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1. No-Win-No-Fee simply means that the solicitor’s bill is only payable if the case succeeds

2. Generally, the loser pays the winner’s costs, so if you win your case the bill is in fact sent to the opponent’s solicitors

3. In personal injury and medical negligence cases, subject to a few exceptions, only the claimant/injured person can recover their costs.  Therefore, if you lose your case the opponent cannot seek their costs from you.  The legal name for this is “Qualified One Way Costs Shifting.”

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4. There are exceptions to Qualified One Way Costs Shifting though such as if a client is dishonest, or their case is struck out by the Court, or they recover less compensation than an opponent’s offer.  Generally, however, if you are always honest with your solicitor, and accept their advice about offers, there should not be any possibility of having to pay any costs.

5. Technically, the “no-win-no-fee” system only applies to the solicitor’s professional fees, so case expenses such as court fees, doctor’s reports etc, could still be charged to you if your case does not succeed.  To protect clients from such expenses, solicitors can take out legal expenses insurance policies to protect the client.  If the case does not succeed then the legal expenses insurance policy pays for these expenses, so nothing is payable by the client either way.  The cost of the legal expenses insurance premium (typically a few hundred pounds) is deducted from any compensation received at the end – if the case does not succeed the premium is cancelled so there is nothing to pay.

6. Legal expenses insurance can also pay any opponent’s costs if you get less than an opponent’s offer at the end.  This is because the law entitles defendants to deduct their costs from an offer if the client gets less later on.  In some circumstances this could lead to the entire offer amount being “eaten up” by these costs.  A legal expenses insurance policy can step in in those circumstances and pay the opponent’s costs meaning that even if you get less than an amount previously offered, the defendant’s costs do not come out of it.

7. Solicitors charge “success fees” in addition to their regular costs, as a reward for taking the risk of doing the case on a no-win-no-fee basis.  Although the main costs/bill is sent to the opponent to pay, the “success fee” is payable by the client, as a deduction from their compensation.  The law states that the maximum a success fee can be, in personal injury and medical negligence cases, is 25% (inclusive of VAT) of the past losses part of your compensation.

8. Very important: not all no-win-no-fee agreements are equal.  Whereas the law states that the maximum deduction should be 25% of past losses, inclusive of VAT, a number of less reputable personal injury firms are employing measures to try to circumvent the law, for commercial reasons.  One such tactic is to add the VAT on top of the 25%, whereas the law states it should be inclusive.  That extra 5% (i.e. 20% of the 25% fee) might not sound like much, but in a high value case it can make a huge difference to the amount a client receives at the end.  Whilst this is technically illegal, the law firms that are doing this argue that the client was told about in the paperwork and has signed to agree.  To our knowledge this has yet to be tested in the courts but suffice to say it is a very unsavoury practice and we would recommend walking away from any firm that is trying to do this.

9. The “VAT switch” is not the only unsavoury practice being utilised by some firms.  Other things to watch out for are: unusually large legal expenses insurance premiums (the law firm may be receiving a large commission from the premiums) and trying to apply the 25% cap to the entire settlement sum.  To explain, whilst the law states that the client should receive 100% of future losses (such as treatment costs, future lost earnings, future accommodation expenses etc), there are some firms (usually the same firms employing the “VAT switch”) that try to take 25% of those future losses as well.  This is never acceptable and even if the opponent does not itemise the overall settlement proposal, the law firm must estimate with the client how much was future losses and then ensure there are no deductions from those future losses.  Future losses can often amount to hundreds of thousands, or millions, of pounds and so taking deductions from those future losses will have a tremendous impact upon the client.  Remember, before you sign or agree to anything, ask about things like this because once you have signed/agreed you may find yourself stuck.

10. Some law firms have begun deducting what they call “shortfalls” from clients’ compensation awards.  Basically, sometimes the law firm will not be able to get all of their fees back from the opponent at the end.  Say their bill is £20,000, but the court only orders the opponent to pay £15,000, then there is a £5,000 shortfall.  Whilst most no-win-no-fee agreements give law firms the right to deduct these shortfalls from client compensation, the practical reality is that most firms will not do so and will instead write off the difference.  However, one large national personal injury firm in particular has begun charging large shortfalls to their clients, sometimes leaving the client with very little at the end.  Often there are certain “red flags” on online reviews such as clients complaining they were left with very little after deductions, but the best thing to do is to ask the law firm whether they will charge a shortfall or not.

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In summary, provided you find a reputable firm that limits their deductions to that allowed by the law, and always provide honest instructions, then the two outcomes will either be that you receive compensation minus 25% of past losses and the cost of any legal expenses insurance taken out or do not receive compensation but have nothing to pay.

Always ask questions about how the deductions will be made up and walk away from any firm that is either not open about their charges or is looking to seek excessive deductions.

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