Conditional fee agreements
In some cases, your solicitor may be prepared to pursue your legal claim on a "no win no fee" basis. This means that the solicitor (or her law firm) will take the risk that your claim fails. Ordinarily, though, the solicitor will want a "success fee" or "uplift" as compensation for taking this risk.
If you decide to instruct a solicitor on a "no win no fee" basis, you will actually enter what's known as a Conditional Fee Agreement, which sets out the details of the arrangement.
Conditional Fee Agreements are formal, legally binding agreements between you and your solicitor, and they must be in writing.
There are some restrictions on the terms of Conditional Fee Agreements ("CFAs"), including limits on the amount a solicitor can charge in terms of a success fee.
- Note: the law on CFAs changed recently. And it may well change again soon, since the government-commissioned Review of Civil Litigation Costs by Lord Justice Jackson has recommended certain changes to the way CFAs work. This article describes the "no win no fee" regime as it stands as of May 2010.
Contrary to popular belief, your solicitor is not permitted to set the success fee as a percentage of the damages you recover on your claim. Rather, the success fee must be an additional percentage of the solicitor's normal fees. Moreover, it may not be more than an additional 100% of the solicitor's normal fees.
Significantly, solicitors are not permitted to use CFAs in matrimonial, child custody or other family law cases, and are not allowed to use them in criminal cases.
What must my solicitor do before I sign the CFA?
Before you sign a conditional fee agreement, your legal representative must inform you about:
- when you may be liable to pay your solicitor's costs;
- the circumstances in which you may seek assessment of the fees and expenses of your solicitor and the procedure for doing so;
- whether there is any existing contract of insurance;
- whether other methods of financing the costs are available, if they are appropriate, and whether your solicitor has any interest in the fee arrangement.
CFA must be In writing
The Conditional Fee Agreement must also be in writing and address a number of areas, as required by applicable regulations (discussed below).
What must the CFA contain?
A CFA must specify:
- the particular proceedings or parts of them to which the CFA relates to (including whether it relates to any appeal, counterclaim or proceedings to enforce a judgment or order);
- the circumstances in which your solicitor's fees and expenses, or part of them, are payable, what payment, if any, is due and when and how it is due;
- the specific monetary amount payable in all the circumstances and cases specified or the method to be used to calculate them;
- that the requirements of the regulation which apply in the case of that agreement have been complied with.
Turning to the success fee, the CFA must specify:
- the reasons for setting the percentage increase at the level stated in the agreement,
- how much of the percentage increase, if any, relates to the cost to the legal representative of the postponement of the payment of his fees and expenses; and
- whether such fees are assessed.
Calculating the "success fee"
As indicated above, the success fee can be as high as 100% of the normal costs. The solicitor will calculate the success fee percentage after he has carried out a "risk analysis" of the case. This will involve investigating a number of factors including:
- the merits and value of the claim;
- the likelihood of settlement;
- an estimate of costs involved; and
- the likelihood of recovery of normal costs and the success fee from the other party.
The success fee cannot be a percentage of the level of damages awarded/agreed in settlement.
What about insurance? And what happens if I lose my case?
If you pursue your claim under a Conditional Fee Agreement and ultimately it fails, generally you will not have to pay your solicitor anything at all -- unless you agreed to pay court costs, expert's fees and similar expenses that the solicitor advanced in connection with the case.
It is, however, important to remember that if your claim fails in court, you will almost certainly be liable to pay the other party's costs. Ordinarily, your solicitor will assist you in taking out insurance (known as "after the fact insurance" or "ATE insurance") before the case begins to cover against this risk, but you will probably have to pay the insurance company yourself.
If you obtain this insurance and lose your case the insurance company will pay any costs that you owe to the wining party and any costs you had to pay to third parties, such as medical experts. You or the insurance company will not have to pay your solicitor's costs, unless you entered into a shared risk agreement with your solicitor.
The insurer may even be prepared to lend you money to pay the premium -- but you need to bear in mind that if you lose you will be liable to pay the premium or repay the loan.
What happens if I win my case?
If you win, you will pay your solicitor his normal fees, his disbursements (which are out-of-pocket costs, such as filing fees and expert's fees that he has advanced in connection with your case) and the success fee.
Ordinarily, the court will order your opponent pay all of these fees and reimburse you for any premium you paid to insure against the risk that you would lose your case. But this does not happen in every case, so you may have to pay your own costs.
Note also that the court may determine that the success fee set by your solicitor was too high and order that it be lowered. In these circumstances, the court generally orders that your opponent pay the entire adjusted success fee and you pay nothing.
Remember too that "winning" a case is not always as straightforward as it may seem. Sometimes it is possible to win a case overall, but to lose important intermediate proceedings. In these circumstances, you may be liable to pay some of the costs your opponent has incurred in connection with the intermediate proceedings that you lost.
Another way that "winning" may be affected is if your opponent made a pre-judgment settlement offer (known as a "Part 36 Offer"), which you rejected. If you reject a Part 36 Offer and receive judgment for an amount less than that offered, you will be liable for some or all of the costs incurred by your opponent after he/she made the offer. The principle is that you have to pay for your opponent's "wasted costs" in forcing further (and ultimately unnecessary) litigation.
If you reject a Part 36 Offer against your solicitor's advice and receive judgment for an amount less than that offered, you will also have to pay all of your own solicitor's fees, including the success fee.
What happens if my claim settles before reaching court?
The vast majority of claims settle before trial. But a settlement will not relieve you of your obligation to pay your solicitor his fees, disbursements and success fee. Generally, fees are discussed during negotiations leading up to the settlement. So, typically, the settlement will require your opponent to pay some or all of your costs -- usually directly to your solicitor.
What if I want to change solicitors before my case is finished?
If you decide to end the CFA before your case is concluded, then your solicitor will require you to pay all of his fees and disbursements up to the date you ended the agreement. You will also continue to be liable to pay him the success fee if you win the case using a different solicitor.
In practice, if you want to change solicitors part way through your case, you will need to negotiate some resolution with your first solicitor.
If your solicitor decides to end the CFA, then the amount you are required to pay him depends on his reason for ending the CFA.
If the solicitor ends the CFA because he has concluded that you are unlikely to win, then you pay only his disbursements, but no fee.
If the solicitor ends the CFA because you have not cooperated with him, you have not met your responsibilities under the CFA, or because you have rejected a settlement offer that he recommended you accept, he can require you to pay all of his fees and disbursements up to the date the CFA ends, plus the success fee if you eventually win the case.
If you're working with a solicitor, he should be able to provide you with a complete explanation of how a Conditional Fee Agreement will work. And the Law Society has produced a client's guide to success fees, which your solicitor should be able to give you.
You can find solicitors willing to do "no win no fee" work in your area for free via solicitor matching services , which can also help you to understand the best course of action for your situation and whether you are even ready to hire a solicitor.
- No Win No Fee Agreements -- Pros and Cons
- Contingency Fee Agreements
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