I have advised on construction disputes for over 20 years.I get phone calls every week from company’s seeking advice on contracts or on payment disputes. Unfortunately, many clients contact me when its just too late to do anything other than fight when had we spoken earlier a dispute may have been avoided.
The reason why clients leave it till the last possible time to contact lawyers is obvious – they know that lawyers are very expensive.
Another reason is that they often cannot find a Construction specialist – but that is for another day.
Although clients accept that a specialist lawyer can help resolve disputes and obtain payment of sums that are due to them, they take the view that the sums that they will have to pay do not justify their involvement and prefer to deal with the disputes themselves. After all, you don’t treat a gunshot by opening an artery. Too often they have paid out substantial sums to achieve very little.
If adjudication is going to cost £5000 that you can never recover (because you can’t claim back your costs in adjudication even if you win) – why not settle for a discount of £4,000?
If going to court for £12,000 is going to take a year, cost £15,000 and expose a company to a claim for costs if it loses – why not settle for £5,000 and be done with it?
Lawyers often charge £200 plus an hour with no guarantee of success. Taking a large claim to court will often cost more than £50,000 and even adjudication, the cheap and cheerful option often costs more than £5,000.
Lawyers have high salaries to pay, pay expensive insurances, run expensive offices, undertake expensive training every year and pay for expensive annual certificates to allow them to practise. Like all businesses they need to cover costs and make a profit – so their fees are high.
Nothing new in any of that. But what can a company do to limit its exposure to legal costs?
There are several options that a company can consider:
Work undertaken on a Conditional Fee Agreement. Some lawyers will undertake work on a “no win no fee” basis. Generally, they will only do so when they believe you have very good prospects of success and will charge enhanced fees should they succeed. Those fees should be recovered from your opponent. The CFA system can be useful, but it will not help if the arguments are evenly balanced or if your lawyer is not convinced that you can win or if the lawyers view of your prospects change during the course of the case.
Legal expense insurance. Some commercial insurances contain legal expense cover. This can be very helpful as it pays your lawyers fees if you need to make a claim or are sued. The insurance cover is strictly limited by the scope of the insurance and cover is often limited to circumstances in which the insurers solicitors assess your prospects as good. The use of the cover may increase future premiums and you may not be able it to send chasing letter for unpaid invoices or to get advice on contracts etc.
After the Event Insurance. This insurance is purchased after proceedings are started, usually by the company making the claim. The insurance pays the opponents legal fees should you lose in an action that you commence. The insurance depends on your having good prospects of success. There is no premium to pay unless you win when the insurer generally charges 10 – 15% of the sums recovered. If you lose the insurer pays your opponent’s legal costs, although you will have to pay your own legal costs.
Litigation funding. It is now possible to obtain funding to pay legal costs as actions progress. Funding is usually obtained for larger cases and usually attracts charges and interest payable to the funder from sums obtained in the proceedings. The funder will want paying if you lose the case and may require security for its investment.
Finally, there is a new solution available to construction companies. The National Legal Consortium offers a monthly subscription service that provides unlimited legal advice (within the scope of the scheme) to its clients. Clients can take or defend proceedings, obtain telephone advice, get advice on contracts and notices and get to use the scheme’s logo all for the cost of the monthly subscription. Unlike insurance there does not have to be a “trigger event”, there is no excess and use of the service will not affect future subscriptions. The NLC scheme is like having a Construction Solicitor on your staff at a fraction of the cost. In practise this means that adjudications and court proceedings cost no more than the monthly subscription so that concerns about whether they can be afforded disappear. With subscriptions starting at £150 plus vat per month, the NLC is an affordable alternative to traditional legal costs and the various insurances now available to assist in litigation.
Legal costs should not deter small companies from taking advice and enforcing their rights. If such companies cannot stand up to their Employers, they will quickly become victims in what is an increasingly litigious and difficult market. Knowledge of the various funding solutions available should assist companies to get the advice they require.