What is a Conditional Fee Agreement
A conditional fee agreement is also know as a ‘no win – no fee’ agreement. It is an agreement with a Solicitor or a Barrister which makes provision for their fees and expenses to be paid in specified circumstances. (Court and Legal Services Act 1990)
The usual practice is for such legal representatives to waive their fees unless the client wins the case either though settlement or by a court order. The client is frequently required to pay the cost of other expenses or disbursements.
The Requirements of a Conditional Fee Agreement
It must be in written form
It must relate to a case where a conditional fee agreement is permitted (all civil proceedings other than family cases)
It must state the success fee
Most clients are concerned about their liability for the cost of the other side in the event that their claims are unsuccessful. This is usually the case as the general rule is that cost follows the event. A safeguard against this potential liability is for clients to obtain after-the-event insurance policies in order to indemnify them against any possible cost order by the court. The premiums for such policies are reasonable in many cases. It is also possible to obtain an insurance policy on a deferred premium basis which means that the premium does not become payable until the case has been decided. In some circumstances the premium itself can be insured as well.
Value of a Conditional Fee Agreement
A legal representative is likely to offer a conditional fee agreement to a client if he or she is of the opinion that the client’s prospect of success is good or that the claim will be successful at trial on the balance of probabilities.
A conditional fee agreement is therefore a very useful method of funding litigation as in many cases the prospective litigant may not have the financial resources to fund the case and may not qualify for legal aid. It is particularly important in personal injury cases as these claims cannot be funded by legal aid and as such many litigants would not have had legal redress owing to the lack of funding.
A conditional fee agreement with its inherent risk by the legal representative of not recovering his or her legal fees if unsuccessful and the potential cost liability of the other side which includes the success fee in conjunction with after-the-event insurance (insurance company indemnifying legal expenses) can sometimes be seen as a tactical measure in an attempt to reach an early settlement of a case. This in many cases can save time and expense as it force the parties involved in the litigation to consider the merits of the case and initiate negotiation.
Conditional Fee Agreement – the way forward
A conditional fee agreement is primarily used in personal injury cases. However it is increasingly becoming an attractive option for clients in other areas of law owing to the current financial climate. Small businesses are likely to find this source of funding particularly useful in potentially reducing their legal expenses and being able to litigate especially in the area of debt recovery. Many commercial law firms are offering this source of funding to their clients which can be a very lucrative strategy in retaining clientele and attracting new clients.