The cap, and what it is a cap on

The starting point is regulation 2 of the Success Fee Agreements Regulations 2020, SSI 2020/110. Regulation 2(1) provides that a success fee agreement must not require you to pay a success fee which, including VAT, exceeds the maximum set by the Regulations. Regulation 2(2) fixes the cap by reference to the financial benefit obtained by you.

For a claim for damages for personal injuries, or for a death caused by personal injuries, regulation 2(3) sets three bands. Twenty per cent of the first £100,000. Ten per cent of the part between £100,000 and £500,000. Two and a half per cent of anything above £500,000. The bands are cumulative, in the way income tax bands are cumulative: the twenty per cent rate does not apply to the whole award simply because the award exceeds £100,000.

Two other caps exist and are not part of that scale. Regulation 2(4) fixes thirty five per cent for employment tribunal proceedings. Regulation 2(5) fixes fifty per cent for every other civil matter. If your claim is not an injury claim, the fifty per cent figure is the one that governs, and none of the injury protections described below apply to you.

The arithmetic, at four different award sizes

Assume in each case an injury claim, a success fee agreement charged at the maximum, and no element of future loss, so that the whole award counts towards the calculation. The effect of future loss is dealt with separately below, and on a large claim it changes the answer substantially.

On damages of £5,000, the maximum success fee is twenty per cent of £5,000, so £1,000, and you keep £4,000. On damages of £30,000, the maximum is £6,000 and you keep £24,000. On damages of £250,000, the maximum is twenty per cent of the first £100,000, being £20,000, plus ten per cent of the remaining £150,000, being £15,000: £35,000 in total, and you keep £215,000. On damages of £800,000, the maximum is £20,000 plus ten per cent of £400,000, being £40,000, plus two and a half per cent of the remaining £300,000, being £7,500: £67,500 in total, and you keep £732,500.

The effective rate falls as the award rises. At £5,000 the maximum is twenty per cent. At £250,000 it is fourteen per cent. At £800,000 it is a little under eight and a half per cent. That is the design of the scale, and it is worth knowing when a firm tells you that a flat percentage is simply how it is done.

Future loss usually does not count towards the fee

On a serious injury the award divides into what has already happened and what is still to come. The part still to come, the future element, is often the largest part: future wage loss, future care, future equipment and adaptations. Section 6(4) of the Civil Litigation (Expenses and Group Proceedings) (Scotland) Act 2018 requires the agreement to leave that future element out of the sum on which the success fee is calculated, unless the future element falls within section 6(5).

Section 6(5) admits the future element only where it is to be paid as a lump sum and either it does not exceed £1,000,000, or it exceeds £1,000,000 and two conditions are both met: your solicitor had not advised you to take the future element in periodical instalments, and the condition in section 6(6) is satisfied. Section 6(6) requires either that the court or tribunal awarding the money stated it was satisfied a lump sum was in your best interests, or, where the case settled, that an independent actuary certified the same after consulting you personally and in your solicitor's absence. An actuary for this purpose means an Associate or Fellow of the Institute and Faculty of Actuaries.

Work it through and the effect is large. Take an award of £800,000 of which £550,000 is future loss taken as a lump sum. Because the future element is under £1,000,000 it may be included, and the fee is calculated on the full £800,000, giving £67,500. Now take an award of £2,000,000 of which £1,600,000 is future loss. Unless both limbs of section 6(5)(b) are satisfied, the fee is calculated on £400,000 alone: £20,000 plus ten per cent of £300,000, being £30,000, so £50,000 in total. The larger claim produces the smaller fee, which is exactly what the section is for.

Section 6(7) provides that the agreement is unenforceable to the extent that it makes provision contrary to section 6(2) or section 6(4). An agreement that quietly calculates the percentage on everything is not merely unattractive; it is, to that extent, not binding on you.

Outlays do not come off. In an injury claim they are not yours

Section 6(2) of the 2018 Act requires a success fee agreement in an injury claim to provide that you are not liable to make any payment, including outlays incurred in providing the services, apart from the success fee, regardless of whether any damages are obtained. Medical reports, expert engineering evidence, the cost of recovering records, court dues: all of it sits with the firm, whether the claim succeeds or fails.

There is a single exception. Section 6(3) provides that those outlays do not include sums paid in respect of insurance premiums in connection with the claim. An after the event insurance premium can therefore be charged to you, and in practice it is deducted from the damages alongside the success fee. It is not recoverable from the other side. Ask for the figure before the policy is taken out rather than when the cheque arrives.

The other side's expenses go to the firm, and do not reduce your fee

When an injury claim succeeds, the defender usually pays a contribution to the pursuer's judicial expenses. It is natural to assume that this money reduces what you pay. It does not. Section 3(2) of the 2018 Act provides that, unless the agreement says otherwise, the provider is entitled to recover and retain those expenses so far as they relate to the services provided, and that the amount of the success fee is not affected by the amount of expenses recovered and retained.

So the firm may be paid twice over on the same file, once by the defender in judicial expenses and once by you in the success fee, and that is what the statute contemplates. The words “unless the success fee agreement provides otherwise” matter: some firms do agree to credit recovered expenses against the success fee, and it is a term worth asking for. Section 3(3) makes this subject to section 17(2A) of the Legal Aid (Scotland) Act 1986, so where legal aid is in place, recovered expenses go to the Scottish Legal Aid Board instead.

Benefits you received can come off, but only from three parts of the award

The second deduction has nothing to do with your solicitor. Where you have received certain state benefits because of the injury, the Social Security (Recovery of Benefits) Act 1997 requires the compensator to repay them to the Department for Work and Pensions, and permits the compensator to reduce your compensation by the same amount. The offset is not open-ended. Schedule 2 to the 1997 Act sets out a table matching each recoverable benefit to a single head of compensation, and the compensator may reduce only that head.

Compensation for earnings lost during the relevant period may be reduced by benefits such as universal credit, employment and support allowance, income support, jobseeker's allowance, statutory sick pay and severe disablement allowance. Compensation for the cost of care incurred may be reduced by attendance allowance, the daily living component of personal independence payment and the care component of disability living allowance. Compensation for loss of mobility may be reduced by mobility allowance and the mobility components of personal independence payment and disability living allowance.

Nothing else may be touched. Solatium, the Scottish name for damages for pain, suffering and loss of amenity, appears nowhere in Schedule 2, and cannot be reduced by benefit recovery at all. On a claim which is largely solatium, the recovery figure is often smaller than people fear.

NHS treatment charges are not yours to pay

Where you were treated by the health service, the cost of that treatment is recovered, but it is recovered from the person paying the compensation and not from you. Part 3 of the Health and Social Care (Community Health and Standards) Act 2003 applies in Scotland, and section 150 makes the person making the compensation payment liable for the relevant NHS charges, payable to the Scottish Ministers where the treatment was received at a hospital in Scotland. This sum sits on top of your damages. It does not come out of them.

What cannot be deducted at all

It is worth being explicit, because the list of things that may not be taken is shorter to state and more useful to know. Your solicitor may not charge you for time spent, over and above the success fee, in an injury claim; section 6(2) permits the success fee and nothing else. Your solicitor may not pass on the outlays, save for insurance premiums. Your solicitor may not add VAT to a capped percentage. Benefit recovery may not touch solatium. NHS charges may not be taken from your damages. And where the case succeeds, the judicial expenses recovered from the defender are the firm's under section 3(2) rather than an additional charge to you.

One thing that may never be done

Regulation 3 of SSI 2020/110 prohibits a damages-based agreement, meaning a success fee agreement under which the fee is determined by reference to the amount of financial benefit obtained, in connection with a matter which is or may become the subject of family proceedings, as defined by section 135 of the Courts Reform (Scotland) Act 2014. No solicitor in Scotland may take a percentage of a divorce settlement or of a financial provision award. Regulation 3(3) preserves other forms of success fee agreement, so an uplift on time charged is not prohibited, but the percentage of the money is.

Interim payments, and when the fee is taken

On a serious claim where liability is admitted, interim payments are often made long before the case concludes. The success fee is a fee on the financial benefit obtained overall, and it is normally accounted for at the end rather than clipped from each instalment. If a firm proposes to deduct its percentage from interim payments as they arrive, ask why, and ask what happens if the final award is reduced. The agreement must, under section 7(2) of the 2018 Act, specify the basis on which the amount of the success fee is to be determined, and that is precisely the sort of thing it should specify.

If you think too much has been taken

A success fee agreement must be in writing under section 7(1), so there is always a document to test the deduction against. If the deduction exceeds the statutory cap, the excess is not payable. If the agreement calculates the fee on future loss in circumstances section 6 does not permit, section 6(7) makes it unenforceable to that extent. Beyond that, a complaint about a Scottish solicitor's fees or service is made to the Scottish Legal Complaints Commission, which is the single gateway for all such complaints; our guide on how to complain about a solicitor sets out the route and the time limits. Ask for a full cash account showing the award, each deduction and the authority for it, before you accept the final figure.