Drafting Conditional Fee Agreements | - The legal costs specialists

Clients are increasingly seeking alternatives to traditional funding methods.

There is now an expectation that for many types of legal dispute solicitors will accept some of the risk of the case.

By far the most common alternative funding method to the traditional retainer is some form of conditional fee agreement (CFA).

Most solicitors will be familiar, at least in principle, with the concept of the “no win, no fee” agreement. Most, but not all, such agreements will also allow the solicitor to charge a success fee in the event of a successful outcome. However, this is but one form of conditional fee agreement and many other versions are available. These include:

No win, discounted hourly rate charged.
No win, fixed fee charged.

These can, in turn, be drafted to include a success fee in the event of success.

Some forms of agreement will allow the solicitor to recover from the client any shortfall in the costs recovered from the other side. Other conditional fee agreements will provide that the solicitor will waive any shortfall in recovery of costs (a “CFA Lite”).

The numerous different types of agreement mean that it is usually possible to create one that is mutually beneficial to both the solicitors and to the client. The risk is shared, in whole or in part, by the solicitors but, in turn, the solicitors have the opportunity to recover enhanced costs in the event of a successful outcome.

Although conditional fee agreements are well established in the field of personal injury claims, they are potentially suitable for almost all types of dispute (with the exception of criminal and family matters). They are commonly used in professional negligence claims, contractual disputes and commercial litigation. Equally, they can be used, for example, in conveyancing work or immigration matters. Suitably drafted, they can work just as well for defendants as for claimants.

The central problem with conditional fee agreements comes from the risk of defective drafting. A poorly drafted CFA can be unenforceable against the client. This means that even in the event of a fully successful outcome, no fees will be recovered from either the client or the opponent. The law reports over the best part of the last twenty years are littered with examples of conditional fee agreements held to be unenforceable for a seemingly endless number of technical defects. (Even Law Society-produced “Model Conditional Fee Agreements” have been open to attack.)

Conditional fee agreements provide a wonderful opportunity for law firms but carry significant risk when drafted by those who are not experts in this field. Even adapting a pre-existing CFA is a recipe for disaster if done by those unfamiliar with the finer points of costs law.

At GWS Costs we can explain the different options available and advise on the most suitable type of conditional fee agreement for your firm’s needs. We can then draft a conditional fee agreement that you can use with 100% confidence.