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‘No win, no fee’ - are clients being hoodwinked?
Dale Gibbons
At a time when a national broadcaster feels obliged to unpick (for the lawyer in us: alleged) misleading information from the leader of the free world[1], I almost choked on my breakfast when reading that we should also be concerned that some of us lawyers may be misleading the public too: 'No win, no fee' under fire: SRA vows to stop law firms hoodwinking consumers | Law Gazette Why now is a mystery; the term has been a feature of daytime TV advertising for decades!
Are clients being hoodwinked? This blog takes a look at what information clients should expect when bringing or defending a civil claim on a ‘no win, no fee’ basis and the costs liabilities they may incur even if they do not win.
Firstly, a ‘no win, no fee’ agreement is known as a conditional fee agreement (CFA). A CFA covers legal fees a firm such as KN will incur on behalf of the client. It may also include the firm’s disbursements such as court fees and experts’ fees but potentially barristers’ fees too (unless they act on a CFA). The starting point: if the client does not win, then no legal fees (or potentially, disbursements) will be payable by the client.
The fact there is a ‘starting point’ may be why the SRA view the marketing term ‘no win, no fee’ as misleading. However, a CFA and its supporting paperwork should set out the circumstances in which legal fees, disbursements and any other costs become payable.
Below is a brief overview of some of the most common.
Great news, the client has won, and by the very nature of a CFA, the legal fees become payable.
The firm will also be allowed to charge an uplift on their fees: a ‘success fee’. A success fee can never be more than 100% of the legal fees and it is calculated based on the prospects of success (a further statutory cap applies in clinical negligence and personal injury claims). The key purpose of a success fee is to compensate the firm for the financial risk they take for acting on a CFA basis. It is only payable by the client and cannot be recovered from the opponent.
By definition, for every winner there must be a loser. In this event, the CFA should confirm that the legal fees are not payable (again, the disbursements may be included but sometimes they are not). In most if not all clinical negligence and personal injury claims, claimants are advised to purchase legal expenses insurance to cover the risk of paying disbursements. However, these are usually self-insured policies meaning that the claimant will only pay the premium in the event they win their claim (as with insurance products generally, the need for transparency and honesty when purchasing a policy is important).
There appears to be a concern that the marketing is not clear enough that the ‘no win’ element ignores the potential risk of paying a successful opponent’s costs. The risk is dependent on the type of claim:
There are other circumstances in which costs may be payable:
For (1) and (2) and where the QOWCS rules apply, (subject to the exemptions above), orders for costs made against a claimant may be enforced without the permission of the court but only to the extent that the aggregate amount in money terms of such orders does not exceed the aggregate amount in money terms of any orders for, or agreements to pay or settle a claim for, damages, costs and interest made in favour of the claimant.
Are clients being hoodwinked and is the marketing misleading to such an extent that clients do not understand what they are signing up to? Small print has long been a feature in marketing campaigns and lawyers seem to be held to a higher standard than other professional services providers. It is not for me to decide.
At Kingsley Napley LLP, we strive to present our clients with clear information and advice on funding options, including what it means to instruct us on a ‘no win, no fee’ basis. We act for claimants and defendants across a wide range of legal disciplines.
Top-ranked in Chambers UK and Legal 500, our costs lawyers are instructed by other law firms but also their clients, and insurers and litigation funders seeking costs dispute resolution, costs advice or costs auditing services.
About the author
Dale Gibbons is a Costs Lawyer and Legal Project Practitioner, specialising in litigation funding, costs management and costs assessment proceedings.
At a time when a national broadcaster feels obliged to unpick (for the lawyer in us: alleged) misleading information from the leader of the free world, I almost choked on my breakfast when reading that we should also be concerned that some of us lawyers may be misleading the public too: 'No win, no fee' under fire: SRA vows to stop law firms hoodwinking consumers | Law Gazette Why now is a mystery; the term has been a feature of daytime TV advertising for decades!
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We welcome views and opinions about the issues raised in this blog. Should you require specific advice in relation to personal circumstances, please use the form on the contact page.
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Dale Gibbons
Waqar Shah
Jemma Brimblecombe
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