Suggested answers to self-test questions

Costs Information to the Client and Funding Options

Question 1: What is the difference between a CFA with a success fee and a DBA?

A CFA with a success fee is available for both claimants and defendants and works on the basis that the client pays nothing throughout the duration of the litigation save for the disbursements and if the client is later successful, then the client’s liability to pay those legal costs arises. The base costs plus counsel’s fee and disbursements can be recovered from the opponent if a favourable costs order is made but the liability to pay the success fee rests with the client and this is limited to 25% of the damages (save for future loss) in PI claims irrespective of the percentage level of the success fee agreed. It is 100% of the base costs in all other claims.

A DBA operates only in claimant cases and again the client pays nothing throughout the duration of the litigation save for the disbursements and possibly counsel’s fees. Should the client successfully recover damages from the opponent (and actually receive a damages cheque), then it is likely that he will also secure a costs order in his favour in respect of his legal costs. However, those legal costs including counsel’s fee and vat are limited to 25% of damages in personal injury cases (excluding future loss) and 50% of damages in all other cases.

Question 2: Why are DBAs not suitable for many defendant claims?

The reason for this is that the DBA Regulations stipulated that the legal fees are recovered on a sum recovered which means that the client has to have actually won damages. The only way a defendant can do this is to have a substantial counterclaim that is more than the claimant’s claim and actually recover that sum. If the counterclaim is less than the claimant’s claim then it is likely that the two sums will be set off against each other but the net benefit will go to the party with the greater claim.

Question 3: What are the sanctions if you fail to provide costs information to your client in accordance with your professional conduct obligations?

The SRA Standards and Regulations has a statutory effect as well as a disciplinary effect. Essentially this means that a breach of the requirements of the Code renders you liable to pay damages to the client and to the reduction of the bill as well as conditions being placed on your practising certificate (if you are a solicitor), a fine, a suspension, or even being struck off the roll of solicitors. These sanctions are all separate from the client’s right to pursue a negligence claim against you if appropriate.