How do Damages Based Agreements work?

Damages Based Agreements (DBAs) are contracts where a solicitor agrees to be paid as a percentage of the judgement or settlement sums recovered in litigation proceedings. If you are unsuccessful, there are no legal costs.  You share the risk with your solicitor and get legal assistance without the immediate cost.

Damages Based Agreements are agreements between a client (be that an individual or company) and a third party that, in exchange for funding their legal costs, they will surrender a proportion of the recovery made.

Whilst mainly relating to litigation proceedings, they can also extend to non-contentious or out of Court negotiations and settlements where substantial correspondence or documentation is required to be analysed and dealt with.

In litigation proceedings, a Damages Based Agreement will generally be appropriate for Claimants only, and they have little or no use to a Defendant (unless there exists a counterclaim).  A Damages Based Agreement can be entered into either with a client’s solicitor or a third party funder/financier.

The Damages Based Agreement works in exactly the same way as any client retainer or (for third party funders) funding agreement with regard to how legal costs are to be paid.

Rather than agreeing stages of a litigation claim and the arrangements for funding such stages, with a Damages Based Agreement the funding question is solely based on the end outcome and, as a result, the client has less concern as to the amount of time being spent on the matter.  Of course, at all times, the instructed solicitor will defer to the client to make decisions or contribute their knowledge of matters, but whilst cost updates must continue to be provided, this has little relevance other than in respect of any ability to recover such sums from your opponent.

However, a Damages Based Agreement will not cover expenses, or disbursments, the most expensive of which (in litigation proceedings) is the barrister’s fees.  Barristers may also enter into a similar type of agreement but, if not, then their fees will be payable immediately (it is only the solicitors who do not immediately seek payment of their fees under a Damages Based Agreement).

In a similar manner, a third party legal funder will not require any payment until the outcome of proceedings.  They may either share in a Damages Based Agreement jointly with the solicitor, or alternatively they may just pay the solicitor’s fees at an agreed rate (and even provide insurance against your opponent’s legal costs, both of such costs being absorbed into the percentage sought under the terms of the Damages Based Agreement.

Once the Damages Based Agreement is signed at the outset that will dictate the cost of legal proceedings up to judgment.  It may however provide against there existing an undisclosed fact, or circumstances where the client enters arrangements to as to avoid this liability, but that will depend on the agreement itself.

At Francis Wilks & Jones we are extremely familiar with Damages Based Agreements and will be able to explain the procedure and further requirements to enter into any such funding 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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