Case Funding, Damages Based Agreements, and Contingency Fees
Damages Based Agreements, or DBAs, are a form of contingency fee arrangement for funding litigation which are now available to claimants in litigation in England. We are a leading specialist disputes law firm based in London and are able to consider entering into DBAs with our clients on cases within our areas of expertise where the claim is of high value (normally at least £5 million).
DBAs have been permitted for commercial disputes in England since the “Jackson reforms” of April 2013. Under a DBA the client agrees to pay the solicitor a percentage of the sums recovered from a defendant in a claim. The lawyer is therefore rewarded based on achieving success in the case.
In the case of a full DBA, nothing is payable to the solicitor until after trial or settlement, and in the case of a hybrid or partial DBA, the burden of funding a case on an ongoing basis is substantially reduced, or passed in whole or part to a third party litigation funder, until recovery of damages is made. It is not presently clear whether hybrid DBAs are permitted. However, it is thought that hybrid DBA arrangements entered into with the involvement of third party litigation funders may be acceptable.
What are the advantages of a DBA?
Cash Flow Benefits
The most obvious advantage of a DBA is that clients will not have to pay any legal fees (except expenses, such as experts’ fees) until sums are recovered from the defendant that can be used to pay them. A barrister may also be prepared to take the case on a DBA basis. A hybrid or partial DBA combines the benefits for a client of a DBA, with aspects of a more traditional charging structure, and will normally mean that the claimant is able ultimately to retain a greater proportion of the damages recovered.
More Certainty on Costs
The client will be better placed to predict legal spend, and where appropriate make a provision on its balance sheet for legal costs. If the case is lost the client will, in the case of a full DBA, not have to pay its own legal fees (other than expenses, assuming a barrister is also engaged under a DBA). The interests of lawyer and client are thus normally closely aligned where a DBA is in place.
How is the fee under a DBA calculated?
The fee is simply a percentage of sums recovered and the precise percentage is a matter of negotiation between client and lawyer. Typically the fee will be in the range of 20% to 50% of damages recovered depending on the assessment of the case by us and in particular the merits and prospects for recovery.
Are costs recoverable from the opponent when a solicitor has acted on a DBA?
Yes, the client can still recover costs from a losing opponent calculated on a time costed basis. When costs are recovered they will be deducted from the amount owed by the client. However, the opponent will not have to pay more than the percentage payable to the lawyer by the client under the DBA.
What factors will we take into account in determining whether to offer a DBA?
DBAs are not suitable for all cases. The factors which we will take into account in deciding whether we can offer a DBA will include, for example:
- The merits of the claim – DBAs are only suitable for cases with strong merits (normally at least 60% prospects of success);
- The value of the claim – the realistic claim value would normally need to be at least £5 million;
- The opponent’s credit worthiness and ability to pay a damages award, as well as the prospects of successfully enforcing the judgment in the place(s) where the opponent has its assets.