Conditional fee agreements (CFAs) can be used in tribunal cases, the senior costs judge has held.
In Tel-Ka Talk Ltd v Commissioners of HM Revenue & Customs Master Hurst ruled that the use of “no win, no fee” cases or CFAs was lawful.
Delivering judgment Master Hurst said: “The position is that in the employment tribunal, solicitors may act under regulated damages based agreements or under CFAs.
“Failure to comply with the Damages Based Agreements Regulations may render the agreement unenforceable. It seems likely that in the future, legal representatives in the employment tribunal will rely on conditional fee agreements which are no longer regulated and which can be drafted in such a way as to produce the same result as a contingency fee agreement.”
In the case, Tel-Ka Talk was appealing against decisions of HMRC to refuse repayment of VAT input tax credit claimed by the company. The company suffered cash flow difficulties due to the withholding of VAT and found it difficult to fund the legal costs of their tribunal hearing.
The solicitors agreed to continue to act on a contingency fee basis and entered into a non-contentious business agreement. The contingency fee arrangement enabled the company to continue to pursue its claim and recover the VAT repayment it was owed by HMRC.
The legality of contingency fees before tribunals is implicitly acknowledged in the Solicitors Code of Conduct 2007, and the Law Society believes hundreds of solicitors enter into such agreements before tribunals every year.
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