Conditional Fee Arrangements
The Conditional Fee Agreement 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.
In summary, the Conditional Fee Agreement 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) on these comprising a % increase of those same hourly rate charges, 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 Conditional Fee Agreement 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.
In such circumstances, where court proceedings are issued, the barrister instructed to attend court may also be on a similarly worded Conditional Fee Agreement.
What is required to enter into a Conditional Fee Agreement?
A Conditional Fee Agreement requires an ability to define “success” for the purpose of triggering the solicitor’s fees. Where “success” is difficult to define or could exist in a variety of situations, then a solicitor will not normally enter into a Conditional Fee Agreement.
Conditional Fee Agreements are best employed by Claimants, as the Claimant seeks a remedy which the solicitor is employed to secure. However, even then the “success” definition must allow for a number of different judgments or circumstances, including the risk that a judgment will be obtained but it cannot be enforced.
We also have experience of a number of circumstances where a Defendant instructs his solicitor on a Conditional Fee Agreement. Provided the outcome or eventual judgment provides for the Defendant’s legal costs to be paid, then this is an option available.
Changes to Conditional Fee Agreements
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 Conditional Fee Agreement.
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 Conditional Fee Agreement.
From April 2013, any Conditional Fee Agreement 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 Conditional Fee Agreement, 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 Conditional Fee Agreement 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. More information about a Damages Based Agreement can be found here.
As from April 2013, a client who had entered into a Conditional Fee Agreement with his/her solicitor would not be in a position to recover all of their legal costs (including the premium or uplift due under the Conditional Fee Agreement) 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 Conditional Fee Agreement.
When is a Conditional Fee Agreement appropriate now?
Conditional Fee Agreements 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. 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 Conditional Fee Agreement 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 opinion on the prospects of litigation success.
However, if such prospects of success are rated highly enough then the Conditional Fee Agreement 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 Conditional Fee Agreement, 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.