Damages-based agreements (DBAs)

DBAs were introduced to counteract the effect of removing the recoverability of success fees in CFAs. Under a DBA we charge a percentage of the sums recovered, up to 50%, on a risk-based approach. Disbursements can be charged and settled during the matter, but no legal fees may be paid by the client (indeed, any fees settled will need to be refunded).

There are significant risks involved in DBAs including the following:

• A DBA cannot require the client to pay any more than the "agreed payment".
• A DBA cannot be used by defendants (as no damages will be recovered).
• A DBA cannot be used for non-money claims.
• The Regulations preclude hybrid DBAs (e.g. you cannot charge a discounted hourly rate % of damages).
• If a client ends a DBA early, the solicitor is arguably unable to charge anything (no right to default to hourly rate). Likewise, if you need to end the DBA early due to the client's conduct or failure to provide instructions.
• We will not be paid our costs in the form of the payment under the DBA until the outcome of the case is known. Even after the case has successfully concluded, there could be significant delays in receipt of payment if the claimant has to take complex enforcement steps to secure recovery.
• The firm runs the risk of never being paid the contingency fees under the DBA if the client loses the case.
• Clients may be more demanding of your time, knowing that they are not paying by the unit of time.
• There is a risk that the firm could be liable for adverse costs. You should therefore make it clear in the agreement that, if the client is unsuccessful, the client will be liable for adverse costs.

As a result, DBAs are not popular and we do not recommend them. If you are considering a DBA, you should discuss the matter with our General Counsel.