What Is a Conditional Fee Agreement?

A conditional fee agreement (CFA) is a funding arrangement between a solicitor and their client under which the solicitor agrees to receive all or part of their legal fees only if the case is successful. Commonly referred to as a no-win no-fee agreement, a CFA allows clients to pursue litigation without paying their solicitor’s fees upfront – with those fees instead becoming payable on a successful outcome.

CFAs are most commonly used in personal injury litigation, but they are also used in a wide range of other civil claims. For solicitors entering into a CFA, getting the agreement right from the outset is not just a matter of good practice – it directly determines what costs can be recovered at the end of proceedings.

 

The Pre and Post April 2013 Distinction

The legal landscape for conditional fee agreement costs changed significantly in April 2013, when the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) came into force.

Before April 2013, success fees and after-the-event (ATE) insurance premiums were recoverable from the losing party as part of an adverse costs order. This meant that a successful claimant operating under a CFA could recover not only their base costs but also the success fee uplift and ATE premium from the defendant.

From April 2013 onwards, that position changed entirely. Success fees and ATE premiums become irrecoverable from the opposing party in most cases – meaning the client became responsible for meeting those elements of the costs from any damages recovered.

The 2013 changes remain highly relevant today. Pre-LASPO cases are still working their way through detailed assessment proceedings, and solicitors need to be clear on which regime applies to any given matter when preparing a bill of costs or responding to points of dispute.

 

What Is a Success Fee?

A success fee is an uplift on the solicitor’s base costs, expressed as a percentage, which becomes payable when a CFA case concludes successfully. The success fee reflects the risk the solicitor takes in agreeing to defer their fees – the higher the litigation risk, the higher the success fee percentage is likely to be.

In pre-LASPO cases, success fees were recoverable from the losing party and were subject to assessment by the court. In post-LASPO cases, the success fee is met by the client from their damages rather than recovered from the opponent, and the maximum success fee in personal injury cases is capped at 25% of the damages recovered, excluding for future care and loss.

At detailed assessment, the success fee in pre-LASPO cases can be challenged by the paying party. This court will consider whether the percentage applied was reasonable at the time the CFA was entered into, having regard to the risk assessment carried out at that stage.

 

CRA Compliance and the Indemnity Principle

One of the most significant costs risks in CFA litigation is a defective conditional fee agreement. Where a CFA fails to comply with the relevant statutory requirement, the agreement may be unenforceable, meaning the solicitor has no legal entitlement to their fees.

The indemnity principle provides that a receiving party cannot recover costs from the paying party that exceed their own liability to their solicitors. If the CFA is defective and therefore unenforceable, the client has no liability to pay their solicitor’s costs, and no costs can be recovered from the opponent.

This is not a theoretical risk. Paying parties regularly scrutinise CFA documentation at detailed assessment, and a successful challenge on compliance grounds can result in the entire costs claim being disallowed.

Common CFA compliance issues include:

• Failure to comply with the Conditional Fee Agreements

Regulations 2000 (for pre-November 2005 agreements)

• Inadequate risk assessment at the time of entering into the CFA
• Failure to properly explain the terms and effect of the agreement to the client
• Unsigned or incorrectly executed agreements
• Gaps or inconsistencies in the retainer documentation

 

Funding Arrangements and Costs Recovery

For solicitors managing CFA cases, the interaction between the funding arrangement and costs recovery requires careful attention at every stage of the litigation – not just at the end.

Key considerations include:

Base costs and hourly rates. The base costs recoverable under a CFA are subject to the same scrutiny as any other bill of costs. Hourly rates will be assessed against the guideline hourly rates, and the works claimed must be proportionate and reasonably incurred.

The success fee calculation. In pre-LASPO cases where the success fee is recoverable, it must be justified by reference to the risk assessment carried out when the solicitor agreed to enter into the CFA. A success fee set without proper risk assessment is vulnerable to challenge at assessment.

ATE premiums. In cases where ATE premiums remain recoverable – most notable in clinical negligence cases, which were a carved out of the LASPO reforms – the premium must be reasonable and proportionate. Staged premiums and the timing of when cover was taken out will often be scrutinised by the paying party.

Retainer documentation. At a detailed assessment, the paying party is entitled to request disclosure of the CFA and any associated documents to verify that the costs claimed are consistent with the client’s actual liability. Retainer documentation must be complete, consistent, and accurately reflect the terms agreed upon.

 

Challenges at Detailed Assessment

Conditional fee agreement costs are among the most frequently challenged items in detailed assessment proceedings. Paying parties will commonly raise points of dispute targeting:

• The enforceability of the CFA itself
• The reasonableness of the success fee percentage
• The recoverability of ATE premiums
• Compliance with the indemnity principle
• Inconsistencies between the bill of costs and the retainer documentation

Responding effectively to these challenges requires a thorough understanding of both the substantive costs law and the procedural rules governing detailed assessment. A well-prepared reply to points of dispute, supported by the relevant retainer documentation, is often the difference between recovering the costs claimed and facing significant reductions.

 

Key Takeaways

• A conditional fee agreement is a no-win, no-fee funding arrangement under which legal fees become payable only on a successful outcome
• The April 2013 LASPO reforms changed the recoverability of success fees and ATE premiums – pre and post-LASPO cases are subject to different rules
• A defective CFA can render costs entirely irrecoverable under the indemnity principle
• Success fees in pre-LASPO cases are recoverable from the losing party and subject to assessment – they must be justified by reference to the risk assessment carried out at the time
• CFA documentation is frequently scrutinised at detailed assessment and must be complete, consistent, and compliant
• Responding robustly to points of dispute targeting CFA compliance requires specialist costs law expertise

 

Frequently Asked Questions

What is a conditional fee agreement in costs?

A conditional fee agreement is a funding arrangement under which a solicitor agrees to defer all or part of their legal fees until the conclusion of the case, with those fees becoming payable only if the case succeeds. The costs recoverable from the losing party are determined by the terms of the CFA and the applicable costs rules – including whether the matter predates or postdates the April 2013 LASPO reforms.

Are success fees recoverable from the other side?

In cases where the CFA was entered into before April 2013, success fees are generally recoverable from the losing party and subject to detailed assessment. In post-April 2013 cases, success fees are not recoverable from the opponent and are instead met by the client from their damages, subject to the relevant statutory cap.

What happens if a CFA is defective?

A defective CFA may be unenforceable, meaning the solicitor has no legal entitlement to their fees. Under the indemnity principle, if the client has no liability to pay costs, those costs cannot be recovered from the paying party. This can result in the entire costs claim being disallowed at detailed assessment – making CFA compliance a critical issue from the outset.

Can a paying party challenge a CFA at detailed assessment?

Yes. The paying party is entitled to raise points of dispute challenging the enforceability of the CFA, the reasonableness of the success fee, and compliance with the indemnity principle. They may also request disclosure of the retainer documentation to verify that the costs claimed are consistent with the client’s actual liability.

Does the indemnity principle apply to CFA cases?

Yes. The indemnity principle applies to all costs recovery, including CFA cases. A receiving party cannot recover more from the paying party than they are themselves liable to pay under the terms of their conditional fee agreement. Where the CFA is defective, or the costs claimed exceed the client’s liability, the indemnity principle may be raised to challenge or disallow the costs.

 

Speak to Greener Costs Today

Conditional fee agreement costs are technically complex and heavily scrutinised at detailed assessment. Whether you need a CFA bill of costs prepared, support responding to points of dispute targeting CFA compliance, or specialist advice on success fee recoverability, getting the costs element right requires expertise in both costs law and funding arrangements.

At Greener Costs, our specialist costs lawyers regularly assist solicitors with CFA-related costs recovery – from drafting bills of costs and preparing replies to points of dispute through to advising on retainer compliance and indemnity principle challenges.

Get in touch today on 01204 263047 or email info@greenercosts.co.uk to speak with one of our team.