What is a Damages Based Agreement?

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We predicted back in 2013 that as a result of the small claims limit rising to £10,000 the number of Litigants in Person would increase and in tandem with this the Damages Based Agreement would also become increasingly popular.

It would seem that both our predictions were correct. On 1st April 2013 the small claims court limit for civil claims rose from £5,000 to £10,000. Since then the number of litigants in person has risen to record numbers. Critics have said that this is denying citizens proper access to justice and has prompted one retiring senior judge to recently describe it as ‘shaming’.

The small claim court rules specify that legal costs are not recoverable from the losing party. This means it’s usually uneconomic for people to appoint a lawyer for small claim on a standard “No Win, No Fee” basis under a Conditional Fee Agreement (CFA).

Again our forecast that Damages Based Agreements (an alternative No Win – No Fee structure) would become more popular also appears to have been correct.

Although the standard CFA remains a staple favourite in higher value cases, the flexibility of the Damages Based Agreement makes it a useful funding mechanism across a spectrum of cases, including those of modest value.

In many ways the Damages Based Agreement is more intuitive and easier for the layman to understand. In simple terms it provides for legal fees to be met by a pre-agreed percentage split of any money recovered. If the claim does not succeed, nothing is recovered and the solicitor doesn’t receive payment.

We have found that people are attracted to a Damages Based Agreement because they offer certainty, so that clients know precisely where they stand . The solicitor agrees a percentage split with the client in advance. The client knows that their percentage is ring-fenced and that if they don’t succeed they won’t have to pay.

A Damages Based Agreement is therefore a shared risk between the client and the solicitor. And there is the added bonus that if a barrister’s input is required their fees are included in the solicitor’s share.

Our contentious probate and civil litigation teams are always happy to consider a Damages Based Agreement. And as explained they can be used in small claims court cases where the value of the claim is high enough to warrant it. In our experience it works best at the upper level of the small claims court threshold with claims valued at around £7,000 and above, depending on complexity.

If you would like to discuss funding options and find out is a damages based agreement is likely to be suitable for you, call us on 0808 139 1606 or email [email protected]