Litigation is usually funded by the client paying his (or her) solicitor's costs at regular intervals, the amount of the payment being determined by the solicitor's hourly rate, and the amount of time spent on the matter. However, where one (or more) of the parties is unable or unwilling to pay legal fees, it may be possible to use a conditional fee arrangement.
A conditional fee arrangement (CFA) works by splitting the risk of the action between the solicitor and the client. The solicitor conducts a risk assessment (to determine whether there is a reasonable prospect of winning), and depending on the outcome, may agree to conduct the case on the following basis:
- he (or she) will charge no fee if the case is lost, but
- he will charge his usual fees, plus a percentage (the 'success fee'), if the case is won.
The maximum by which he can increase his fee is 100%.
If you use a CFA and win your case, the court may order the losing party to pay your reasonable basic costs, plus all or part of the 'success fee', plus any expenses incurred, plus the premium for any insurance policy purchased under the CFA (see below). However, if the court does not make such an order, or the order is made but not complied with, you remain liable to your solicitor for all these costs.
If you use a CFA and lose your case, you will not have to pay your solicitor's fees, but will still be liable for out of pocket expenses, and may be ordered by the court to pay the winner's costs. You can take out insurance to cover this potential liability (see question 20).
You (or your solicitor) must tell the other parties involved in the case about the existence of any CFA, and also whether insurance has been taken out to cover the loser's potential liability. This is required under the Civil Procedure Rules as it may have an impact on the way in which a case is handled, and whether and when there are offers to settle.
