What happens if I lose a No Win No Fee case?

When looking at whether to pursue a claim for compensation for personal injury, people are generally experiencing significant changes to their lives, including to their financial circumstances. No win no fee claims can be beneficial in these circumstances but there are questions about what happens if you lose.

Injured Victorians commonly have 2 concerns about claiming compensation:

1. I can’t afford to pay for a lawyer; and
2. I can’t afford to go backwards if I lose.

For many people, engaging a personal injury expert on a No Win No Fee basis is the answer to the first issue. When a lawyer offers No Win No Fee arrangements, it helps to provide confidence that the lawyer believes you can win your case. This is because the business model of law firms who get paid upon successful claims is reliant on them winning the majority of their clients’ cases

Here, we examine the second concern.

In most cases, if your case is not successful (is withdrawn or investigation of a potential claim is stopped), there should be no costs for you to pay under a No Win No Fee agreement.

Examples include:

• your claim is investigated but your injuries resolve; or
• you’re unable to get the evidence you need to support a claim.

However, there are circumstances where you can be required to pay even if you do not win your claim.

Here are 3 exceptions you should be aware of.

If your personal injury claim is withdrawn (because it is unlikely to succeed) before the claim is heard by court, generally the case can be withdrawn on the basis that “each party bears its own costs”. This means that if you withdraw a personal injury claim say, at a mediation prior to a court hearing, generally the defendant (usually an insurance company) will agree for the claim to be discontinued without you being required to pay their costs in defending an unsuccessful case.

In the highly unlikely event that your case goes to court and is unsuccessful, you may be ordered to pay the costs of the other side, which can be very significant.

This is because of the principal that the winner of a case is entitled to have their costs paid by the losing party and No Win No Fee agreements generally only cover you for the costs payable to your own lawyers; not to the other side also.

However, whether the case is likely to get to a court hearing and whether the defendant enforces that order (and seeks payment of their costs) is a different matter.

Some large insurers have policies which mean that they will only seek payment of their costs where the plaintiff’s claim (that is, your claim) was fraudulent or had no merit, or where the injured person was warned (usually by a formal offer called an “offer of compromise”) that if they went to court and lost that they would be required to pay costs, including penalty costs.

It is important to engage lawyers who guide you every step of the way, prepare your case well so that it is less likely to go to a court hearing and tell you about the risks of taking your case to a court hearing.

Polaris carefully guides clients through the legal process, working hard to prepare cases so that our clients don’t need to go to court to get the best possible outcome.

No Win No Fee agreements will almost always include terms that state that if you breach the terms of the agreement you will be required to pay for your lawyer’s costs (including both legal fees and the disbursements).

Typical terms of a No Win No Fee agreement include that you will:

• tell your lawyer everything that they need to know;
• be open and honest; and
• not engage other lawyers.

This ensures that your lawyers are protected against the small percentage of clients who may have been dishonest in their claims.

Disbursements are third party expenses incurred to run your case. They can include things like court fees, the cost of medical reports and barrister fees.

Some personal injury law firms will require you to pay for the bills or disbursements if you lose your case. This can mean that you are out of pocket for thousands of dollars even though your case was unsuccessful. Polaris covers these bills for our client if the case has not successfully resolved.

Usually, No Win No Fee agreements ensure that you do not have to pay for the fees of your lawyer until your case is successfully resolved, or until the agreement is ended. However, this agreement regarding your lawyer’s fees is separate to the requirement to pay for any disbursements in your case.

Think of the claim as being like going to a mechanic who gives you a quote for labour (the fees for the time their mechanic worked on your car) and parts (disbursements like a battery or brake pads, payable as the mechanic orders them.

The most common disbursements in personal injury claims are the cost of getting medical reports in support of the claim. These reports can range from $1,000 to $5,000 each.

While law firms can generally present a number of options about how third party bills can be paid (including some which mean that you pay nothing at all until you win your case), some No Win No Agreements require you to pay for any unpaid bills if the case is unsuccessful. There are also some firms who require you to pay disbursements (not the lawyer’s fees) ‘as you go’ whether your agreement is No Win No Fee or not.

While Polaris does not make its clients pay for disbursements for unsuccessful cases, it is important to check the terms of any No Win No Fee agreement before signing it to understand who will be responsible for paying the third-party bills if the case is lost.