No Win No Fee

An Explanation of How No Win No Fee Arrangements Work

Companies and people can take a case against other organisations without the risk of having to meet major legal costs, by agreeing a no win no fee arrangement with a law firm in the John Kennedy network.

But, what exactly is a no win no fee arrangement and how does it work?

Everybody has become accustomed to no win no fee arrangements in personal injury matters.  Generally speaking, liability is not a huge issue in personal injury cases, for instance, if someone hits your car from behind and you get a whiplash injury, there is not a lot to argue about in terms of whose fault it was.  That is why, in many cases, if you are making a claim, you will get all of your compensation. 

However, when it comes to business disputes and commercial claims, it is not always 'cut and dried'.  Very often, the case can be complicated; you may need more evidence, the person you are claiming against may have a good argument,  a counterclaim or investigations may need to be carried out to find out if the potential defendant has any assets.

The real name of a no win no fee arrangement is a Conditional Fee Agreement (CFA).  Solicitors are allowed to run cases on this basis because the law allows it.  Previously, solicitors were restricted from doing this and they were also still restricted in many instances from running a case on a contingency fee basis (where they take a share of your winnings). 

This is how a CFA works:  The solicitor signs you up to a CFA which means that they do not get paid until the end of the case, therefore, they are risking their own cashflow.  They do all the work and at the end of the case, they will draw up a bill.  If you have won, they present the bill to the other side (the loser) for them to pay and, generally, all things being equal, the Court will order the other side to pay it.  Everybody in the legal profession in England and Wales is quite accustomed to this as it is the way we have been doing it for a very long time - the loser pays - it is known as "costs shifting".

However, just as in everything, there are some exceptions.  For instance, the Court may decide that your solicitor's bill is too high and there are items that should not be paid by the other side.  There are rules and guidelines that the Courts work on - it's not just down to the whim of the Judge.  Or the Court may feel that some behaviours by the Claimant do not warrant them achieving payment of all the costs.  Also, sometimes "a win" is not always what you might expect it to be which may cause problems with the order for the payment of costs.

The way the English law works, means that even though you are signing up to a no win no fee arrangment (CFA), you are always in contract with your solicitors and are liable to pay their bills for the work you do for them.  Due to our quirky legal system, if you are not liable for the costs then you cannot claim them from the loser.  This is an essential point to remember, however, when you sign up to a CFA the solicitors are foregoing their right to make you pay the bill at the end if you lose.  Occasionally and in a very few cases there may be a shortfall between what the court orders the losing defendant to pay and the full extent of your costs and the solicitor is now entitled to claim his "success" fee from you.  This can, be paid out of the compensation or damages you or your company has won and will usually be a proportion of the damages or compensation won.

There is a risk that if your opponent has got no money and you win, you could end up paying your solicitor's bills.  The arrangement is a no win no fee but if you do win, you are liable to pay your solicitor's fees in accordance with English law.  It is essential, therefore, that the potential defendant has sufficient assets to pay, not only your damages if you win, but also your solicitor's fees which can be substantial if the case has gone all the way through the courts. Furthermore, you are expected to tell your solicitor the truth.  If you do not do so and it is subsequently discovered after your solicitor has carried out work on your behalf, you will be liable to pay those fees.

Also, your case may not be as clear cut as you might hope.  In this case, the solicitors may offer you what is commonly known as a discounted CFA - in other words, they will charge you an hourly rate come what may but it will be a lot less than their usual hourly rate.  If you lose, you will have to pay your solicitors this lower hourly rate but if you win, they will claim it off the loser.

Another way of funding your case may be by asking someone else to pay for it.  This only works if your claim is for a substantial amount of money (probably in the region of £1 million or more).  This is known as 3rd Party Litigation Funding.  If you are able to fund your claim in this way, the funders will take a substantial portion of your winnings at the end.  Nevertheless, it is a good option if your business needs to maintain its cash-flow and you need to litigate.  Finding the right 3rd Party to fund your litigation is all part of John Kennedy's Litigation Concierge service.

Finally, there may be some costs to pay up front.  As we said earlier, commercial claims are not always as easy to win as personal injury claims and there may be some investigations to be done as well as a risk assessment by the solicitors.  Depending on the value of your claim, you may be expected to pay for this up front.  This may be in the region of £750 to £2,500.  However, you will not incur this charge unless you have been informed clearly at the beginning (before you have spent any money whatsoever) and you agree to go ahead.  It does not mean that your solicitor will definitely take your case on a CFA but it will give you a much better idea of the prospects of your case and whether it is worth proceeding with.

How do the solicitors make their money?  Well, as we said at the beginning, it is their cash-flow they are risking and as it says on the tin, if you don't win, your solicitors do not charge you their fee.  They are, of course, in business and need to make a profit so the law allows them to charge an uplift on their fees if you win.  Remember, it is not you who are paying the base fees but the loser, however, your solicitor may look to you to pay the uplifted fee.  This can be as much as 100% of the solicitor's base costs.  This, in effect, compensates them for the cases they lose and makes it a viable proposition for them to do no win no fee arrangements.  Also, they will have taken out insurance on your behalf to cover the risk that if you lose, you will be liable to pay the winner's costs (this insurance is called After The Event insurance or ATE).  In most cases you will not be expected to pay the premium up front (as these can be very high).  Usually, you are only liable to pay the premium when you win and it will be deducted from your damages.  If you lose, you are not expected to pay it and it is the insurer who has taken the risk in this case.  

Other costs you are likely to incur are the costs of issuing the Court documents (the claim form) and other Court costs, the costs of any experts you may need to prove your case (ie surveyor, medical expert, etc) who have to be paid for their reports and any other expenses incurred in taking a case to Court (train fares, hotel stays, etc).  Unless a particular specialist barrister is required, it is likely that your barrister will be representing you on a Conditional Fee Agreement as well.  Remember though that if you have had to pay fees up front, you are likely to get most of these fees back if you win.

When you use our services and we place your claim with one of our panel solicitors, all this will be explained up front by your solicitor so you know where you stand.  The conversation with us is free and the initial conversation with the solicitor is free for you.  At that point, you and they can decide if you want to proceed and whether they will offer a full CFA, a discounted CFA or will only represent you on a paying basis.  The point is, you are fully informed and can make your decision whether to proceed with your case knowing the risks and how much it is going to cost you.  John Kennedy also works on a no win no fee basis.  If your case goes ahead, then we will charge you a fee of 8% plus VAT of any damages you receive after all legal costs have been deducted.  These charges are incurred whether the case is settled prior to any Court case or they are awarded by a Judge after a fully litigated claim.  These charges will be deducted from your damages and paid to John Kennedy Limited before your damages are paid to you.  If you lose, however, John Kennedy will not make any charges.  No win no fee!

No win no fee has never meant no win no cost but it does mean that if you lose, you can walk away without having spent a great deal of money to lose - merely the initial costs as mentioned above and the court fees and possible expenses.  In other words, you can risk taking your case forward in the sure knowledge that you are not going to be lumbered with a huge bill for costs at the end of the case.  This means that you have access to justice at a reasonable price and have the opportunity of getting what is due to you through the Court system without it costing a fortune and putting you out of business or losing your house.  It's a bit like having your cake and eating it!

Far too few UK-based companies and individuals take advantage of no win no fee commercial litigation, though it is open to most types of cases.


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