No win no fee explained

Two kinds of no win no fee agreement

“No win no fee” is a marketing phrase for two different legal instruments, and the difference decides how much of your money you keep.

A conditional fee agreement is the common one. Your solicitor records their normal charges as the case runs. If you win, those charges are payable, usually by the other side, plus a success fee that comes out of your damages. If you lose, the charges are written off.

A damages-based agreement is simpler and rarer. The solicitor takes an agreed percentage of whatever you recover, and that is the whole fee. If you recover nothing, they get nothing.

Both are legal, both are regulated, and both have caps written into statutory instruments rather than left to the firm.

How much a solicitor can take: the 25% and 50% caps

Conditional fee agreements. For specified proceedings, which in practice means personal injury, the Conditional Fee Agreements Order 2013 caps the success fee at first instance at 25 percent. The percentage is not taken from your whole award. It is taken from two categories only:

• General damages for pain, suffering and loss of amenity
• Damages for pecuniary loss, other than future pecuniary loss

Future losses are excluded from the calculation. That matters enormously in a serious injury claim, where future care and lost earnings can be most of the award. A £400,000 settlement made up of £60,000 general damages, £40,000 past losses and £300,000 future care exposes £100,000 to the success fee, not £400,000, so the maximum success fee is £25,000.

Damages-based agreements. The Damages-Based Agreements Regulations 2013 cap the payment, including VAT, at 25 percent of the recovered sums in personal injury claims, and at 50 percent of the sums recovered in most other claims and proceedings.

Agreement	Claim type	Cap
Conditional fee agreement	Personal injury, first instance	25% of general damages and past financial loss
Damages-based agreement	Personal injury	25% of recovered sums, including VAT
Damages-based agreement	Most other civil claims	50% of recovered sums, including VAT

A cap is a ceiling, not a price. Firms compete below it, and a 25 percent success fee is a starting position rather than a fixed rate in every case.

Worked example: deductions from a £15,000 settlement

Take a road traffic claim that settles for £15,000, made up of £11,000 general damages for the injury and £4,000 of past losses, with no future loss element.

Line	Amount
Settlement	£15,000
Base costs, paid by the defendant	Not deducted from you
Success fee at 25% of £15,000	£3,750 maximum
After-the-event insurance premium, deferred	Deducted if the policy says so
What reaches you	£11,250 less any premium

Two things to notice. The success fee is capped against the whole £15,000 here only because none of it is future loss; in a claim with a large future care element the exposed portion is much smaller. And the maximum is not the market rate. Firms compete on this number, and asking two firms for their success fee on the same facts is the cheapest comparison you will ever run.

What you still pay if you lose

The phrase covers your own solicitor’s fees. Three other things are not automatically covered.

The other side’s costs. In most personal injury claims, qualified one-way costs shifting means a losing claimant is not usually ordered to pay the defendant’s costs, with exceptions including fundamental dishonesty. Outside personal injury there is no such protection, and the general rule that the loser pays applies.

Disbursements. Court fees, medical reports, expert evidence and counsel’s fees are paid to other people. Some firms fund them and absorb them on a loss; some fund them and reclaim them from insurance; some expect you to pay them as they arise. This is the question that separates two otherwise identical agreements.

Insurance premiums. After-the-event insurance covers the other side’s costs and your disbursements if the claim fails. The premium is usually deferred and self-insured, meaning it is only payable if you win, and it comes out of your damages when you do.

Four questions to ask before you sign

1. What percentage is the success fee, and what is it charged on? Get the answer as a worked example on a realistic settlement figure for your case, not as a percentage in the abstract.
2. Who pays the disbursements, and when? During the case, and if it fails.
3. Is there after-the-event insurance, what does it cover, and what does the premium cost? Deferred and contingent is the usual arrangement, which means it comes off the award.
4. What happens if I stop the case? Agreements contain termination clauses, and some make you liable for costs incurred if you withdraw without good reason.

Ask for the answers in writing. They belong in the client care letter alongside the rest of the terms you are agreeing to, and a firm that will not put them there has told you something useful.

How to compare two no win no fee agreements

Put them side by side and read four lines in each.

• The success fee percentage, and what it is charged on.
• Who pays disbursements during the case, and who bears them if it fails.
• The insurance premium, whether it is deferred, and whether it comes out of damages.
• The termination clause, which decides what you owe if you change your mind or the firm drops the case.

Two agreements with the same headline percentage can leave you thousands apart once those four lines are read.

Cases no win no fee does not cover

It is designed for claims that recover money. It does not fit work with no damages at the end: a divorce, a will, a house purchase, a business contract. Some firms offer fixed fees or staged fees for those instead, and a few offer legal expenses insurance you may already hold through home insurance or a union without knowing it.

It is also worth checking whether you have existing cover before signing anything. Household policies, motor policies, credit cards and trade union membership frequently include legal expenses insurance that pays hourly rates and leaves your damages intact.

No win no fee in Scotland and Northern Ireland

Scotland runs success fee agreements under its own legislation, with caps set by Scottish regulations rather than the 2013 Orders above, and the sliding scale for personal injury works differently. Northern Ireland has its own rules and, historically, a more restricted market for conditional fees. The English caps quoted here do not apply in either place, so a firm on the Edinburgh or Belfast lists should be asked for its own figures and the local rule behind them.