Discounted CFAs – how do they work and are they too good to be true?

18 June 2020

A discounted conditional fee agreement (DCFA) is so called because it allows for a discounted hourly rate so that only part of the firm's fees are conditional.

Let’s say for example, your solicitor ordinarily charges you £10,000.00 for a piece of work. That sum would either be payable in full under a private retainer (not suitable for clients without significant cash reserves) or under a regular no win no fee agreement (CFA) and is entirely subject to a successful outcome – i.e. a payment of damages. The CFA is rarely viable for the solicitor who then carries all of the risk and finding a barrister to join in that same no win no fee agreement can be like trying to find the latest fad toy on Christmas Eve. The risk can be too great for the firm and the barrister to carry.

But with a DCFA the risk is shared. On a typical basis the lawyer agrees to charge only 50% of the normal rate so using our example, £5,000.00 would not be conditional upon success. If the lawyer wants to get paid the remaining £5,000.00 they need to win the case for the client. Losing 50% of a solicitors fees would result in running the case at loss so the other 50% would be crucial to firm = a sense of investment in the outcome beyond the desire to do the best for the client that might not be present in privately funded case or a pure no win no fee case where the case may have been too risky to take on in the first place.

The client is also keeping one eye on costs being incurred so that they can control their potential exposure to legal costs for the part of the fees that is not conditional. Suddenly both client and solicitor are acting in the most efficient way they can muster.

A victory also opens up a costs order that means the client will be able to seek recovery of their fees from their opponent.

We find that there is a growing desire to fund litigation in this way which can create a single shared goal of winning the case in a reasonable time frame and in an efficient manner. It is difficult to see how other funding methods can create such a unification of solicitor and client.

FURTHER INFORMATION

This blog was written by Michael Tyler, Partner in our Costs team.

You may be interested in our Litigation Funding Options page and/or Litigation Funding FAQs .

If you would like further information on the issues raised in this blog, please contact  a member of the Dispute Resolution team or Richard Foss, Head of the department.

 

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