‘No Win No Fee’ isn’t what it used to be

The term ‘No Win No Fee’ is the common title for Conditional Fee Agreements (“CFA”) which means that if someone brought a claim and lost they would pay no legal fees.

This was previously coupled with a guarantee that if you won a case, you would in most cases keep 100% of your compensation, because your costs would be paid by the losing party.

The crux of a CFA is that for taking the risk of losing, your legal representative will be entitled to what an uplift on their base costs (known as the ‘success fee’).

In addition you would also have taken out ‘After the Event (“ATE”) Insurance’ which would pay for third party expenses (such as court fees and expert fees) and the opponent’s costs if you lost.

Before April 2013, the success fee and ATE was recover from the opponent, which allowed many people to keep 100% of their compensation.

The impact on success fees and ATE post LASPO

Since the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (“LAPSO”), this is no longer the case. The success fee and ATE must now be borne by the client’s themselves in most civil claims.

In personal injury claims, the maximum deduction from the client’s damages is capped at 25% – but in all other types of civil claims, there is no such cap, although most firms will agree a voluntary cap.

But, this now means that clients will never recover 100% of their compensation, something that hasn’t quite sunk in for most of the general public.

What is now emerging is costs litigation between clients and their solicitors once a case has concluded.

For example, the Sunday Times, reported about Mrs Neal’s claim worth about £100,000 in which she received about £125,000, and her solicitors are now claiming a shortfall in excess of £150,000. Tragically she has now had to hire a second set of solicitors to dispute these costs.

Clearly the number in this case do not stack up and in fact Mrs Neal would have been better off if she lost.

Whilst technically under the CFA, Mrs Neal’s solicitors, were entitled to seek their success fee (capped at 50%) and the ATE directly from her, their costs still need to have been reasonable, and the client is entitled to have been provided costs information throughout the case.

Recourse in these type of cases unfortunately will usually involve further litigation (if it cannot be settle by negotiation beforehand) either by way of detailed assessment of those costs, or a professional negligence claim against the solicitors – which is probably the last thing a client needs having just spend time and expense in the first case.

Clients should now be aware that in the post LASPO climate, there is no longer an entitlement or guarantee of getting 100% of your compensation so a CFA is not always as attractive as it should to be. I have had clients specifically decline the offer of a CFA as they did not wish for the deductions from any compensation they might receive.

Guidance to consumers

A client should always read the terms of their CFA very carefully and weigh up what is at stake and the likely costs, to make an informed decision about whether having No Win No Fee is worth it; it wasn’t for Mrs Neal.