No Win No Fee – Conditional Fee Agreements
Conditional fee agreements (CFA’s) have now been commonly used for several years as a way to pay for your legal costs. They are particularly common in Personal Injury cases. They are used much less in commercial litigation cases, but at RG Litigation we are happy to consider them in each case we review for our clients.
How do CFAs work?
There are different types of CFA. The most common works on the basis that, the solicitor makes no charge if the case is not won. However, if the case is won, the solicitor will charge at an agreed hourly rate (your "base costs") and also is entitled to charge a "success fee". That success fee is calculated as a percentage of the hourly work done (up to a maximum of 100%).
Example 1: Your claim is worth £50,000. The solicitor's agreed hourly rate is £400 per hour. You agree a success fee of 40%. The case is won and you receive £50,000 in damages. Your solicitor has done 20 hours work, so the "base costs" are £8,000. The Success Fee is 40% of £8,000 (£3,200). Total bill to you is £11,200.
Example 2: Your claim is worth £50,000. The solicitor's agreed hourly rate is £400 per hour. You agree a success fee of 60%. The case is won and you receive £50,000 in damages. The case is long and complicated. Your solicitor has done 50 hours of work, so the "base costs" are £20,000. The Success Fee is 60% of £20,000 (£12,000). The total bill to you is £32,000.
Do you have to pay the entire bill, or can you get a contribution from your opponent?
If you win you can expect to get a contribution to your costs from your losing opponent.
The amount you recover is usually somewhere between 75-85% of what your base costs. You normally recover most, if not all, of your disbursements / expenses.
Example 3: In the above example 1 your base costs were £8,000, so you could expect to recover between £6,000 - £6,800, from your opponent.
Example 4: In the above example 2 your base costs were £20,000 so you could expect to recover between £15,000 - £17,000, from your opponent.
Will you get the success fee back?
As a result of changes to the law called the "Jackson" reforms in most cases success fees are not recoverable from your opponent. You may be able to recover them is your CFA was dated before 1 April 2013 or in certain types of cases (e.g. defamation).
This means that in most cases after 1 April 2013, you have to pay the success fee. Of course that will only happen if you WIN. If you do not win, then you pay neither the base costs or the success fee.
While this makes CFA's less beneficial than they were before 1 April 2013, they are still a very popular method of funding, because of the lack or up front risks for clients.
A common example is a hybrid CFA where the solicitor may charge a lower rate than normal but increase the rate is the case is successful. This means that you do pay as you go, but rather than paying a success fee at the end of the case if you win, the solicitor then bills for the whole case at a higher rate.
The benefit of this type of CFA is that it would be expected that in such a CFA the higher overall rate would be less than is a standard rate plus success fee was charged. The downside is that the client would have to pay as the case proceeded.
Example 5: Usual base costs rate is £400 per hour, but you agree a rate on a hybrid CFA of £100 per hour. You agree an uplift to £450 per hour if the case is won. The solicitor does 20 hours of work and you win. The total bill will be 20 x £450 = £9000. You will have been billed as the case progresses but only at the £100 per hour rate. If the case is not won, the uplift would not be billed to you.
Example 6: In example 5 let's say a standard CFA was used, and the success fee was set a 45%. The base costs at the usual rate of £400 per hour would be £8,000. The success fee at 45% of that would be £3600 so the total bill if you win would be £11,600. This is £2,600 more expensive than the hybrid CFA at Example 5.
This is why at RG Litigation we give you the RG Litigation Funding Review at the outset of your case. It is too late when you undertake such a review a year into the litigation. That is why RG Litigation believes in clarity and simplicity. Nothing is hidden.
These are very beneficial to clients. They work so that the solicitor only charges for the work done at the end of the case; and only if it is won; and does not charge a success fee; and limits the bill to what is recovered from the opponent. The benefits for the client are obvious - no payment of your own solicitors costs either during or at the end of the case.
Example 7: In your case the solicitor's base costs are £400 per hour. There is no success fee. The solicitor works 20 hours on the case, so the maximum bill is £8,000. The solicitor recovers 80% of the base costs from the opponent - £6,400. You are billed £6,400 and the solicitor writes off £1,600.
Common Questions about CFAs
Can I use a CFA if I am defending a case?
Yes, with a "win" being defined by no liability or the Claimant failing to beat an offer to settle.
- Do I still have to go to court?
No, most cases settle before a trial.
- Can I start by paying at an hourly rate then move onto a CFA?
Yes, you do not have to start a case straight away. It may suit you to pay for a while rather than agreeing a success fee, if it is likely the case may settle quickly.
- How much will the success fee be?
This has to be agreed with your solicitor in each case. The maximum will be 100% of your base costs.
- Will the case finish more quickly on a CFA?
Rarely. The funding method strictly has no effect on the speed of a case, but some Defendants may choose to settle is commercial factors influence the case - one being that their opponent is not paying for legal advice.
- Can my solicitor take my damages?
Yes, but only to cover any shortfall on costs due to them.
Example 8: Let's say, you win. The final costs and success fee amount to £20,000. Only £15,000 is covered from your opponent. That leaves a £5,000 shortfall which you are due to pay your solicitor. The solicitor can deduct that from your damages, with your agreement.
If you require an RG Litigation Funding Review today, enquire here.