Conditional fee agreements and success fees explained

A CFA is a retainer under which some or all of a lawyer’s fees are payable only in specified circumstances, usually success. It is permitted by section 58 of the Courts and Legal Services Act 1990 and must be in writing. Many are described informally as no win, no fee agreements, although that phrase can hide important detail, such as whether disbursements are payable regardless of outcome.

A CFA must clearly define success. In a personal injury claim it may mean recovering damages; in commercial litigation it might be tied to a judgment, a settlement of a specified value or a staged outcome. Ambiguity about success is a frequent source of later disputes between solicitor and client.

A success fee is a percentage uplift on base costs, reflecting the risk the lawyer takes of being paid nothing. It cannot exceed 100% of base costs. For CFAs entered into on or after 1 April 2013, the Legal Aid, Sentencing and Punishment of Offenders Act 2012 generally prevents recovery of the success fee from the paying party, with limited exceptions such as certain insolvency and older transitional cases.

In personal injury cases, the success fee payable by the client at first instance is capped at 25% of general damages and past financial losses, excluding future losses. Other claim types do not have the same cap, so it is particularly important for clients to understand the possible deduction from their damages before signing.

Base costs are recoverable from the opponent in the usual way, subject to assessment on the standard basis, the indemnity principle and any fixed or budgeted limits. The indemnity principle means a receiving party cannot recover more from an opponent than it is liable to pay its own lawyer, so a defective CFA can undermine recovery entirely.

Paying parties sometimes challenge CFAs on grounds of formality, the timing of signature or whether the agreement covers the work claimed. When preparing a bill of costs, our Costs Lawyers check the retainer documents first, because a problem found early can usually be addressed, while one raised in points of dispute can become expensive.

A client who is unhappy with the deduction made from their damages may be able to apply for an assessment of their solicitor’s bill under the Solicitors Act 1974, including a challenge to the level of the success fee. The court considers whether the percentage was reasonable in light of the facts known when the agreement was made.

For solicitors, transparent explanation at the outset is the best protection. A clear risk assessment, a written explanation of how deductions will be calculated, and accurate time recording all make a success fee easier to justify if it is later questioned.