There is a fundamental principle at the centre of the law relating to costs which is called the indemnity principle. It is that a successful litigant is entitled to be indemnified by his unsuccessful opponent in respect of the costs he has incurred. If he has not incurred costs, because, for example, his retainer with his solicitors is unlawful and unenforceable, then there is no liability to indemnify. This principle has prevented solicitors and their clients from entering into the sort of risk sharing agreements that are common in relation to non-contentious cases, but it has now been relaxed as a result of the introduction of CFAs.

For some years it has been possible for solicitors to offer their clients a range of fee agreements provided they were in writing and complied with the regulations governing CFAs. Unfortunately the regulations were too complicated and both solicitors and clients found the agreements unattractive. As a result the Government has decided to repeal the regulations and a new simplified CFA regime will be introduced as from 1st November 2005. Under the new regime it should be much easier for clients and solicitors to share the risks of litigation through the introduction of discounted rates, capped fees and success fees. A CFA is a solution to the problem of unpredictable costs and one that we are very happy to discuss.

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