The death of the contingency fee agreements and the birth of the damaged based agreement

DRAFT

The information herewith gives general guidance. It should not be regarded or relied upon as a complete or authoritative statement of the law or treated as a substitute for specific legal advice concerning individual situations. Read our full legal notice on the left.

 

After the 1st April 2013 expect a bit of a sea change in respect of how personal injury claimants are able to pay for legal representation.  For the last few years if you were a claimant it was more or less standard for you to enter into a contingency fee agreement “No Win No Fee” to fund your legal representation.

This meant that you were not charged an up-front fee but agreed to give your lawyer a certain percentage of the money received if you won or settled your case out of court.

The percentage of the damages that you had agreed to be paid to your solicitor in the event that you were successful at Court, etc. would then have been recoverable from the insurers and you would in most instances have received the full value of your claim.

In the event that you lost your case your lawyer would not receive a fee but you might still have had to pay the Defendant’s costs of the action.   Depending on the circumstances, these costs could be quite high.

Well from April 2013 all that changed and I am afraid the changes do not benefit you as a Claimant.   The Government have now decided that this relatively well tried and tested method of a Claimant being able to fund their personal injury claim is to be no more.

The main beneficiary of this decision is the Insurance Companies as they will not be liable to pay the proportion of the monies that you agreed to part with in the event that your case is successful.  This government in its wisdom have decided that Claimants should enter a Damages Based agreement with their legal representative.

A Damage Based Agreement is a contract which will be entered into between you as the claimant and your legal representative (usually but not always a solicitor).  The agreement sets out how you will pay your legal representative for the service and work they undertake when handling your case.

A Damaged Based Agreement is a type of “No Win No Fee” arrangement under which your legal representative is only paid if the case is successful and receives nothing if the case is lost.  This agreement binds you to pay your legal representative a percentage of your damages which is agreed between both of you prior to your claim commencing

What is the difference then, well, with a Damages Based Agreement the percentage of the damages agreed to be paid to your legal representatives from your compensation is not recoverable from the insurers yes that’s right NOT RECOVERABLE FROM YOUR INSURERS so in simple terms if your claim is worth £1000 and you have agreed to 25% of your damages being taken in the event that you win your case then you will get £750.

Now how have the government decided to ensure that you are compensated for this loss, it has recently been decided that the value of personal injuries will increase by 10%.

Now I know my math’s is not great but if I were a claimant and my case settled for £1100, and I had to pay my legal representative 25% that would leave me with £825.  Obviously as you can see you will receive some compensation but definitely not 100%.

You may well say it is not fair for a  legal representative to retain a portion of your compensation but with 20 years’ experience as a litigator I must point out that many cases have to be financially front loaded by solicitors.   Unless the client is willing to pay for disbursements upfront and these include copies of their GP’s and Hospital Notes which normally come to around £150 and their medical reports in support of their claim. (I recently had to obtain three medical reports on behalf of a client and the total fees for the medical experts came to £4,500) then it is the Solicitor who is financially compromised.

On many occasions once all the evidence is obtained, it becomes clear, that the Claimant has not got a claim which would be successful if it proceeded to trial and the Legal Representative is out of pocket.

We live in interesting times.

 

Deborah Aloba

Affordable Law For You Limited

The information herewith gives general guidance. It should not be regarded or relied upon as a complete or authoritative statement of the law or treated as a substitute for specific legal advice concerning individual situations. Read our full legal notice on the left.

 

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