Supreme Court Confirms “no Foal, No Fee” Arrangements Are Not Champertous

In a significant decision concerning the funding of litigation in Ireland, the Supreme Court in Howley v McClean; Howley v Howard [2026] IESC 34 clarified the legality of “conditional uplift” fees and “no foal, no fee” arrangements, in the context of a tax debt recovery action by the Revenue Commissioners. The Supreme Court confirmed that “conditional uplift” fees are permitted in actions for debts or to recover liquidated sums (they are not permitted otherwise, for example in personal injuries actions). The long standing practice of “no foal, no fee” arrangements, facilitate access to justice, and are not unlawful. The Supreme Court also clarified that champerty can be relied upon as a defence.

Background

The fee agreement between the Revenue Commissioners and its panel of solicitors included two distinct elements: a conditional fee uplift based on the percentage of tax actually recovered, as well as a “no foal, no fee” structure dependent on whether sums were actually recovered against the taxpayers.

The taxpayers contended that both aspects of the agreements were champertous and, accordingly, were unenforceable. The High Court and the Court of Appeal rejected that argument, finding that the agreements were not champertous and were therefore not unlawful. Subsequently, permission to appeal to the Supreme Court was granted in respect of the champerty issues, recognising the lack of clarity in this area of law.

Are conditional fee uplift fees permitted?

Conditional fee uplift arrangements are traditionally champertous (and therefore unlawful) at common law but are subject to an exception in section 149(1)(a) of the Legal Services Regulation Act 2015, which provides that:

“(1) A legal practitioner shall not charge any amount in respect of legal costs if –

(a) they are legal costs in connection with contentious business expressed as a specified percentage or proportion of any damages (or other moneys) that may be or become payable to his or her client, other than in relation to a matter seeking only to recover a debt or liquidated demand”.

The Supreme Court observed that the effect of the statutory exception is twofold: firstly it re-states the general rule as to champerty in statutory form by preventing a solicitor from charging a percentage fee in respect of damages that may be awarded on behalf of a client (for example in personal injuries litigation); and secondly the re-statement of the rule on champerty does not apply to actions for debts or claims seeking only to recover liquidated sums. The taxpayers argued that section 149(1)(a) should be construed narrowly such that it would not apply where the relevant agreement provided for both a percentage fee and a flat commission payment. However, the Supreme Court found that the provision of a conditional fee uplift based on the percentage of tax recovered, even if coupled with a commission payment, could still fall within that statutory exception. Given the proceedings were seeking recovery of a debt, the fee arrangement in this case was found to be lawful.

Are “No Foal, No Fee” arrangements permitted?

Although consideration of the specific “no foal, no fee” clause was rendered academic (as the Revenue Commissioners confirmed they would only claim costs under the conditional fee aspect), the Supreme Court took the opportunity to provide some clarity on the legality of “no foal, no fee” arrangements, given the centrality of their importance to funding arrangements currently in the Irish legal system.

The Supreme Court said that the use of “no foal, no fee” arrangements has become a widespread practice that, prior to this litigation, had “never really been doubted in any serious way”. The role of such arrangements as a means of ensuring access to justice for many was also recognised by the Supreme Court, noting that if found to be unlawful that would “immediately present the legal system with a serious crisis”.

Hogan J, delivering judgment on behalf of the Supreme Court panel, undertook a detailed analysis of previous authorities on the matter, including those concerning section 11 of the Attorneys’ and Solicitors’ Act 1870, which provides:

“Nothing in this Act…shall be construed to give validity to any purchase by an attorney or solicitor of the interest, or any part of the interests, of his client in any suit action, or other contentious proceeding to be brought or maintained, or to give validity to any agreement by which an attorney or solicitor retained or employed to prosecute any suit or action, stipulates for payment only in the event of success in such suit”

The Supreme Court acknowledged that, when taken in isolation, this provision gives the impression that “no foal, no fee” arrangements are unlawful but that this is not the way the section was interpreted prior to 1922. The Court concluded that the practice of “no foal, no fee” arrangements has become inveterate in the legal system and the population as a whole has acted on the basis of this legality in a widespread or fundamental way. Prior to this litigation, the practice was not doubted in any serious way. The Court also noted that Article 34 of the Constitution guarantees a constitutional right of access to the courts and if that right is to be made effective, then an existing practice whereby a person of modest means can obtain access to justice should not lightly be held to be unlawful. All of this means that the common law rules of maintenance and champerty should not be extended to render the “no foal, no fee” system unlawful if that can be avoided. Taking all of these into consideration, the Court concluded that “consistent judicial understanding of that provision, coupled with long-standing professional practice, supports the conclusion that such arrangements are not in themselves champertous or otherwise unlawful.” In the absence of compelling grounds to declare such a practice as unlawful, as well as the Supreme Court’s expressed caution in extending the law of champerty, the court declined to find the relevant contractual provision unlawful.

The Supreme Court also considered objections to the arrangements based on the indemnity principle, including in particular the requirement that the party in whose favour a costs order is made must be under an actual legal liability to pay the costs claimed. The argument raised was that where a “no foal, no fee” arrangement had been agreed, there was in fact no legal liability to pay the costs. Although the Supreme Court accepted that “no foal, no fee” arrangements “do not sit easily” with the indemnity principle, it concluded that the principle could not “undermine a system of legal practice which is both longstanding and of practical importance.” Accordingly, it held that the indemnity principle “must yield, to the extent necessary, to accommodate such arrangements”.

Champerty can be relied up upon as a defence

The Supreme Court held that a champertous agreement can be raised as a valid defence to proceedings. This was contrary to the view of both the High Court and the Court of Appeal, that it could only be raised in a separate tort action. The Court considered that the essential rationale of the rules of maintenance and champerty is to maintain the integrity of the administration of justice. The rules would be undermined by requiring a litigant to defend champertous proceedings with the only remedy being a separate action in tort for damages.

What are the implications of the decision?

The decision confirms that arrangements providing for conditional fee uplift fees are champertous except where they fall within the exception in section 149(1)(a) of the Legal Services Regulation Act 2015 which applies only to cases concerning the recovery of a debt or liquidated demand.

Of broader application is the finding (while obiter) that “no foal, no fee” arrangements are not unlawful. This brings clarity to a practice that is widespread in the profession.

The additional finding that champerty can be raised as a defence (and it is not necessary for a separate tort action to be brought) is an important clarification for those involved in litigation where champerty is a live issue.