to provide sufficient financial resources himself (or separately from a litigation funder) to ensure the case reaches its natural conclusion.  An ATE insurer may not be obliged to cover the claimant's liability to pay the defendant's costs (nor the claimant's disbursements) where the claim simply discontinues because the claimant cannot, or will not, commit funds to see the case through to a conclusion.… Read More

   On its own the court does not normally consider the existence of an ATE Insurance policy to be adequate ‘security for costs’ for the defendant’s costs should the claim fail.  Accordingly a claimant ordered to provide security for costs would usually have to provide the security monies from its own resources or do a deal with a litigation funder to provide the security.  The claimant may ultimately be unable to raise the necessary finance and therefore be unable to continue pursuing the claim.  In such circumstances the ATE insurer may not be obliged to cover the claimant's liability to pay the defendant's costs (nor the claimant's disbursements) even though the claimant would probably become liable for such costs. Close

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   2.5.3 The costs turn out to be greater than initially anticipated:

   At the time of applying for ATE Insurance, the level of cover/costs indemnity needed for the entire duration of the case needs to be considered carefully together with the claimant's legal representatives. It is important to ensure that enough cover is purchased. Top-up insurance is commonly available where there is an overrun but it is only offered at the discretion of the ATE insurer, who would need to be convinced that the claim still has a good prospect of succeeding.

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   2.5.4 A dispute arises between the insurer and the claimant:

   The ATE Insurance contract between the insurer and the claimant requires the claimant to act 'with utmost good faith' at all times.  This requires the claimant to provide all material facts to the insurer, whether or not he is asked for such information and whether or not the information is unhelpful to the claimant's case… Read More

   Also the claimant must co-operate with the insurer and with the claimant's solicitors throughout the case.  Where the insurer or the solicitors do not consider that the claimant is co-operating with them, the insurer may terminate the claimant’s ATE cover with immediate effect.

   The claimant must also comply with any terms and conditions of the ATE policy in respect of settlement offers.  For example, if the insurer does not approve a rejection by the claimant of a settlement offer received from the defendant, the insurer may terminate the ATE cover from that point.  The reasoning behind this is that, by rejecting the defendant's settlement offer, the claimant may expose himself (and therefore also the ATE insurer) to potential adverse costs consequences if at trial the claimant fails to obtain a judgment more advantageous than the defendant’s earlier settlement offer.  The claimant can proceed with his claim but he will not have the benefit of ATE Insurance from that point forward.

   Many ATE insurers are keen to agree minimum settlement figures with the claimant at the outset and some are happy to work with the claimant and his solicitors to consider the reasonableness of each settlement offer as and when it is made.  In most cases the insurer, once notified of the existence of an offer, will support the view of the claimant's lawyers as to whether or not the offer is reasonable and whether it should be accepted or rejected.

   Failure by the claimant to comply with such requirements on him set out in the ATE policy can invalidate the ATE Insurance and result in a dispute between the claimant and the ATE insurer.

   The detailed terms and conditions of the ATE policy may also include provisions favourable to the ATE insurer that apply, for example, where the insured claimant is successful in one part of his claim but unsuccessful in another part of his claim.  In these circumstances an insurer may be entitled to some or all of the monies received by the claimant from the defendant in respect of the successful part of the claim.  The ATE insurer would then use such sums to offset costs the ATE insurer is obliged to pay to the defendant in respect of the unsuccessful part of the claimant’s claim.

   Similarly, the ATE policy may include provisions favourable to the ATE insurer that apply, for example, where there is more than one defendant or more than one claimant.  It is important to ensure you are happy with the contents of such clauses before signing up to the ATE policy.

   Nonetheless, most ATE Insurance policies will also contain a mediation or arbitration provision with a view to resolving any dispute that may arise between the ATE insurer and the claimant.  ATE policies are also designed to be flexible given the unpredictable way in which litigation can develop.  For instance, the policy can be drafted to cover the adverse costs risk that the claimant may be exposed to in the event that he fails to obtain a judgment more advantageous than the defendant’s earlier settlement offer. Close

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3. Tactical Advantages of Litigation Funding & ATE Insurance

   Aside from the financial aspects, one potential benefit for a claimant of obtaining litigation funding and/or ATE Insurance is that he will be able to notify the defendant he has obtained such risk protection.  This might in turn encourage the defendant to settle the dispute on terms more favourable to the claimant because the defendant will then know that:… Read More

   1. The claimant is facing less financial risk going forward, such that the claimant is likely to be more ready, willing and (financially) able to continue to pursue the case all the way to trial rather than have to abandon the claim;
   2. An independent, hard nosed, third party insurance company or funder is prepared to invest in the claim, which probably tends to indicate that the claim is likely to succeed.  This is because litigation funders and ATE Insurers generally only invest in claims that that they consider, after considerable investigation and deliberation, have a good prospect of success; and
   3. The ATE Insurance premiums are often staged to increase as the case progresses. This means that the earlier the case settles the lower the premium will be. This acts as an incentive to the defendant to try to conclude matters swiftly – so that the defendant will not have to pay quite so much for the premium.

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4. Important Notes

   The decision whether or not to take out an ATE insurance policy or to enter into a funding arrangement rests of course with the client. We have no interest, financial or otherwise, in recommending one product over another.… Read More

   Given the need to demonstrate the reasonableness of the level of the ATE Insurance premium as well as ensuring our client secures offers of insurance in the first place, we believe the advice of a specialist independent broker is vital. We may, therefore, instruct leading independent broker, TheJudge, to source a litigation funder or ATE insurer on our client’s behalf. The client is, however, free to appoint an alternative broker should they wish to do so.

   Needless to say, if the client simply does not wish to transfer the risk they are not obliged to take out a policy of insurance nor seek litigation funding. Close

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5. Who should I contact for more information?

   We cannot provide financial advice but if you are interested in finding out more information we can put you in touch with a specialist litigation funding & ATE insurance broker who will be able to provide you with information on the range of different products that are currently available in the market.… Read More

   In the meantime, if you would like any further information or want to discuss an area or matter of interest to you, please speak to your usual Mishcon de Reya contact or with Neville Illingworth-Law.

   Neville Illingworth-Law
   Tel +44 (0)20 7440 7272
   neville.illingworth-law@mishcon.com

    

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