Ombudsman's report says business model is "potentially misleading"
The Legal Ombudsman, Adam Sampson has questioned whether solicitors should be allowed to use the term “no win, no fee”, amid concerns about the use of conditional fee agreements (CFAs).
The Ombudsman imposed nearly £1m in financial remedies on solicitors in the last year over CFAs, and handled about 600 complaints about CFAs. In a hard-hitting report published this week, he cites examples of poor service including solicitors exploiting loopholes, not honouring agreements, and failing to explain costs to clients.
Sampson said: “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.”
In one case, the Ombudsman intervened to stop a firm charging a client £15,000 after she lost her case, which had a less than 50% chance of success and therefore broke the insurer’s terms of agreement. One firm tried to charge their client £30,000 after they dropped the case for reasons they had known about from the start. Another firm entered into a CFA with a client, stopped doing work on the case because it was too risky and then asked for £24,000 after the client successfully represented himself in court and was awarded £5,000.
In one case, a client’s joy at winning his personal injury case turned sour because he had not been told he would have to give his solicitor 30% for success fees and disbursements.
The Ombudsman called for greater monitoring and review of CFAs by regulators.
Last month, The Committees of Advertising Practice (CAP) warned that the phrase “no win no fee” was “potentially misleading, because it can imply that the client will be liable for no costs whatsoever.”
Since the Jackson reforms were introduced last April, solicitors can no longer recover their success fees or insurance premium from the losing side but must take it from the client’s award. Damages based agreements (DBAs) have also been introduced although there has so far been little takeup of these.
Richard Scorer, partner and head of serious injury, Pannone Solicitors, says: “A problem arises when the defendant is entitled to be paid costs in a lost case.
“The client should be advised to take out insurance but the Ombudsman’s case studies show this advice is sometimes not given.
Post-Jackson if you want to claim a success fee when you win, the term could be misleading as clients think it means they will never have to pay anything.
“CFAs can be complicated and it is incumbent upon the solicitor to explain them properly. If a solicitor fails to do this they could be left paying costs on behalf of their clients.”
