“The minute you read something that you can’t understand, you can almost be sure that it was drawn up by a lawyer.”
Conditional Fee Agreements
We’ve all heard of ‘No Win, No Fee Agreements, but do we all understand the implications of what we are actually getting into?
Conditional Fee Agreements, also called No Win No Fee, is a form of funding for civil cases, such as ‘personal injury’ in the Small Claims Track. There are normally 2 different forms of Conditional Fee Agreements in the UK:
Conditional Fee Agreement with Success Fee
With this agreement, if you lose the case, you will not pay ‘your’ legal costs, or depending on the specific wording of the CFA; you may have to pay reduced legal costs.
On the other hand, if you win the case, you will usually pay your own legal costs, and a success fee. The legal costs are calculated from the solicitor’s hourly rate, and the success fee is a percentage of the overall legal costs. In personal injury cases, the success fee should not exceed 25% of the damages awarded to you (this excludes Damages for ‘future care and/or loss). This ensures that you obtain 100% of Damages for any future care you may be entitled to.
In other cases covered by a Conditional Fee Agreement, the solicitor can charge up to 100% of their normal base costs.
Damages Based Agreements
These Conditional Fee Agreements can now be used in civil litigation, however; are normally used in Employment Tribunal Cases. The Agreement means that solicitors are not paid if they lose a case, but they can take a percentage of the awarded Damages, if successful.
The percentage amount they can recover from the client is capped:
- No more than 25% of Damages in personal injury cases (excluding future care and loss Damages)
- Up to 35% in Employment Tribunal Cases
- Up to 50% of Damages for all other cases
Claimants who are successful can recover their solicitor’s legal costs and disbursements from the other side, however; if there is a shortfall in the solicitor’s disbursement fees, the Claimant will need to cover the shortfall from their pay-out.
Disbursements arise out of the use of ‘expert witnesses’ and Barrister’s fees. A solicitor who operates on a Conditional Fee Agreement will, in most cases, instruct a Barrister who also conducts proceedings on this type of Agreement, which means that their costs may not become applicable unless you win.
Remember though, if the Barrister chooses to use Expert Witnesses in the Case at Court, these Experts ‘do not’ operate on Conditional Fee Agreements, and this would therefore come as a cost to you.
A Barrister, also called Counsel; may be operate under a Conditional Fee Agreement, however; this Agreement is made between the solicitor pursuing your Claim and the barrister they instruct. Rules of professional conduct state that only solicitors can instruct a Barrister.
Obviously, if the Barrister does not agree to pursue the matter under a Conditional Fee Agreement, their fees will be added to your disbursements. A barrister will usually not operate under these Agreements if your Case has a element of great risk.
(Before you sign your Conditional Fee Agreement, you should acknowledge that if the Barrister does not wish to operate on a Conditional Fee Agreement, and your case goes to Court, you may be paying for Barrister’s fees in excess of your Damages Award, which may leave you out-of-pocket, as you will need to fund these Fees out of your own savings.
(Solicitors may not always make this clear when getting you to sign No Win No Fee Agreements).
No Win No Fee does NOT only relate to ‘your’ legal costs if you lose the case. Although your opponent’s legal fees do ‘not’ operate under the same Agreement; if you lose after Court proceedings have commenced, you are liable to pay your opponent’s legals fees and expenses.
It is therefore worthwhile taking out BTE Insurance, before an event occurs, or checking to see whether this comes as an additional ‘add-on’ to an insurance policy you may already hold. For further information, see the following Article: BTE & ATE Insurance ATE insurance is also a possibility, however, as this insurance is taken out after the event, the premium tends to be rather expensive.
Remember, No Win No Fee is not as straight forward as it suggests. As with any Agreement, there is always an element of ‘risk’ however; when you assign yourself legally to take that risk, there is usually no way in getting out of it.