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No Win - No Fee Lawyers - Not all are the same

By Nicholas O’Bryan

Lawyers acting on a no win - no fee basis is not new to the law and some legal firms such as Galbally and O’Bryan have worked on this basis since the 1960’s.
What is relatively new is the use by some law firms, of “no win-no fee” slogans as a marketing device to attract work, enabled in part by the lifting of advertising restrictions that once applied to the Victoria legal profession.

So what is a no win-no fee cost agreement, also known as a “conditional cost” agreement?

How does it work?

What should you look out for in such an agreement?

Typically, in Victoria, no win-no fee cost agreements between clients and law firms apply to personal injury claims (TAC, workcover, medical negligence and public liability) and also to Will/Estate disputes. A legal practice is prohibited by law from entering into a conditional cost agreement that relates to criminal proceedings or family law proceedings.

A no win-no fee cost agreement usually requires the client to pay legal fees only if there is a successful outcome of the matter. The definition of ‘successful outcome’ is an important aspect for the client to consider. For a personal injury claim a successful outcome may mean money is payable to the client net of all liabilities including legal costs, arising out of the matter, but it can be defined in other ways.

Generally, a legal practice will only offer to act in a personal injury matter or a Will dispute on a no win-no fee basis, if there is a reasonable prospect of the client receiving an award of money or a cost order from which the clients legal costs can be paid.

The offer by the law firm to enter into a no win-no fee arrangement is also governed by both legal and practical considerations.

A lawyer, practising in Victoria, has obligations under the Civil Procedure Act (Vic) 2010. Specifically the lawyer has an overarching obligation and paramount duty to the courts to further the administration of justice. The lawyer must certify, by certificate filed with the court, that on the factual and legal material available there is a proper basis to commencing a civil proceeding.

In relation to legal costs, the lawyer has an overarching obligation to use reasonable endeavours to ensure that costs incurred in connection with the civil proceeding are reasonable and proportionate, having regard to the complexity of the matter and the amount in dispute.

At a practical level there must be a reasonable prospect that the party, against whom the claim is made, is able to pay money and or legal costs if so ordered by the court. Typically, a defendant to a personal injury claim is covered by insurance but not always. Depending on the defendant’s circumstances there may be no capacity to pay without insurance. In such circumstances a law firm would be reluctant to enter into a conditional cost agreement.

What to look for in no win-no fee agreements

The Legal Profession Uniform Law Application Act (Vic) 2014 requires legal practices to provide specified information in relation to legal costs so that potential clients can make informed choices about their options before retaining a lawyer. This information must be set out in a disclosure statement and legal cost agreement. The Act imposes additional requirements for conditional cost agreements (eg: no win-no fee) where the payment of some or all of the legal costs is conditional on the successful outcome of the matter to which the costs relate.

The potential client must always be informed of the right to seek independent legal advice before entering into a cost agreement. This is important because no win-no fee agreements may contain terms which can cause the unwary client to pay more in legal costs than could otherwise be the case.

Some of the things I would look out for are:

(a) How are the legal costs calculated?

In my opinion the costs should be calculated in accordance with a court scale of costs (Magistrate, County or Supreme), which apply to the court out of which the legal proceeding is best issued. The court scale of costs is determined by Parliament in conjunction with the legal cost committee and the Victorian Legal Services Board and indexed annually. This should give some confidence that the formula for calculating costs has been determined independently as fair and reasonable. Some legal firms, however, may have different charge out rates which are higher and not in accordance with the court scale of costs. Although not necessarily improper, this may significantly increase the client’s legal costs.

(b) Does the no win no fee arrangement apply to costs and disbursements?

Costs are the Professional fees charged by the legal practice for the legal services provided which typically are only payable upon successful outcome under no win-no fee agreements.

Disbursements are out of pocket expenses incurred by the legal practice connected with the matter. They might include court fees, barristers fees, or fees for medical and other expert reports to be used as evidence or incurred to investigate the merit of a claim.

Arrangements in relation to liability for disbursements can vary depending on the circumstances of the matter and the type of claim. In some personal injury claims the prospects of success or otherwise may not be known until investigation. In such circumstances a legal practice will generally require a client to provide upfront funding for disbursements incurred to investigate. For instance, to bring a medical negligence claim evidence is required to the effect that the prospective defendant has failed by act or omission to exercise an appropriate standard of care which has caused injury. In addition, evidence is required that the injury satisfies threshold requirements under the Wrongs Act (Vic) 1958 so to permit the recovery of pain and suffering compensation. Disbursements to investigate a medical negligence claim might include amongst other things, the cost of obtaining relevant health records and expert medical opinion as to the standard of care, etc. Generally a legal practice will require a client to fund disbursements until a case can be made out.

In other cases, typically for TAC claims and workcover claims, information can be readily obtained at the outset without cost to the client, to determine the likelihood or otherwise of a successful outcome. For cases that fall within this category Galbally and O’Bryan will generally pay the disbursements and not bill the client unless there is a successful outcome. Other firms cost agreements may provide that the client is liable for disbursements incurred regardless of outcome, even for straight forward claims.

(c) What is an uplift fee?

What extra costs does it add to my bill?

Is it necessary?

Most no win-no fee cost agreements which I have seen from other firms provide an uplift fee of 25% on top of the client’s costs. This means for example, if the total professional fees were calculated in accordance with the agreement at $10,000, the legal practice would charge an additional 25% uplift of $2,500.

If the matter is complex or involves difficult issues or urgency or requires specialised skill, experience and expertise then it maybe reasonable to charge an uplift fee of 25%, particularly for medical negligence claims and occasionally for difficult or complex TAC, workcover or public liability claims.

However, many WorkCover and TAC claims, in my opinion, are uncomplicated and an uplift fee is unwarranted. For straight forward matters Galbally and O’Bryan are one of the few law firms that do not charge an uplift fee. This can make a big difference to the client’s legal costs payable at the conclusion of the matter.

The estimated amount for the uplift fee payable upon successful outcome must be included in the disclosure statement accompanying the cost agreement. It is worth looking at and checking whether a firm, such as Galbally and O’Bryan, might be prepared to do the same work without charging an uplift fee.

(d) Who is the lawyer at the legal practice looking after your matter?

Ideally the cost agreement should name the legal practitioner who will be looking after your matter. This is important because generally an experienced lawyer is able to process the work more cost effectively and obtain a better outcome than a junior or inexperienced lawyer.

I know from experience, in taking over files from other firms, that nothing is more unsettling for a client than to have frequent changes of legal practitioner, particularly when the new practitioner may not be across all of the details of the claim or have the same rapport with the client.

At Galbally and O’Bryan, all personal injury matters are managed by a dedicated partner, who will be responsible for conducting your matter and supported by a team. Our cost agreement will specify the name of that partner. This means that the client will have the benefit of dealing with a senior practitioner throughout the duration of the claim.

(e) What is my estimated maximum contribution towards costs and disbursement if there is a successful outcome?

All disclosure statements accompanying a cost agreement should set out your maximum contribution towards legal costs and disbursements. Although the estimate is not binding and may vary as the extent or scope of the work changes, it does give some indication as to what to expect. In short it is worth comparing estimates as there can be a huge variation between firms.

For further information on this firm acting for you on no win - no fee arrangement for personal injury claims or Will/Estate disputes, contact Nicholas O’Bryan on (03) 9200 2500 or email at nobryan@galballyobryan.com.au

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