Funding options (private, CFA, DBA, legal aid, third-party)

LSV.05 — Funding Options

Five ways a client pays for legal services. The SQE tests which is permitted for a given case and the technical limits on each.

1. Private retainer (paying privately)

Client pays the solicitor's costs directly, win or lose. Charged hourly, fixed fee, or on account. Solicitor must give the best possible information about costs at the outset and as the matter progresses (SRA Codes; Transparency Rules). Always the default; available in any matter.

2. Conditional Fee Agreement (CFA) — "no win, no fee"

• Governed by Courts and Legal Services Act 1990 s.58 (as amended by AJA 1999 / LASPO 2012).
• Solicitor charges nothing (or reduced fee) if the case loses; if it wins, charges the base fee plus a success fee (uplift on base costs, max 100%).
• Trap: since LASPO (1 April 2013) the success fee is NOT recoverable from the losing opponent — the client pays it out of damages. In personal injury, the success fee is capped at 25% of damages (excluding future pecuniary loss). ATE insurance premiums likewise generally not recoverable.
• Banned in family and criminal cases (s.58A CLSA 1990).

3. Damages-Based Agreement (DBA) — contingency fee

• CLSA 1990 s.58AA; DBA Regulations 2013.
• Lawyer takes a percentage of the damages recovered; nothing if the case loses.
• Caps (inclusive of VAT, and applied to the client's payment with recoverable costs credited against the DBA fee): 25% in personal injury (excluding damages for future care/loss), 35% in employment matters, 50% in any other civil claim.
• Banned in family and criminal cases. Drafting is technically unforgiving; an invalid DBA is unenforceable.

4. Legal aid

• LASPO 2012 drastically narrowed civil scope — most areas (e.g. most family, immigration, welfare) are now out of scope unless an exception applies. Criminal legal aid survives (means + interests of justice test for representation).
• Administered by the Legal Aid Agency; subject to means and merits tests. The statutory charge lets the LAA recover its costs from property/money recovered or preserved.

5. Third-party / other funding

• Before-the-event (BTE) insurance (e.g. on a household/motor policy) and after-the-event (ATE) insurance (covers adverse costs/disbursements).
• Trade union funding; litigation funding by a commercial funder (priced from the recovery).
• Traps: ATE premiums generally non-recoverable post-LASPO. Always check for existing BTE cover first — failing to do so is a competence/regulatory failing.

Key distinctions to nail

• CFA = uplift on fees; DBA = share of damages. Don't confuse them.
• Recoverability: post-LASPO, success fees and ATE premiums come out of the client's damages, not the opponent's.
• CFAs and DBAs are both banned in criminal and family proceedings.