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No Win, No Fee Lawyers - Pros & Cons

December 1, 2019 by Graeme Heckenberg

The reality of the human psyche is that consumers are easily persuaded by tricky marketing messages that tell us we’re getting a really good deal when often we aren’t.

It is a basic concept in the psychology of marketing, that suggests in order for consumers to be influenced sufficiently to buy any product or service, the marketing message must trigger an emotional response that leads to a purchasing decision.

When you remove emotion and use logic to assess a marketing message on its merits, often you will discover that the deal you think you’re getting is really not a great deal at all.

In the business of law, many firms use the No Win, No Fee marketing message to influence us to use their services. The suggestion that if you don’t win your case then you don’t have to pay legal fees creates a clear impression that commencing legal action is financially risk free for consumers. They are tapping into our fear of loss - none of us want to lose our hard earned cash and lawyers have a reputation for being very expensive. By creating the impression there is no financial risk, then we feel more confident about seeking legal assistance and commencing legal action.

They are also tapping into our ignorance about the process of law. They take advantage of the fact that most consumers don’t understand the intricacies of the law and how it is administered.

All areas of law involve a very deliberate due process. When you employ a lawyer, you are employing someone who knows and understands the due process as it relates to your matter. Lawyers assume you don’t know how to navigate the legal process and so they use your ignorance to take advantage of you when it comes to a No Win, No Fee offer.

Let’s take a closer look at a No Win, No Fee offer to work out whether you are, in fact, better off to work with a lawyer using this type of agreement, or not.

No Win, No Fee agreements are common in many areas of law including all types of compensation law and contested Will law. The following analysis can be applied to all areas of law but it really focuses on contested Will law.

What is a No Win, No Fee Agreement?

A No Win, No Fee agreement is formally recognised as a “Contingent Cost Agreement” or “Conditional Cost Agreement”. These agreements include very specific terms and conditions that usually favour the legal representative.

The marketing phrase suggests you won’t have to pay legal fees unless your lawyer wins your case. The reality is different. When you read the terms and conditions carefully, you will learn that you may still be liable for costs.

The phrase also suggests the lawyer is so confident of winning your case, they are prepared to risk their fee. The reality is that they can assess the merits of your claim and negotiate an outcome where they get paid no matter what. I mean let’s be real - have you ever heard of a lawyer who doesn’t get paid for their work?

The purpose of a No Win, No Fee agreement is to allow clients who are not able to pay legal fees upfront the option to pay the legal fees once a settlement is reached.

Risks Associated with No Win, No Fee Agreements

With a No Win, No Fee agreement:

  • You pay an “uplift fee” where you are charged up to 25% more than a normal cost agreement.
  • You enter into a “litigation loan agreement” that provides a finance option which includes interest and fees.
  • You may pay a “break fee”.
  • You still pay the legal costs of the other party.
  • You still pay disbursements.
  • If you have a difficult case, lawyers may not take your matter on for fear of not getting paid.
  • You’re not working with an accredited specialist in Will disputes.

The ‘Uplift Fee’

An uplift fee is often charged by firms who offer No Win, No Fee Conditional Cost Agreements. The idea is that law firms pay themselves an additional fee as a reward for taking the risk that the claim may fail.

When properly assessed, the majority of contested Will cases come with very little risk and so there is no need for a law firm to charge an ‘uplift fee’. The concept can easily be misused, particularly when a client is not familiar with the law or they don’t ask the right questions.

‘Litigation Loan Agreement’

A litigation loan agreement is offered by a third party finance company to you the litigant / lender to finance your case. The agreement allows the law firm to draw fees and costs from the loan to pay disbursements as well as their professional fees. As with any loan, interests and fees are charged as well.

The result is you either end up paying more than you need to or you receive a lower settlement amount due to the excessive costs incurred.

‘Break Fee’

If for any reason you decide to stop working with a lawyer who you have signed a No Win, No Fee agreement with, you may be required to pay a “break fee” for terminating their services before a resolution has been granted.

This is one big reason you should carefully consider using a No Win, No Fee lawyer and to make certain the agreement works in your interests.

Costs of the Other Party

If the case is resolved during mediation you may end up with very little money where the value of the estate is not significant. The lawyer always gets paid first.

If you contest a Will and lose the case in court, you may be liable to pay the court costs and legal fees for the other party.

The judge does have the power to review a ‘No Win, No fee’ / Conditional Cost Agreement and set it aside if it is not fair and reasonable.

In considering what is fair and reasonable the judge will take into account whether your lawyer:

  1. misrepresented,even innocently, the effect of the ‘No Win No Fee’ agreement.
  2. failed to disclose all costs information as required under the Legal Practitioners Act.
  3. acted inappropriately during the handling of the case.

The Court will also consider the circumstances, and conduct of both client and lawyer before the Costs Agreement was made and during the course of the case.

Disbursements

The "fee" in No Win, No Fee, usually relates to a lawyer's professional charges and may not include disbursements such as court fees, experts fees, service fees, office costs and barrister or other agents fees. Disbursements are out of pocket expenses that the law firm is charged to work on your behalf.

Difficult Cases

If a lawyer considers your circumstances and on the balance of probability determines that it will be difficult for them to prove a fair and reasonable outcome, they will most likely not take your matter on because they risk not being paid.

Accredited Specialists

The practice of law with regard to Wills and Estates is complex. It involves common law principles as well as equity principles. This means that judges make decisions both on points of law as well as what they consider to be fair and reasonable. What is considered fair and reasonable is subjective and may be different for one judge compared with another.

When doing your research for a lawyer to work with, be sure to choose a lawyer who only practices in Wills and Estate law. Many firms who practice many areas of law such as family law, criminal law and compensation law, are offering law services in this area as they have recognised the number of Will disputes increasing. If they are not a specialist in Will disputes they will take longer to navigate the process and possibly make incorrect decisions. This extra time costs you money.

Another consideration is that many of the large law firms have only one Will dispute specialist on their legal team. They then have to rely on other staff to assist them with their caseload. The issue for you is that you may rarely get to communicate with “your lawyer” if you require advice or assistance.

How to Get the Best Deal

Lawyers often attract a bad reputation for the fees they charge. People hate to be taken advantage of and pay more than they need to for a service.

We understand that it is reasonable for a client to expect transparency around how much their case may cost. We are proud, that for over 25 years Heckenberg Lawyers have always acted in an honest and ethical manner when it comes to explaining our services, what you can expect and what it may cost you.

We are experienced Will dispute lawyers and we recommend that you be aware of some of the tactics other law firms use to get your business:

Get at Least Two Opinions on Your Situation

Speak with at least two lawyers about your claim. If both lawyers agree that your claim is strong and there is little chance of you losing, then there is no need for you to be offered a No Win, No Fee agreement with unreasonable terms and conditions. All agreements should provide for professional fees to be paid on settlement.

Get Independent Advice on a No Win, No Fee Agreement

If you have been offered a No Win, No Fee agreement by a law firm, get another lawyer to review the agreement before you sign it. You want to make sure many of the risks we have discussed either don’t exist or are in your best interests.

Ignore ‘Risk Free’ claims

If you see any claims by a law firm that influence you to contest a Will without risks, ignore them. I described earlier that Wills and Estate law is complex and that it involves common law principles as well as equity principles. This means that judgements are made using both a point of law as well as what a judge considers fair and reasonable. For this reason, there are always risks.

If You Still Decide to Use a No Win, No Fee Lawyer

If you have completed all your due diligence and decided to use a lawyer that has offered you a No Win, No Fee agreement, in order for it to be valid, it must:

  • Define exactly what type of outcome will allow an uplift in fees.
  • State the basis for the fee uplift and give an estimate of it (or a projected range, with major variables along such a range).
  • Be in written, clear plain language.
  • Be signed by the client.
  • Confirm the client has been advised of the right to seek independent legal advice about the agreement.
  • Confirm that the client has 5 clear business days after signing to ‘cool off’.
  • Be used only where the chance of the case failing is significant.
  • Not allow, in a court dispute, the fee uplift to exceed 25% of costs otherwise payable.
  • Notably, the agreement can require the client to pay (win, lose or draw) for disbursements. These may include out-of-pocket expenses of the lawyer, such as:
  1. Barrister’s fees;
  2. Court fees;
  3. Fees for expert reports etc.

Bear in mind that in a contested court case, disbursements alone can sometimes amount to tens of thousands of dollars.

Finally, no lawyer offering a No Win, No Fee agreement can request a success fee or a fee payable as a percentage of the award or settlement obtained.

Now we've removed the emotion from the No Win, No Fee marketing message, you can be the judge as to who benefits most and whether it is in fact a good deal for you.