Damages Based Agreements v Conditional Fee Agreements

The Conditional Fee Agreement (or “CFA”) was brought in in the 1990s to assist parties, who could not otherwise afford access to justice through legal aid or by use of their own resources, by providing access to legal advisors without having to immediately pay for them.

Alternatively, a Damages Based Agreement (“DBA”) is a more modern creation (often referred to as a Contingency Agreement) and, as with Conditional Fee Agreements, it is an arrangement between a client and their solicitor wherein the solicitor’s legal fees are only payable in the event the instruction is successful (as defined within the DBA).

The advantage of a DBA is that it can apply to both contentious litigated legal proceedings and non-contentious instructions to recover, for example, shareholding interests.

The advantage of a CFA is that it can be less expensive, whilst still depending on a successful outcome.

In summary, the CFA is an arrangement between the client and the solicitor that – in the event the claim or defence is successful – the solicitor would charge his fees plus an uplift (or premium) which is a % increase of those same fees, to a maximum of 100% (which would effectively double the legal fees that would ordinarily be charged).

However, and this is the most important part, under the CFA if the claim or defence was unsuccessful then no fees whatsoever would be charged and the only cost the client would face would be the solicitor’s expenses (which are normally quite small unless a barrister is employed in litigation proceedings, which may still be on a limited basis).

The DBA, as an alternative, is type of agreement has been very popular in the US for a number of years but was only recently introduced as a concept in the UK’s legal system.

A DBA, once entered into, will mean that the solicitor’s legal costs will only be payable upon the outcome of the matter s/he is instructed on (as defined within the DBA).  The legal costs will then become due as a percentage of the sums sought.  The percentage charge will usually reflect legal fees that are higher than would otherwise be incurred on a standard basis, to allow for any risk that more time is required for the matter and to provide for the general risk of the solicitor’s portfolio of similarly funded cases.

The additional benefit for the client, where s/he is a Claimant in litigation proceedings, is that they remain entitled to claim their solicitors’ standard time costs recorded (in addition to the sums claimed) and the recovery of such costs from the Defendant may serve to partially underwrite the percentage payable their solicitor under the DBA.

At Francis Wilks & Jones we often work on projects under the terms of a CFA or a DBA and will always consider this option if it is appropriate to your circumstances.

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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