A No Win, No Fee agreement is designed to remove or reduce the financial risk of bringing a legal claim. Under this type of arrangement, you do not pay your solicitor’s legal fees if your case is unsuccessful. It helps ensure that you can pursue justice without worrying about upfront legal costs.
There are two main types of No Win, No Fee agreements:
- Conditional Fee Agreements (CFA)
- Damages-Based Agreements (DBA)
Understanding the Difference Between a CFA and a DBA
Although both agreements fall under the “No Win, No Fee” umbrella, they work differently. Understanding how each operates will help you choose the right funding option for your case.
Conditional Fee Agreement (CFA)
Under a CFA
The solicitor charges based on the time spent working on your case.
- If your case is successful, you pay:
1. Your solicitor’s basic fees, and
2. A success fee(an uplift on those fees)
- Basic fees are usually recovered from the losing party if you win your claim.
- The success fee is taken from your compensation and is capped by law in certain types of claims.
- If the case is unsuccessful, you generally do not pay your solicitor’s fees.
Damages-Based Agreement (DBA)
Under a DBA
- Instead of charging for time spent, the solicitor’s fee is a fixed percentage of the damages you recover.
- That percentage is agreed with you at the outset and is subject to legal limits in some types of cases.
- If the claim is unsuccessful, you generally do not pay your solicitor’s fees.
Why Hourly Rates Appear in a Damages-Based Agreement
Clients sometimes ask why hourly rates are included in a DBA when the fee is based on a percentage of damages. There are important reasons for this:
- Solicitors are required to provide clear pricing information. Even where fees are percentage-based, hourly rates must be disclosed.
- If the DBA is ended, whether you choose to change solicitors, end the claim, or the agreement is breached, the solicitor may be entitled to chargefor the work already done. Hourly rates provide a recognised and fair way to calculate those fees.
- If your case succeeds, the other party may have to pay a contribution toward your legal costs. Courts assess these costs using an hourly rate model,so the rates must be set out in the agreement.
In Summary
- CFA = payment based on time spent + a success fee
- DBA = payment based on a percentage of your damages
Other Expenses: Understanding Disbursements
During your case, additional third-party expenses, known as disbursements, may arise. These can include:
- Medical or expert reports
- Court or tribunal fees
- Barristers’ fees
- Costs for retrieving documents or evidence
- Specialist assessments
While your solicitor can waive their own fees if the case is unsuccessful, they cannot waive third-party disbursements. This means you may still be responsible for these costs whether you win or lose.
What happens if I lose my claim?
If your claim is unsuccessful, your solicitor will waive their legal fees, provided you have complied with your obligations under the No Win, No Fee agreement.
However, it is important to understand that:
- You may still be responsible for disbursements, and
- You may be required to pay your opponent’s legal costs, depending on the circumstances of the case.
Because of these potential risks, considering appropriate insurance is strongly recommended.
Protecting Yourself: Legal Expenses Insurance
A good first step is to review any existing insurance policies you already have, such as home, motor, or travel insurance, to see whether they include Legal Expenses Cover. If they do, your insurer may pay your legal fees and/or protect you against third-party expenses.
If you do not have existing cover, you may be advised to take out After the Event (ATE)Insurance. This is a specialist insurance policy designed to protect you if your claim does not succeed. If your claim is unsuccessful, an ATE policy should cover the third-party costs (and, in many cases, adverse costs) as long as you have complied with the policy terms.
So, is a “No Win, No Fee” agreement completely risk free?
Not entirely. While a No Win, No Fee agreement is designed to make legal action more accessible by removing the need for upfront solicitor’s fees, it does not eliminate every financial risk.
Pursuing any legal claim carries potential costs, and it is important to be aware of them. Under these agreements:
- You may remain responsible for certain third-party costs (such as court fees or expert reports), and
- In some circumstances, you may be liable for your opponent’s legal costs if the case is unsuccessful.
However, you can take practical steps to protect yourself. Options such as Legal Expenses Insurance or After the Event (ATE) Insurance can significantly reduce or even eliminate your personal financial exposure if things do not go to plan.
A No Win, No Fee agreement aims to keep the process fair and affordable, but it is not entirely risk-free, and understanding those risks helps you make an informed decision. Your solicitor will discuss the specific risks associated with your case, explain how they apply to your circumstances, and help you put appropriate protections in place.
In Summary
- CFA and DBA arrangements allow you to pursue a claim without paying legal fees upfront.
- Under a CFA, fees are based on time spent plus a capped success fee.
- Under a DBA, fees are a percentage of the compensation recovered.
- You may remain responsible for the cost of any third-party costs whether you win or lose your claim
- Insurance should be considered to protect yourself from any financial liability.
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