No Win No Fee. Not So Shiny & New.

No Win No Fee. Not So Shiny & New.

There was a time when no win no fee costs agreements (or as we call it “conditional legal costs agreements”) were actually a viable differentiator between legal firms. Because it meant injured everyday people would not be charged a cent if their lawyer failed to secure an offer from an insurer.

Those firms that offered this unique fee structure captured a fair market share because it made the legal process accessible. Those that didn’t offer no win no fee fell by the wayside. It wasn’t long before every personal injury law firm offered no win no fee and it was actually odd to see a firm that didn’t offer it.
Fast forward a few decades and we still see no win no fee advertised as though it’s the bee’s knees in the personal injury space. But is it really all that it’s cracked up to be?

With the “maximum 25% uplift fee” (ie a $40,000 legal bill increased to $50,000) and the “5o:50 rule” (ie splitting the leftover settlement money after refunds and disbursements are paid down the middle) attached to conditional legal costs agreements those people with smaller matters found a lot of their settlement money eroded by these premiums. With it, the concept of providing access to justice seemed in itself unjust.

Whilst both the uplift fee and the 50:50 rule are permitted by the Legal Profession Act 2007 (sections 324 and 347 respectively) there is a growing shift amongst newer law firms to move away from applying the uplift fee and lowering the permitted 50% fee cap.

Large law firms that focus on increasing market share and aggressive growth rely more heavily on these premiums to meet the overall operating costs to keep their legal machine running. This in turn sees lawyers running high portfolios and aiming for high sometimes unrealistic budget targets. Leaving injured everyday people feeling like a number and the workforce stressed and spent. Removing the uplift and 50:50 rule from their costs agreements may not be a viable option as it would eat into their profit margins which may already be stretched.

So it becomes a genuine differentiator between BigLaw and NewLaw. Large seemingly powerful law firms versus the much smaller much more agile firms.

With a growing number of highly skilled senior personal injury lawyers with at least a decade of industry specific experience now branching out and setting up boutique specialist personal injury law firms there is a palatable shift away from factory law firms back to grassroots law. And it’s the mums and dads that will ultimately benefit.

Offering injured everyday people the human touch they crave at a price point that is very fair is the emerging ground. Use of technology to better engage with client’s will result in a stronger bond between client’s and their lawyers.

So what is the new no win no fee?

No Win No Fee will always be the overarching protective mechanism attached to personal injury claims. But we believe there will be an emergence of a second tier of protection as boutique law firms emerge into the market with lower overhead costs (many operating from a virtual office space or from a serviced office) which they can pass immediately on to their clients.

We believe that a combination of a detailed legal costs calculation (which is already standard in many law firms) coupled with the removal of the 25% uplift fee and the reduction of the 50% fee cap will offer claimants with the greatest level of transparency and a sense of assurance.

This fee structure already exists in a growing number of small firms but as claimants become more aware we will see more firms move to meet the new standard.

The concept of “fixed fees” is getting some traction in areas of law outside of personal injuries but in the motor vehicle law and catch-all (PIPA) space it’s not too relevant since the insurer is obliged to pay a contribution to the legal costs and disbursements past a certain point anyway. And the legal bill is not paid as you go, rather its paid once at the very end of the claim.

It would only be relevant to the smaller range claims and the reduced cap on professional fees would adequately protect the interests of claimants. A “fixed fee” also implies you will pay a set amount whereas a “fee cap” provides a ceiling with the actual fees potentially being lower.

A “fixed cap” verse “fee cap” debate would seem like a “jetty” verse “pontoon” type argument and the pros and cons of each would be lost in a glazed stare.

We believe the new battleground for client attention will not revolve around the fee structure at all, at some point, law firms will need to remove the 25% uplift and will need to lower their fee cap and when that happens the battleground will be nailing client satisfaction.

Michael Andersen
ILP Legal Practitioner Director
No Win No Fee. No 25% uplift. 35% fee cap.
Itemised legal costs calculations.

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