How Does A No-Win, No-Fee Agreement Work?

When the worst happens and you need legal assistance to make a compensation claim, it’s not always the best timing. You may not have the funds on hand to engage a lawyer, but you need to get your claim started ASAP.

A no-win, no-fee arrangement could be a lifesaver in this situation, as you won’t have to pay your lawyer’s legal fees until you win or settle your case.

However, there are some potential pitfalls in no-win, no-fee agreements that could give you a large bill to pay (even if you lose your case!) if you don’t ask the right questions upfront.

In this article, we’ll answer the question, How does a no-win, no-fee agreement work? We will also give you the tips you need to enter into a no-win, no-fee agreement with confidence. You can also contact our legal experts at Main Lawyers, who are happy to explain the process clearly and simply.

What is a no-win, no-fee agreement?

Before we can discuss ‘no-win, no-fee’ agreements, it’s important to understand the different types of fees we’re discussing.

Generally, these are the types of legal costs that may arise in your case:

  • professional fees – fees that a lawyer charges to do the job
  • disbursements/outlays – expenses that a lawyer incurs on their client’s behalf
  • defendant’s legal costs.

Usually, in a no-win, no-fee agreement, you don’t pay professional fees for your lawyer’s services unless you win your case or settle (i.e. a ‘conditional costs agreement’).

If your case is successful, you will usually pay your lawyer out of the money you receive from the other party or settlement.

No-win, no fee arrangements can be made for any matter except criminal and family law matters. As your lawyer takes all the risk of your case being unsuccessful, they usually make this arrangement only when:

  • you’re likely to receive compensation or damages
  • the other party will have the ability to pay if they lose.

For this reason, personal injury claims and deceased estates are the most common cases where no-win, no-fee arrangements are made, including:

In a no-win, no-fee agreement, your lawyer’s fee may be higher than for a standard agreement. This is to cover the risk that they may not be paid.

It’s important to understand that this refers to professional fees only. You may still have to reimburse your lawyer for disbursements and pay the other party’s legal costs.

Additionally, if you lose your case, you might have to pay the other party’s legal costs.

Benefits of no-win, no fee

A no-win, no-fee agreement gives you access to professional legal help regardless of your financial situation. This is especially important after a car accident or workplace injury that leaves you without an income while you recover.

Usually, there are time limits on personal injury claims, so the sooner you get started, the better. With a no-win, no-fee agreement, you can engage a lawyer to start the process on your behalf immediately.

What a no-win, no-fee agreement contains

There is no standard no-win, no-fee agreement so knowing how does a no-win, no-fee agreement work can be challenging as each law firm will have its own. But there are some things that all agreements must contain under the law. When you’re reviewing an agreement, make sure it includes:

  • the definition of a ‘successful outcome’
  • a list of expenses you may need to pay, including interest, even if your case is unsuccessful
  • any ‘uplift fee’ (which can’t be more than 25% of your total fees)
  • a statement that you’ve been informed of your right to seek independent legal advice before signing
  • a cooling‐off period of at least five business days.

All no-win, no-fee agreements must be written in plain language, so be sure to query anything you don’t understand.

Important points to check

A no-win, no fee arrangement can be ideal when you need to make a compensation claim but can’t pay for a lawyer upfront. By delaying your lawyer’s professional fee payment until you win or settle your case, you can get started on your case quickly and get the funds you need while you recover from your injury.

However, there are a few potential issues to watch out for when you engage your lawyer on a no-win, no-fee basis. At Main Lawyers, we will always discuss each of these with you, so you can make an informed decision and feel confident about working with us.

Outlays/disbursements

Your lawyer may need to commission various reports and assessments to build a case for you. These may include medical or psychological reviews, accounting reports and other specialist assessments.

These documents can cost several thousand dollars each to obtain. There are also court filing fees, barrister fees, etc. Depending on the complexity of your case, you might end up with $10,000 to $20,000 worth of outlays.

Your no-win, no fee cost agreement needs to outline which outlays you will need to pay for and when. Some expenses you will need to pay upfront. Others your lawyer will pay for and you will reimburse (with interest) when the matter is settled.

Some lawyers will ask you to get a ‘litigation loan’ to cover the outlays. You pay this back when the matter is settled.

It’s essential that you understand what you will pay for and how, as well as what will happen if you lose your case. You could be liable for thousands of dollars in costs that you’re not expecting!

Defendant legal fees

Under a no-win, no-fee arrangement, you don’t have to pay your lawyer’s professional fees if your case isn’t successful. However, the court might make an adverse cost order, which requires you to pay the defendant’s legal fees. Usually this isn’t part of the no-win, no-fee agreement.

Your lawyer can’t guarantee this won’t happen, as the court may order this. If your lawyer is guaranteeing that you won’t have to pay the defendant’s legal fees, they probably intend to push for a settlement rather than go to court.

50/50 rule

Many people worry that their lawyer will charge more in fees than the amount of personal injury compensation they will receive. The good news is that the law protects you from this occurring.

There is a limit to the professional fees a law firm can charge. The most they can charge is 50% of your settlement amount after refunds and outlays/disbursements are deducted.

However, this applies no matter how many hours they spend on your case. Some firms automatically take 50% of the settlement amount, which can lead to you being overcharged if they don’t spend a lot of time on your case.

Ideally, your lawyer should calculate their professional fees based on the hours spent on the case. Ask for an itemised invoice at the end.

Uplift fee

Many no-win, no fee lawyers add an uplift fee to compensate them for the risk they’re taking that the case will be unsuccessful.

By law, the uplift fee can’t be more than 25% of their professional fees. Make sure your agreement states whether they will charge a fee and how much.

Changing law firms

Sometimes things don’t work out and you need to change lawyers during your claim. Be sure that this is the best decision, as you might have to pay the legal fees of both law firms.

Make sure your costs agreement outlines exactly what will happen if you change law firms and ask your lawyer if you’re unsure.

If your case isn’t successful

No-win, no-fee lawyers are careful to take on cases they believe they can win, but there are no guarantees. So you need to understand who will pay your fees and other costs if your case is unsuccessful.

If your lawyer carries 100% of the financial risk, you won’t pay legal fees or outlays/disbursements if you lose your case. This is the ideal scenario, but it’s not typical.

The more common scenario is that you don’t pay legal fees but do pay for outlays/disbursements, as outlined in your agreement.

Note: As discussed above, a court may require you to pay the other party’s legal costs if you go to court and lose – even with a ‘no win, no fee’ costs agreement.

Before you sign an agreement

No-win, no-fee arrangements have helped many people get the compensation they deserve after an accident or injury caused by someone else’s negligence. It’s important to ask how does a no-win, no-fee agreement work at each law firm you talk to as it can differ from firm to firm.

In this difficult time, you may not have funds to engage a lawyer until your matter is settled. Depending on the complexity, your case could take months to be resolved. A no-win, no-fee arrangement allows you to proceed with your claim immediately and focus on your recovery.

However, it’s essential to understand all the terms of your agreement and ask your lawyer to explain anything you’re unsure about.

You will have a five-day cooling-off period to review the contract and even get independent legal advice if you’re unsure about anything before signing.

How Main Lawyers can help

At Main Lawyers, we offer a no-win no-fee service for all Gold Coast, Brisbane and Northern NSW residents. Our expert legal team can assist you with your personal injury, superannuation or insurance claim.

The question of how does a no-win, no-fee agreement work is important to ask as every law firm can be different. Contact us today for a no-obligation consultation about how we can help you get the compensation you deserve!

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