Nearly all of us have switched on the television, radio or other source of media to be greeted by an advert offering ‘no win, no fee’ legal services. These are common for accident and injury cases. Known as “conditional fee arrangements”, they have come under a lot of scrutiny recently. Those in favour argue they provide greater access to justice – poorer litigants without money can still pursue their legal rights. Opponents argue they encourage speculative claims that lead to a “compensation culture” of entitlement.

Consequently, they formed a considerable part of Lord Justice Jackson’s review into Civil Litigation, which was published in 2010. This article won’t delve too deep into the arguments on each side, but instead provide a quick overview on:

• the mechanics of these arrangements;
• how Jackson’s review proposed to change these; and
• how far his recommendations have been implemented.

The Mechanics of a ‘No Win No Fee’ Fee

These fees are made up of two parts – the standard fee, and the success fee. The standard fee constitutes the fee for the solicitors’ work. The success fee is a percentage increase that is added to the standard fee. This percentage is calculated on the perceived risk of losing the case: the higher the risk, the higher the success fee.

The success fee is there to cover the cases that a solicitor takes on, but loses, and so is not able to reclaim their fees from the losing party. The standard rule in litigation is that the losing party pays the majority of the winning party’s costs. Therefore if you lose your case, you may find yourself on the end of a Costs Order. (A Costs Order is an order made by the court as to who should pay the legal fees in a case.) To cover your potential liability for costs, after the event insurance can be taken out. As with any insurance, a premium is paid to take this out. As the law currently stands, if you obtain a costs order in your favour the insurance premium is recoverable.

Please note that this is an extremely basic overview of a very complicated subject and should not be considered advice on costs of litigation.

Jackson’s Review and where this currently stands

When Lord Justice Jackson published his review in February 2010, he made a number of recommendations regarding no win no fee arrangements. The first of these was removing recoverability of success fees from the paying party. Even when this is done, a lawyer can still recover the success fee from their client directly if this is the private arrangement between the two of them. It will only stop lawyers reclaiming the success fee in the court-awarded Costs Order. Secondly, Jackson recommended removing the ability to reclaim the insurance premium for any costs order. Practically, what this means is that any insurance premium or success fee will have to be paid out of any damages awarded.

To implement these recommendations the government is in the process of passing the Legal Aid, Sentencing and Punishment of Offenders Bill 2011. This received its first reading in the House of Lords on 3 November 2011, with its second reading yesterday (21 November).

If you have any questions regarding litigation or litigation funding, please feel free to contact Jon Finebaum on 020 7790 2000 or email him directly on jfinebaum@adamslaw.co.uk.

~ Richard Padley