No Win No Fee Cost Agreements

No Win No Fee Costs Agreements (also known as Conditional Costs Agreements) between solicitors and clients have become more and more common in our legal system, particularly in respect of litigation involving personal injury, professional/medical negligence and estate and family provision litigation. They cannot be entered in relation to matters relating to criminal law or family law.The Australian legal system recognises the value of No Win No Fee Costs Agreements which provide access to justice for people who do not otherwise have the means to fund their litigation.

In its simplest form a No Win No Fee Costs Agreement is an agreement between a solicitor and his or her client to carry out work in respect of the client’s claim, on the basis that no fee is chargeable or charged until the litigation is brought to a successful outcome (a “win”).In the absence of a term in the agreement as to what “win” means, at common law in Australia, a “win” is construed as meaning a financial benefit to the client.

Disbursements are third party costs incurred by the firm as part of investigating and running your case. They include costs such as expert report fees, court filing fees, barrister’s fees, and subpoena conduct money.  Disbursements are distinct from a solicitor’s professional fees which are what we charge for the work we do (usually on an hourly rate basis).

Under a No Win No Fee Costs Agreement professional fees are payable only if you have a successful outcome.However, No Win No Fee Costs Agreements commonly require you to pay disbursements regardless of the outcome of the case.

You may also have to pay the costs (professional fees and disbursements of the defendant) if you are unsuccessful. However, as we move forward with your case, we will constantly be evaluating the likelihood of success and to minimise your exposure to this risk.

No. It is extremely important to understand the terms of the agreement proposed before you enter a No Win No Fee Costs Agreement with your solicitor.

No Win No Fee Costs Agreements often vary as to the definition of “successful outcome” or “win” which triggers the obligation to pay the law firm’s professional fees.  Examples of what may be defined as a “successful outcome” include a decision by you to:

– reject your solicitor’s advice regarding a settlement offer
– not to further pursue the case any further after substantial work has been done 
– Instruct another solicitor without providing proper security for the first solicitor’s fees.

In NSW, No Win No Fee Costs Agreements are regulated by the Legal Profession Uniform Law (NSW) (the “Uniform law”).

For a No Win No Fee Costs Agreement to be valid in NSW, the agreement must:
1. be in writing and in plain language;
2. set out the circumstances that constitute the successful outcome of the matter to which it relates; 
3. be signed by the client; and 
4. include a statement that the client has been informed of their right to seek independent legal advice before entering into the agreement.

The failure to abide by these requirements may result in disciplinary implications for the solicitor and prevent the recovery of all the solicitor’s professional fees.

However, just because there is no written agreement does not necessarily mean that a solicitor cannot recover a portion of their fees from their client. The solicitor may still have restitutionary rights available to them to pursue the client for payment of their fees in quantum meruit.

It is in your interests to ensure that you have a valid and binding No Win No Fee Costs Agreement and that you fully understand the terms before you enter into the agreement.

In the absence of any written agreement to the contrary, under a No Win No Fee Costs Agreement a solicitor cannot charge you more than the amount received as part of a successful outcome. In other words, you would not pay anything out of your pocket for your solicitor’s fees.

However, there may be terms of your No Win No Fee Costs Agreement that entitle a solicitor to charge you more than you receive.

If you are successful, the other party will generally be liable to pay a portion of your costs. However, the costs payable usually cover 60-80% of the legal fees and you would be responsible for paying the gap between the legal fees and the costs payable by the defendant (likely out of the money received as part of the successful outcome).

No. In NSW solicitors are prohibited from entering into agreements that calculate their professional fees by reference to the amount of the settlement or award. There are serious disciplinary consequences for solicitors who violate the law in this regard.

Solicitors can however enter agreements which require payment of an uplift fee, that is a percentage of up to 25% of the base fees charged. You must agree to the uplift and be given an estimate of the uplift amount.