In 2013, the Legal Aid, Sentencing and Punishment of Offenders Act was enacted to revise certain legal processes within the UK justice system.
Parts of this act contain provisions that completely overhaul the no fee no win arrangement, including the stipulation that the success fee paid to a solicitor now be paid by the claimant along with certain other legal costs, rather than be paid by the defendant.
Therefore, these revisions might make some possible claimants reconsider entreating into a no fee no win arrangement. However, for all intents and purposes the arrangement has been strengthened for all involved parties, and all it requires is that all involved parties understand the new process.
- Standard fees for small claims court
- Basics of success fees
- How success fees are determined
- Types of no win no fee damages
- What if damages are unpaid or small
- CFA insurance policies
- CFA for multiple claimants
- How a solicitor defines success
- Reasons for accepting a no win no fee case
- Asking a lawyer to cover personal costs
- Claimant plans
- The future of no win no fee
Though the law increases protection for the losing party, it does not automatically absolve them from all costs. It simply rectifies the practice of making a losing party pay beyond what is fair by making it illegal to endlessly fine them with costs.
The act does allow for some disbursements to be recovered from the losing party, depending on the type of personal injury case being handled and other factors like available financial resources. In some instances, legal expense insurance is allowed to also offer coverage for what the losing party cannot pay.
Preparing a no fee no win case costs solicitors a hefty bit of coin. Disbursements play an important part in preparing a case, so a lawyer wants to recover these costs. Custom and ethics infer that the payment of these services come from the clients, as it would make no sense for lawyers to pay for services they are hired to perform. Without these services, many solicitors would be unable to perform research or gather the paperwork necessary for winning a case. Such services include but are not limited to:
- barrister fees paid to cover court attendance,
- medical record costs paid to a GP or consultant,
- accident report costs,
- travelling expenses, ranging from travelling to interview witnesses to *picking up paperwork to arranging transport,
- conduct money; i.e., witness payments, including expert witnesses;
- payments for non-witnesses;
- VAT, if applicable, and
- an after-the-event insurance premium.
In addition to the above fees, there is the success fee, a staple of no win no fee cases.
The Basics of Success Fees
Conditional fee agreements (CFAs) of the no win no fee type help claimants with little money, as they delay payment of most upfront legal fees. They also help clients pay their lawyers a success fee. This is a fee in addition to the legal fees, one that serves as payment for winning the case.
This fee arrangement is quite commonly used in personal injury cases, and never allowed in criminal cases. The reason for that is because no monetary reward exists in criminal cases. When it comes to personal injury cases, the monetary rewards prove quite satisfactory. Cases such as car accidents, slips in the grocery, and medical malpractice are all common personal injury cases that can result in lucrative payouts to claimants and in turn, lucrative success fees for lawyers.
As previously mentioned, the new law bars lawyers from receiving their success fee from the losing party because it was considered one of the unfair burdens they had to endure. Now the success fee comes from the claimant’s settlement, also known as damages.
It is important to keep in mind that if a claimant loses, the law does not force a claimant to pay the lawyer for any legal costs. Furthermore, the claimant is not required to pay his or her opponent’s fees except in the following cases:
- the claim he or she brought to the court proves unreasonable,
- the claim exploited the court,
- the claimant lied and displayed overall behaviour of a dishonest nature,
- the claimant dishonestly filed suit to financially benefit someone else.
However, what many people don’t realise is that if they file the claim and lose, they are considered the losing party. The term “losing party” didn’t just apply to the party being sued, but also to the party who sued.
For instance, some claimants in the past agreed to a no win no fee arrangement thinking they would not pay any money if their claim was lost, but unscrupulous lawyers and insurance companies sometimes hit their losing clients with bills to cover an array of legal costs. They were able to do this via payment agreements that claimants did not understand.
This new act is designed to help prevent such instances. In light of what happened in the past, it seems to be a much needed improvement even though it requires the success fee to be paid by the claimant in the case of a win.
How Success Fees Are Determined
Success fee payments operate under several determinations:
- A success fee can be up to a maximum of 100% of normal fees.
- Success fees are capped in certain ways:
At first instance proceeding, they are capped at twenty-five percent;
All other proceedings are capped at one hundred percent.
An easy way to look at it is if a lawyer wins, he or she receives double the normal fee, and receives nothing if the case is lost.
It is always best to know what one is getting agreeing to ahead of time, so it proves wise to inquire about the process upfront, before signing anything. Though CFAs vary from law firm to law firm and case to case, anyone in need of the service of a solicitor for a personal injury claim can look at a standard CFA form via the Law Society’s website.
Types of Damages That Occur in a No Win No Fee
The damages recovered in a CFA no win no fee case are the following:
- loss of amenity, and
- pecuniary loss.
What Happens if the Damages Remain Unpaid or Are Small
If the losing defendant party refuses to pay damages, a claimant’s lawyer should pursue the damages by implementing a judgement for them.
Some solicitors will not require payment of a success fee if the damages recovered are so small, but that is not standard. Therefore, it is best to discuss this possibility ahead of time, so there are no surprises when the damages are received and most of them have gone toward the success fee.
However, a good portion of these cases are against entities that will have no trouble paying, such as medical entities or governmental bodies. Therefore, worrying about unpaid damages or small recoveries prove largely unfounded. Even if the defendant lacks money, insurance and other factors often play into the matter, helping ensure cost coverage.
Insurance Policies for CFAs
A claimant may be asked to take out an insurance policy to cover legal costs for the losing party, as the new Parliament act no longer allows this cost to be recouped from the losing party. Or, a claimant may wish to take out this insurance without urging from counsel. This policy is called after-the-event (ATE) insurance.
Some ATEs provide deferred and self-insured premiums. This delays the payment of premiums until the case is decided, and also helps avoid a lumps sum payment which could financially devastate clients. This means the insurance activates and covers the premium itself as well as any other costs stemming from a loss.
ATEs generally only apply to the claimants, but do extend to defendants and even both sides if needed.
An ATE premium depends on when it’s purchased. The further into the proceeding the ATE is purchased, the higher the premium. Increasing coverage as proceedings go along is allowed, though it means additional premiums apply to each new coverage phase.
When a claimant wants to purchase an ATE, the insurer requires certain information such as:
- a proposal form detailing the solicitor’s risk assessment of the case,
- explanation of the merits and estimates of the case; and
- the proposal form must include all pleadings, counsel’s opinions, and other documents.
Before the Legal Aid, Sentencing and Punishment of Offenders Act, insurers almost never expected premiums before the outcome of the case was decided. However, the new act means that premium collections are no longer delayed. Some may even expect money at the time of the ATE purchase.
ATE premiums taken out after the April 2013 enactment of the will not be recoverable except for the following case types:
- publication and privacy proceedings, i.e., defamation,
- mesothelioma, and
- reports on liability and causation in clinical negligence claims from an initial expert report.
This one factor of the law that is not particularly favourable for the claimant on appearance, but in exchange for the protection the ATE offers, it’s necessary.
As far as premium costs, they often range between thirty to forty-five percent of the insured sum. Insurers may agree to a lower premium if the insured agrees to a higher insurance excess. Additionally, the insurers may calculate the premium as a percentage of the successfully concluded claim, either reached by negotiation and/or in court.
CFAs for Multiple Claimants
It is not unusual for claimants to consist of more than one party. In a case of multiple claimants, CFAs become Collective Conditional Fee Agreement, or CCFA. These types of agreements are taken out by insurance firms or other such large organisations invested in the case. Therefore, the arrangement occurs between the organisation and the solicitor.
Each claimant still receives individual legal representation and must pay individual success fees and other costs, as applicable.
How the Solicitor Defines Success
The law requires that CFAs be put on paper, so no sort of handshake agreement or any such other nonsense will be entertained by a UK court. A large part of the CFA agreement deals with defining success. This is important because under the new act of Parliament, the success fee (or uplift) is no longer covered by the defendant. Therefore, anyone hiring a lawyer for a Small Claims Court case should want to know as well as inquire about the definition of success for the solicitor. Specifically, this means defining success clearly in writing for by all invested parties.
The Parliament act does outline certain stipulations, but there are always other concerns that must be addressed. Everything should be made clear.
Reasons for Accepting a No Fee No Win Case
It is of paramount importance that a person who wishes to make a claim understands that when a solicitor enters into a no win no fee that means the solicitor now commands a vested interest in the case. If a solicitor enters into this CFA agreement, it is because he or she feels the case commands merit and will be worth the time financially.
On the other hand, even if it is plainly obvious that the claimant has been wronged, a solicitor may not take a case if he or she feels it is not winnable. To do so would amount to working for free for an extended period of time, devoting endless hours and resources to a cause that will not payout. No other profession is expected to devote this time, energy, and money to a lost cause, and no one should expect a lawyer to do so, either.
In light of that, when a claimant receives repeated rejections on a possible claim, he or she should take that rejection as a sign that pursing legal action is not a good course of action. Solicitors wish to make money while helping people. If money is to be made on a case, they will be the first to admit it.
Some people who bring about these cases expect to be involved every step of the way by giving statements and answering inquiries on a regular basis. However, Small Claims Court cases often drag on and involve a seemingly endless amount of document review. These processes take a considerable amount of time.
The best thing that any claimant can do is to organise all his or her facts when presenting the case to a lawyer for consideration, and to maintain this organization throughout the process. Other than that, if a lawyer decides to take on a case, there may be very little direction interaction with the claimant other than requests for records or signatures; things that can be done quickly, for the most part. Claimants are expected to remain easily reachable by email, phone, or text, and to never delay the signing of important documents.
The lack of interaction should not be taken personally, or as a sign that the lawyer is not working on the case. Delay is the natural state of the CFA process and Small Claims Court in general. Claimant should understand, however, that the delay can never be caused by their lack of follow through. Acceptable delays only occur when document providers—doctors, governmental agencies, insurance, police—cause the delay. Or, the court appearances are rescheduled by the court. As long as a claimant responds quickly when contacted, and doesn’t withhold information or fabricate stories, then the claimant is working well with the lawyer.
Asking Lawyers to Cover Personal Costs
Some claimants feel a strong financial push to seek compensation for their cases. Dire circumstance caused by devastating injuries or redundancies can push a claimant to expect help in unconventional ways from their solicitors.
Lawyers may be able to help negotiate payment arrangements for certain financial obligations that a client has trouble meeting, but cannot be expected to cover the costs of such financial obligations.
Even though there is a good chance of a sizable reward in terms of damages, no lawyer should be expected to cover any costs based on this chance.
Another mistake some claimants make is to hedge his or her plans on winning the case, and in doing so overextending themselves financially. Overextending financially can mean purchasing unnecessary luxury items, going on expensive holidays, borrowing money from creditors, and borrowing money from family and/or friends, all to be paid off by court winnings.
These acts lend an air of desperation to the claimant if the claimant finds himself being hassled for the money, a desperate air that may even come back to haunt him or her if the financial factors arise during the proceeding. It looks bad because it looks like the driving force for pursuing the claim arises from outstanding debt due to an over extravagant lifestyle.
The Future of No Fee No Win
The changes to no win no fee have already been implemented, and have not interrupted the duties of a small claims court in the UK.
As of right now, anyone that filed a claim prior to the enactment of the law has a claim that is still being handled in the old way.
So far, the system has been able to function well in this dual manner. As the system closes more old cases , concerns about dual management will resolve because cases prior to the April 2013 enactment will be resolved.
The true concern about a Small Claims Court case is that no claimant sign an agreement with a solicitor until it is fully understood by all involved parties. If a claimant makes an effort to understand the process, it is far more likely to be a process that works out to a satisfactory arrangement rather than an arrangement that costs a claimant more money than ever anticipated.