Kerry Underwood gives his personal tips on setting up and managing conditional fee agreements

Conditional Fee Agreements have been around for 26 years, but the torrent of litigation and publicity concerning them is unabated, albeit now generated largely by former clients, rather than the other side.

The reality is that clients love them, and despite being stirred up to claim against former solicitors, 99% do not do so.

They give real access to justice and enable solicitors to get work and clients that they would not have on an old-fashioned hourly rate, win or lose, basis.

How best, then, to avoid problems?

 

1. Have one agreement, the Conditional Fee Agreement, in any one matter, dealing with costs and funding matters and get it right

Most firms have a confusing and unnecessary array of documents including Client Care Letters, Terms and Conditions of Business, Service Level Agreements etc. all containing costs and funding information.

It is clear to me that many solicitors do not understand their own agreements, and needless to say there is no possibility of the client being given informed consent in those circumstances.

 

2. Familiarize yourself with the various possible Conditional Fee Agreements

Below is a list of types that I have written for general civil litigation, that is not personal injury:

  • No win no fee: without success fee.
  • No win no fee: without success fee (no charge to client beyond recovered costs).
  • No win no fee: without success fee (charge to client capped at x% of damages including ATE insurance premium).
  • No win no fee: without success fee (charge to client capped at x% of damages excluding ATE insurance premium).
  • No win no fee: with success fee.
  • No win no fee: with success fee (all charges to client capped at x% of damages including ATE insurance premium).
  • No win no fee: with success fee (all charges to client capped at x% of damages excluding ATE insurance premium).

All of these can be No-Win Lower-Fee Agreements, with the same conditions.

 

3. Checklist of charging options in civil litigation

  • Hourly rate: uncapped.
  • Hourly rate: total capped at fixed sum.
  • Hourly rate: total capped by reference to damages.
  • CFA (no win no fee) with success fee: fee not capped by reference to damages (cannot be used in personal injury work).
  • CFA (no win no fee) with success fee: fee capped by reference to damages.
  • CFA (no win no fee) with success fee: fee capped at fixed sum.
  • CFA (no win no fee) without success fee: costs not capped.
  • CFA (no win no fee) without success fee: costs capped at fixed sum.
  • CFA (no win no fee) without success fee: costs capped by reference to damages.
  • CFA (no win no fee) without success fee: recovered costs plus percentage of damages.
  • CFA Lite: costs limited to those recovered from the other side.
  • Fixed fee.
  • Fixed initial fee: then hourly rate with all above combinations.
  • Fixed initial fee: then CFA with all above combinations.
  • CFA (no win lower fee) with all above combinations.
  • CFA (no win lower fee): lower fee capped at fixed sum.
  • Credit (or not) for fixed initial fee in the event of success.
  • Contingency Fee Agreement under section 57, Solicitors Act 1974 (pre-issue work only).
  • Damages-Based Agreement (not recommended).
  • Underwoods Method: Contingency Fee Agreement/Bridging Agreement/CFA.

 

4. Meet the client in person or on Zoom or Microsoft Teams and explain the agreement and record the explanation and send it to the client

This is so easy now that COVID has got us all used to these ways of meeting.

Sending a clueless agent to sign a client up does not satisfy the Solicitors Act 1974, nor the Solicitors Code of Conduct, and nor should it.

 

5. Cap or fix all charges to the client, not just the success fee

When you go to a restaurant or whatever you do not ask how much is profit, how much is materials etc. You want to know the bottom line.

So do clients.

Capping the success fee, but not the solicitor and own client shortfall is pointless and that is the basis of the High Court’s decision in

Belsner v Cam Legal Services Limited [2020] EWHC 2755 (QB)

There is no damages-based limit on the overall charge to the client; it is just the success fee in personal injury cases which is so limited – to 25%, including VAT, of the Allowed Damages Pool.

A No-Win Lower-Fee Agreement with the lower fee being a fixed fee is attractive to clients and solicitors who get a fixed sum upfront. Careful drafting is needed.

Fixed costs are also useful if the claim is not just about damages, for example Judicial Review or injunction work.

Belsner is subject to appeal to the Court of Appeal and given that the Judge has accepted in another case that he was wrong in certain parts, that appeal will succeed, at least in part.

However, that does not affect the central principle of capping all charges to the client by reference to damages, something which the High Court described as having a “magnetic attraction” as far as informed consent is concerned - Swann v Slater and Gordon (UK) Limited.

 

6. Deal clearly and thoroughly with disbursements

Who is paying disbursements?

What are they likely to be?

After-the-event (ATE) insurance

Are counsel’s fees included in deal, or payable on top?

Who gets interest?

Higher hourly rate to reflect solicitor funding case

Part 36: who is taking the risk?

 

7. Keep the client fully informed as to costs

There is an understandable tendency to provide less costs information to the client on a conditional fee, especially if the total is capped, as whatever the actual charges on an hourly rate the client will be paying the capped charge, or nothing on defeat in a no-win no-fee case.

The problem comes when a solicitor and client fall out and the client is then charged the full hourly rate and justifiably claims that they had no idea of the level of costs incurred.

Make a virtue of it:

I have done £10,000 work of work, but you are protected in that the charge to you will be capped at 30% of damages.”

 

8. Deliver proper statute bills

A client is still entitled to a full and detailed bill setting out all work done, even if the charges are capped.

 

Kerry Underwood is universally acknowledged as the leading expert on Conditional Fee Agreements and is author of the seminal work No-Win No-Fee No Worries and specializes in drafting funding agreements and advising on them and dealing with challenges under the Solicitors Act 1974.

 

He can be contacted on Kerry.Underwood@lawabroad.co.uk