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http://www.justice.gov.uk/consultati...agreements.pdf
focus's on employment tribunal funding (DBA damages based agreements) but covers NWNF / CFA based agreements
focus's on employment tribunal funding (DBA damages based agreements) but covers NWNF / CFA based agreements
Conditional Fee Agreements (CFAs)
10.
The Courts and Legal Services Act 1990 (CLSA) allowed CFAs to be enforceable in England and Wales. Section 58 of the CLSA (as amended by section 27 of the Access to Justice Act 1999) set out the mandatory requirements for CFAs. The first Order in 19954 made it possible for CFAs to be enforceable in personal injury claims, insolvency proceedings and applications before the European Court of Human Rights. In 19985 this was extended to all types of case except criminal and family.
11.
CFAs are used primarily in litigation before the courts, where rights of audience and rights to conduct litigation are restricted. CFAs operate on the principle that a solicitor or barrister (“lawyer”) will act for a client if he thinks there are sufficient prospects of success. If the case is lost, then the lawyer will not be paid. If the case is successful, the lawyer will be able to claim an ‘uplift’ on his normal fees. This uplift is also known as the ‘success fee’. This maximum permitted uplift that lawyers can charge their client is currently prescribed6 at 100%. An ‘After the Event’ Insurance (ATE) market has developed to protect claimants against the opponent’s costs if the case was unsuccessful.
12.
CFAs act as a mechanism for filtering out weak or unmeritorious claims. Before entering into a CFA a lawyer would assess the merits of a case, as they bear the risk of not being paid if the case is unsuccessful. This encourages lawyers to take on only those claims they think are meritorious and have a 50% or higher chance of success.
13.
Under the scheme introduced in 1995, while the lawyers’ normal fees could be recovered from the losing side, the claimant was responsible for paying the uplift and ATE insurance premiums which were usually met from the damages recovered. In April 2000, following the reforms under the Access to Justice Act 1999, the Government changed the way in which personal injury cases were funded: personal injury cases were removed from the scope of legal aid due to the availability of CFAs. At the same time, changes were introduced in respect of CFAs to make them attractive to lawyers in most categories of case including personal injury. CFAs played a role in access to justice by enabling meritorious claims to be funded. The reforms provided for the uplift and ATE insurance premiums to be recoverable from the unsuccessful party, in the same way as other costs. This encouraged lawyers to take more cases on under CFAs, as
4 The Conditional Fee Agreements Order 1995 (S.I 1995/1674)
5 Conditional Fee Agreements Order 1998 (c)
6 The Conditional Fee Agreements Order 2000 (SI 2000/823) 9
Regulating Damages Based Agreements Consultation Paper
they no longer had to take their success fees from the client’s damages. It also made CFAs available in cases where damages are not likely to be substantially more than the success fee.
14.
If parties cannot agree on costs under CFAs, it is for the court to decide what a reasonable level of success fee that may be recovered from the unsuccessful party. In certain types of personal injury cases the recoverable success fee is fixed depending on the stage at which the case is concluded.7 For example, for a case which concludes before trial a recoverable uplift of 12.5% is set for Road Traffic Accident claims and 25% or 27% Employer’s Liability Claims. The recoverability of success fees (up to 100%) from the other side has caused concerns in the public and private sector including in defamation and clinical negligence claims.
15.
While CFAs are now frequently used in civil litigation, the costs regime differs between most courts and tribunals i.e. the general rule that the unsuccessful party will pay the costs of the successful party does not generally apply in tribunals. The fact that costs are rarely recovered from the unsuccessful party means that the claimant must pay the costs (including the success fee) from the damages awarded. CFAs are used less frequently in tribunals because DBAs have been available as an alternative funding option.
10.
The Courts and Legal Services Act 1990 (CLSA) allowed CFAs to be enforceable in England and Wales. Section 58 of the CLSA (as amended by section 27 of the Access to Justice Act 1999) set out the mandatory requirements for CFAs. The first Order in 19954 made it possible for CFAs to be enforceable in personal injury claims, insolvency proceedings and applications before the European Court of Human Rights. In 19985 this was extended to all types of case except criminal and family.
11.
CFAs are used primarily in litigation before the courts, where rights of audience and rights to conduct litigation are restricted. CFAs operate on the principle that a solicitor or barrister (“lawyer”) will act for a client if he thinks there are sufficient prospects of success. If the case is lost, then the lawyer will not be paid. If the case is successful, the lawyer will be able to claim an ‘uplift’ on his normal fees. This uplift is also known as the ‘success fee’. This maximum permitted uplift that lawyers can charge their client is currently prescribed6 at 100%. An ‘After the Event’ Insurance (ATE) market has developed to protect claimants against the opponent’s costs if the case was unsuccessful.
12.
CFAs act as a mechanism for filtering out weak or unmeritorious claims. Before entering into a CFA a lawyer would assess the merits of a case, as they bear the risk of not being paid if the case is unsuccessful. This encourages lawyers to take on only those claims they think are meritorious and have a 50% or higher chance of success.
13.
Under the scheme introduced in 1995, while the lawyers’ normal fees could be recovered from the losing side, the claimant was responsible for paying the uplift and ATE insurance premiums which were usually met from the damages recovered. In April 2000, following the reforms under the Access to Justice Act 1999, the Government changed the way in which personal injury cases were funded: personal injury cases were removed from the scope of legal aid due to the availability of CFAs. At the same time, changes were introduced in respect of CFAs to make them attractive to lawyers in most categories of case including personal injury. CFAs played a role in access to justice by enabling meritorious claims to be funded. The reforms provided for the uplift and ATE insurance premiums to be recoverable from the unsuccessful party, in the same way as other costs. This encouraged lawyers to take more cases on under CFAs, as
4 The Conditional Fee Agreements Order 1995 (S.I 1995/1674)
5 Conditional Fee Agreements Order 1998 (c)
6 The Conditional Fee Agreements Order 2000 (SI 2000/823) 9
Regulating Damages Based Agreements Consultation Paper
they no longer had to take their success fees from the client’s damages. It also made CFAs available in cases where damages are not likely to be substantially more than the success fee.
14.
If parties cannot agree on costs under CFAs, it is for the court to decide what a reasonable level of success fee that may be recovered from the unsuccessful party. In certain types of personal injury cases the recoverable success fee is fixed depending on the stage at which the case is concluded.7 For example, for a case which concludes before trial a recoverable uplift of 12.5% is set for Road Traffic Accident claims and 25% or 27% Employer’s Liability Claims. The recoverability of success fees (up to 100%) from the other side has caused concerns in the public and private sector including in defamation and clinical negligence claims.
15.
While CFAs are now frequently used in civil litigation, the costs regime differs between most courts and tribunals i.e. the general rule that the unsuccessful party will pay the costs of the successful party does not generally apply in tribunals. The fact that costs are rarely recovered from the unsuccessful party means that the claimant must pay the costs (including the success fee) from the damages awarded. CFAs are used less frequently in tribunals because DBAs have been available as an alternative funding option.
