Speculative or Conditional costs arrangements, often called ‘no win, no fee’ agreements, mean that clients do not have to pay their solicitors’ fees, but the solicitor gets the normal fee plus at discretion, an uplift fee if they win the case. Arrangement of this type is most frequently used in the context of compensation claim matters.
The policy behind this is access to justice.
As with insurance policies, no two agreements will be the same. Generally, what a client will have to pay under a ‘no win, no fee’ agreement are:
- the winner’s legal bill at the end of the case (either the client’s own legal fees or legal fees of the other side); and
- other expenses like barrister’s fees (unless also on a conditional fee arrangement) and expert witness fees.
FORM OF THE ‘NO WIN, NO FEE’ AGREEMENT
Speculative costs agreement according to section 323 of the Legal Profession Act 2007 (LP Act) must:
- set out the circumstances that constitute the successful outcome of the matter;
- be in writing;
- be in clear plain language;
- be signed by the client; and
- must contain a cooling-off period of not less than 5 clear business days during which the client, by written notice, may terminate the agreement.
If you are offered a ‘no win, no fee’ arrangement you should carefully read the terms of the costs agreement before taking up the offer. A five-day cooling-off period allows you to change your mind about proceeding with a conditional costs agreement in that time. Written notice of this is required.
The so-called “50/50 Rule” is set out in ss 345-347 of the LP Act and only applies to personal injury claims which a solicitor conducts on a speculative basis. Other claims are not caught by this provision.
This rule sets a cap on the fees your lawyer may charge.
This cap is to be calculated in the following way:
- start with the amount of the settlement or judgment, including any costs to be paid by the other side;
- then deduct any refunds you have to make and all disbursements, to arrive at a balance; and
- your lawyer’s fees, inclusive of GST (calculated in accordance with your client/costs agreement, or s 319 of the LP Act if no client/costs agreement) must not exceed half of that balance.
Put another way, in the words of the Legal Services Commissioner (LSC), your lawyer can charge you no more than half the amount which you get under a judgment or settlement after deducting any refunds you are required to pay and the total of disbursements for which you are liable.
Uplift fees are governed by s 324 of the LP Act.
If you have a ‘no win, no fee’ agreement, your lawyer may charge an uplift fee. This is an extra fee you pay if your case is successful. Your agreement must contain an estimate of the uplift fee or, if that is not reasonably practicable, both a range of estimates of the uplift fee and an explanation of the major factors that will affect the calculation of the uplift fee.
The uplift fee cannot be more than 25% of the fees excluding fees to get documents and records, doctors’ reports, barristers’ fees etc.
As with any contract, read the details carefully and in the case of solicitor cost agreements, you can (and often should) get independent legal advice about it.
There are other issues to consider, such as what happens if the solicitor wishes to transfer the matter to a different firm (either with or without client express permission).
If you cannot afford a lawyer then consider attending a Community Legal Centre where private practitioners donate their time, pro bono publico.
This article contains general information, not personal advice.