Know How: your solicitor gets paid
This is perhaps one of the biggest questions that you will have before deciding whether to pursue a claim for personal injury.
The rules relating to the payment of solicitor’s costs are historically complex. The first thing that your solicitor will consider with you are the various methods of funding a personal injury claim.
HOW YOUR CLAIM IS FUNDED
The public on the whole does not realise that a “No Win, No Fee” agreement can be entered into if there are no other ways of funding the claim. There is a hierarchy of funding agreements that your solicitor will consider with you which will generally be:
- Membership of a Union
- Before the Event Legal Expense Insurance
- And then, if none of those are available, a “No Win, No Fee” agreement.
As a fully paid member of a union then you will have, as part of that membership, certain benefits. One of those benefits may be that the union will pay your legal fees if you are involved in an accident.
Similarly, you may have (sometimes unwittingly) paid for Legal Expense Insurance. If you have paid for, let’s say, household and contents insurance on your home you may have paid for Legal Expense Insurance as part of your premium. If you do then your insurer may cover you if you are involved in an accident and pay for your legal fees to pursue a claim for personal injury. Your solicitor can investigate whether you have Legal Expense Insurance if you let them have details of any cover to a home contents, car insurance or other policy which you or your spouse/partner may have.
Lastly, we come onto a “No Win, No Fee” agreement which does what it says on the tin. Sort of. A “No Win, No Fee” agreement is an agreement that you enter into with your solicitor which has different consequences depending on whether your claim wins or loses.
- If you win your claim, your opponent will have to pay your compensation and your legal fees.
- If your case loses, you do not have to pay your legal fees which is where the term “No Win, No Fee” comes from.
Simple. Well, there may be a catch if your solicitor is charging a Success Fee. We will discuss this below.
HOW DOES YOUR SOLICITOR CHARGE?
Your legal costs are calculated for each hour engaged on your case based on your solicitor’s hourly rate. The hourly rate is set by each firm and may take into account guideline hourly rate set out by the court. Routine letters and telephone calls will be charged as units of one tenth of an hour. Other letters and telephone calls will be charged on a time basis.
So if your solicitor’s hourly rate is £100 per hour and he writes you 3 routine letters his fee is £30. If you spend 30 minutes on the telephone with your solicitor his fee is £50.
HOW DOES YOUR SOLICITOR GET PAID ON A “NO WIN, NO FEE” AGREEMENT?
If you win your claim, your opponent will have to pay your compensation and your legal fees.
How much does your solicitor get paid by the opponent?
There have been a number of changes in the rules relating to the payment of solicitor’s legal fees.
Firstly, your opponent now only has to pay your solicitor a fixed amount of money for the time that they spend on your case. The amount of costs depends on a number of factors – what type of case it is, how much compensation your case is worth and how far the case has gone along the claims process.
So, if you are involved in, say, a road accident where your opponent admits that they are at fault quickly and the case settles by negotiation without court proceedings then your opponent will have to pay your solicitor £500.
If you are involved in an accident at work where your employer admitted that they were to blame quickly and you agreed an appropriate amount of compensation under £10,000 by negotiation without court proceedings then your opponent will have to pay your solicitor £900.
AT PI SUPPORT WE WILL ACCEPT THOSE FIXED FEES AS FULL PAYMENT OF OUR FEES even if our fees are higher than the fixed fees we receive from your opponent. We won’t ask you for any money.
If you are funded by Legal Expense Insurance or your union, it is likely that your solicitor will also accept the fixed fees as full payment.
DO I HAVE TO PAY ANYTHING IF I WIN ON A “NO WIN, NO FEE” AGREEMENT?
With PI Support? No.
However most other solicitors will ask you to pay a “Success Fee” if your claim is successful on a “No Win, No Fee” agreement.
WHAT IS A SUCCESS FEE?
A Success Fee is a percentage increase on the solicitor’s legal costs. The Success Fee must be no more than 100%.
If your solicitor has incurred legal fees of, say, £2,000 and your “No Win, No Fee” Agreement has a Success Fee of 50%, then your solicitor can charge you £1,000.
You will pay the Success Fee from your compensation. However under the rules your solicitor must not deduct any more than 25% of your compensation.
So if you are awarded £10,000 you may have to pay your solicitor up to £2,500 for the Success Fee. If you are awarded £1,000 then pay up to £250 and so on.
In addition, your solicitor cannot deduct more money for legal costs from your compensation than has actually been incurred.
So if you are awarded £10,000 and the Success Fee comes to a total of £1,000 your solicitor can only deduct £1,000. You do not have to pay the full 25% deduction.
Here’s the catch then: Your solicitor may place a high Success Fee on your case or charge you a high hourly rate so that in most cases the full 25% is deducted from an injured person’s compensation.
There was a time before April 2013 when the rules were changed when the opponent’s insurance had to pay the Success Fee. The Success Fee was fixed in road accidents at 12.5% and in accidents at work at 25%. After the rule change however, when the client had to pay the Success Fee, solicitors started charging much more than this.
There are guideline hourly rates for solicitors and legal staff depending on what part of England and Wales you live. Your solicitor is not bound by these guidelines and may charge you a higher rate. You are expected to shop around but we have never known a member of the public negotiate an hourly rate in an accident claim.
Here’s two examples of how this might work in practice:
Number one (where the Success Fee is more than 25% of the compensation):
You enter into a “No Win, No Fee” agreement with your solicitor. Let’s say your solicitor sets the Success Fee at 50% and the hourly rate at £195 per hour plus VAT.
Your case lasts 5 months and you receive £5,000 in compensation.
Your solicitor says that he spent 15 hours on your case. His fees are £2,925 plus VAT. He receives £900 plus VAT from your opponent. He can charge you £1,462.50 plus VAT but his fees are limited to 25% of your compensation. 25% of your compensation is £1,250, so your solicitor takes the full £1,250.
Let’s do another example:
Number two (where the Success Fee is less than 25% of the compensation):
You enter into a “No Win, No Fee” agreement with your solicitor for a straight-forward work accident. Here the Success Fee is set at 25% and the hourly rate was much more reasonable £100 per hour.
Your case lasts 5 months and concludes without any major dispute and you receive £5,000. If your solicitor does 10 hours work at £100 his fees would be £1,000 plus VAT. He charges you a Success Fee of 25% which would be £250 plus £50 VAT. Your deduction is therefore just £300. Your solicitor cannot take any more money from your compensation than that £300.
We would wager that the first example is more representative of what is happening in the industry at the moment.
PI Support do not charge a Success Fee in any case. We do not take any of your compensation for our legal fees.
If we receive, say, £500 from your opponent we will accept this as payment of our full fees – every time.
We hope this is clear but if you wish to discuss this article with us then please contact us.