Contingency Fees

A. Context

The term ‘contingency fee’ has many meanings. The basic idea is that the lawyer does not get paid unless the contingency occurs, but gets a higher fee than would be normal if it does.

There is a long history of antipathy towards the use of contingency and specula­tive fees to support litigation. This was reflected in the rules of conduct of the legal profession. The recent relaxation of rules prohibiting contingency fees is intended to save public money, legal aid payments, while supporting access to justice. There are some concerns regarding the ethical risks surrounding contingency fees.

B. Public Policy against Stirring up Litigation

Hostility to contingency fees can be traced to longstanding rules aimed at discourag­ing third parties from supporting or stirring up litigation by maintaining or taking a share of proceeds of cases. Such practices were banned at least since the Statute of Westminster of 1275. Rejection of third party support is not universal. In the US, for example, contingency fees are a common way of supporting litigation. American texts on legal ethics marvel at ‘the mysteries of the Macbethian witches of the common law who stirred the law of despised litigation; maintenance, champerty and barratry’.⁶³

⁶³ CW Wolfram, Modern Legal Ethics (St Paul, MN, West Publishing Co, 1986) at 489; D Luban, ‘Speculating on Justice: The Ethics and Jurisprudence of Contingency Fees’ in S Parker and C Sampford (eds), Legal Ethics and Legal Practice: Contemporary Issues (Oxford, Clarendon Press, 1995) 89, at 114.

i. Maintenance, Champerty and Barratry

Maintenance describes the act of a third party becoming involved in, supporting and encouraging a law suit.

Lawyers were particularly affected by the rules against maintenance and champerty. The normal contingency fee arrangement in the US, where the lawyer is not paid if the case is lost but gets a percentage of the winnings if it is won, was prohibited in the UK under the common law relating to champerty.^[1855] Speculative fees, where a lawyer agrees to be paid only what the losing side is ordered to pay in costs, and arrange­ments whereby a client’s fees are paid by third parties or by the lawyer, were prohibited by the common law prohibiting maintenance.^[1856]

The consequences of charging unlawful contingency fees were, first, that the lawyer could not recover the fee, or even disbursements, from the client.^[1857] Further, if the case was won, and the arrangement was discovered, there was no basis for ordering the losing party to pay costs. This was because, applying the indemnity principle, the claimant had no costs liability. If, however, the client had already paid money to the solicitor, it could not be reclaimed, the agreement being unenforceable rather than void or voidable.^[1858] Nor was the loss of a champertous fee insurable.^[1859] More serious for solicitors, that they could find themselves liable for the costs of the other side if the case was lost.^[1860]

The common law offences were nearly rendered obsolete by the professional ethics of lawyers in the nineteenth century. Rules prohibiting maintenance prevented conflicts of interest between lawyer and client and removed lawyers’ disincentives to probity in court proceedings. The Criminal Law Act 1967 removed criminal and tortious liability for maintenance and champerty, but arrangements for the support of litigation were still unenforceable.^[1861] It is instructive to consider why maintenance and champerty were considered so dangerous and unprofessional that they justified such serious consequences.

ii. The Ethics of Supporting Clients’ Litigation

Maintenance and champerty offend the ethical principle against lawyer and client conflicts of interest. If lawyers can support litigation, they owe allegiance to a party outside of the lawyer and client relationship; they have a potential personal conflict of interest. This can give rise to various temptations to sell the client short. For example, it may be in the client’s interest to negotiate long and hard for maximum damages but, for the lawyer, any extra damages recovered by hard bargaining might not compensate for the extra hours put in to achieve it, particularly in small value cases.^[1862] Giving law­yers a personal interest in the outcome of a case also provides an incentive to engage in corruption or sharp practices, such as suborning perjury.

iii. Access to Justice

The principle that a third party should not support litigation brought by another was initially compromised on the grounds of providing access to justice. By the introduc­tion of legal aid, the state rapidly became the largest maintainer of litigation of all. In England, some lawyers resisted the introduction of the legal aid scheme in the 1940s and 1950s on the ground that the independence of lawyers to act in their clients’ best interests would be compromised by their responsibilities to the legal aid fund.^[1863] Later, proposals for block funding and franchising of legal aid proposed by the Conservative and Labour Governments led to similar concerns.^[1864]

As the century progressed, concern grew over the inadequacy of state funding to support access to justice. Organisations devoted to the task of encouraging and enabling others to take legal action were established. These included charitable organ­isations, pressure groups and bodies like insurance companies, motoring organisa­tions and trades unions. Similar developments in the US, for example, the growth of trades’ union organised legal expenses insurance plans, were resisted on the ground that it constituted maintenance.

As eligibility rates for legal aid fell in the 1980 and 1990s, pressure to find alterna­tive ways to enable ordinary people to bring litigation increased. The compromise was that lawyers would be able to support litigation in return for a success fee by entering a conditional fee agreement (CFA) with clients. Despite the widespread use of contin­gency type agreements, there remain concerns that such arrangements are vulnerable to exploitation by legal professionals. CFAs were ringed with strict requirements and lawyers who did not comply with them could find that their arrangement was struck down.

Maintenance and champerty continue to have great relevance, despite the new centrality of contingency type fees in delivering access to justice. Technically, only fee arrangements specifically allowed by statute escape the common rules of mainte­nance and champerty. Support for litigation that does not satisfy the relevant statutory or regulatory regimes may be unenforceable.^[1865] The practical effect of this is that defendants are not liable for the costs of claimants supported by such arrangements. Further, claimants may not be liable for the fees of their own lawyers. It is therefore necessary to consider the main types of permitted fee agreement.^[1866]

C. Conditional Fee Agreements

A government Green Paper, published in 1989, rejected US-style contingency fees based on lawyers receiving a percentage of damages. It argued that litigants would be unable to negotiate terms meaningfully with lawyers.^[1867] A variant, so-called ‘conditional fees’, were therefore created by the Courts and Legal Services Act 1990. These were, however, only finally implemented by the Conditional Fee Agreement Regulations 1995.

i. Scope

CFAs were initially available for actions for personal injury, to wind up companies or in bankruptcy proceedings and actions before the European Commission or Court of Human Rights.

The Administration of Justice Act 1999 made a number of significant changes to the CFA regime. As regards scope there were two main changes. The first extended the use of CFAs to dispute resolution other than court proceedings. The second allowed for the use of Collective Conditional Fee Agreements (CCFAs) by membership organ­isations, such as trade unions.

A CCFA is an arrangement that does ‘not refer to specific proceedings, but provides for fees to be paid on a common basis in relation to a class of proceedings... or more than one class of proceedings’.^[1870] In order to facilitate these, the Act provided that the indemnity principle did not apply to the recovery of costs.^[1871] Many CCFA arrange­ments relate to personal injury. These claims continue to be the most significant in terms of volume for both CFAs and CCFAs.

In November 2008, Lord Justice Jackson was appointed to lead a fundamental review of the rules and principles governing the costs of civil litigation. The broad conclusion of his final report, published in January 2010,^[1872] was that some areas of civil litigation costs were disproportionate and impeded access to justice. Jackson proposed ‘a coherent package of interlocking reforms, designed to control costs and promote access to justice’.^[1873] Some recommendations included further adjustment of the rules on CFAs. Others included the introduction of another kind of contingency fee, called a damages-based agreement, as an alternative to CFAs.

Lord Justice Jackson’s proposals were taken forward in a variety of ways, coincid­ing with serious cuts in civil legal aid.

ii. Main Elements

From 1995, CFAs allowed solicitors to finance litigation, in return for payment, on satisfaction of a condition.^[1874] The normal terms provided for a success fee if the claim succeeded. When first introduced, CFAs would usually provide that clients would also pay their own lawyer’s disbursements, win or lose. If the case was successful, most of the disbursements would be recoverable as part of a costs order. Therefore, under a CFA, a losing claimant may have to pay the defendant’s costs and his lawyers disburse­ments. The risk of paying the defendant’s costs could be covered by ‘after the event insurance’ (ATE insurance) which might also cover the client’s own disbursements.

a. After the Event Insurance

The first and most commonly used insurance, provided by Accident Direct, was arranged by the Law Society. Clients paid a reasonably modest premium provided their solicitor agreed to insure all his personal injury cases with Accident Direct. The policy could also be used to cover the client’s disbursements that were not paid by the other side on winning the case. In some cases, however, premiums were reported to be extremely high, up to half of projected damages.

b. Calculation of the Success Fee

In successful claims the regulations limited the success fee to a percentage up to 100 per cent of the normal fee, excluding disbursements. The ethical issue for the solicitor was being fair to the client. The percentage for calculating the success fee was supposed to reflect the degree of risk the case represented for the solicitor. Such calculations inevitably involve numerous variables involving the merits of the case and the strength of the evidence. The evaluation of each variable involved, potentially, a large number of assumptions.

The complex calculation of CFA success fees depends entirely on the solicitor’s experience and expertise. Precision is almost impossible.^[1875] The process is entirely impenetrable to clients, who have no basis of comparison. The difficulty of protecting clients was one of the reasons why the success fee chargeable was limited to 100 per cent of the solicitor’s costs.

iii. Recoverability of Success Fees and ATE Insurance Premiums

There were two major costs issues to be confronted on the introduction of CFAs. The first was allocating responsibility for paying, first, the success fee and, secondly, the ATE insurance premiums, if the claimant won. Both of these involved costs over and above claimants’ legal costs in an ordinary claim. It might therefore be considered unfair to make the defendant pay such fees. This unfairness was magnified in difficult cases. If the claim was high risk, such that the defendant was justified in defending it, the amount paid in costs as a success fee would increase.

Ambivalence on the impact of the additional costs of CFAs is reflected in almost constant changes in the detail of CFA arrangements since 20 00.^[1876] The incidence of responsibility for the extra costs was different in the three main regimes for CFAs, particularly in relation to personal injury claims.

a. Initial Phase: Non-recovery of Success Fees and ATE Premiums

When introduced in 1995, success fee and insurance costs were not recoverable from the other side. Clients were hesitant about using the new conditional fees. They were complex and did not protect them against paying for disbursements.^[1877] Additionally, the cost of ATE insurance was also a disincentive to clients without moderate resources. Large numbers of people had dropped out of the scope of legal aid, but it was not clear that CFAs were sufficiently attractive to fill the gap. It seemed that access to justice might have taken a step backwards.

b. Second Phase: Recovery of Success Fees and ATE Premiums Allowed

The Access to Justice Act 1999 provided for recovery of success fees and ATE insur­ance premiums from defendants if the case was won. Rules were introduced for CFAs made after 1 April 1 2000. The successful CFA litigant was therefore protected from most costs. There was, however, a theoretical possibility that the lawyer would ask the client for any shortfall in actual costs compared with those recovered from defendants.^[1878] From 2003, a ‘simplified CFA’ could provide that the percentage of the success fee was levied on the recoverable costs, not on the costs chargeable to the client.^[1879]

The strategic balance in the CFA regime substantially changed in the second phase. New rules were introduced so as to be fair to defendants who might have to bear this additional liability. The defendant and Registry had to receive notice that a CFA was in place as soon as reasonably practicable after execution.^[1880] Defendants, for whom CFAs were rarely available or appropriate, often settled cases, however spurious and unlikely to succeed in court, because of the risk of having to pay additional costs of litigation.

The new arrangements certainly increased access to justice. Anyone, including the poor and those of moderate means, could litigate personal injury cases and other claims without worrying too much about cost. Clients could even take out loans to pay insurance premiums, albeit at the generally high rates of consumer loans. Lord Nicholls was seriously concerned that ‘claimants now operate in a costs-free and risk-free zone’.^[1881] This raised the question of whether the arrangements were fair to defendants.

The control of claimants’ costs in CFA cases had passed to losing defendants in assessment proceedings. This led to a considerable volume of satellite costs litigation where defendants queried not only the base costs but also the percentage uplift. To facilitate this, the CFA regulations required claimants to agree to disclose the level of the success fee. This overcame potential claims for privilege that clients might make. Although the courts attempted to indicate appropriate levels of success fees, 5 per cent in claims for passengers in road traffic cases for example, this did not prevent chal­lenges. Even the courts had to acknowledge that the guidelines were reviewable.^[1882]

c. Third Phase: Non-recovery of Success Fees and ATE Premiums from Defendants Re-introduced in Personal Injury Cases

Lord Justice Jackson’s review of the cost of civil litigation concluded that the recovery of success fees and ATE premiums was a major driver of disproportionate cost. He rec­ommended that both ceased to be recoverable in personal injury claims, including those involving clinical negligence. The incidence of these costs would therefore revert to successful claimants. This burden, Jackson suggested, should be offset by a 10 per cent increase in general damages for pain, suffering and loss of amenity.^[1883] From 1 April 2013 new rules on CFAs came into force.^[1884] These required most clients entering into a CFA on or after that date to pay the success fee and any ATE premium from their damages.^[1885]

Claimants with mesothelioma claims, insolvency proceedings, publication and privacy proceedings and pre-commencement agreements would still be able to claim success fees.^[1886] The inability to claim ATE insurance premiums was offset by the introduction of qualified one way costs shifting (QOCS) for personal injury and clinical negligence claims. This means that orders for costs against a claimant can only be enforced, without the permission of the court, if the aggregate of such costs do not exceed the aggregate amount of damages awarded the claimant.^[1887] In the majority of cases, claimants will not be liable for the defendants’ costs in the event that the claim is unsuccessful. The excep­tion is where they refuse a reasonable offer of settlement before trial.^[1888]

The maximum success fee remains an uplift on basic costs of 100 per cent. There is, however, a cap on the amount deductible as a success fee from the claimant’s dam­ages in personal injury and clinical negligence claims. The cap on the recoverable success fee in personal injury claims heard at first instance is 25 per cent of general damages and past losses, less any benefits recoupable by the Department of Work and Pensions.^[1889] Whilst it is not clear from the legislation, the Law Society considers it is likely that the cap includes any success fee payable to counsel.^[1890]

iv. Lawyers Indemnifying Claimant’s Liability for Defendant’s Costs

It is likely that the removal of claims for success fees and ATE insurance premiums in the Jackson reforms will reduce the provision and availability of insurance. There are circumstances when, despite QOCS, personal injury victims may be liable to pay defendant’s costs. This possibility arises, for example, where a claimant fails to accept what the court later considers a reasonable offer to settle. If they are not to face significant pressure to accept low offers of settlement they may still need indemnity against such a risk.

Reduced availability of ATE insurance and increasing cost of premiums will probably increase the pressure for lawyers to provide indemnity for client liability. In effect, lawyers in this situation are offering to replace the ATE contract of insur­ance. Arrangements where solicitors provide indemnities for defendants’ costs are challengeable on the grounds that they are champertous and constitute an illegal insurance contract.

In one case it was found that upholding a CFA where the lawyer agreed to indem­nify the client against paying a defendant’s costs was contrary to public policy.^[1891] The Court was concerned that lawyers providing such an indemnity would have too much at stake on the outcome. This would be dangerous when they were in a position to influence the conduct of the litigation. In another case, such an arrangement was found not to be maintenance.^[1892] The costs judge considered that the professionalism of solicitors was sufficient guard against temptation to try and influence the outcome of a case unethically, even if they had a financial interest.

The uncertain position regarding solicitors providing clients with indemnity for defendants’ costs was addressed in Sibthorpe v Southwark LBC.^[1893] The claim was for housing disrepairs worth £1300. The CFA provide for a 10 per cent success fee. It also provided that the claimant’s solicitors would indemnify their client against the defendant’s costs if insurance was not available. The Court of Appeal decided that this arrangement was not champerty because the indemnity was not a share of the outcome of litigation. It is likely, however, that there will be further challenges to such arrangements.

It seems that the position of lawyers who support litigation, outside of the strict statutory framework for CFAs and DBAs, is risky. While the courts seem satisfied that indemnities for costs do not constitute insurance contracts, the conclusion that they are not champertous is less secure. The courts have been generous in interpreting such arrangements, apparently aware that ATE insurance is disproportionately expensive for some types of claim and may not be available for others.^[1894] Nevertheless, solicitors entering such arrangements are at risk of not being paid and being responsible for paying the defendant’s costs.

The position regarding solicitor indemnity for client costs liability reflects increas­ing tolerance of ethical risks. One of the possible impacts of the new regime appears to be acceptance of situations that would once have been seen as an unacceptable conflict of interest.

v. Regulation

a. Statutory Regime

The early CFA regime was managed by detailed regulations made under statute. Initially, the agreement had to state the percentage of uplift.^[1895] Regulations made in 2000 added requirements covering the contents of the agreement,^[1896] including reasons for setting the percentage uplift,^[1897] and specifying the information provided to clients.^[1898] The regulations required that legal representatives inform clients, before the agreement was made, of the circumstances in which costs would be payable by the client to the representative and how they would be assessed.

Solicitors were required to consider other potential sources of funding available to clients before agreeing a CFA with them. This included any ‘before the event’ insur­ance, such as household policies covering policy holders’ legal expenses in the event of injury. They also had to explore the availability and appropriateness of other methods of financing an action.^[1899] The information provided to clients was required to be given orally, whether or not it was also given in writing.^[1900] Many claimants did not understand the information and, since after 2000 they were not substantially at risk on costs, most were not interested.

b. Professional Regulation

Given the statutory and regulatory requirements imposed on CFAs, there seemed little need for additional regulation by the profession. Some changes to the conduct rules were implemented to reflect the new reality. In 1996, the Law Society’s Practice Rule 8, which prevented solicitors charging a contingency fee in respect of contentious pro­ceedings, was amended. The new wording was that contingency arrangements were prohibited ‘save one permitted under statute or by the common law’.^[1901] Solicitors failing to observe these requirements might, in theory, face disciplinary charges. This was more likely if, for example, the circumstances caused a conflict of interest.

From November 2005, the government repealed the complex rules on CFAs imple­mented since 1995.^[1902] From that date, the Law Society was told to regulate CFAs. Those made after November 2005 were governed by the Solicitors’ Code of Conduct. The 2007 Code included a specific rule,^[1903] but CFAs were not, as might be expected, smothered in professional practice rules. The Law Society was keen to promote their use, producing a model contract and detailed guide.

The guidance to solicitors added little. Solicitors acting under a CFA were required to give additional information to the client on costs. They had to be informed how they might be liable to pay their own solicitor. They also had to be told of the avail­ability of any alternative funding mechanisms and of their right to seek assessment of those costs.

Guidance to solicitors did include a reminder of the statutory requirements for agreements to be in writing and that success fees could not be more than 100 per cent. It recommended that solicitors should not charge a success fee which exceeded 25 per cent of the amount recovered by the client. This was a limitation on the suc­cess fee, rather than the total fee recovered, which could exceed 25 per cent of the sum recovered. Ultimately, it was for the courts to confirm the success fee and much lower percentages were often imposed.

The Law Society’s model contract used plain English to be comprehensible to the lay client, stating clearly hourly rates, liability for disbursements and the success fee. Clients terminating the agreement paid basic costs to the solicitor. The solicitor could terminate the agreement where the client failed to discharge his or her obligations. These were to give instructions, not to mislead the solicitor, to be co-operative, sub­mit to any necessary medical or other examinations and to pay disbursements as the case proceeded. The solicitor could also terminate the agreement if the client rejected advice on settlement.

The new guidance warns that breaches of the statutory requirements could render agreements unenforceable.^[1904] Under the previous regime, the courts decided that CFAs were unenforceable if there was a ‘material’ departure from the regulations. It was not necessary to show detriment to the CFA client in order to establish a material departure.^[1905] A failure to abide by the Code in providing costs estimates did not, how­ever, mean that the contract between solicitor and client was unenforceable. Therefore, the indemnity principle in awarding costs still applied.^[1906]

Although costs orders against third parties were originally viewed as ‘exceptional’,^[1907] there were several bases for orders against third parties. Solicitors entering into CFAs can be liable for costs under the general discretion to award, or disallow, costs under the Senior Court Act 1981.^[1908] They could be liable in costs because they had manage­ment of the action or because they had maintained or financed it.^[1909] Further, costs orders could also be made against solicitors where the CFA with their client was invalid and unenforceable.^[1910]

An example of the courts controlling CFA costs occurred in the case of King v Daily Telegraph Group,^[1911] in which the claimant in a libel case had a fee agreement providing for a 100 per cent success fee. The likely costs would exceed £1 million, far in excess of any damages that would be awarded, estimated at £150,000. The defendant newspaper could not get their costs paid, even if they won, because the claimant had no money and no ATE insurance.

As the situation stood, the defendants in King would be better off financially by conceding the case than by winning it. As was pointed out by Lord Justice Brooke, the case was more valuable to the claimant’s lawyers. If the claimant won, the lawyers stood to gain huge costs from the defendant. They had no incentive ‘to advance their client’s claim in a reasonable and proportionate manner’. In the judge’s opinion, the solution was for the court to make an order capping the recoverable costs early in the proceedings. This would be by way of an order under CPR Rule 44.8 or by a retro­spective costs assessment or wasted costs order.^[1912]

D. Damages-based Agreements

i. Legalisation

In England and Wales, it was possible to enter into a contingency fee arrangement, based on a percentage of sums recovered, for the conduct of various non-contentious business. For example, a solicitor could charge for the collection of debts on a contin­gency basis, provided legal proceedings were not started. The ban on contingency fees in litigation by statute,^[1913] and by professional rules,^[1914] did not apply to cases before Employment Tribunals.^[1915]

Lord Justice Jackson recommended the wider introduction of contingency fees to increase the funding methods available to litigants. This was considered important as CFA success fees and ATE insurance premiums ceased to be recoverable from the los­ing party. From 1 April 2013 contingency fees, or damages-based agreements (DBAs), were permitted for litigation and arbitration proceedings in England and Wales.^[1916]

The terms on which DBAs can be entered are set out in regulations^[1917] allowing lawyers to conduct contentious work for a share of damages. DBAs may be avail­able for some kinds of group litigation, but not for the class actions to be introduced for competition law claims. The percentage of damages the lawyer is allowed to take varies from case to case. In Employment Tribunal cases the existing 35 per cent cap continues to apply. Most other types of claim are subject to a 50 per cent cap, but personal injury and clinical negligence claims are subject to a 25 per cent cap.

The only sums recoverable from a successful client are the ‘payment’, the capped percentage recovery, and non-counsel disbursements. Counsel fees must be paid from the solicitor’s profit costs. If there is no recovery the lawyer has no entitlement other than recovering non-counsel disbursements. Lawyers are not allowed to combine a DBA with other methods of payment, such as bills based on the hourly rate.^[1918] If lawyers act under a DBA the agreement must truly be ‘no win no fee’.

The DBA Regulations do not specify that the contingency fee charged must reflect the degree of risk in supporting the proceedings. They do require that the reason for setting the amount of the payment at the level agreed be set out in the agreement.^[1919] In an employment matter, this must deal with whether the claim or proceedings is one of several similar claims or proceedings.

ii. Recoverability

The existence of a contingency fee arrangement will not increase the amount of the defendant’s costs liability. Costs recoverable by a claimant are limited according to the ‘Ontario model’ operating in Canada. A successful claimant’s costs are assessed conventionally, based on reasonable hours and rates and proportionality, reflecting the overall reasonableness of the costs to the matters in issue. If the contingency fee is higher than the costs assessed in this way, the claimant pays the shortfall from the damages.

The existence of a contingency fee arrangement may, however, operate to decrease the defendant’s costs liability. This is because the claimant cannot recover more in costs than he is liable to pay its own lawyer. If the agreed contingency fee is lower than the figure arrived at through a traditional costs assessment, the defendant only has to pay the lower amount. If a claimant’s DBA is unenforceable as a result of a breach of legislation or the regulations, the defendant is not liable for costs, even if liable for damages.

The DBA Working Group recommended that lawyers working under a DBA should not be liable for costs awarded against their client when cases are lost. The DBA Regulations do not make express provision for this, so, unless the lawyer agrees to indemnify the client, it is thought that they would not be liable.

E. Regulation

The terms and conditions of a DBA must specify the claim or proceedings or parts of them to which the agreement relates, the circumstances in which the representative’s payment, expenses and costs, or part of them, are payable and the reason for setting the amount of the payment at the level agreed.^[1920] In an employment matter the rea­son for the level of payment must include whether the claim or proceedings is one of several similar claims or proceedings. Since no criteria have been set for determining appropriate percentages charged, it is anticipated that most lawyers will charge up to the cap.

As with CFAs, it is anticipated that breaches of the regulations by lawyers could lead to their DBAs being unenforceable against clients. These obligations are largely formal. Since no additional sums are recoverable from opponents, lawyers are under no obligation to notify opponents of the existence or terms of DBAs. One of the new potential conflicts of interest arising from DBAs is the fact that counsel fees are deducted from the lawyer’s costs rather than being treated as a disbursement. This is an additional incentive for solicitors to settle outside of court rather than to incur the expense of trial.

F. Impact of Funding Arrangements

Under the new arrangements for CFAs, clients can agree to pay their lawyers a success fee and take out ATE insurance, but must bear the cost themselves. Since these costs cannot be recovered from the other side, CFAs may become less attractive, particu­larly in lower value claims. Unfortunately, because they have to give credit for costs recovered under DBAs but not CFAs, DBAs may also be unattractive to lawyers.^[1921] This, together with the familiarity of CFAs, means that they could continue to be the main source of litigation support. The arrival of DBAs adds a new dimension to the ethical decision-making of solicitors when advising clients. They must now be sure that they state clearly which funding arrangement is in the client’s best interest. They must also consider whether their own, or perhaps another firm, would be prepared to offer the best terms.

Solicitors usually calculate whether to offer a client a funding arrangement on a case by case basis. When deciding whether to accept a case, firms have no obligation to consider an obligation to provide access to justice. To do this they would have to be required to consider their record in taking riskier cases. A method already exists for this purpose. When CFAs were introduced, the Law Society, concerned that solici­tors were unused to calculating risk, provided Continuing Professional Development to prepare them. Risk calculations were supposed to be based on factors such as the merits and value of the claim, the likelihood of settlement, estimated costs involved and the likelihood of justification for success fees, including by considering the risk at different stages of a case. The purpose of this development was so that firms of solicitors could aim to break even in terms of cases won and lost.

Some solicitors could charge success fees without ever taking risky cases and suf­fering any losses. This creates doubt over the capacity of CFAs to promote access to justice on a par with legal aid. It is arguable that firms should aim to use success fees in winning cases to support losing cases. It would, however, be necessary to review a large number of cases in order to see whether this was achieved, or whether success fees were purely providing additional profit to lawyers. It is not possible for courts to consider the reasonableness of success fees in individual cases with reference to firms’ overall caseload. Regulators could conduct such investigations, but even if they did, they could not, under present regulation, require lawyers to accept more risky cases.