UK: No win, no fee - a licence for would-be litigants.

UK: No win, no fee - a licence for would-be litigants. - Going to law is too often a sad fact of commercial life. It can give terrifying new meaning to the term 'extraordinary costs'. But now the Government is planning big changes that will bring new dan

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Last Updated: 31 Aug 2010

Going to law is too often a sad fact of commercial life. It can give terrifying new meaning to the term 'extraordinary costs'. But now the Government is planning big changes that will bring new dangers as well as new opportunities for business. From April 1998, by remmoving legal aid from all cases involving money and financial damages, the Government is aiming to introduce the concept of 'no win, no fee' in most cases of civil litigation.

Essentially, such conditional fee deals mean that a plaintiff agrees a contract whereby he does not pay the lawyer a penny unless he wins his case. If successful, the lawyer's fee - if agreed - is then paid, together with an 'uplift' or 'success fee' of anything up to 100%. The one caveat is that their mark-up should not exceed 25% of the damages won.

Conditional fees have already been tried with some success. When introduced in 1995, conditional-fee arrangements were restricted to personal injury work and to certain insolvency and human rights cases. They have been used in more than 30,000 personal injury cases, often against drivers, employers and local authorities, where insurers pick up the tab.

The Lord chancellor Lord Irvine's proposals have opened up the possibility of a powerful new army of litigants. If the Government ends up getting its way, consumers, for so long deprived of the chance to litigate, will now be given the licence to drag all manner of supposed cowboy builders, unsound holiday firms and sellers of duff products and services through the courts.

Vanessa Shenton, a solicitor and underwriter at Greystoke Legal Services, which provides legal expenses insurance, expects that 'litigation is likely to increase, as conditional fees are going to help people come forward and pursue good cases'. Lawyers also agree that conditional fees will be particularly attractive to small businesses in actions against larger businesses. Michael Seymour, a partner at top City law firm Lovell White Durrant, is one of many lawyers who recognise the potential for business-to-business action. 'This is one area where litigation may increase,' he says. Others agree that companies, particularly small businesses, may find conditional fees attractive. The Forum of Private Business, representing 25,000 companies, is 'broadly in favour' of them. 'This will actually widen the franchise for business owners to take legal action,' says Nick Goulding, head of policy.

However, the success of conditional fees will be dictated by insurers' willingness to offer reasonable premiums for the essential cover of defendants' costs, says Marlene Winfield, head of policy on legal services at the National Consumer Council. 'It could enfranchise both the middle-class consumer and the small business-owner, but cheap insurance is the key.' This will mean that, as with legal aid, only cases with sufficient chance of success will merit support.

Companies have yet to use conditional fees, and no one knows for certain what the effect of extending their use will be. But as David Hartley, a Law Society policy expert, says: 'Certainly, we're on the brink of a revolution in dispute resolution. I'm sure this means there will be more work for lawyers.'

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