ARE “NO-WIN, NO-FEE” AGREEMENTS AVALIABLE FOR CLAIMS AGAINST AN ESTATE?

Funding arrangements such as Conditional Fee Agreements (“CFA’s”) or Damages Based Agreements (“DBA’s”) are collectively referred to as “no win, no fee” agreements.  These funding arrangements are offered by some firms for some types of claims, however unless you are claiming against a very large estate and are expecting to recover a significant sum, it is unlikely to be in your best interests to fund your claim under one of these agreements because of the success fee which is charged.

What is a success fee?

Whilst the idea of not paying any legal fees if you lose the case sounds vey attractive, the flip side of the agreement is that if you win the case, you will pay to your solicitor on top of their fees, a success fee which is calculated on a percentage of the fees incurred (up to 100%) (for a CFA) or a percentage of the damages recovered (for a DBA).

Why is a success fee bad?

The general rule in claims relating to an estate is that the winner of the claim pays the losers costs.  It is generally misunderstood that all costs will come from the estate.

This means that if you are successful in your claim, your legal costs will be paid by the losing party (subject to assessment by the court).  The losing party will not, however, be required to pay your success fee.  This will have to be paid by you from the award you receive from the court.  As an example, if your legal costs are £100,000 and you have been awarded £80,000 plus costs by the Judge at trial, whilst you have won and you will receive £180,000 from the losing party, you will be required to pay your solicitor £200,000 (being £100,000 costs plus 100% success fee), which means that you could end up owing your solicitor £20,000.

It is for this reason that funding arrangements of this nature should not be entered into unless the sum you expect to receive from the estate is very large.  Otherwise, you would be far better to pay for your legal fees on a normal hourly rate retainer basis, with no success fee.

What are the other downsides of a “no-win, no-fee” agreement?

If you lose your claim, you will not have to pay your solicitor’s fees, but you will be required to pay the fees of the winning party.  To protect you, should the case be lost, your solicitor may offer you an insurance policy which will pay the other side’s costs if you lose. 

Whilst this may on the face of it solve the issue, there are often high premiums to be paid to the insurer if you are successful in your claim, further reducing your award from the court.

There may also be circumstances when an insurer refuses to pay the costs which you have been ordered to pay after losing a claim, for example if the court has made a finding that you have been untruthful about anything concerning the case.  If you are considering taking out such a policy, make sure that you fully review the circumstances in which the insurer can refuse to pay out.

Finally, whilst the arrangement covers your solicitor’s fees, you will still be required to pay disbursements, such as court fees, experts fees and your barrister’s fees (unless they are also retained under a similar agreement).

Can I ever recover the success fee as damages?

At present, following the decision of the Court of Appeal in Hirachand v Hirachand (2021), it is possible for the court to take into account a success fee payable by a claimant in a claim for reasonable financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Act”).

This case involved a claim under the Act by a daughter against the estate of her deceased father who had not made provision for her within his will. Following a trial, the Judge awarded the claimant a lump sum for her maintenance.  When calculating that sum, the Judge classed the success fee which the Claimant would be required to pay to her solicitor as a debt of the Claimant and increased the award accordingly.

The executor of the father’s estate appealed the Judge’s decision to the Court of appeal on the basis that the Judge should not have included the success fee as a debt, however the Court of appeal disagreed and ruled that Judges do have a discretion under the Act to take into account any success fee payable when determining how much to award a Claimant.

A further appeal of this case was heard by the Supreme Court in January 2024 and the decision is eagerly awaited …