CONDITIONAL FEE AGREEMENT
What is a Conditional Fee Agreement?
You may have been asked to read or even sign a Conditional Fee Agreement (CFA) by your solicitor acting on your behalf in a potential legal dispute. They may have even mentioned that Conditional Fee Agreements are free, and you won’t have to pay anything towards your legal costs even if your claim is ultimately unsuccessful.
What is a Conditional Fee Agreement?
Conditional Fee Agreement’s are the more modern versions of the old style “no win no fee” agreements, that were phased out in April 2013, and were often referred to on the radio and TV, advertising law firms no win no fee offerings.
Conditional Fee Agreements were introduced back in 1998, as an option for those claimants without the financial means to pay for legal representation. In April 2013 CFAs needed to change following some new UK legislation, but the key reason for existing had not changed at all, i.e. helping the average client pursue a legal action.
How does a Conditional Fee Agreement work?
Conditional Fee Agreements are essentially detailed contracts between a client and a solicitor which sets out the details of the client’s legal action, in such a way that the solicitor will only be paid, and be able to charge the client fees, in the circumstances that the client’s legal case is successful because the solicitor has won the case, and damages (money) is awarded to you.
If their client’s case is not won, then the law firm cannot charge a fee hence the “condition” of the CFA contract. So, in essence this is still a “no win no fee” agreement.
Another part of the CFA agreement is something called a success fee, which a solicitor would charge as an additional fee in the event of a success, in order to make up for the lost cases in which he receives nothing. Originally these success fees were recoverable from the defendant and didn't really make any difference to a claimant’s damages.
However, following the changes in the CFA regulations the success fee is no longer recoverable from the defendant or paying party, and must now be paid for by the successful client out of their damages. These success fees can be quite flexible and are set by the law firm when entering into your CFA agreement, but some do have caps set such as the maximum success fee for a personal injury claim is 25%.
It should also be noted that there are some legal expenses and costs that could be recovered from the losing party at the end of a successful claim, but these are just standard expenses which now exclude the additional success fee.
How does a Conditional Fee Agreement work in the event of a win?
In the majority of occasions, the losing defendant will have to pay back any costs and expenses incurred by your solicitor and should there be any shortfall in these disbursement costs then you may be able to claim on a legal expenses insurance policy such as an ATE or BTE for the difference.
Such costs and expenses or “disbursements” means anything your solicitor has had to pay for during the prosecution of your legal case, for example:
A doctors or medical report
The defendant would also pay your solicitors reasonable legal costs, and you would be responsible for paying your solicitors successfully.
Once all these fees have been paid to your solicitor, then any remaining damages that were awarded to you will be yours to keep, possibly less a bank transfer fee.
But what happens if the case is lost?
As the CFA agreement you have entered into was a no win no fee agreement, you will not have to pay your solicitor any legal fees. You will also not have to pay your opponent's legal fees in certain circumstances, such as a personal injury claim, unless there were very exceptional circumstances with the claim, and a court has ruled that:
There were no reasonable grounds to make your claim
Your claim was an abuse of court procedures
You were judged as being dishonest or fundamentally dishonest
Even though you do not have to pay your solicitors fees and potentially none of your opponent’s fees, you may still need to pay for any legal expenses or disbursements that were incurred for your legal case. However, this may be covered by a legal expenses insurance policy that you would have taken out at the outset of your legal claim, and may have been a before the event or after the event legal expenses insurance policy.
What if I don’t recover much in damages?
Any deduction from your damages is capped at 25%. Most law firms Conditional Fee Agreement will waive any shortfall basic charges in the event of your damages being less than anticipated.
What if I win but the opponent cannot or doesn't pay?
In by far the majority of cases your opponent will pay as they are likely to be cloud insurance company. however, in the unlikely event that your opponent refuses to pay, your solicitor has the ability to take legal action for the recovery of your damages, and can get a court order making them pay eventually.
Is there an alternative to a Conditional Fee Agreement
There are several alternatives to a traditional Conditional Fee Agreement, although CFA’s are the most common funding method, and are generally considered the most cost effective for people of limited financial resource.
One alternative way to fund your legal action is to simply pay as you go, known as being on a “private retainer” basis with the law firm, and just paying your bills and fees and disbursements on a monthly basis. You would also have to take out an insurance policy against the risk of losing and having to pay the other sides adverse costs, unless you were so wealthy you could afford to pay those as well.
Another alternative to a Conditional Fee Agreement is known as a Damages Based Agreement, this works in a slightly different way, but the general gist of this agreement is that a law firm will take a certain percentage of your damages in return for winning the case.