Conditional costs agreements, more commonly known as no win no fee arrangements are mostly offered to plaintiffs in personal injury cases. The reason for such agreements is to ensure that people who have been injured due to someone else’s negligence can access legal representation regardless of whether or not they have the financial capital available to pay their legal fees upfront.
With some law firms, a no win no fee agreement does not guarantee a plaintiff pays nothing if they lose. In this article, we’re going to cover what you need to look out for before agreeing to sign a conditional costs agreement.
What is a ‘no win ‐ no fee’ costs agreement?
In a ‘no win ‐ no fee’ costs agreement, a law firm makes an agreement with a plaintiff stating that “the legal costs associated with their claim will only be deemed payable upon a successful outcome.
To put it simply, this means that the legal practice agrees to take the financial risk on behalf of the plaintiff in case the claim unsuccessful, and if it is, they will not pursue the plaintiff for the fees. On the other hand, the plaintiff agrees to pay the firm only if their claim is successful. However, it’s worth noting from a plaintiff’s perspective, that in most cases, the legal costs are recovered from the losing party or their insurance company.
However, agreements aren’t always simple and there are many other important factors that should be taken into consideration before agreeing to or signing any contracts. For example, depending on who you are making your claim with, you may be covered for the lawyers own professional fees but their disbursements.
Legal costs are broken down into two categories, professional costs and disbursements.
These are monies the law firm has spent in while fighting a case and may include things such as court filing fees, barristers’ fees, expert reports and testimonies. Not all law firms will automatically cover disbursements in their ‘no win ‐ no fee’ agreement. However, if a firm might not offer to cover disbursements from the offset if you really want them to act on your behalf, you may be able to negotiate a better deal with them. This is why it’s important to have basic knowledge of no win no fee before making any commitments.
Most people who practice law are hardworking honest people, but some that may be out to get you so be careful.
Professional costs are monies charged for the law firms time, effort and expertise. While most legal firms are happy to carry the risk for their own fees, it is very uncommon that they will be willing to pay the other party’s legal fees if your case is unsuccessful. Normally, when a case is lost, the losing side will be the ones who foot the winning side’s costs.
If and when you win your case, the law firm will usually deduct their fees from your compensation when it settles.
What types of matters are covered?
Conditional costs agreements can not and are not applied to all legal matters. The reason being it is so common in personal injury is that the firm can easily, in most cases, determine whether or not there will be money available to cover their costs well before any legal proceedings commence.
So what personal injury claims are covered? The short answer to this question is that all personal injury claims may or may not be covered depending on who you ask to represent you. For example: If you ask someone who is inexperienced to take on what looks like it could be a long and complex legal battle, you will probably find that they will not be able to offer you a conditional costs agreement. However, if you were to ask someone with years of experience who has practised successfully in that area, they will be more inclined to help.
Some of the most common claims that warrant conditional costs agreements include:
- Workplace injury claims
- Public place accidents
- Medical negligence
- Motor accident claims including whiplash, in NSW, VIC, QLD and WA
What if my lawyer can’t offer me No Win-No Fee?
Unfortunately, by law, law firms are not required to offer ‘no win ‐ no fee’ to plaintiffs. In fact, some firms don’t offer costs agreements at all. It all depends on the individual law firms’ personal preferences.
At Millner and Knight, our panel of law firms are 100% ‘no win – no fee’, in fact, we have never undertaken a case where we have required a plaintiff to pay for their legal costs upfront or as you go. If you have had your case rejected by another law firm, you can call us for free to have your case reassessed by one of our experts. Every day we help people with their matters when other firms can’t. You can contact us on 1800 106 107 for a free, no-obligation consultation regarding your situation.
When you call us, your accident and injuries will be assessed by one of our customer service consultants to determine which one of our panel members are best suited to advise you on your matter. They will then perform a very precise assessment based on their own eligibility criteria.
So how do we differ from other firms?
We manage probably the largest panel of compensation solicitors in Australia so if one of our team members is incapable of catering to your needs, we have hundreds of other solicitors ready to help. However, if for some reason we were unable to help, there are still options available for injured people to get justice.
If you cannot find someone who will offer you a conditional fee agreement consider the following options:
- If you really believe that you have been wronged and think that
- Start a crowdfunding page to cover the legal fees
- Contact Legal Aid in your state
- Free legal advice is available from your local community legal centre
- Represent yourself
What should a costs agreement look like?
There is no one size fits all agreement for law firms. Though some may be similar to one another, none will be identical. However, there are several components which must, or should be mentioned on a law firm/plaintiff agreement.
In particular, the agreement:
- Needs to set out, (in detail) what is considered a ‘successful outcome’ for the plaintiff
- May provide for outlays to be paid (possibly with interest) irrespective of the outcome of your claim
- May contain information (depending on which State you are in) regarding an ‘uplift fee’.
- Must be in writing; in clear plain language (en-au) and signed by the law firm
- Must contain a statement that the plaintiff has been informed of their right to seek independent legal advice before signing any paperwork
- Must by law contain a cooling‐off period of not less than five clear business days during which the client, by written notice, may terminate the agreement
If you have questions or queries regarding a contract that has been presented to you by a law firm you can call us anytime for peace of mind. You can also learn more about contracts between businesses (law firms) and consumers (plaintiffs) on the Australian Competition and Consumer Commission website.
What is an uplift fee or success fee?
When you enter into a conditional cost’s agreement with a law firm, depending on which State you suffered your accident and injuries in, the person representing you may be permitted to charge you an uplift fee. An uplift fee or success fee is an additional amount which may be payable on the successful outcome of a personal injury claim.
The uplift fee is designed to compensate the law firm for taking the initial risk in undertaking a personal injury case on a ‘no win – no fee’ basis. The agreement must identify the basis on which the uplift fee is calculated however, the uplift fee must not exceed 25% of the fees otherwise payable.
Law firms must also give plaintiffs an estimate of what the extra costs are expected to be, and explain what variables determine the calculation of the uplift fee.
Can I challenge my lawyer’s success fee?
If you decide there is some kind of problem regarding your law firms’ legal fees, time limits apply so it’s important to act fast. There are several ways that you can challenge the fees you have been charged. Different States have different legislation and usually, you will be governed by the law of the state or territory in which you first engaged the firm. In some cases, if your legal matter has a significant connection to another State or Territory you may abide by those laws if both plaintiff and law firm agree.
Here are some important links if you have a problem with legal fees:
- New South Wales (OLSC)
- Victoria (LSBC)
- Queensland (LSC)
- Western Australia (LPBWA)
- South Australia (LPCC)
- Tasmania (LPBT)
- Australian Capital Territory (ACTLS)
- Northern Territory (LSNT)
The above-mentioned organisations can quickly help resolve any concerns.
What is the 50/50 rule for personal injury cases?
In Queensland, there is what is called a 50/50 rule which is designed to protect the plaintiff when making a personal injury claim from being wiped out financially by legal costs. It works by restricting the amount that a law firm can charge their clients by putting an upper limit on the professional fees (including GST) that a law firm is allowed to charge their client.
So why the term 50/50?
The reason it’s called the 50/50 rule is that a law firm cannot deduct more than 50% from a client’s compensation. For example, if you were awarded $50,000 in compensation for your accident and injuries after outlays such as medical bills have been deducted, but your law firms’ fees amounted to $33,095, they would only be able to recover $25,000. This means that you would keep $25,000 in compensation instead of being ending up with just $19,905.
Law firms use the following formulas when calculating caps:
- Begin with the amount of compensation, including any costs to be paid by the losing party
- Deduct any refunds the plaintiff needs to make and all your disbursements, to arrive at a balance
- Then calculate your fees, inclusive of GST which must not exceed half of that balance.
- Maximum fees = [settlement amount – (refunds + disbursements) ÷ 2]
Legal financing/litigation loans
Technically these types of capital advances aren’t actually considered loans because the advance is conditional in nature and is only to be repaid by the plaintiff following a successful claim for compensation. There are many different names for this type of funding, including legal financing, litigation financing, professional funding, settlement funding, third-party funding, legal funding, lawsuit loans and, litigation funding.
Regardless of what name has been given to such advance by the law firm presenting the idea to you, this is how they work.
- It is a cash advance
- Must be made by a nonparty
- Paid to a plaintiff to help them pay for legal proceedings
- Are paid back only on successful outcomes
- May be subject to crippling amounts of compound interest
Although that may sound simple enough, litigation loan contracts can be complex and confusing to the untrained eye. The legal financing industry is also unregulated in many parts of the world. This can means that the final amount you receive after the loan has been deducted can be much less than you expected. Litigation lending is a breeding ground for predatory lenders because of the large amounts of money involved in personal injury cases. To make things worse, funding companies also offer lawyers huge incentives in the form of kickbacks and commissions for them to persuade their clients to accept these types of deals.
In 2018 Wall Street banker George Soros devised a plan to securitise litigation lending promoting 20% returns. As good as that sounds to investors, the 20% ROI he is talking about is in effect coming straight out of the plaintiff’s pocket.
If you are asked to enter into a litigation loan arrangement, think carefully, seek independent legal advice or get a second opinion.
What to consider before signing a ‘no win ‐ no fee’ agreement?
Now that you have read this page, you should have a better understanding of how conditional costs agreements work. Never the less we have created a checklist for plaintiffs to use before entering into an agreement with a law firm.
The No Win No Fee agreement 10 commandments.
- Do you understand exactly what you’re entering into?
- Have you thoroughly read the terms and conditions of the agreement?
- Do you completely understand the terms? If not ask for them to be explained or get a second opinion.
- Have you been made aware of the five‐day cooling off period?
- Don’ agree or sign any paperwork on the spot, many people can often feel intimidated which may affect one’s judgement.
- Is the law firm charging an uplift fee?
- Has someone at the law firm given you an estimation regarding the overall costs?
- Does the contract clearly state the 50/50 rule?
- Have you shopped about and compared law firms?
- Have you been made aware that the defending parties legal costs may not be covered
Is a conditional costs agreement right for me?
Only you can answer that question. We hope that after reading this page you will have a better understanding of how the process works. If you are still unsure and would like some further information you can call us for a free and friendly chat regarding your individual circumstances. We can also let you know whether or not you qualify for a CCA, normally within a matter of minutes.
When you call us, we will never ask or pressure you into starting your claim for compensation with us. Our goal is to simply make you aware of your rights and responsibilities as a plaintiff and find a lawyer from our panel that is best suited to your case.
The number to call is 1800 106 107,