Last chance to get benefits of old costs regime

Posted 30/01/2013

The 1st April 2013 will see significant changes to the rules governing “No win – no fee” agreements, known technically as Conditional Fee Agreements (CFAs).When a client enters into a CFA, they agree to pay a ‘success fee’ in the event that the case is won. This is a percentage mark up, agreed in advance, on the costs recoverable from the losing party. For example, if a losing defendant is ordered to pay £10,000 in costs and the percentage mark up agreed is 50% then the success fee would be £5,000. Under the current rules, that success fee is payable by the losing party in addition to the costs awarded.Most CFAs are backed by the After the Event (ATE) insurance policy to cover the risk of having to pay the other side’s costs in the event the case is lost. Such policies inevitably carry a premium. Once again, under the current rules those insurance premiums are payable by the losing party. The rule change occurring on 1 April will mean that, although CFAs are still permitted, the winning party will have to pay their own success fees and insurance premium, and will no longer be able to pass these onto the losing party. Whilst CFAs will still be viable in large cases where the recovery of significant damages will offset the success fee and insurance premium, the benefits will become far more marginal in lower value cases. The old rules will apply to all claims issued before 1 April, so there is still time to take advantage of the benefits afforded by them.For individual advice, please contact our team.