Managing the Cost of Litigation: Dispute Resolution and Funding Options

The cost of litigation is often the first concern for clients navigating a potential dispute, and rightly so. Legal costs can be complex, shaped not just by hourly rates or court fees, but by the strategic decisions made at every stage of the process.

This guide explores the practical realities of dispute costs and highlights how early, informed choices can help businesses and individuals control legal spend while pursuing the right outcome.

Understanding Cost

How is the cost of a case decided?

The cost of any case is determined by its value and complexity.

The value of a claim determines to which ‘track’ the matter is allocated (small claims track; fast track intermediate track; or multi-track).

Each track has its own requirements and rules on costs recovery. A multi-track claim has the most procedural demands, and therefore takes more time, which in turn affects costs.

The County Court and the High Court will differ in their approach as well, as will the divisions of the High Court. Regardless of what funding model is used, time spent on a matter is really what determines its cost. Even where fixed fees are agreed, these are usually linked to time, albeit with greater certainty.

Nevertheless, complexity is an equally important factor. A claim with a lower value can involve a great deal of documents, and be much more complicated than, for example, a very large debt claim. It is therefore likely to take much more time to deal with, with a lot more resource dedicated to disclosure, for example.

The value and complexity of a claim are usually the factors which will determine the time and cost of the case. With this in mind, we can look very carefully at the likely cost, risk and recoverability. Balancing that against value, a decision can be made very quickly about whether the matter is commercially viable.

What factors influence the overall cost of a dispute?

Once the likely cost of each stage in a dispute can be estimated, taking value and complexity into account, it is generally possible to estimate how much it would cost to take the matter to trial. In multi-track claims, it is a requirement that a costs budget is submitted to Court.

However, this does not reflect the reality of litigation. A good litigator has the primary aim of early settlement. Clients should be advised at the outset of the overall likely cost of proceeding to trial, as far as is foreseeable, so that a realistic strategy for resolution can be adopted. A matter that is resolved early will of course cost a great deal less than proceeding to Court, and will avoid the risks which come with that.

Managing Costs

Why is an initial cost assessment important before starting a dispute?

As previously mentioned, the starting point is an initial review, which can be on a traditional time basis, or a fixed fee. This will include costs considerations, recoverability, proportionality, and the other party’s ability to pay.

Knowing all of this at the outset will help you to make clear, informed decisions based on affordability, risk and the merits of the claim.

How can you manage costs or reduce them?

A dispute over a modest sum of money can quickly escalate if every satellite issue is pursued. It can become disproportionate very early on. Keeping to the point and focusing on the aim is key, as is an early strategy for resolution. And where resolution cannot be achieved, decisions on what to do next must be carefully and commercially considered.

Document management is also key. Making sure that evidence is discussed early with clients is essential to working out at the outset what will need to be done going forward, and problems can be avoided if all the relevant evidence is considered and evaluated at the earliest possible stage. In larger matters where there is likely to be a lot of documentation, anticipating and discussing what is likely to arise is imperative to cost estimating and management.

Choosing the correct path for your dispute

What are the different types of dispute resolution, and how do their costs compare?

Let’s firstly mention what should be the last resort. Court proceedings are the most time consuming and therefore costly.

Informal, and preferably early, negotiation is a quick and easy option and can start straightaway. This is done alongside pre-action correspondence. It is always recommended, but should be done very carefully, with sound advice on merits in the background.

Playing it wrong will set the wrong tone for the whole matter.

You can then try joint settling meetings, or even mediation. As the formality of the process increases, so does the cost. Mediation is a powerful tool, but there are at least two sets of lawyers setting aside at least a day, and the costs of a mediator to consider. All of these methods can be seen as ‘Alternative Dispute Resolution’, or ADR.

Arbitration is a formal process to determine claims and there can be costs savings as compared to Court. Although it is, in the literal sense, a form of ADR, it is different in that it is a determinative process, rather than a forum for settlement. In construction disputes, adjudication is another such determinative process. They have their place, but are part of the litigation strategy, rather than the settlement strategy. The two are inextricably linked, but distinct at the same time.

Your Funding Options

We offer a wide variety of options, which can be viewed by clicking here.

The starting point is an initial review, which can be on a traditional time basis, or a fixed fee.

After that, depending on suitability, we can offer the following (or even a combination):

Traditional Hourly Rate

This option is the most informal and flexible. You will always be advised on risk, proportionality.

Fixed Fees

In some cases, we can agree bespoke fixed pricing based on a staged approach. With this fee route, you receive certainty and we carry the financial risk of any unforeseen events.

Conditional Funding Agreements (CFAs)

This is sometimes referred to as ‘no win, no fee’. This is a better explanation:

If you win:

• You pay our standard rates and expenses, which can be recovered subject to the normal rules of recovery
• You will pay our success fee, which is not recoverable, but which reflects the risk that we shared with you in the case.

If you lose:

• You will not pay our fees (hence the ‘no win, no fee’)
• But what most don’t make clear is that you still have to pay our expenses (e.g. barrister’s fees, expert’s fees, and Court fees). And you are likely to have to pay the other side’s costs.

Opponent’s costs can be insured against, but premiums are expensive and irrecoverable.

CFAs are a great option for the right cases, but will not suit all cases and will not suit all clients.

A variation on the CFA is the ‘Discounted CFA’

This means that you will pay discounted hourly rates as normal. If you win, you will pay the remainder, plus a success fee. The success fee will be lower because of the reduced risk. If you lose, you will not pay the uplift or the success fee, but we will retain the reduced fees paid, and the other consequences will apply in the same way as a ‘normal’ CFA.

Damages Based Agreements

Sharing the proceed of the claim.

If you win:

• You pay us a percentage of the damages that you are awarded (never more than 50%), less any of our fees or barrister’s fee recoverable from the other side.
• You pay our other disbursements, such as court fees and experts’ fees.

If you lose:

• You will not pay any fees.
• You will still have to pay the other side’s costs and expenses.

A variation of this is a Pre-Action DBA, where the funding model can change or go to hourly rates once Court proceedings are issued.

This is one example where we can use a combination of funding options.

Third Party Funding

This is for the highest value cases and involves a third-party institutional funder ‘buying-in’ to the case, for a share of the proceeds.

Insurance

Some clients are already insured for legal costs in certain circumstances. This is called ‘Before-the-Event' (BTE) insurance.

Where this is not available, ‘After-the-Event' (ATE) insurance can be purchased for opponent’s costs, although premiums can be considerable and irrecoverable. These are often considered for higher value, CFA claims, for near-comprehensive cover.

What can you expect at the end of your case?

Can you recover your legal costs if you win your case?

We will always advise on costs recovery in all cases, as each case has its own considerations. This includes whether there is a risk that the other side might not be in a position to pay.

Normally, except in small claims (under £10,000, where each party ordinarily pays their own costs), the usual rule is that the losing party will contribute to the winning party’s costs. This will not be all the costs incurred but a proportion of them, usually of around 60%, though the Court always has discretion in relation to costs recovery and any offers made can affect recovery.

For claims between £25,000 and £100,000 (which are ‘Intermediate Track’ claims), the costs that can be recovered are capped at various amounts depending on complexity and the stage at which they are concluded. Generally, in such claims, a lesser proportion of costs is recoverable.

We will also always advise on how any offers and negotiations during the proceedings might affect the general rules. Each case is different. For example, there will be times where the costs position is complicated by procedural applications along the way.

What happens if you lose your case?

The successful party will recover their costs in the same way as set out above.

Speak to our solicitors about litigation funding options

Understanding the cost implications of litigation from the outset empowers you to make commercially sound decisions. With transparent advice, tailored funding options, and a strategy that compliments your commercial objectives and cashflow, funding your case can become more manageable and less disruptive.

If you are weighing up a potential claim or defence, engaging the right legal support early can protect your position and provide certainty on costs. Our experienced dispute resolution team can help you assess your options and move forward with confidence.

Contact Our Solicitors