BLACK SOCIAL HISTORY Lawyers forced to pay out £1m in no win, no fee disputes
Legal ombudsman questions whether solicitors should be allowed to use phrase, after receiving 600 complaints in a year :
The ombudsman says the no win, no fee model has 'played its part in fostering a culture of ambulance chasing and fraudulent claims'. Photograph: Alamy
Lawyers were ordered to pay almost £1m in compensation to disappointed clients last year owing to failures in no win, no fee agreements, according to figures released by the legal ombudsman.
The agreements have attracted so many complaints that Adam Sampson, the chief ombudsman, has questioned whether solicitorsshould be allowed to use the phrase to market their services.
Withdrawal of legal aid for many types of civil cases has resulted in conditional fee agreements – usually advertised as no win, no fee – becoming a common means of pursuing personal injury, unfair dismissal or medical negligence cases. They are sold on the basis that a lawyer will not take a fee if the claim fails. In most cases, if the claim is successful the lawyer charges a success fee.
Such agreements are supposed to make legal services risk-free, but they frequently leave customers facing thousands of pounds of unexpected costs, according to the ombudsman's report. Sampson's office received about 600 complaints about them last year.
"The no win, no fee market has become increasingly aggressive, with many law firms competing for cases and sometimes prioritising sourcing a large number of customers over a careful selection process," the report says. "A business model which consistently overvalues the chances of success can drive lawyers into unethical practice in order to avoid financial meltdown. This report raises genuine questions as to whether the no win, no fee label should be used at all, " the report says.."
Between 1 November 2012 and 30 November 2013, the ombudsman ordered lawyers in England and Wales to pay out a total of £944,177 in compensation, fee reductions and costs to remedy errors after agreements went wrong.
In one of the worst cases, Paul Stacey, 42, was left to represent himself in court after a law firm pulled out of a no win, no fee agreement. He won his case but then received a claim for £24,000 from the firm for work it had supposedly carried out. The solicitors were denied their claim and instructed to pay compensation after threatening him with legal action.
The ombudsman's report says: "With access to legal aid diminishing in many areas of law, these services enable people who otherwise might not be able to [make] claims. But the no win, no fee model has played its part in fostering a culture of ambulance chasing and fraudulent claims which has inadvertently driven up insurance premiums.
"The legal ombudsman has begun to see cases where the fundamental promise which underpins the marketing of [these agreements] – that the consumer will not have to pay for losing cases – is being broken. People who have entered into no win, no fee agreements have been hit with significant and unexpected costs when cases have failed."
The report points out that the Advertising Standards Authority (ASA) has warned about referring to conditional fee agreements as no win, no fee. It has said: "No win, no fee claims can be misleading because sometimes the client is liable for undisclosed costs, such as insurance, if they lose their case. That's unfair and can be financially damaging to a consumer."
Nicholas Fluck, president of the Law Society, said: "So-called no win, no fee was brought in by the government to fill the gaps left by its policy of removing some legal aid provision. No win, no fee solicitors are bringing justice to the masses for people denied legal aid. Solicitors working on conditional fee agreements take on significant risk with these often complex cases.
"The Law Society is pleased that the legal ombudsman agrees with us that solicitors need to be very clear with clients on their agreement terms and commends our model agreement. We agree that the MoJ's regulations covering damages-based agreements are a nightmare and the government needs to change them urgently."
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