The Original Rules
The original rules only allowed for conditional fee agreements in personal injury claims, proceedings relating to the administration or winding up of a company, or proceedings before the European Commission or Court of Human Rights. Any success fee and/or legal expenses insurance premium had to be paid by the client, normally out of any damages received. The success fee was limited to a maximum of 100% of the normal (or base) fees. The maximum success fee has remained at 100% ever since. There was no cap on the overall amount of the success fee, although the Law Society, as it then was, recommended a 25% cap and this was followed by a lot of solicitors.
On 30 July 1998, the Conditional Fee Agreements Order 1998 extended conditional fee agreements to all types of claim, other than criminal or family proceedings. The client still had to pay the success fee and/or any legal expenses insurance premium.
From 1 April 2000 the old regulations were all revoked to be replaced by new Conditional Fee Agreement and Collective Conditional Fee Agreement Orders. For the first time both the success fee and any after the event legal expenses insurance premium were recoverable from the other party, with any shortfall between the amount claimed and the amount recovered being payable by the client. Suddenly legal representatives for insurance companies (as opposed to clients) were examining the agreements and trying to avoid having to pay. At the same time legal aid was withdrawn from all mainstream personal injury claims and, in October that year, the Human Rights Act 1998 was implemented.
As the agreements were a creature of statute the argument was that a material breach of the agreement made it invalid. The requirements for the agreement were strict and this led to a challenge that the Law Society model agreement, which was followed by a large percentage of solicitors, was invalid. This sent shock-waves through the legal profession with firms looking at going bust overnight and the Law Society facing massive negligence claims.
On 2 June 2003 further changes to the regulations enabled solicitors to offer their clients a shortened agreement (known as "CFA Lite") where the client was guaranteed all of their damages. The take up was low given the ongoing background of challenges to existing agreements. Legal representatives were sticking with what was currently working rather than risk embracing the change.
The original regulations were brought in to protect the public from greedy lawyers. However, in practice insurers and paying parties were using the regulations to avoid having to pay. More money and time was regularly being spent arguing over costs than had been incurred in the original claims. In addition, the large information requirements that had to be complied with before an agreement could be entered into were both unwieldy and completely confusing to most clients. This was seen as preventing access to justice, rather than promoting it.
On 1 November 2005 all of the current regulations were scrapped in favour of a simplified regime regulated by the Law Society (now the Solicitors Regulation Authority). Breach of any of the requirements for a conditional fee agreement no longer mean that the lawyer is not entitled to be paid, but a breach may lead to disciplinary action.