What are Conditional Fee Arrangements? What does "No-Win, No-Fee" really mean?
"No Win, No Fee" is the popular term for a Conditional Fee Arrangement (also known as a CFA). The CFA is a contract between yourself and your solicitor which sets out the terms of your funding arrangements for litigation and commercial disputes.
The CFA is an alternative to funding claims where you and your solicitor agree to share the risk of litigation. The details of your CFA would be clearly defined before you formally instruct your solicitor.
For a "No-Win, No-Fee" arrangement, your solicitor would typically waive any upfront fees or charges to pursue your claim in the hope that, if your claim is successful, you would pay them the fees with a "success fee" or "uplift" out of your award or "damages". This means that some of your damages would be used to pay for the solicitor’s normal fees plus a "success fee" which is usually calculated as a percentage of their normal fees and can be up to 25%.
What are the benefits of having a No-Win, No-Fee arrangement or CFA?
Having a "No Win, No Fee" arrangement in place means:
- you can afford to pursue your claim without having to pay any upfront costs
- you avoid having to abandon your claim part way through because you have run out of money
In addition to this you can take out After the Event Insurance in conjunction with your CFA to cover certain costs.
What is After the Event Insurance (ATE) and what does it cover?
Traditional insurance, such as buildings insurance, is taken out to protect you in the event that something unfortunate happens. A feature of this is that you are often paying for something that, fortunately, is unlikely to ever happen. After The Event (ATE) insurance is completely unique as it is only taken out once you have actually encountered a problem.
If you find yourself in a legal dispute, the normal rule is that if you are unsuccessful you will have to pay your opponent’s legal fees and other associated costs such as court fees. The fear of having to pay these sums can often deter people from bringing claims. ATE Insurance provides full cover for these costs.
This type of insurance enables you pursue a claim for money you are owed without the fear of having to pay out large sums if things do not go as predicted. Not only does this give you peace of mind but it shows your opponent that you can afford to fight the case for as long as need be.
How is the insurance paid for?
ATE is unique in that – unlike other insurance - you don’t need to pay the insurance premium up front. In addition, you don’t need to pay the premium if your claim is unsuccessful – you only pay the premium if you win. Premiums are set at an affordable level to help make access to justice available to people regardless of their financial circumstances.
What are the advantages of having ATE Insurance?
- ATE gives you the peace of mind that if the action is lost, you will not be exposed to your opponent’s costs or own disbursements
- ATE enables you to transfer the risk of adverse costs from the litigation to the ATE insurer
- ATE provides an extra incentive for an opponent to settle the case because an independent ATE insurer has looked at the case and has decided to support the claim
- ATE “levels the playing field” and enables meritorious litigation to proceed that otherwise would not be pursued
- ATE enables a client to fix, or at least have much better control over, their costs exposure to the litigation
The potential outcomes of my claim
You win your case
Depending on the defined success criteria that was agreed when you entered into your CFA, a success fee will be payable when the case is won. This is in addition to the solicitor’s fees.
Changes to the CFA regime after April, 2013 meant that success fees are no longer recoverable from your opponent so this now becomes payable from your compensation. However there are still instances where the fees may be payable by the defending party.
In most cases, the losing party will be liable for expenses incurred by your solicitor. These expenses are anything your solicitor pays out in relation to your case such as costs of expert reports or travel expenses. Once the success fee and the unrecoverable expenses are paid the remaining amount is entirely yours.
You lose your case
If you lose your case, you are usually not required to pay your solicitor anything. However, do note that the terms of your CFA with your specific solicitor may include a term that you pay a reduced fee instead so you need to make sure you understand your liabilities before you agree the terms.
You may still need to reimburse any expenses incurred by your solicitor during the case, subject to the terms of your CFA. However, such disbursements may be covered through your ATE legal expenses policy.
You will also not be liable to pay any of your opponent’s legal expenses or costs UNLESS the Court finds that you had no reasonable grounds for bringing the claim or that your claim has exploited and abused the court procedure.