The recoverability of a CFA success fee in legal proceedings depends on when the CFA was entered into and the type of proceedings. For most proceedings, where the CFA was signed after 1 April 2013 the success fee is not recoverable. For insolvency proceedings, this deadline was 1 April 2016.
We refer to our separate page which deals with Conditional Fee Agreements at the following link.
The Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”), which took effect from April 2013, introduced key changes to the ability of a client to recover their legal costs (including the premium) under a CFA.
This was in reaction to claims where small sums claimed were outweighed by huge legal fees which were further uplifted by the premium due under a CFA.
From April 2013, any CFA entered into would not affect the legal costs recoverable in the event there was a successful outcome in the case. Whereas historically the client could recover all of their legal costs plus the premium that became due under the CFA, from April 2013 the situation returned to the pre-CFA position – namely that a client could only recover their base legal costs (although under the CFA they would still be liable to pay the premium to the solicitor).
To balance this out, the legislation introduced the US concept of a contingency arrangement – which in the UK we refer to as a Damages Based Agreement.
As from April 2013, a client who had entered into a CFA with his/her solicitor would not be in any better position than a conventional fee paying client in the event their claim or defence was successful. However, as opposed to a conventional fee-paying client, in the event s/he was unsuccessful then there would still be no liability for their solicitor’s legal fees in accordance with the CFA.
CFAs are still in use today – some of them refer to arrangements entered into pre-April 2013 (and therefore not subject to the LASPO prohibition) and others continue to be entered into by clients who seek the benefit of the “no win no fee” mechanism, even though it will ultimately cost them considerably more in terms of the uplift applicable to your solicitor’s legal fees.
The reason for this latter approach may be that the outcome of any legal proceedings or negotiations outweighs (or will pay) the premium to be paid on the client’s legal costs. Other examples of where this may be appropriate are, for example, director disqualification proceedings where the advantage of defending a position and remaining a director is a benefit that quite easily outweighs the premium payable on legal fees.
Of course, the CFA depends on the outcome being “successful” rather than any sum being recovered, and therefore a CFA is more appropriate as an alternate method of legal funding for Defendants.
At Francis Wilks & Jones we are extremely familiar with all types of funding models and will seriously consider entering into a CFA, subject to a risk assessment. We can also discuss alternative forms of litigation funding applicable to your situation.
Please call any member of our commercial litigation team for your consultation now. Alternatively e mail us with your enquiry and we will call you back at a time convenient to you.