What is a Damage Based Agreement (DBA)?
A Damage Based Agreement (“DBA”) is an agreement in which we agree to share with you the risk of litigation – put simply, we do not get paid unless we are successful in your claim, and if we are successful you agree to pay us a percentage of the amount you receive in damages.
DBAs can be used in Civil and Employment claims.
Under the Civil Procedure Rules which governs claims in the civil courts, it is usual that the loser pays the winners reasonable costs. DBAs are only available to Claimants (or Counterclaimants) and not Defendants to an action.
*The costs rules are different in Employment Tribunal claims, – a specific case has to satisfy the Tribunal based upon the conduct of the other party (Claimant or Respondent), that costs should be awarded.
Payment of our fees by you under a DBA depends upon achieving the success agreed when you enter into the DBA. It is based on a percentage of the sum you are awarded to be paid from the losing party/opponent.
Where appeal proceedings are concerned there is no limit on the DBA percentage fee payable.
What are the advantages for you entering into a DBA?
• You share the risks of litigation, but pay none of our legal costs unless we succeed (except where there are any disbursements and expenses).
• If we do not achieve the success criteria you would have no liability for our legal costs. You will have to pay disbursements and expenses.
• If a DBA is entered into and the case is won, but the recovery from the losing party is relatively low, the DBA percentage fee from recovered monies may be a sum significantly less than that which would have been payable by you on a normal retainer basis.*
What are the disadvantages of a client entering into a DBA?
• If the case is won, depending upon the sum recovered from the losing party, the DBA percentage fee from recovered monies may be a sum significantly greater than that which would have been payable by you on a normal retainer basis.*
• If a case is lost and the Defendant is awarded legal costs these would become payable by you. All litigation processes run risks of legal costs being paid, not just on losing at trial. Costs can be awarded on applications made through the litigation process.*
Is the whole of the DBA fee recoverable from a losing Defendant? *
The defendant will not necessarily have to pay the full amount of the DBA fee if the claim is successful. Costs are recoverable where:
(i) The claimant’s recoverable costs will be assessed in the conventional way – ie how many hours were reasonably spent on the case, what is a reasonable rate for those hours, and (where costs are assessed on the standard
rather than the indemnity basis) do the costs meet the test of proportionality
(ii) If the contingency fee agreed with us is higher than the figure arrived at through that exercise, the claimant usually will have to pay the shortfall out of the damages. WE DO NOT ADOPT THIS PROCESS.
Is there a cap on the level of contingency fee?
The DBA percentage fee is paid by way of deduction from the sum recovered (damages) from the losing party.
*In employment claims, the DBA fee is up to 35% of the sum recovered for the lawyer’ fees and VAT. The rules for recoverability of costs in Employment Tribunal cases is covered by different legislation to Civil claims and is based considers on matters of conduct that it would be just and equitable to do so on application and following scrutiny on arguments made that
All other disbursements (including expert fees) and expenses are payable by the client in any event, and are in addition to the DBA percentage fee.
Contingency fees for most types of claim are subject to a 50% cap. Personal injury and clinical negligence claims are subject to a 25% cap.
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