Conditional Fee
Agreements (No Win, No Fee)
Background
During the ’70s and ’80s, successive governments of of
both parties continued to reduce eligibility for legal
aid, leaving a vast chunk of the public no choice but to
pay for legal advice.
It was felt by many that access to justice was
restricted to the very rich who could afford to pay
privately and the few who still qualified for legal aid.
Pressure on successive governments to reduce the legal
aid budget continued. This culminated in legal aid being
removed for all personal injury litigation in January
2000.
In order to increase access to justice, legislation was
introduced which ran in parallel with changes in the
Civil Practice Rules. It was believed that these changes
would encourage early settlement of disputes and
increase the proportion of the population who could have
access to legal advice.
In April 2000 regulations were brought in enabling
litigants to instruct legal advisers on what is now
known as a no-win-no-fee basis.
The way for this had been paved to some extent by the
introduction of the Civil Procedure Rules in 1998. These
brought in a number of new concepts. At the same time
pre-action protocols were introduced in many areas of
civil disputes. One of the first protocols brought in
was in relation to personal injury litigation.
The rules also brought in the concept of allocating
civil claims to a track. There are 3 tracks, and the
selection of the appropriate track is generally governed
by the financial value of the claim, disregarding
interest, cost, and contributory negligence.
The Small Claims Track
A small claim is one:
- which has a
financial value of no more than £5000;
- where in any claim
for personal injury the financial value of the claim
is not more than £1000.
The Fast Track
A fast track claim is one where financial value of the
claim does not exceed £15000.
The Multi Track
A multi track is the normal track for any claim for
which the small claims track or fast track claim would
not be appropriate. Any claim in excess of £15000 in
financial value is deemed to be a multi track claim.
The small claims track is designed to encourage
litigants to take their own cases to the courts. The way
in which this is facilitated is through the recovery of
costs. It is fundamental principle of English law that
where a party is successful, the opponent is ordered to
pay the successful party’s legal costs. In the small
claims track the successful party’s entitlement to costs
is limited to the cost of issuing the summons, plus a
fixed amount. Both of these costs are negligible.
In fast and multi track claims the successful party will
recover their legal costs on the standard basis. This
means that the successful party will recover all costs
reasonably incurred. The costs include the successful
party’s lawyers’ fees and the expense of investigating
and pursuing the claim. Expenses would include
barrister’s fees, medical expert’s fees, liability
expert’s fees, and the expense of obtaining GP and
hospital records and police accident reports. It follows
that in a personal injury case involving financial value
in excess of £1000 the claimant will recover costs and
expenses. (See below).
Conditional Fee Agreements
The Access to Justice Act brought in the concept of
Conditional Fee Agreements. It is a principle of English
law that a successful party can only recover its legal
costs if there is a written agreement between it and the
legal adviser. Since 1 April 2000, a litigant can retain
the services of legal advisers under a Conditional Fee
Agreement. Under this agreement, the client agrees to
pay his advisers’ fees, but this liability does not
arise unless the claim is successful. This is commonly
known as no win no fee. Success is defined as settlement
in negotiation or at trial.
A successful claimant is entitled to recover the
following from the losing party.
Basic Costs
These are costs charged by the solicitor. The time spent
on the file is calculated on an hourly basis with
letters and telephone calls charged separately. Letters
and telephone calls are charged by dividing the hour
into 10 units, with each telephone call of less than 6
minutes and a letter out charged at one tenth of the
hourly rate.
Success Fees
As the adviser would not be paid by the client unless
the claim is successful, the concept of success fee was
introduced. Thus, apart from basic costs, the adviser is
entitled to charge the client a success fee. This is a
mark-up on the hourly rate. The maximum success fee is
100%. The success fee is determined by the adviser at
the first stages of instruction. A number of factors are
taken into account in arriving at a figure for the
success fee.
The Court of Appeal recently adjudicated on the
claimant’s right to recover success fees, and the
appropriate percentage where claims are settled before
the commencement of proceedings. It held that in
straightforward road traffic accident cases the
claimant’s advisers could not justify a success fee in
excess of 20%. However it did not lay down rules that
20% or more could not be charged by claimant advisers.
After the Event Insurance Premiums
Where claims were pursued with the benefit of public
funding the successful party used to get an order for
costs, but there was always a qualification that such an
order for costs could not be enforced without leave of
the court. This was often known as the ‘Pools’ Order. In
practical terms this was of very little benefit to the
insurance industry. It was never practical to keep a
file open in order to return to the courts and seek
leave to enforce the costs order.
A claimant runs the risk of having to pay the opponent’s
costs in the event that a claim, having been started, is
abandoned, discontinued or lost at trial.
In addition to basic costs and success fees, a
successful claimant can also recover the premium paid
for after-the-event insurance. There are a number of
providers of this type of insurance in the market. We
have experience of buying this cover from Amicus Legal
Limited.
The Court of Appeal recently confirmed the claimant’s
entitlement to premium even on claims settled without
the issue of proceedings and within the pre-action
protocol period of 3 months. The paying party’s right to
challenge the amount of basic costs, success fees, and
the premium, remains unaltered.
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