New regulations relating to success fee agreements take effect from 27 April 2020, to ensure that litigants in Scotland have a clearer understanding about the costs involved in raising a Court action and providing Scottish solicitors with more attractive methods to enter into success fee agreements.
The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (Success Fee Agreements) Regulations 2020 provide clarity on the amount a client can be asked to pay their solicitor in such agreements and puts a cap on the level of the success fee that a solicitor can recover from the client’s damages.
The regulations provide ways for Scottish solicitors to enter into agreement either by way of Speculative Fee Agreement or Damages Based Agreement. For Speculative Fee Agreements, if a claim is successful, in addition to recovering costs from the opponent, they can charge an uplift on those costs, to be paid out of the damages received by the client. Alternatively, in Damages based agreements, the solicitor’s fee can be calculated as a percentage of the damages – in which case the solicitor would receive an agreed percentage of damages recovered as well in addition to costs recovered from the opponent.
The caps provide greater certainty for clients entering into success fee agreements - Regulation 2 sets out caps on success fees for different areas of law and it should be noted that success fee agreements cannot be used in family proceedings, unless the success fee is contained in a Speculative as opposed to Damages based typed agreement.
The regulations provide consumer protection in terms of form and content of what an agreement between solicitor and client must include for it to be valid.
The Law Society of Scotland Success Fee Agreement Working Party has designed a template to be used in personal injury cases to support the profession in complying with the 2020 regulations and provide a gold standard agreement for the profession’s use going forward.
You can download the style success fee agreement*, which the profession can adapt for use in other areas of law and the cooling off notice, here. Solicitors are reminded that they must issue the client with the Success Fee Agreement together with the Cooling off notice.
The Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 (Success Fee Agreements) Regulations 2020 can be accessed here.
*Please note that as of 27 May 2020, clause 5(2) (c) has been removed from the template above. An issue has been raised as to whether a provider is able to charge for fees, VAT and outlays which have been incurred by the recipient to date, including a success fee when the recipient unreasonably rejects the provider’s opinion. As such and until such a time when the Success Fee Agreement Working Party have reviewed clause 5(2) (c) and provided a resolution, solicitors are advised to remove clause 5(2) (c) or at least the reference to “success fee” in the clause, before entering into the agreement with their client. Where solicitors have already entered into such agreements, they are advised that they should issue a new contract with an amended clause 5(2)(c).
Originally set up in 2018, by the Professional Practice Committee and the Civil Justice Committee to draft a style Success Fee Agreement to submit to the Scottish Government for review. The agreement was later superseded by the Scottish Government’s consultation on Success Fee Agreements. The Working Party submitted a response to the consultation and continued to work closely with the Scottish Government contributing to the draft regulations. The Working Party have worked hard to balance the interests of the profession whilst protecting the public interest. Since the regulations were finalised the Working Party have amended the previous draft success fee agreement to ensure that it complies with the 2020 regulations.
The Law Society of Scotland Success Fee Agreement Working Party is chaired by Iain Nicol, Scottish solicitor and convener of our Civil Justice Committee. The working party’s membership is balanced with solicitors who specialise in both pursuer and defender personal injury work, an academic member and two lay members.The Working Party has a good balance of regulatory and representative perspectives.