Conditional fee arrangements advantages and disadvantages
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 success fee) under a Conditional Fee Agreement.
In summary, it prohibited a claimant or defendant from recovering the success fee. Accordingly, whether a CFA has been entered into or not by a party, it would only be the standard rates charges by a solicitor that can now be recovered from your opponent in litigation proceedings.
However, 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 premium applicable to the 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, before entering into a CFA a solicitor must be satisfied that the client’s case has prospects of success. Often, the solicitor will require a thorough examination of the case by a barrister, who will provide an alternate perspective on the prospects of litigation success.
However, if such prospects of success are rated highly enough then the CFA becomes an option for the client to consider in terms of mitigating their initial exposure to legal costs where the potential outcome merits this type of funding arrangement.
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 on 020 7841 0390. Alternatively e mail us with your enquiry and we will call you back at a time convenient to you.
Page # of 33