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What does “no win no fee” mean?

Solicitors in London

What does “no win no fee” mean?

News article published on: 24th June 2014

Most personal injury claims in the UK are run under Conditional FeeAgreements, commonly known as “No Win No Fee” agreements.

This method of funding was established by the government in 1995.

Previously, accident victims only had three real funding options: eitherthey qualified for legal aid with its low financial eligibilitythreshold, or they were in a union and qualified for union assistance,or else they paid their legal fees (and their opponents legal fees ifthey lost) out of their own pockets. Very few had deep enough pocketsto fund litigation themselves and so a great swathe of middle England,the MINELAs (Middle Income Not Eligible for Legal Aid), wereeffectively disenfranchised from the civil justice system.

The idea of No Win No Fee Agreements was that the accident victim (theClaimant) would only pay his lawyer if he won, and then he would recovermost if not all of those costs from the opponent. The client was leftwith having to pay his lawyer’s success fee, a cut of the damages tocompensate the lawyer for the cost of funding the case and the risk oflosing. That success fee was capped at 25% of damages.

In 1999 the government legislated again to make the success feerecoverable from the defendant rather than from the Claimant, therationale being that if someone had to pay for it then it would bebetter to charge the person who caused the loss than to charge hisvictim.

Since 2000 the industry has been mired in satellite litigationconcerning whether and how much the Defendant should pay in these cases.But the “costs war” has not unduly concerned the individual claimant.One positive development of the No Win No Fee system is that Claimantsdo not usually bear any risk for running their cases. If they lose thenthe lawyer is simply not paid, and may indeed be stuck with the cost oflegal expenses (court fees, medical reports etc). If they win then theyoften have a guarantee from their lawyer that they will retain 100% oftheir damages: that there will be no deduction to cover any part of thelegal costs. The lawyer keeps what he can recover in fees from theopponent.

This is not a perfect system but it offers certainty and risk freelitigation for Claimants. It guarantees them access to justice.

All is about to change, with the publication of the Jackson report oncivil costs in January 2010. Lord Justice Jackson has recommendedwholescale changes to the system of civil litigation costs and fundingwhich, if implemented, will completely change the landscape.

Jackson considers it unfair that Defendants or their insurers shouldhave to pay success fees and so recommends that the government repealsthe legislation under which they corrently pay them.

If the Defendant does not pay success fees should they still be paid andif so by whom?

Jackson LJ suggests we go back to the old regime where they are paid bythe client. After all, he says, it is not right that Claimants shouldbe allowed to litigate without any personal risk to themselves whetherthey win or lose. He would compensate them by increasing damages forpain and suffering by 10% and protect them by capping any success fee at25% of their damages and ring fencing future losses (such as careclaims).

It could be argued that Claimant lawyers should do without success fees.After all they get paid if they win and should not take on cases thatwill lose. But the reality is that there are a large number of claimsthat are potential winners at the outset but which lose because ofinsufficient evidence or lack of fault on the Defendant’s part or anynumber of other reasons. Ours is after all a fault based system wherethe Claimant needs to prove duty, fault, and the extent of his loss inorder to win his claim and maximise his damages. That is why he needs alawyer.

It is also a system without legal aid so we rely on Claimant lawyers toprovide access to justice for injured people. None can work for toolong without getting paid and the lawyers need a success fee on thewinners to be able to back a broad range of cases. Without the successfee the lawyers would inevitably choose to run only the simpler and lessrisky cases.

Are Claimants prepared in the future to pay up to 25% of theircompensation in costs, where they currently pay nothing? Is it rightthat they do so? They may have no choice if these reforms areimplemented, but it is a sorry state of affairs that will see theinsurance industry rid themselves of the cost of success fees at theexpense of the injured Claimant. The Association of Personal Injury Lawyers(http://www.apil.org.uk/) a campaigning organisation that fightsfor the rights of injured people will be challenging the Jacksonfindings on this and other issues. See their press release athttp://www.postonline.co.uk/post/news/1586196/jackson-review-misses-point

Another option recommended by Jackson LJ is that parties be allowed toenter into “contingency fee agreements” for the first time in personalinjury and other litigation. The Contingency Agreement differs from theConditional Fee Agreement in that all the legal costs are payable by theclient as a percentage of the Contingency Agreement. No part of thecosts are recovered from the Defendant. Again, the injured person istaking over from the Defendant the burden of his legal costs.

If the Jackson report is implemented then No Win No Fee agreements willsurvive, but not in their current form, and accident victims will findthat that they need to add on to the “No Win No Fee” label the tag “Win= 25% Fee”.

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