A Conditional Fee Agreement (“CFA”) is an arrangement between you and your solicitor, agreeing to share the risk of litigation by offsetting the initial legal costs. Part, or sometimes all of the solicitor’s fees will only be payable by you in the event of success and can often be recovered from the other side. Even upon success, recoverability from the other side is not always an option. This is something you must be prepared for.
CFA’s have come under an enormous amount of scrutiny, which was recently highlighted in a case involving Frank Warren, a well-known boxing promoter, and his former solicitor. Frank Warren went to court in 2017 to argue against his former solicitor after they requested their full fee. He argued that the former solicitor had agreed on a CFA and he wasn’t under any obligation to pay the balance of their fee. Frank Warren lost his case.
- Frank Warren entered into two CFA’s with his former solicitor in relation to: (1) a claim for breach of contract; and (2) a claim of defamation.
- Despite his success in both cases, Mr Warren attempted to avoid paying the balance of his solicitor’s fee, as per their contractual arrangement set out in the CFA.
- Mr Warren’s argument was that he did not recover any damages or costs from the defendant due to their bankruptcies and therefore given that he had not received any compensation, he did not believe the fees due to the former solicitors were owed.
- Mr Warren, to his own detriment, admitted that he did not read the documentation he was asked to sign.
See full case details here: http://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWHC/Costs/2018/B6.html&query=(frank)+AND+(warren)
The court found that the CFA made “clear references to and warnings to Mr Warren about his liability to pay his solicitors’ costs, whether recovered from an opponent or not”.
It is normal practice that the balance of the solicitors’ costs is recovered from the other side, from the damages successfully received from the opposing party or from the client who is contractually obligated under the CFA.
A solicitor should always carry out an assessment to ensure it is commercially viable for the recovery of: (1) compensation for the client; and (2) the balance of the legal costs. It is wise however, to always be prepared to pay the full solicitor’s fee, if their fees cannot be recovered from the other side.
As an alternative, it may be commercially viable to consider obtaining an After the Event insurance policy. You would pay a premium which will insure against paying the balance of your solicitor’s fees, alongside other costs.
There is no reason why you should be afraid of conditional fee agreements. A good solicitor will be transparent and do the following to make sure you are entering into the best possible agreement:
- Assess the merits of your claim;
- Review the likelihood of recovery i.e. whether the defendant is able to make payment of the compensation sought (if applicable) and/or make payment of any costs that they may be ordered to pay by the Court;
- Discuss various fee structures that may be available to you;
- Ensure that you understand the fee structure on the table.
If your solicitor does not do the above or provide clear and transparent advice, it may be worthwhile considering other solicitors services as an alternative.