Most people will be familiar with the term “no win no fee” and that it relates to lawyers acting on someone’s behalf without charging them. As with most legal terms, many people are mistaken as to how this type of retainer actually works and the issue of how legal costs are calculated. Attwood Marshall Lawyers Legal Practice Director Jeff Garrett explains the “no win, no fee” agreement in his latest interview with Steve Stuttle on Radio 4CRB.
What is “No Win No Fee”?
While there are various versions of “no win no fee” agreements, the most common arrangement is where you engage a lawyer to act on your behalf where the lawyer will only get paid the fees that you have agreed to pay the lawyer if you “win” your case. If you lose your case, the lawyer won’t charge you for the work that has been done or the expenses that have been paid on your behalf (if this is what you have agreed to with your lawyer – sometimes you have to pay the expenses or disbursements). You would think that such an arrangement is relatively straightforward, however, nothing could be further from the truth!
The most common case where a lawyer acts on behalf of a client on a “no win no fee” basis is in a personal injuries claim. For example, if you are involved in a car accident and suffer injuries, you can usually engage a lawyer to act on your behalf on a “no win no fee” basis.
In most cases, the lawyer will act on your behalf in relation to the claim including spending any money that is necessary to obtain medical and expert reports which might be required to prove your case.
Most motor vehicle accidents are straightforward, and it is fairly easy to work out who was at fault. To succeed in a case involving an accident, you need to establish that the accident was caused due to the negligence of the other driver or the driver of the vehicle in which you are a passenger. Pedestrians can also claim against a driver at fault and it is rare that pedestrians are held to be liable.
Prior to a lawyer taking on your case, they are bound by law to provide you with a disclosure document and costs agreement. This agreement sets out the basis upon which the lawyer will calculate their fees that they are going to charge you. Lawyers are not allowed to charge a percentage of claims as is the case in the USA. There are various ways that a lawyer charges, including hourly rates, lump sum fee agreements, and item charges based on the relevant court scale (or a combination of these options). In many cases lawyers who accept cases on a “no win no fee” basis impose a contingency fee or “uplift fee” which is capped at no more than 25% of the total of the professional costs charged (not including the disbursements).
Disbursements and Outlays
While some firms agree to pay all of the report fees, court filing fees and expert report fees on behalf of their client, many lawyers (including the larger firms) take out a “litigation loan” from a financier to effectively borrow money at commercial rates to pay for these expenses.
Quite often the interest rates are very high and matters can take quite some time to settle which means that the interest bill will be charged on top of the usual fees. It is also important to be very clear about if you lose the case who is going to pay for these disbursements. In many cases the agreement provides that the client is to pay for these expenses in the event that the case does not succeed, or you receive an amount which is less than what you expected.
NB: Attwood Marshall Lawyers don’t take out loans and normally cover all the disbursements and outlays on cases accepted on a ‘no win no fee’ basis.
What is the definition of “win” and what happens if you don’t receive enough for your claim to cover all the costs?
Normally the definition of a “win” is that you obtain an award of damages or you settle your case for an agreed amount of money. In cases where liability is not in dispute, the injuries are severe and the impact on the client’s life is significant, there is usually no question about the amount of damages being recovered being enough to provide compensation to the client as well as cover the legal costs and disbursements to the lawyer.
In cases where liability is contested or where the damages awarded are not as high as is expected (perhaps due to pre-existing conditions etc.), the law in Queensland protects clients by applying the “50/50 rule”. This basically states that the lawyer cannot charge you any more than 50% of the damages that you recover in the case (but only if the agreed costs exceed 50% of your damages award). Many people confuse this law by thinking that lawyers are entitled to automatically charge 50% of your damages award in Queensland. This is not the case. The 50/50 rule only applies in the cases where the legal costs exceed 50% of your settlement amount or your damages award. This can happen due to a number of reasons, but most cases don’t attract the operation of this rule.
One of the main problems is that clients do not properly understand the costs agreement that they are entering into. It is very important that they understand the method of charging and the estimate of costs that is provided to them by their lawyer. Usually the costs will be higher if the matter is complex and involves a significant amount of time and effort being spent on the case. If the matter does not settle at mediation and goes to court, the costs can reach hundreds of thousands of dollars. Thankfully, the vast majority of cases settle at mediation in most personal injury cases and only a very small percentage make their way into court.
Should I enter into a “no win no fee” agreement?
For many people they have no choice except to engage a lawyer who provides a “no win no fee” service. The legal costs of pursuing a claim and being represented by a lawyer are usually very high and many people simply cannot afford to pay these costs up front or to pay for the disbursements required for medical report fees and expert’s reports.
The lawyers who act on a “no win no fee” basis perform a very important function of allowing everyone the right to access justice in our Court systems. Many people do not qualify for Legal Aid and the types of claims that are covered by the scheme are very limited. Accordingly, “no win no fee” lawyers perform an extremely important function in our society, although they are often attacked by governments and insurance companies for providing this service. It is little wonder that the government and insurance companies are the ones who have to payout these claims where “no win no fee” lawyers act and therefore seek to make things as difficult as possible for the injured claimants and their lawyers. If it were not for the lawyers being prepared to do this, many people would be unable to obtain justice for their claims.
Types of cases where “no win no fee” arrangements apply
Most personal injury claims are accepted on a “no win no fee” basis. This is because the injured person is entitled to compensation and quite often some component of the legal costs are recovered as part of their process. The lawyer takes on the case on the basis that they will be paid when the claim has been successfully concluded and paid for by the government department or insurance company responsible.
Insurance Companies and Government agencies
There are other types of compensation claims generally against insurance companies and governments that can be taken on a “no win no fee” basis. For example, if a person’s house burns down and the claim is denied by the insurance company (which often happens), you may need the assistance of a “no win no fee” lawyer to force the insurance company to payout on the policy. Similarly, there are many policies where insurance companies refuse to indemnify the customer and quite often legal proceedings are needed to extract the money for the claim out of the insurance company.
Another increasing area is the mismanagement and negligence by the State Government Public Trustees around Australia. Although these government instrumentalities are responsible for looking after minors who are not old enough to conduct their own affairs, people who have a disability or lack mental capacity to conduct their own affairs, and elderly people who have lost capacity due to dementia, they are regularly involved in the gross negligence and/or mismanagement of the financial affairs for these people.
Most government instrumentalities deny any liability and the families of the affected people are forced to take proceedings against them for compensation and to have them removed as the financial managers. Although this is a more specialised area of law and only some firms agree to take these matters on a “no win no fee” basis (such as our firm), it is becoming an ever increasing area of litigation and most families do not have the financial resources to pay lawyers to act on their behalf.
The types of commercial litigation that lawyers will accept on a “no win no fee” basis are fairly limited. Usually commercial litigation is far riskier than running a compensation case for a personal injuries claim. In commercial litigation matters there is no guarantee that you are going to receive the damages claimed or that the person or company you are suing will have the money to pay the judgment even if you are successful.
However, there are certain cases that we regularly accept instructions on a “no win no fee” basis against banks, financial planners, accountants and other professionals. Once again, these cases need to be looked at very carefully in terms of whether they have prospects of success, but usually if the client’s financial circumstances means they are unable to afford paying for a lawyer to take these proceedings on their behalf, we will always look carefully at these cases and, where appropriate, take them on a “no win no fee” basis.
Cases against the banks and their inhouse financial planners for negligent advice are far more prevalent after the Banking Royal Commission and we regularly accept instructions in these cases on a ‘no win no fee basis’. Likewise, actions for losses suffered as a result of professional negligence by financial planners, accountants, lawyers, and other professionals are regularly accepted on the same basis, subject to the usual preconditions of the client having reasonable prospects of success in their claim, including payment. In most of these cases there is a professional indemnity insurer who can pay even if the professional ceases operating or dies.
There are many lawyers who accept instructions to contest the validity of Wills and/or to bring a provision claim against the estate in circumstances where someone has been left out of or not properly provided for in a Will. This is a very specialised area that only certain lawyers accept (we are one of them) and, once again, the usual pre-condition is that the client has reasonable prospects of succeeding in a claim against the estate. There also needs to be sufficient assets in the estate to pay any claim that may be awarded (including legal costs).
Difference between “no win no fee” and pro bono
Many people confuse the terms “no win no fee” and pro bono. While “no win no fee” is taking on a case subject to being successful and obtaining damages or a payment as the pre-condition to charging, if a lawyer takes a matter on a pro bono basis they usually do not charge anything to act on the matter.
While some of the larger firms do a certain percentage of pro bono cases, it is becoming increasingly difficult for lawyers to act on a pro bono basis. Lawyers are the same as other business owners and have expenses to pay. If they are taking on “no win no fee” cases which can take years to result in a judgment and costs to be paid, it is very difficult for some lawyers to fit in doing true pro bono work as well as the “no win no fee” cases.
There are many community and government funded legal centres that take on pro bono cases. There are many lawyers who take on pro bono cases on a selective basis and sometimes it is worth asking whether the matter can be done on this basis if a “no win no fee” arrangement is not available.
When is “no win no fee” available?
If there is a case for damages against an insurance company, bank, a professional with indemnity insurance or the State or Federal governments, lawyers will normally take these cases on a “no win no fee” basis. Criminal cases would not be eligible (even if you “win” and get acquitted, it is very difficult to obtain legal costs from the Crown). Normal conveyancing matters, property transfers, Wills and other run of the mill legal work cannot be taken on a “no win no fee” basis as there is no compensation payable down the track.
How can Attwood Marshall Lawyers help?
We are committed to providing you with affordable solutions in order to resolve your matter as quickly as possible. Our team communicate clearly and effectively so that you know where you stand up front. We want to support you in your journey for justice and will advocate and fight for your rights and ensure you have the legal representation you deserve.
Whether you are making a workers’ compensation claim, claiming compensation for someone’s professional negligence, or contesting a Will and trying to bring a provision claim against an estate, we are one of the specialised law firms who can take eligible cases on a “no win no fee” basis*. Our “no win, no fee” guarantee will ensure you don’t need to put your hand in your pocket to get your claim underway.