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No Win, No Other Choice: An Evaluation of the Conditional Fee Arrangement

About The Author

Jessica Johnson (Criminal Editor)

Jessica is currently undertaking a study year abroad at the University of Copenhagen, Denmark, studying modules such as Law and Literature, The Law of Armed Conflict, and EU Development Law. She aspires to be a solicitor and is currently interested in personal law, specifically criminal and tort.

It is impossible to imagine daytime television without the endless ‘No Win, No Fee’ advertisements gracing the screen. These conditional fee arrangements were launched by the Government in 1995 to resolve the burden on legal aid for civil matters, such as medical negligence and personal injury. The underlying concept is that should your case fail, you do not have to pay the legal fees incurred. Initially it was the respondent who dealt with the ‘success fee’. However, following the Jackson reforms introduced by the Legal Aid, Sentencing and Punishment of Offenders Act 2012, it is now the claimant who must pay the ‘success fee’.

A survey conducted by the New Law Journal found that, in 2013, 63% of firms were adapting their practise to suit these reforms, ensuring that clients are more aware of any financial risk. ‘Clients have become increasingly cost conscious and seek certainty of the expense of legal services and tangible value for money from their lawyers.’ However, there is debate as to whether the reforms actually increased accessibility for civil claims, or restricted it. Clients of a modest income may feel discouraged from pursuing mediation or litigation due to this evolved financial fear.

Various legal professionals have come forward to shed a critical light on the legislation. Seamus Smyth, partner of Carter Lemon Camerons, stated for the above survey that ‘we do not think that the Jackson Reforms will increase access to justice. Both Woolf and Jackson have increased (and accelerated) the overall cost of litigation and that overall cost will have the effect of reducing, not increasing, access to justice.’ When the survey asked firms, ‘Have you stopped offering or restricted your use of conditional fee agreements (CFAs)?’ following the reform, a dramatic 34% responded ‘Yes’.

Nevertheless, research by the Legal Services Board has demonstrated that conditional fee arrangements as a whole have ‘brought the profession closer to the general consumer’. Due to ‘No Win, No Fee’ being viewed as somewhat more informal and down to earth than traditional services, they are considered to be ‘more accessible in terms of both location and language used’. This is especially valuable in the current era of legal aid cuts.

There are detrimental glitches within the scheme however. A recent Legal Ombudsman report, entitled ‘Complaints in focus: ‘No win, no fee’ arrangements’ has identified the central issues affecting the procedural stability of the arrangement. The Ombudsman received 600 complaints regarding ‘No Win, No Fee’ last year, and was thus responsible for financial remedies to consumers of almost £1m. The report identified two key areas for concern which commonly made up the subject matter of a complaint; transfer of risk, and unclear terms and conditions.

Firstly, transfer of risk will be examined. Due to the various costs incurred through litigation, lawyers are often resilient to take on a case with a low chance of success. Nevertheless, great deals of complaints have been made where law firms withdraw from cases that they no longer believe they can win. This may occur even if the facts of the case have been known since the beginning. Claimants are then left having to defend themselves, and cover unexpected fees such as insurance and the other side’s legal costs.

This may be a consequence of market pressure. The ‘No Win, No Fee’ market is rapidly increasing, with firms demonstrating both aggression and competition in their proceedings. A relevant factor in this market is the rise of Alternative Business Structures (ABS). ABS have been in operation within the UK since March 2012, with organisations such as The Co-Op and Direct Line participating. Essentially, they involve a non-lawyer managed or owned firm providing legal services in civil areas such as negligence. They are a keen driver of ‘No Win, No Fee’ arrangements, and are becoming an increasingly powerful competitor for the more traditional law firms. In order to keep up with this competition, it has been suggested by the report that firms are ‘forfeiting a robust vetting process in favour of a high risk approach that sees them taking on cases with a low chance of success.’ In other words, firms are becoming so desperate to obtain the successful cases that they are not stopping to evaluate the likelihood of success with due care and attention. It is not until the case is underway that the lawyer becomes aware of the risk, which is then transferred onto the claimant after withdrawal.

The second key area for concern is that of unclear terms and conditions. Legal agreements can seem foreign and peculiar to the average lay person. Therefore, when a firm advertises ‘No Win, No Fee’ agreements, that is exactly what the claimant expects. It is a commonly held belief by the general public that nothing will be paid unless you succeed. Yet, there are often undisclosed costs such as insurance, disbursements, and the other side’s costs. It is all dependent on the agreement in question. Some agreements are overly complex, and there is little evidence of lawyers offering a thorough explanation of the terms and conditions. In response to this issue, the Law Society has produced a model conditional fee agreement to be used by firms. Nevertheless, it is only there for reference. Lawyers are more than able to ignore the recommendation and pursue to facilitate their own.

The principle pushing the ‘No Win, No Fee’ agreement is essentially access to justice for all. The Ministry of Justice has aimed to reduce the legal aid budget by £300m through severe cuts within recent years. With justice being restricted in such a way, it begs the question of where people are supposed to turn to for legal support. ‘No Win, No Fee’ may have its downfalls, however, for many it is the only alternative. Surely this is comparable to the Payday loans which are also frequently advertised on television. Critics have argued that these high-interest loans essentially exploit the vulnerable by not making the customer fully aware of the terms, conditions, and consequences. Yet, to many they seem to be a necessity.

Of course, there is one obvious alternative to using a ‘No Win, No Fee’ arrangement, but it is hardly more secure. In her article, ‘Do-it-yourself law: access to justice and the challenge of self-representation’, Professor Dame Hazel Genn identifies the current situation regarding ‘litigants in person’ (LIPs) following cuts to legal aid, with many claimants deciding to take the law into their own unexperienced hands. The Legal Aid and Sentencing and Punishment of Offenders Act 2012 effectively removed the possibility of legal aid for civil and family matters. This has unquestionably led to an increase in LIPs. In July 2012, Ryder LJ discussed the problems facing LIPs; ‘They will not have had the benefit of legal advice to identify solutions to their problems or the merits and demerits of their proposals. They will not have had identified to them the issues the court can address before arrival at the court door. They will arrive without professionally advised applications seeking permission to file evidence. Many will have noidea what a conventional court process entails and some will have difficulty in understanding its rules.’ It is clear that LIPs are at a severe disadvantage compared to those who can afford adequate legal representation. Thus claimants are faced with a choice; they can risk a ‘No Win, No Fee’ arrangement which could essentially leave them paying unanticipated fees, or they can represent themselves and risk misrepresenting their claim.

With legal aid in its current state, agreements which aim to make justice accessible and financially available ought to be encouraged. However, the Government should take immediate steps to deal with the above issues. The public will continue to use these agreements for civil claims, and many lawyers will continue to negligently assess the situation and fail to declare the possible risks. The Government would be wise to take on the criticism of the Ombudsman. It can be considered reasonable to cut the legal aid budget, however there must be secure alternatives for the public to resort to.

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Tagged: Commercial Law, Justice, Legal Business

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