What
does NO WIN NO FEE claim mean?
Most personal injury
claims in the UK are run under Conditional FeeAgreements,
commonly known as "No Win No Fee" agreements.
This method of funding was established
by the government in 1995.
Previously, accident victims only had three real funding options:
eitherthey qualified for legal aid with its low financial
eligibilitythreshold, or they were in a union and qualified
for union assistance,or else they paid their legal fees (and
their opponents legal fees ifthey lost) out of their own pockets.
Very few had deep enough pocketsto fund litigation themselves
and so a great swathe of middle England,the MINELAs (Middle
Income Not Eligible for Legal Aid), wereeffectively disenfranchised
from the civil justice system.
The idea of No Win No Fee Agreements was that the accident victim (theClaimant) would only pay his lawyer if he won, and then he would recovermost if not all of those costs from the opponent. The client was leftwith having to pay his lawyer's success fee, a cut of the damages tocompensate the lawyer for the cost of funding the case and the risk oflosing. That success fee was capped at 25% of damages.
In 1999 the government legislated again to make the success feerecoverable from the defendant rather than from the Claimant, therationale being that if someone had to pay for it then it would bebetter to charge the person who caused the loss than to charge hisvictim.
Since 2000 the industry
has been mired in satellite litigationconcerning whether and
how much the Defendant should pay in these cases.But the "costs
war" has not unduly concerned the individual claimant.One
positive development of the No Win No Fee system is that Claimantsdo
not usually bear any risk for running their cases. If they
lose thenthe lawyer is simply not paid, and may indeed be
stuck with the cost oflegal expenses (court fees, medical
reports etc). If they win then theyoften have a guarantee
from their lawyer that they will retain 100% oftheir damages:
that there will be no deduction to cover any part of thelegal
costs. The lawyer keeps what he can recover in fees from theopponent.
This is not a perfect system but it offers certainty and risk freelitigation for Claimants. It guarantees them access to justice.
All is about to change, with the publication of the Jackson report oncivil costs in January 2010. Lord Justice Jackson has recommendedwholescale changes to the system of civil litigation costs and fundingwhich, if implemented, will completely change the landscape.
Jackson considers it unfair that Defendants or their insurers shouldhave to pay success fees and so recommends that the government repealsthe legislation under which they corrently pay them.
If the Defendant does not
pay success fees should they still be paid andif so by whom?
Jackson LJ suggests we go
back to the old regime where they are paid bythe client. After
all, he says, it is not right that Claimants shouldbe allowed
to litigate without any personal risk to themselves whetherthey
win or lose. He would compensate them by increasing damages
forpain and suffering by 10% and protect them by capping any
success fee at25% of their damages and ring fencing future
losses (such as careclaims).
It could be argued that
Claimant lawyers should do without success fees.After all
they get paid if they win and should not take on cases thatwill
lose. But the reality is that there are a large number of
claimsthat are potential winners at the outset but which lose
because ofinsufficient evidence or lack of fault on the Defendant's
part or anynumber of other reasons. Ours is after all a fault
based system wherethe Claimant needs to prove duty, fault,
and the extent of his loss inorder to win his claim and maximise
his damages. That is why he needs alawyer.
It is also a system without
legal aid so we rely on Claimant lawyers toprovide access
to justice for injured people. None can work for toolong without
getting paid and the lawyers need a success fee on thewinners
to be able to back a broad range of cases. Without the successfee
the lawyers would inevitably choose to run only the simpler
and lessrisky cases.
Are Claimants prepared in
the future to pay up to 25% of theircompensation in costs,
where they currently pay nothing? Is it rightthat they do
so? They may have no choice if these reforms areimplemented,
but it is a sorry state of affairs that will see theinsurance
industry rid themselves of the cost of success fees at theexpense
of the injured Claimant. The Association of Personal InjuryLawyers
(http://www.apil.org.uk/)
a campaigning organisation that fightsfor the rights of injured
people will be challenging the Jacksonfindings on this and
other issues. See their press release at http://www.postonline.co.uk/post/news/1586196/jackson-review-misses-point
Another option recommended
by Jackson LJ is that parties be allowed toenter into "contingency
fee agreements" for the first time in personalinjury
and other litigation. The Contingency Agreement differs from
theConditional Fee Agreement in that all the legal costs are
payable by theclient as a percentage of the Contingency Agreement.
No part of thecosts are recovered from the Defendant. Again,
the injured person istaking over from the Defendant the burden
of his legal costs.
If the Jackson report is
implemented then No Win No Fee agreements willsurvive, but
not in their current form, and accident victims will findthat
that they need to add on to the "No Win No Fee"
label the tag "Win= 25% Fee".
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