More losers than winners with no win, no fee litigation
'No win, no fee - what a brilliant idea, ' I have heard some people say.'Stands to reason doesn't it? If a lawyer acts for you in a dispute and you lose, you don't pay them. Well, why should you?
If the lawyer was any good, you would have won.
I tell you, give me no win, no fee any time. If it works for the Americans, it can work for us.'
Trying to unravel this 'Great Bores of Today'style misunderstanding is no easy business, but let us have a go:
Starting with the Americans, their system differs from ours in two important respects. First, the level of compensation awarded to claimants is decided by a jury, not a judge. Damages are inflated to reflect the fact that the claimant's lawyers will be paid a percentage of the damages, typically one third. This is usually a lot more than even American lawyers would have earned on an hourly rate. Second, unsuccessful claimants are not liable to pay the defendant's costs. There is no costs pressure on the claimant to be reasonable or realistic in their expectations. Quite the reverse, the claimant has nothing to lose and may as well hold out for the jackpot.
Few people in the commercial world work for nothing.Some do pro bono work for their own reasons, be they altruistic, loss-leading or image-improving. But pro bono does not pay the rent and few lawyers would be prepared to take on a no win, no fee case unless it was a winner.
Although, in litigation, there is no such thing as a sure-fire winner, some types of claim, such as claims for personal injury, are, in the main, successful. For such claims, the no win, no fee lawyer is likely to recover their percentage, or uplift, irrespective of their input. The only question is how much?
Other types of claim are far less predictable.
The no win, no fee lawyer would not touch them with a bargepole, and the claimant would be left without representation.
What is a win? Is it the recovery of some money, any money, or the recovery of the sums of money to which the claimant ought to be entitled? Is it recovering more than any offer made by the defendant? Is it recovering more than the counterclaim? If you are a defendant, you win by paying nothing. Who wants a cut of that?
It is thoroughly undesirable for an adviser to have a financial stake in the outcome of their client's case. If a claimant has been advised by a no win, no fee lawyer that their claim is worth between £100,000 and £125,000, and the defendant offers £90,000, does the claimant take the offer or hold out for more? If the claimant does not beat the offer, they will be considered by the court to have lost. The no win, no fee lawyer who recommends acceptance of the offer is guaranteed a fee, but is denying the claimant the opportunity to recover up to £35,000.
But the lawyer who rejects the offer puts their fee at risk.
It is not possible to advise on the merits of some claims, such as those arising out of defective buildings, until the problems have been investigated by an expert who can advise on the cause of the defect, on who is responsible, and how much it will cost to put right. Who is to foot the expert's bill? If no win, no fee is such a good idea for the lawyers, it should be possible to retain experts on a similar basis. It is not, for obvious reasons.
As you can see, with no win, no fee, claimants end up paying more for recovering damages that they were going to recover anyway. Or they will be forced to accept less than they would have done, had they been independently advised. Or they will not be able to find anyone to represent them because their case is 'difficult'.
Attempts to make litigation self-funding would encourage unscrupulous advisers and throw a bad light on even the most principled.
No win, no fee? Not such a good idea after all.