The shifting Sands of ‘No Win No Fee’ – Why Law Firms are Being Investigated

How No Win No Fee broke!‘No Win No Fee’ is a bit like Marmite – people either love it or hate it! For me, No Win No Fee is a great thing, and very important, as it enables people who are on low income to get some legal aid when they might need it. However it has always had a bit of a negative image, and recently, law firms have been adding to this image by being investigated after not honouring No Win No Fee agreements.

No Win No Fee is more technically known as a ‘Conditional Fee Agreement (or arrangement)’ or a CFA. However, No Win No Fee has become more popular due to it’s simple nature of explaining exactly what it does. It is straight-forward, if you lose your case, you pay nothing. Your solicitor will have to pick up the bill, as they were confident enough of a win to sign a CFA in the first place. If you win your case, you pay the solicitor out of the compensation package you are awarded. The other bonus is that the losing party is usually responsible for at least some of the costs of YOUR solicitor, and the amount you pay your solicitor is limited to what they normally charge on a typical case, so you should walk away with the majority of your compensation.

However, recently there has been an increase of law firms refusing to honour the CFA, and attempting to bill their client after losing a case. Last year, the Legal Ombudsman said they have “…become increasingly concerned about the operation of ‘no win, no fee’ legal services. We have made conduct referrals to regulators about the way some law firms have handled these agreements…”. The reason for this appears to be that law firms are finding themselves in an increasingly competitive area, particularly around personal injury claims, and are having to offer no win no fee more than they feel is appropriate to get the business. When they lose though, the costs are starting to take their toll, and so they review the case fully looking for a way to accuse the client of ‘breaking the Conditional Fee Agreement terms’. They then charge the client for the fee of the solicitor’s time during the case.

The Legal Ombudsman identifed that two major components of these failures was ‘Unclear terms and Conditions’, and ‘Misleading advertising’. They also list a few case studies at the bottom of their report, with one reprinted here in full:

“Miss A was hit with a bill for the other side’s costs of nearly £15,000 by her law firm after her personal injury claim was unsuccessful, despite proceeding under what should have been a ‘no win, no fee’ agreement. The bill came as something of a shock to Miss A. Not only did the firm agree to such terms, it had taken out after the event (ATE) insurance on her behalf to
cover any costs – she thought all financial risks had been protected against. However, our investigator discovered that the firm had broken the conditions it had agreed with Miss A and her insurer by proceeding with the case despite it having less than a 50% chance of success. When the case lost, the insurance company refused to pay out. As a result the firm then tried to make Miss A pay for its mistakes.
Miss A was extremely upset. As far as she was concerned the firm had made it quite clear she wouldn’t have to pay anything if she lost the case. She was also worried about how she would afford it. She complained to the firm in the first instance but the firm claimed it had done nothing wrong. Miss A then contacted the Legal Ombudsman for help. We resolved the dispute informally by asking the firm to honour its agreement and pay the other side’s costs. Miss A told us that she was happy and relieved that we could help.”

It is good that the Ombudsman could help Miss A, but I imagine the torment of facing that bill, along with just losing a compensation case, was emotionally draining and damaging! The Ombudsman is taking steps to ensure that law firms offering no win no fee are taking proper staeps to ensure that when they offer these agreements, the claimant is fully aware of all terms, possible charges and obligations. By being transparent, it should reduce any misinformation and misunderstandings, and make it harder for any unscrupulous firms to take advantage.

Common no win no fee logo

Smart businessmen are already trying to steer customers to them on the back of this, with one firm doing personal injury solicitors Bolton area, positioning themselves as a ‘broker’ style firm, who pass clients to the right solicitor. They claim that because they aren’t tied to any firm in particular, they can ensure the client gets the best service from reputable solicitors. I would imagine this type of set-up becomes more prevalent, to help push out any small, ‘dodgy’ law firms. This could be a good thing, but a better method would be to make the whole process much clearer and ensure any terms are properly set out up front, as advised by the Ombudsman, however, we will see!

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