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From CFA to Contingency

30th October, 2012

In April 2013, civil litigation will face some of its biggest ever changes to funding. One of the most controversial reforms is the change to the Conditional Fee Agreement (CFA) approach to funding civil litigation. These are commonly known as ‘no-win, no-fee’ agreements and the primary feature of a CFA is that the lawyer does not charge his client (or charges a reduced fee) for his work if he loses the case. However, if the lawyer wins the case, he is entitled to charge not only his basic time costs but also an uplift or ‘success fee’ on top of his basic costs. This is to compensate the lawyer for taking the risk of losing and getting nothing. The success fee, which can be as much as 100% of the basic costs, is treated as a balancing payment to cover the costs on those claims that are lost.

Under the current system, CFAs are usually supported by a policy of insurance that will cover an adverse costs award if the case is lost meaning that the client has everything to gain and nothing to lose by pursuing the claim. The lawyer also benefits if he wins as his client can recover from the losing party, the basic time costs, the success fee and any after the event (ATE) insurance premium.

As we are all aware from the adverts we are bombarded with on commercial radio, CFAs have been widely used in personal injury claims, which are almost exclusively covered by policies of insurance. It is a consequence of the dramatic rise in insurance payouts to pay the increased legal costs of claims that the insurance industry has fought back and pushed for changes to be made to litigation funding.

From April 2013, the recovery of success fees and ATE premiums from the losing party is to be abolished and CFAs are essentially being replaced with a new acronym, a DBA (Damages Based Agreement). These are still no-win no-fee agreements and the client still does not have to pay his lawyer if he loses. It is when he wins that the biggest changes can be seen. The lawyer will still be able to recover his basic time costs from the losing party, but cannot recover any success fee or ATE insurance premium.

In order to compensate the lawyer for not having this ‘balancing’ payment, the law is being changed to allow the lawyer to share in the client’s ‘winnings’ or damages. This will be expressed to be a percentage of whatever is recovered for the client and the obvious downside for the client is that they will not recover all of their damages as some of it will now go to pay their solicitor if he has acted under a DBA. The new system will therefore be much less client friendly.

We therefore suggest that if anyone thinks they might have a claim that they were hoping to pursue under a CFA, they must act immediately. Any CFAs entered into prior to 1 April 2013 will still be valid and success fees will still be recoverable from the losing party. Any funding agreements entered into after 1 April 2013 will almost certainly result in the client having to forego some of their winnings to their lawyer. Why forego something that you can keep if you act now?  Since 1998, Aaron & Partners have acted on over 100 CFA cases in non personal injury litigation matters and have had an extremely high success rate.

If you have a (non personal injury) claim that you would like to pursue, please call John Devoy on 01244 405523 to discuss further or email [email protected].

 

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