CONDITIONAL FEE AGREEMENTS (T4)

What is a conditional fee agreement (CFA)?

An agreement under which the lawyer’s entitlement to some or all fees depends on specified circumstances, commonly success as defined in the agreement. The lawyer shares the financial risk of litigation with the client.

Example: Basic fees become payable if the client recovers damages.

What is the statutory definition of a CFA under CLSA 1990, s.58(2)(a)?

An agreement with a person providing advocacy or litigation services which makes their fees and expenses, or any part of them, payable only in specified circumstances.

Example: An agreement makes part of the solicitor’s fees conditional on winning the claim.

Why were CFAs introduced?

To improve access to justice, providing an alternative means of funding litigation for people unable to fund legal fees, particularly against the background of restrictions on civil legal aid.

Example: A claimant who cannot afford ordinary hourly fees pursues a claim under a CFA

Does every CFA mean that all fees are payable only on success?

No. The statutory definition covers some or all fees being conditional. The agreement’s terms determine the payment obligations.

Example: A discounted CFA requires reduced fees if the case is lost and higher fees if it succeeds.

What does CLSA 1990, s.58(1) provide about enforceability?

A CFA satisfying the applicable statutory conditions is not unenforceable merely because it is conditional. Other CFAs are generally unenforceable, subject to s.58(5). Compliance does not prevent challenges on other contractual grounds.

Example: A compliant CFA can still be disputed on grounds of misrepresentation.

What exception is contained in CLSA 1990, s.58(5)?

Where the agreement falls within Solicitors Act 1974, s.57, concerning non-contentious business agreements, s.58(1) does not itself make it unenforceable.

Example: First identify the applicable statutory regime rather than assuming every conditional arrangement falls under the same enforceability rules.

What three requirements does CLSA 1990, s.58(3) impose?

The CFA must (a) be in writing; (b) concern proceedings permitted under the legislation; and (c) comply with applicable requirements prescribed by the Lord Chancellor.

Example: An oral understanding alone does not satisfy the statutory writing requirement.

Which proceedings are excluded under CLSA 1990, s.58A?

Specified family proceedings and criminal proceedings, subject to the exception for proceedings under Environmental Protection Act 1990, s.82.

Example: A CFA cannot ordinarily fund the defence of a criminal prosecution.

Can the criminal-proceedings exception under EPA 1990, s.82 include a success fee?

A CFA may be permitted for these statutory nuisance proceedings, but the 2013 Order excludes them from proceedings permitted to carry a success fee.

Example: Permission to use a CFA does not necessarily mean permission to include an uplift.

What principle does Woods v Chaleff [2002] illustrate?

Failure to comply with the applicable statutory CFA requirements can make the agreement unenforceable and prevent recovery of the relevant legal fees from the opponent.

Example: The client cannot recover fees through an inter-partes costs order where no enforceable liability for those fees exists.

Name correction: The case is generally cited as Woods, rather than Wood.

Why must the CFA’s definition of success and scope be drafted carefully?

Payment depends on the actual wording, including the claim, parties, work covered and success trigger. A successful outcome does not necessarily trigger payment under a narrowly drafted agreement.

Example: A CFA confined to a claim against one named person may not cover recovery against a different party.

What happened in Hailey v Assurance Mutuelle des Motards [2015]?

The CFA identified the motorcycle rider as the defendant, but recovery was obtained against the insurer. The narrow wording meant that the relevant success condition was not met, preventing recovery of the solicitor’s fees under that CFA.

Example: A carefully drafted agreement should address reasonably foreseeable changes in the identity of the defendant.

What is a success fee?

An increase above the fees otherwise payable, usually expressed as a percentage uplift on basic charges, payable in the circumstances specified by the CFA.

Example: A 50% uplift on £10,000 basic charges produces a £5,000 success fee before VAT and any applicable cap.

What requirements does CLSA 1990, s.58(4) impose on a CFA containing a success fee?

It must (a) relate to proceedings specified by the Lord Chancellor; (b) state the percentage increase; and (c) not exceed the prescribed maximum percentage.

Example: The agreement must identify the uplift rather than leave the solicitor free to select it after winning.

What is the maximum percentage uplift under article 3 of the Conditional Fee Agreements Order 2013?

100% of the relevant basic fees. This means the success fee can equal those basic fees; it does not mean 100% of damages.

Example: £10,000 basic fees can attract a maximum £10,000 uplift, before considering VAT and other applicable restrictions.

What additional requirement arises under CLSA 1990, s.58(4B), in specified proceedings?

The CFA must provide for the success fee to be subject to a maximum limit expressed as a percentage of specified damages. Personal injury claims are specified for this purpose.

Example: A PI agreement must address the damages-based cap as well as the percentage uplift on fees.

What is the success-fee damages cap in personal injury proceedings at first instance?

Under article 5, the success fee is capped at 25% of the applicable damages, inclusive of VAT, subject to the relevant transitional and saving provisions.

Example: If applicable damages are £40,000, the maximum success fee under this cap is £10,000 including VAT.

What damages count towards the PI success-fee cap?

General damages for pain, suffering and loss of amenity, plus past pecuniary losses, net of relevant Compensation Recovery Unit sums. Future pecuniary losses are excluded.

Example: Past lost earnings count; future care costs do not.

What damages-based cap applies to other PI proceedings, such as appeals?

Article 5 specifies 100% of the applicable damages, inclusive of VAT. This concerns other proceedings within the PI category, rather than all non-PI litigation.

Example: The first-instance 25% cap should not automatically be applied to an appeal.

How do the basic-fee uplift limit and damages cap work together?

Both applicable limits must be respected: the agreed uplift cannot exceed 100% of basic fees, and the resulting success fee must also comply with the relevant damages cap.

Example: A £12,000 success fee calculated from basic charges would be restricted to £10,000 if that is the applicable damages cap.

Does the PI cap mean the solicitor automatically receives 25% of damages?

No. 25% is a ceiling, not an automatic entitlement. Calculate the contractual success fee first, then apply the cap.

Example: If the contractual calculation produces £3,000 including VAT and the cap is £10,000, the cap does not increase the fee to £10,000.

What factors are relevant to assessing a success fee?

Your notes identify the risk of non-payment, responsibility for disbursements and available alternative funding. Distinguish the historical inter-partes assessment regime from modern solicitor–client assessment; these are not a universal statutory formula for every CFA.

Example: A weak liability case may involve greater non-payment risk than a straightforward admitted-liability claim.

At what point should litigation risk generally be assessed?

By reference to the circumstances reasonably apparent when the CFA was entered into or varied, rather than simply using hindsight after success.

Example: Winning at trial does not establish that the case carried no risk when the solicitor accepted it.

Can a solicitor justify a standard 100% success fee merely by pointing to the 25% damages cap?

Not necessarily. Herbert v HH Law [2019] emphasises litigation risk and informed client approval. The damages cap does not itself establish that the uplift is reasonable.

Example: If the firm uses 100% in every case without individual risk assessment, that charging approach needs clear explanation to the client.

What change did Access to Justice Act 1999, s.27 introduce?

It enabled success fees to be recovered from the opposing party through a costs order, subject to the applicable rules.

Example: Under the historical regime, a losing defendant could be liable for basic costs and a recoverable success fee.

What change did Access to Justice Act 1999, s.27 introduce?

It generally abolished inter-partes recovery of success fees for CFAs within the new regime from 1 April 2013, subject to transitional protection and exceptions. The success fee is ordinarily the successful client’s responsibility under the agreement.

Example: A defendant pays recoverable basic costs while the claimant pays the contractual success fee.

Are insolvency and publication/privacy proceedings still blanket exceptions to non-recoverability?

No. The relevant reforms commenced for insolvency proceedings on 6 April 2016 and publication/privacy proceedings on 6 April 2019, subject to transitional protection for qualifying earlier arrangements. Diffuse mesothelioma remains an exception.

Example: A newly signed insolvency CFA does not qualify merely because the claim concerns insolvency.

Why are the CFA date and transitional provisions important?

They determine whether the historical recoverability rules or newer restrictions apply. Check the relevant statutory savings and CPR Part 48 rather than relying on the claim category alone.

Example: A qualifying older CFA may retain recoverability even though a new CFA for the same type of claim would not.

What is misleading backdating of a CFA?

Giving the agreement a date which falsely suggests it was executed earlier than it actually was. This is different from openly agreeing retrospective coverage.

Example: Signing on 1 June but presenting 1 March as the actual signing date is misleading.

What is a retrospective CFA?

An agreement bearing its true execution date which expressly covers work undertaken earlier. Retrospectivity is not inherently unlawful.

Example: A CFA signed on 1 June states that its terms apply to work undertaken from 1 March.

What distinction is associated with Holmes v Alfred McAlpine Homes [2006]?

The court deprecated false backdating, while recognising that an agreement may legitimately provide for earlier work if properly expressed.

Example: Record the true signing date and separately identify the earlier work covered.

What did King v Telegraph Group [2005] establish about retrospective base costs?

A retrospective CFA could support recovery of base costs from the initial instruction date to execution. The success fee for the earlier period was not recoverable in that case.

Example: Basic fees for pre-signature preparation may be recoverable even though the claimed retrospective uplift is disallowed.

What principle did Birmingham City Council v Forde [2009] establish about retrospective success fees?

There is no general prohibition on retrospectively agreeing or increasing a success fee. Contractual validity, proper consent and assessment of reasonableness remain important.

Example: A retrospective uplift may be validly agreed without being recoverable in full from the opponent.

Why distinguish a retrospective CFA’s validity from recovery against the opponent?

An agreement may be valid between solicitor and client while the opponent’s liability remains restricted by assessment rules, notification requirements under the historical regime and other applicable principles.

Example: Signing a valid retrospective CFA does not automatically impose every contractual charge on the losing defendant.

What should happen when a child represented through a litigation friend turns 18?

The litigation friend’s role generally ends, and the solicitor should establish the now-adult client’s instructions and contractual responsibility, commonly through express ratification or a new agreement. Do not assume every CFA automatically terminates: its terms and contracting parties matter.

Example: The adult client confirms in writing that they adopt the existing funding terms.

Can ratification of the original CFA be implied?

Potentially, through sufficiently clear conduct adopting the arrangement, although express written confirmation is clearer. Ratification may preserve the original agreement, but recoverability of any historical success fee still depends on the applicable rules.

Example: The adult knowingly continues instructing the firm on the existing CFA terms.

Does losing capacity after entering a CFA automatically terminate it?

No. In Blankley [2015], later loss of capacity did not frustrate the CFA; instructions could continue through an appropriate representative. The agreement’s terms and circumstances must be considered.

Example: A deputy gives instructions on behalf of a client who signed the CFA while capable.

Why distinguish later loss of capacity from incapacity when the CFA was made?

They raise different issues. Later incapacity does not automatically make the agreement voidable. Where capacity was lacking at formation, enforceability may depend on the relevant contractual rules, including the other party’s knowledge.

Example: A valid agreement signed before incapacity should not be analysed as though the client lacked capacity when signing.

What procedural step is needed if a litigant loses capacity during proceedings?

A litigation friend is generally required. Under CPR 21.3, further steps normally require the court’s permission until a litigation friend is in place. The solicitor must also check authority to instruct and the funding arrangements.

Example: A relative does not automatically become authorised to conduct the litigation

What happens to the CFA and accrued costs when the client dies?

Check the death and termination provisions. Many standard CFAs expressly terminate on death, requiring arrangements with the personal representatives for future work. Entitlement to pre-death fees depends on the agreement; those fees are not automatically payable regardless of its conditions.

Example: The death clause may preserve fees subject to the estate later succeeding in the claim.

What is the central question when a client switches from legal aid to a CFA?

Whether the decision to change funding was reasonable in the client’s particular circumstances, supported by adequate advice and the actual reasons for switching.

Example: Compare remaining legal aid, possible extensions, CFA liabilities and insurance costs before changing.

What is the significance of Hyde v Milton Keynes NHS Foundation Trust [2017]?

The CFA was enforceable in circumstances where the legal aid financial limit had been exhausted, despite the certificate not yet being formally discharged. Avoid reducing the case to a blanket rule that reaching a limit always justifies switching.

Example: Distinguish genuinely exhausted funding from charging privately for work still covered by legal aid.

What principle does the Ramos decision in your notes illustrate?

A funding switch may be unreasonable where the client received inadequate advice about its financial consequences, including potential liability for the ATE premium.

Example: Describing a CFA as advantageous without explaining the insurance commitment prevents a properly informed comparison.

What did XDE v North Middlesex University Hospital NHS Trust [2020] establish?

CFA-lite is not inherently superior to legal aid. The key issue is the reasonableness of the actual decision to switch, which requires examining the actual reasons and advice given, rather than relying on generic advantages. A CFA-lite ordinarily limits the client’s liability to costs recovered.

Example: Saying “CFA-lite protects damages” does not, by itself, justify abandoning available legal aid.