Statutory provision for CFAs was first made in 1990. However, with effect from 1 April 2013, important changes were made to the way in which CFAs operate. As a consequence, and while they remain a popular method of funding litigation, they are a less attractive option for claimants than they once were.
CFAs comprise two elements, a basic fee and a success fee. While the basic fee is calculated by multiplying the total time spent by the solicitor on the claim by the agreed hourly rate, the success fee is a secondary fee, calculated by applying a pre-agreed percentage to the basic fee.
As a claimant, and where your claim is successful, you become liable to pay both the basic fee and the success fee. However, while the basic fee may then be claimed from your opponent, the success fee may not. This means that the total amount you recover is likely to be less than if your claim was funded under a private retainer, where only the equivalent of a basic fee would apply.
As the level of the success fee depends on the amount of time spent dealing with the claim, the amount due in respect of it is not fixed. For this reason, you should treat any offers to apply the lowest level of success fee with some caution: if the amount of time spent on the claim is higher than it could be and/or the compensation recovered is lower than it could be, the net outcome may be disappointing.
You should also be aware that standard CFAs are not ‘no recover, no fee’ agreements. This means that as a claimant you remain liable for your own legal costs, even if these cannot be physically recovered from your opponent. However, this is rarely an issue in professional negligence claims where the majority of opponents are insured.
Finally, you should note that, more often than not, CFAs cover only the solicitor’s own fees: they do not generally cover disbursements, such as court fees and expert’s fees. However, these can often be covered separately by way of an after-the-event (ATE) insurance policy.
The big advantage of CFAs over other forms of funding, such as a private retainer or a Discounted Fee Arrangement (DFA), is that if your claim fails you have no liability for your own solicitor’s fees.