A damages-based agreement (DBA) is a form of a ‘No Win, No Fee’ arrangement between a representative and a client. It operates on the basis that if the client wins the case and receives damages, a percentage of the compensation will be paid to the representative. However, if the client is unsuccessful then there will be the risk of the representative not being paid.
The DBA fee payable for solicitor’s fees, counsel fees, and VAT will be up to 25% of the relevant sums recovered by the client in personal injury cases, up to 35% in employment cases, and up to 50% in all other cases. If the case is unsuccessful there is the opportunity to appeal, in which case there is no cap on the DBA percentage fee payable.
When determining whether to use DBA representatives should carry out due diligence to evaluate the prospect of success, and the risk of non-recovery. DBA should only be used when it is appropriate, and this is determined by whether there is reasonable confidence that the client will win, and whether the defendant will pay damages.
The advantages to using DBA is that if the case is unsuccessful then the client will have no liability for solicitor’s and counsel’s fees, but will have to pay disbursements and expenses, and if the compensation paid is relatively low the percentage fee will be significantly less. However, the disadvantage to using DBA is the percentage fee recoverable from the compensation may be significantly greater than that which would have been paid without the DBA or using CFA.
The conditional fee arrangement (CFA) pursuant to s58(2)(a) CLSA 1990 allows for the client and representative to share risk, as the client will pay different amounts for the legal services depending on the outcome of the case. If the client is successful the client will be liable to pay all the fees and expenses, however if the client is unsuccessful then they will not be liable to pay the fees and any expenses that are subject to the CFA.
What are the advantages for a client of entering into a CFA or DBA?
- If a CFA is entered into and the case is lost, or predetermined success criteria are not achieved, a client may only have to pay reduced solicitors fees and disbursements and expenses
- If a DBA is entered into and predetermined success criteria are not achieved the client should have no liability for solicitors’ and counsel fees, but will have to pay disbursements and expenses
- If a DBA is entered into and the predetermined success criteria is achieved but the recovery from the losing party is relatively low, the DBA percentage fee from recovered monies may be a sum significantly less than that which would have been payable by the client on a normal retainer basis or pursuant to a CFA.
What are the disadvantages of a client entering into a CFA or DBA?
- If a CFA is entered into and predetermined success criteria are achieved, in addition to normal costs the client will have to pay the CFA success fee
- If a DBA is entered into and the predetermined success criteria is achieved, depending upon the sum recovered from the losing party, the DBA percentage fee from recovered monies may be a sum significantly greater than that which would have been payable by the client on a normal retainer basis or pursuant to a CFA.
For further information on this topic or on any other legal area, please contact John Szepietowski or Kay Stewart at Audley Chaucer Solicitors on 01372 303444 or email admin@audleychaucer.com or visit our Linkedin page.
This information was correct as of June 2024