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What to do when you sign up to a “no win, no fee agreement” in a personal injury case
The terms of a "no win, no fee" agreement (the correct legal terms is a "Conditional Fee Agreement" or CFA for short) can have a dramatic effect on the amount that you receive from your compensation at the end of a personal injury claim, so it is important to understand them properly.
In many cases the explanation that is given to you verbally in your first call with the solicitors does not properly explain the true effect of the agreement, and you should consider the documentation itself carefully before signing up, or within the 14 day "cooling off" period that is required under the rules.
Often the explanation given by the solicitors is that they will deduct 25% (or sometimes as much as 35%) of your compensation at the end of the case to cover their fees, and that is presented as if it is the industry standard, giving the impression that there is not really any point in you shopping around. But the percentages are actually limits on what the solicitors can deduct in respect of legal fees, not fixed percentages, and the way in which your legal fees are calculated is actually much more complex than applying a percentage to your compensation.
Here are examples of the sort of difference that the precise wording of your CFA can make to the amount that you receive. In each example we have looked at a claim for compensation for a road traffic accident, which was dealt with through the "road traffic accident portal" and was settled without proceedings being issued, which is by far the most common outcome for most road traffic accident cases.
A "No win no fee agreement" that is heavily weighted in favour of the solicitor
Compensation awarded : £5,000You receive : £3,250
A "No win no fee agreement" that is fair to the client, and complies with all of the relevant rules
Compensation awarded : £5,000You receive : £4,910
What should you look out for for clues that your CFA might be a bad one?
CFAs can be long and complex, and come in different formats, but they should all contain the same basic ingredients. Some of the headings that we refer to below might be worded slightly different, but you should be able to identify them relatively easily. If you cannot, that alone is a sign that the CFA may not be in your best interests.
Under the heading "basic charges"
Are the hourly rates significantly higher than £217 for the most experienced solicitor, and £118 for the most junior fee earner?
Does it say that you will have to pay any shortfall in the basic charges not recovered from the other side?
Does it make any reference to waiving your rights under section 74(3) of the Solicitors Act 1974?
Under the heading "success fee"
Is the success fee set at 100%? If so, unless it sets out risks that are specific to your case, that should be a warning sign
Is one of the factors in setting the success fee something along the lines of "we apply X% in every case as standard" or similar? If so, you should probably think again.
If your case is a straight-forward road traffic accident, any success fee higher than 15% should sound a warning bell
The success fee should reflect the real risk of not winning your case. Only cases where the chance of winning are 50% or less should attract a 100% success fee. A case with a 75% chance of winning should attract a success fee of 33%.
ATE or "After the Event" Insurance
In road traffic accident cases in particular, it is debatable whether you actually need "after the event" insurance at all. This is because the law is quite clear that if you lose your case, unless you are found to have been "fundamentally dishonest" you will not be ordered to pay the other side's costs.
There is no risk of you being ordered to pay the other side's costs unless and until court proceedings are issued. In the vast majority of cases that does not happen.
If the solicitors say that they will not act for you unless you take out this insurance, you should consider going elsewhere.
If the cost of the insurance policy is more than £100, that should sound a loud warning bell. If a policy is necessary for some reason, they are available for less than £100.
Finally, you should check that you do not already have insurance cover or Trades Union Funding
The solicitors should have asked you to check for this, but they often gloss over the impact. If you do already have legal expenses insurance or Trades Union membership that will cover a claim, the likelihood is that you do not need a "no win, no fee" agreement at all. Your insurance / Trades Union will pay your legal fees as well as covering you for any risk of having to pay the other side's costs, so you would receive the full amount of your compensation without any deduction at all for legal fees.
You should check in particular-
Your motor insurance policy
AA / other motoring organisation membership
Home insurance policy
Add-ons to credit cards
You should ask immediate family members to do the same, as their policy may well cover you
What to do if your CFA is a bad one?
The document should have as part of it, or sent as a separate document at the same time, a "Notice of the Right to Cancel" which gives you the right to cancel within 14 days without giving any reason. You can use this form, but you do not have to. You can simply email the solicitors saying "I hereby give notice that I cancel my contract for the supply of legal services"
Bear in mind however that if you have already signed the "Request to start work during the cancellation period" form, this could lead to you being charged for any work that has already been done.