Damages Based Agreement Regulations

The Damages Based Agreement Regulations 2013 implement section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”), which allows a client to instruct a solicitor under a DBA on terms which provide for legal fees to be recovered as a % of claims recovered.

Damages Based Agreements provide an arrangement between a solicitor and their client whereby the solicitor agrees, in exchange for charging his professional fees on a time cost basis, to share in the outcome of the instruction.

For non-contentious, or out of Court, instructions this is largely unregulated subject to normal contractual restrictions applicable to all commercial arrangements.

However, in litigation proceedings, historically this was not encouraged and indeed was not as attractive as the solicitor could not accurately forecast the risk v reward and the client would have no ability to recover his/her other legal costs, including those of their barrister (who would often not be subject to such an agreement).

The reason was that this was considered a breach of the Indemnity Principle – which provides that a party to litigation cannot claim legal costs that they do not have to pay (as the separate underlying legal costs are forfeited under a Damages Based Agreement).

More information concerning the Indemnity Principle can be found here. However, from 2013, legislation has changed this position.

Under Section 45 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LASPO”) an amendment to former legislation (which brought in the Conditional Fee Agreement in 1990) meant that a party to litigation proceedings could seek payment of their legal costs notwithstanding that s/he had entered into a Damages Based Agreement with their solicitor.

This is of course in direct breach of the Indemnity Principle and thus the need for this change to be reflected in legislation (as had previously occurred for a Conditional Fee Agreement).  Accordingly, once a Damages Based Agreement is executed, a Claimant can claim legal costs which they would never have been liable for in either a win or lose scenario.

This arrangement has the benefit of enabling a Claimant to enter into a Damages Based Agreement with their solicitor yet still seek recovery of their solicitor’s recorded time costs, their barrister’s fees and all other legal costs (including the Court fee, which is no longer insubstantial).  Accordingly, although a part of the sums claimed and/or recovered have been forfeited, this loss will be mitigated by the Claimant being able to recover the solicitor’s base time costs (and thus the need to ensure your solicitor continues to record all of their time spent on a matter).

These changes to the regulations were seen as fairer, by not imposing too high a legal cost burden on losing parties and ensuring the access to justice by the Defendant is not frustrated by the risk of incredibly high legal costs formerly sought under the Conditional Fee Agreement procedure.

At Francis Wilks & Jones we are extremely familiar with Damages Based Agreements and will seriously consider entering into a Damages Based Agreement, subject to assessment of the claim or proposal, and an appropriate risk assessment.

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.

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