A Definition and Short History of No Win No Fee Claims

Monday, 12th September, 2011


The type of arrangement between clients and solicitors now known as no win no fee was originally defined in the UK as a conditional fee. Also known as a contingent fee in the US, the principle is simple; a conditional fee is any fee payable for services where the fee is payable only if the client receives a favourable result.

In English Law, conditional no win no fee arrangements are formally defined as:

“[a] fee charged for a lawyer’s services only if the lawsuit is successful or is favourably settled out of court…Contingent fees are usually calculated as a percentage of the client’s net recovery.” Black’s Law Dictionary (8th edition2004)

The history of no win no fee in the UK

In the United Kingdom, the concept of conditional fee arrangements has caused much argument and controversy amongst politicians and the legal profession for at least the last 200 years. Conditional fees were long held to offend ancient legal prohibitions against an old idea known to lawyers as champerty and maintenance. Maintenance is defined in the legal context as the meddling of an uninterested party to encourage a lawsuit. Champerty is defined as an aggravated form of maintenance – the support of litigation by a stranger in return for a share of the proceeds.

Rather than these concepts being directly applied to no won no fee arrangements in the modern context, the ideas of maintenance and champerty were actually established to prevent people from ‘sponsoring’ legal action in the Middle Ages. Prior to judicial independence and the establishment of modern legal practices, dodgy nobles, landowners, royals and their officials would give credibility to a person’s claim in return for cash or a share of any settlement.

No win no fee in the UK today

Today in the English judicial system, conditional fee arrangements between a legal service provider (law firm, solicitor, barrister or lawyer) are referred to as no win no fee. The predominant form of this type of arrangement is that a legal service provider may choose to take on a legal case for a client on the understanding that they will not receive any payment if the case is lost. Enshrined in English law, fee structures must comply with the UK statutory scheme.

If their case is successful, the legal professional will receive their normal fee based on hours worked, and commonly a pre-arranged ‘success fee’. In the UK this success fee cannot be more than 100% of their standard fee, whereas in America the lawyer is awarded a percentage of the claim settlement.

The intention of the current system is to increase access to litigation for those who would otherwise not be able to pursue justice, and is meant to reduce the vulnerability of poorer people in the eyes of the law. Conversely, critics of these arrangements state that conditional claims have the potential to encourage frivolous or unjustified litigation and strain the legal system.

The pros and cons of conditional no win no fee arrangements go much further than this simple view. Critics of conditional fees point out the potential for solicitors to cherry-pick only those cases which are likely to succeed quickly and provide a predictable short-term profit. Profit-motivated legal professionals are presumably very likely to turn down those cases which may require a greater investment of time and resources as extensive investigations, expert advice and contentious public issues all increase the element of financial risk to the solicitor when a no win no fee case collapses. Such cases might not even reach the assessment stage for a no win no fee arrangement if that assessment is deemed too expensive or time consuming at the point of application, potentially leaving poorer would-be litigators with nowhere to turn.

However no win no fee’s many advocates can counter these arguments with some strong points.

Providing access to the courts for people whose means cannot extend to the high costs of legal fees and litigation, conditional fees may also motivate legal service providers to work harder on a client’s behalf. Consider other forms of fee arrangement based on an hourly rate, where the client isn’t offering a substantial ‘win bonus’ to their lawyer. In these cases where a legal representative is privately retained, it normally makes little or no difference to a case’s profitability if the client is successful in court or not. It’s also worth noting that due to the lawyer’s potentially high financial risk in accepting a no win no fee case, their judgement on the likelihood of success may help to reduce the numbers of speculative or frivolous legal cases finding their way to court.

Since recent legal aid reforms in the UK aimed at increasing competition and value for money in the legal services market, many people who would previously have received help through the legal aid system must now use no win no fee solicitors.

 

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