The term no win no fee is frequently used but what is the real meaning of no win no fee? The answer is that the term no win no fee means different things to different providers, so it is important to check that the terms are right for you before entering into an arrangement.
This blog will explain the benefits and potential dangers of entering into a no win no fee arrangement (this blog refers to no win no fee arrangements in the context of employment law litigation).
Contents
- Is no win no fee really free?
- No win no fee fees
- No win no fee hidden costs?
- 1. No win no fee hidden costs – fees for assessing prospects
- 2. No win no fee hidden costs – third party costs
- 3. No win no fee hidden costs – escalation of hours spent on the case
- 4. No win no fee hidden costs – uncertainty about what is included by the firm
- 5. The win no fee hidden costs – the costs of pulling out
- No win no fee dangers
Is no win no fee really free?
The short answer to that question is that much would depend on what was agreed to and the particular circumstances. Due to the number of factors involved, it is important not to see no win no fee as free. Care needs to be taken to ensure that, if you do decide to opt for a no win no fee arrangement, you make an informed decision.
Despite the need for thought and care, no win no fee arrangements often appeal to individuals who want to pursue a claim because of a misconception that ‘if I lose there is nothing to pay.’ As will become clear, things are not as simple as that.
No win no fee fees
No win no fee fees typically are either a damages based agreement or a conditional fee arrangement.
A damages based agreement would essentially result in the firm taking a percentage of the amount secured for the client (whether that be the amount negotiated for the client prior to a Tribunal hearing, or the sum that is awarded to the client by the Tribunal).
The percentage may well vary depending on the advice provider but is often 35% (the maximum percentage permitted in employment cases). Therefore, as an example, if £10,000 was secured as a settlement sum the firm would receive £3,500 as their fee.
A conditional fee arrangement typically involves a success fee whereby the firm can increase their normal hourly rate (often referred to as base fees) by up to 100%. This means that if the hourly rate is £250 an hour the firm could charge up to £500 an hour for all the time spent on the case, in the event that a sum was secured for the client.
As referred to above, there are limits to the amount that can be charged in respect of damages based agreements and conditional fee arrangements. However, it is important to remember that a firm can charge less than the maximum limit if it chooses to.
Similarly, the firm would decide whether it wishes to offer assistance on the basis of a damages based agreement, a conditional fee arrangement or whether it would consider both options.
The terms of the agreement should be clearly set out. It will then be for potential clients to decide if they wish to proceed or not.
There are a number of no win no fee hidden costs or, more accurately, fees that individuals often do not take into account and, therefore, the charges come as an unpleasant surprise.
Examples of no win no fee hidden costs are:
Some providers may charge a fee to review documents in order to decide whether or not the case could be accepted on a no win no fee basis. If there is a charge, this should be made clear. It is also important to remember that, if there is a charge, that does not necessarily mean that the claim will be accepted on a no win no fee basis.
As the approach for assessing the prospects of a case may vary depending on the firm, it would be wise for a potential client to be clear about whether there will be charges to undertake the review and how a decision will be reached. For example, a firm may make a decision on the basis of what was said during a free consultation. On the other hand, another firm may wish to review a substantial amount of documentation before making a decision.
It is common for people to think that everything is covered by the no win no fee agreement. This is not necessarily the case. Depending on the circumstances, the services of third parties may be needed. For example, a barrister may be used to provide representation at the hearings, or a report from a medical practitioner may be necessary to establish how long it would be before the person could return to the workplace etc.
These third party costs, which are commonly referred to as disbursements, may well not be included in the no win no fee arrangement. That being so, it is important to know what the position is regarding disbursements and whether or not the firm will be providing the required representation, or if those tasks will be undertaken by a third party.
It is common for aspects of a case to take longer than originally planned. Perhaps, there is an unexpected hearing, or the final hearing has been allocated more time than had been anticipated. This is entirely normal. However, the use of conditional fee arrangements mean that it is particularly important to keep track of the time spent on the case in order to know the amount that would be received by the client from an award or settlement.
The amount of work included within the no win no fee arrangement can vary dramatically. For example, a firm may include all phases of the Employment Tribunal process, another may undertake all the tasks except representation at the Employment Tribunal (see the earlier comments on disbursements) or a firm may only become involved at the time of the Employment Tribunal hearing (requiring the person concerned to have done all the work up until that point themselves).
It is not a question of which is right and wrong. What matters is knowing what would be received, if the agreement was entered into, and what the obligations would be.
Individuals are entitled to a cooling off period from when a contract is signed. The individual cannot be charged for work undertaken during the cooling off period – which enables the person to change their mind. However, if the person chooses to waive their right to a cooling off period, or chooses to pull out after the cooling off period has expired, the firm may well charge for the time spent on the case.
No win no fee dangers
As has been highlighted by the examples above, no win no fee dangers occur when the person entered into the arrangement without appreciating when they would be charged, what would be received as part of the agreement, and what obligations the person would have. It should not be assumed that there will be nothing to pay.
There is not a straightforward answer to whether or not a no win no fee arrangement is right for you, and it may be that, after considering the options, that you decide that hourly rate fees are best.
Plotkin & Chandler works exclusively in the areas of HR and employment law.
We have expertise in advising on all aspects of bringing an Employment Tribunal claim and we consider taking on cases on the basis of a Damages Based Agreement, in appropriate circumstances.
To discuss your requirements, and the ways in which we can help, call us for a no obligation consultation on 020 3923 8616 or email us at info@plotkinandchandler.com
