‘No Win No Fee’ costs agreements have divided the legal profession and it’s regulators. On the one hand, its advocates have been quick to point out that it provides greater community access to expensive, but effective private legal services, which ultimately levels the playing fields for plaintiffs or defendants who would otherwise have not been able to afford them. On the other hand, some commentators have argued that No Win No Fee agreements may open the door to so-called ‘junk’ litigation (that is, litigation initiated for no valid purpose other than harassment or intimidation), as well as the opportunity for some legal practitioners to engage in predatory, fee-inflating tactics.
Needless to say, both sides have their merits – but the persistence of No Win No Fee cost agreements in the Australian legal landscape means that prospective clients can best serve their own interests by understanding what a No Win No Fee cost agreement truly entails.
What is a No Win No Fee Cost Agreement?
No Win No Fee cost agreements (‘NWNF agreements’) generally come about where a person has limited finances to pay for legal services in full, however, the legal practitioners believes that there is a realistic prospect of success and agrees to take on the case on the condition that the individual pay these fees after they win the case and receive the resulting payout.
Despite the name, NWNF agreements very rarely allow a client to pay absolutely nothing if they lose. While this varies from agreement to agreement, it is generally understood that in the event that you lose your case, you will have to bear the cost of the other side’s legal fees. Having to pay the other side’s legal fees is a common law rule that dates back well over a hundred years, and is in fact one of the key distinctions between Australia’s legal system and, for example, that of the United States.
An individual who enters into a NWNF agreement may also be required to pay for a legal practitioner’s disbursements. Disbursements are incidental, often administrative costs, and may include things like:
- Photocopying expenses
- Medical report fees
- Court fees
- Title searches
- Barrister’s fees
A legal practitioner is obliged to give you a rough estimate of the cost of these disbursements before you enter into an agreement.
Another cost that may be incurred, although much later on in the game, is an ‘uplift’ fee. An uplift fee is an amount added on top of any legal fees if you win your case. In Victoria, it is illegal for this particular fee to be more than 25% of the overall legal costs of your case. Although an uplift fee appears to be a fee for fee’s sake, its purpose is to compensate a legal practitioner for the necessary ‘gamble’ of a NWNF agreement, and the fact that he or she has had to work for free up until that point. Where a NWNF agreement includes an uplift fee, by law it must also include an explanation of how the uplift fee is to be calculated.
What Must a NWNF Agreement Contain?
Because NWNF agreements present themselves as a fairly risky undertaking, a number of laws have been passed to protect potential clients and ensure that they are aware of the risks and liabilities involved. As such, NWNF agreements must contain the following:
AN ESTIMATE OF TOTAL COSTS
This will include details of how these costs will be calculated, as well as details on when and how they will be payable.
A COOLING-OFF PERIOD
Much like other major transactions, your NWNF agreement must contain a cooling-off period of at least five business days. If, during this period, you change your mind about entering the NWNF agreement, or decide to go with another lawyer, writing to your lawyer in this period allows you to ‘escape’ the agreement without incurring significant costs.
It should be noted that in some cases, a legal practitioner may be able to still charge you for any work performed before this agreement was ended.
A DEFINITION OF A ‘WIN’
Generally speaking, a ‘win’ in a NWNF agreement involves a ‘successful outcome’, but the ambit of what this means exactly can sometimes be difficult to define. Most circumstances in which you are awarded some form of compensation – whether that be through a court order or offer of settlement – can be regarded as a ‘win’, but it is always important to seek clarification where necessary.
INDEPENDENT LEGAL ADVICE
Given that a NWNF agreement is a binding legal contract, it must also include a statement that informs you of your right to get independent legal advice before signing it. While this is not always necessary to do, where you feel uneasy or confused by the contents of an agreement, pursuing independent legal advice is always an excellent course of action.