Andrew Noble LLB (Hons) [Manchester] FRICS, FCIArb

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Please read this website's Legal Notice

Conditional Fee Arrangements

Conditional fee agreements, once prohibited, are now lawful. A CFA is an agreement with a solicitor or a barrister providing advocacy or litigation services which provides for his or her fees and expenses (or any part of them), to be payable only in specified circumstances e.g upon “success” in the litigation.  Although litigants prefer the catch phrase “no win  no fee”. Lawyers prefer to add to the latter phrase, the catchier phrase “if win – enhanced fee”!

Barristers and solicitors routinely enter into such agreements in appropriate circumstances, based upon their judgment as to the prospects of success of the case in hand. They are the only professionals who work on the basis of success. Lawyers (solicitors and barristers) need to know what they are doing in such cases or run the risk of not being paid.

Such agreements can be entered into with Claimants or Defendants. Such agreements extend to solicitors and barristers acting in court based litigation or in Arbitration Act 1996 arbitrations.

Prior to the enactment of the Courts and Legal Services Act 1990 conditional fee agreements were not lawful. A solicitor acting for a client in litigation was not entitled to agree with the client to accept a financial reward which varied according to the success of the case.

Following a policy review in 1988 and consultation, the original form of s.58 of the Courts and Legal Services Act 1990 was enacted, with Regulations following in 1995 to permit CFAs to be used in a fairly circumscribed range of six types of case.

New regulations in 1998 extended the range of cases in which a CFA could be used but 'no win no fee' funding as it became known had to await developments in case law and statute before becoming commonplace.

In early 1998 the Court of Appeal gave judgment in Thai Trading (A firm) v Taylor [1998] Q.B. 781, holding that an agreement between solicitor and client that the solicitor would charge no fee in the event of failure and only his normal fee in the event of success was no longer contrary to public policy and was not an unlawful agreement despite involving conduct by the solicitor which had been in breach of rule 8 of the then Solicitor's Practice Rules (which forbade conditional fee agreements).

In 1999 reform to the whole subject of litigation funding was considered by Parliament and the subject was placed on a new statutory footing in the guise of s.27 of the Access to Justice Act 1999 above, which wholly replaced s.58 of the Courts and Legal Services Act 1990 and introduced s.58A.

The following conditions are applicable to every conditional fee agreement:

(a) it must be in writing;
(b) it must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement; and
(c) it must comply with such requirements (if any) as may be prescribed by the Lord Chancellor.

Although in the early days of CFA, personal injury and insolvency cases could be the subject of CFAs, CFAs now extend to most commercial, contractual, construction, land, property, insolvency and professional liability disputes/claims (whether already commenced or contemplated).

Examples of cases that cannot be the subject of CFAs include criminal and family proceedings.

Litigation Funding Agreements

A litigation funding agreement is an agreement under which:

(a) a person ("the funder") agrees to fund (in whole or in part) the provision of advocacy or litigation services (by someone other than the funder) to another person ("the litigant"); and
(b) the litigant agrees to pay a sum to the funder in specified circumstances.

Such agreements must (also) be in writing. The agreement must not relate to proceedings which cannot be the subject of an enforceable conditional fee agreement or to proceedings of any such description as may be prescribed by the Lord Chancellor (see above).

Recovery of success fees and insurance premiums by way of costs

Where in any proceedings a costs order is made in favour of any party who has taken out an insurance policy against the risk of incurring a liability in those proceedings, and/or is acting on a CFA, the costs payable to him may from the losing party, subject in the case of court proceedings to rules of court, include costs in respect of the premium of the policy and the uplift for success.

The development of CFAs has gone hand in hand with major developments in the insurance products being offered in respect of litigation. It is now possible for a person contemplating litigation to take out a bespoke insurance policy to cover, in the event that the case is lost, both the costs of the other party and his or own legal costs (including the solicitor's fees if they are not subject to a CFA). Some of these policies were developed to support the use of CFAs but others are used to meet lawyers' fees in the traditional way i.e. non CFA cases. Section 29 of the 1999 Act makes premiums paid for After the Event (ATE) insurance recoverable in costs.

It is in principle permissible for a claimant to enter into a CFA with a success fee and to take out ATE insurance when he first consults his barrister or solicitor and before the letter of claim is written and receives the prospective defendant's response. ATE premiums are in principle recoverable as part of a claimant's costs even though his claim is quickly resolved without the need for proceedings.

Before the event insurance

Modern practice dictates that lawyers should normally invite a client to check all insurance policies to establish whether BTE insurance is available for the case concerned. Such policies might include any household insurance policy and any stand alone BTE insurance policy belonging to the client and/or any spouse or partner living in same household of the client. It is worth ticking the box in insurance policy applications for BTE insurance, always remembering to check what kind of disputes are covered.

Review of Civil Litigation Costs:
Final Report – Things are about to change!

Things are about to change significantly for people who have been wronged, making them worse off. Accordingly, if you have a good case, which is to be conducted on a CFA basis, it is better that you issue proceedings before these reforms come in. 
In January 2009 the then Master of the Rolls, Sir Anthony Clarke, appointed Lord Justice Jackson to lead a fundamental review of the rules and principles governing the costs of civil litigation in England and Wales and to make recommendations in order to promote access to justice at proportionate cost.
This Final Report presents the findings and supporting evidence of the civil litigation costs review. It outlines the final proposals on the costs of civil litigation, informed by the period of public consultation that followed the 'Review of Civil Litigation Costs: Preliminary Report'.
Lord Justice Jackson was asked to review the rules and principles governing the costs of civil litigation and to make recommendations in order to:

  • promote access to justice at proportionate cost;
  • review case management procedures;
  • have regard to research into costs and funding;
  • consult widely;
  • compare our costs regime with those of other jurisdictions; and

Major recommendations cover:

  • Conditional fee agreements, of which "no win, no fee" agreements are the most common species, and which have been the major contributor to disproportionate costs.
  • Success fees and ATE (after-the-event) insurance premiums should cease to be recoverable from unsuccessful opponents in civil litigation.
  • Success fees should come out of the damages awarded to the client (not the losing party as is now the case); awards of general damages should be increased by 10 per cent, and the maximum amount of damages that lawyers may deduct for success fees be capped at 25 per cent of damages.
  • Lawyers should not be permitted to pay referral fees in respect of personal injury cases.
  • Qualified one way costs shifting, taking away the need for ATE insurance.
  • Fixed costs in fast track litigation.
  • Establishment of a Costs Council.

Other sections of the report deal with:

  • Other funding issues
  • Personal injuries litigation
  • Some specific types of litigation
  • Controlling the costs - including pre-action protocols, greater use of alternative dispute resolution (ADR), disclosure, case and costs management by the judiciary.


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