A no win ‐ no fee costs agreement gives people with limited finances access to justice. For people who can’t afford to pay their legal costs up‐front or on a ‘pay as you go’ basis, this type of agreement enables them to engage a lawyer to help them pursue their legal rights. They pay the lawyer only after their case is settled or otherwise decided, and only if they are successful.
Many lawyers and law firms enter into no win ‐ no fee costs agreements with their clients,
undertaking legal work on their behalf on what is sometimes called a ‘speculative’ (or ‘spec’) basis.
No win no fee
- What is a no win ‐ no fee costs agreement?
In a no win ‐ no fee, a lawyer agrees with a client not to charge any fees for their services unless and until the client ‘wins’ their case. The lawyer agrees to take the risk that the case might lose – and if this happens, the lawyer does not charge any fees. The client agrees to pay the lawyer if the case succeeds (typically, but not always, out of the money recovered from the other party).
However you should note:
- Generally the law firm is still entitled to recover their outlays (also known as disbursements).
These are monies the law firm has spent in pursuing the claim and include court filing fees, the cost of expert reports and barristers’ fees. The terms of the no win ‐ no fee costs agreement should state whether or not the firm can recover their outlays.
- While a lawyer may carry the risk for their own fees, it is highly unusual for them to carry any risk for the other party’s legal costs. Typically, if a case is lost, the client who loses must pay the other side’s legal costs, irrespective of whether or not they have a no win ‐ no fee costs agreement with their own lawyer.
- In what kinds of cases can I ask for a no win ‐ no fee ?
Lawyers and their clients can enter into this type of arrangement in any case except criminal matters or family law matters.
However, law firms typically offer no win ‐ no fee terms only in cases where there is, or is likely to be, money available to pay the costs after the matter is settled.
The most common cases are personal injury claims and some types of deceased estate matters. Ask your lawyer up‐front if they are prepared to enter into a no win‐ no fee costs agreement.
A law firm is not obliged to take any matter on a no win ‐ no fee basis. Some firms never offer these terms at all.
Shop around if you can. Different law firms offer different fees, funding arrangements and expertise.
Ask several firms how they would approach your matter and if they will agree to a no win ‐ no fee arrangement.
If the lawyer you consult will not accept such an arrangement, find someone who will or talk to them about an alternative arrangement. For instance, some firms will require their fees to be paid whether you win or lose the case, but will not need to be paid until the end of the case.
If a lawyer and a client agree that a case will be conducted on a no win ‐ no fee basis (that is, if there is a conditional costs agreement between them), then the Act imposes certain requirements. In particular, the agreement:
- must set out the circumstances that constitute a ‘successful outcome’ of the matter;
- may provide for outlays to be paid (possibly with interest) irrespective of the outcome of the matter;
- may provide for payment of an ‘uplift fee’;
- must be in writing; in clear plain language; and signed by the client;
- must contain a statement that the client has been informed of his/her right to seek
independent legal advice before entering into the agreement;
- must contain a cooling‐off period of not less than five clear business days during which the client, by written notice, may terminate the agreement.
While these requirements must be observed, there is no ‘standard’ form of agreement.
The fees charged in a no win ‐ no fee costs agreement can be higher than those charged in a standard costs agreement between a lawyer and client. This is because the lawyer is taking the risk that the matter might not be successful and hence that he/she may not be paid for their services.
The Act also allows a law firm to charge an ‘uplift fee’ in a conditional costs agreement. This is an additional fee over and above any fees that are otherwise payable, and it is payable only on the successful outcome in the matter. An uplift fee may be stated in dollar terms but is usually calculated as a percentage of the fees (excluding outlays) otherwise payable.
In either case however, the uplift fee must not exceed 25% of the fees otherwise payable. It must also be separately identified in the costs agreement. The lawyer must give the client an estimate of what the uplift fee is likely to be, and explain what they will take into account in deciding how much the fee will be.
Not all lawyers charge an uplift fee.
If you have a no win ‐ no fee arrangement with a lawyer and your claim is for damages for personal injury, then the Act makes the arrangement subject to what is often referred to as the ‘50/50’ rule.
This protects a person making a claim (called the claimant) in personal injury matters by restricting the amount that a law firm can charge them. Its objective is to ensure that claimants are not worse off financially after pursuing a legitimate personal injury claim.
The rule puts an upper limit on the professional fees (including GST) that a law firm may charge in such cases. The maximum a law firm can charge (including GST) is one half (or 50%) of the settlement amount 5 after refunds (e.g. to Medicare or Centrelink) and outlays have been deducted.
The formula used is roughly stated as follows:
Maximum fees = [settlement amount – (refunds + disbursements) ÷ 2]
- What if my lawyer won’t enter into a no win ‐ no fee ?
A law firm is not obliged to take any matter on a no win ‐ no fee basis. Some firms never offer these terms at all.
Shop around if you can. Different law firms offer different fees, funding arrangements and expertise.
Ask several firms how they would approach your matter and if they will agree to a no win ‐ no fee arrangement.
If the lawyer you consult will not accept such an arrangement, find someone who will or talk to them about an alternative arrangement. For instance, some firms will require their fees to be paid whether you win or lose the case, but will not need to be paid until the end of the case.
- My lawyer will take my case on a no win ‐ no fee basis. What do they have to do now?
If a lawyer and a client agree that a case will be conducted on a no win ‐ no fee basis (that is, if there is a conditional costs agreement between them), then the Act imposes certain requirements. In particular, the agreement:
- must set out the circumstances that constitute a ‘successful outcome’ of the matter;
- may provide for outlays to be paid (possibly with interest) irrespective of the outcome of the matter;
- may provide for payment of an ‘uplift fee’;
- must be in writing; in clear plain language; and signed by the client;
- must contain a statement that the client has been informed of his/her right to seek
independent legal advice before entering into the agreement;
- must contain a cooling‐off period of not less than five clear business days during which the client, by written notice, may terminate the agreement.
While these requirements must be observed, there is no ‘standard’ form of agreement.
- What is an ‘uplift fee’?
The fees charged in a no win ‐ no fee costs agreement can be higher than those charged in a standard costs agreement between a lawyer and client. This is because the lawyer is taking the risk that the matter might not be successful and hence that he/she may not be paid for their services.
The Act also allows a law firm to charge an ‘uplift fee’ in a conditional costs agreement. This is an additional fee over and above any fees that are otherwise payable, and it is payable only on the successful outcome in the matter. An uplift fee may be stated in dollar terms but is usually calculated as a percentage of the fees (excluding outlays) otherwise payable.
In either case however, the uplift fee must not exceed 25% of the fees otherwise payable. It must also be separately identified in the costs agreement. The lawyer must give the client an estimate of what the uplift fee is likely to be, and explain what they will take into account in deciding how much the fee will be.
Not all lawyers charge an uplift fee.
- The ‘50/50’ rule
If you have a no win ‐ no fee arrangement with a lawyer and your claim is for damages for personal injury, then the Act makes the arrangement subject to what is often referred to as the ‘50/50’ rule.
This protects a person making a claim (called the claimant) in personal injury matters by restricting the amount that a law firm can charge them. Its objective is to ensure that claimants are not worse off financially after pursuing a legitimate personal injury claim.
The rule puts an upper limit on the professional fees (including GST) that a law firm may charge in such cases. The maximum a law firm can charge (including GST) is one half (or 50%) of the settlement amount 5 after refunds (e.g. to Medicare or Centrelink) and outlays have been deducted.
The formula used is roughly stated as follows:
Maximum fees = [settlement amount – (refunds + disbursements) ÷ 2]
