Success Fee Agreements and legal aid

The basis of funding may change during the life of the case.

There may be a change in agency, or the solicitor may simply no longer be able or willing to proceed under the pre-existing or current basis.

An obvious example is a grant of advice and assistance in the early stages of a case then, whether through a change in agency or a change in the basis of funding with the same solicitor, it moves to an SFA.  It may also happen with civil legal aid funding.

It is important that clients and solicitors understand the consequences of a change in the basis of funding, especially if the new solicitor will not be funded by legal aid.

A major feature of funding by SFA is that the solicitor may have a direct interest in any recovered expenses, and the success fee itself is paid from the damages recovered.

Where the client has received legal aid funding, there will be consequences for expenses and damages recovered whether or not the solicitor had any involvement with legal aid – see section on Civil Legal Aid below.

The key elements with any SFA case where the client has at any time been in receipt of legal aid are:

• SLAB has a prior call on any expenses recovered, and (where that is insufficient to extinguish any net liability on the Fund)
• SLAB has a prior call on any sums recovered in the claim.

Expenses

You should have regard to section 3(3) of the 2018 Act. It provides that the solicitor’s entitlement to receive the judicial expenses in the case is subject to section 17(2A) of the Legal Aid (Scotland) Act 1986. That section requires that any judicial expenses received in a case where legal aid has been in place for any stage of the case should be paid to SLAB.

You can read our guidance on expenses and legal aid here.

Principal Sum

In cases where expenses recovered are insufficient on their own to recoup the legal aid costs, section 17(2B) of the 1986 Act requires any remaining balance to be paid from the principal sum. This takes priority ahead of any other debt, including any success fee.

These provisions apply to the totality of all stages of proceedings.

Accordingly, if a case has failed at first instance while on legal aid, but is then successful on appeal while on a success fee agreement, payment of the expenses under section 17(2A), and, if necessary, from the principal sum under section 17(2B), is due to be paid to the Legal Aid Fund even though only the first instance stage was legally aided.

The same applies in relation to the cost of related proceedings, such as an action to restore a company to the register so that it can be sued.

Where there is a change of agency, we would encourage you to ascertain at an early stage whether any prior stage of a case, or related proceedings, has been legally aided so that you can give consideration to how these provisions will impact on the outcome of it.

Enquiries can be made with the client, previous solicitors and us. We can offer a view on the applicability of the provisions in particular cases, and this can be of use when considering settlement offers.

It will be important for you to find out the cost of the case thus far to the Legal Aid Fund, and the anticipated eventual cost. This will indicate how much we are expecting to be paid from the expenses and principal sum, ahead of any payment you may be due under the success fee agreement.

We can try to assist in this, however, we may not have been provided with all relevant information or received any accounts. Any uncertainty is itself is an important element for any incoming solicitor to take account of.

If you have any questions, you should contact Scott Cownie at cowniesc@slab.org.uk.