In many claims for personal injuries in Queensland, an injured person can recover a contribution towards their legal costs from the responsible party. This is usually either a fixed amount or a proportion of the legal costs which they incur in making their claim. The amount of no win no fee costs ultimately recoverable in a personal injury claim depends upon a number of factors. The first step to understanding no win no fee costs agreements is to identify the basis upon which your law firm charges their legal fees.
No Win No Fee Percentage
In Queensland, it is unlawful for a law firm to charge a client a fixed percentage of their settlement or judgment. This type of arrangement is called a ‘contingency fee agreement’ and is prohibited by section 325 of the Legal Profession Act 2007 (Qld).
However, the Legal Profession Act 2007 (Qld) does cap the amount of professional fees which a solicitor is able to recover from a client in a no win no fee case. Section 347 of the Legal Profession Act 2007 (Qld) provides that a law practice cannot charge a client more than one-half of the net settlement or judgment amount, in professional fees. This is known as the ‘50/50 Rule’.
The amount of fees which a law firm is able to charge is capped at one-half of the amount which is left, after all statutory refunds and disbursements are paid on a case.
Jane settled her personal injury case for $100,000.
Jane owes Medicare Australia a refund of $5,000 and a refund to Centrelink of $5,000.
She also incurs medico-legal report fees and Barrister’s costs of $10,000.
Jane’s solicitor’s professional fees total $60,000.
Applying the 50/50 Rule, Jane’s solicitor is only able to recover of $40,000 (including GST) for their professional fees.
In the majority of cases, we cap our client’s fees at lower than the statutory maximum. Our capped fee agreements offer client’s fees capped as low as 30% of their net settlement monies, where many firms charge up to 50%.
No Win No Fee Charges
Under a no win no fee costs agreement, legal costs can be charged on an hourly rate, according to a Court scale or by a fixed fee.
In addition to professional fees, a law firm may charge a client:
- care and consideration;
- an uplift fee.
At No Win No Pay Law, we do not charge any uplift fee and cap our charge for care and consideration. Care and consideration is an amount which is charged in addition to a lawyer’s fees to account for the complexity of the matter.
In addition to charges related to professional fees, claims for personal injuries also involve a number of disbursements, outlays and office costs. These amounts can include things like medical report costs and Barrister’s fees. Often these types of costs are recoverable from the party at fault, however, this is not always the case.
No Win No Fee Pitfalls
Under a ‘no win no fee’ costs agreement, a person’s legal fees will be payable in certain circumstances. It is important to understand the terms of the costs agreement with the law practice engaged and the facts which will trigger payment of their legal fees. This often comes down to how the law practice has defined ‘successful outcome’ under the terms of their costs agreement. A ‘successful outcome’ in a no win no fee costs agreement may include:
- rejecting the legal advice of the solicitor to settle the claim;
- engaging another law practice to act;
- judgment or settlement in favour of the injured person.
Another pitfall in no win no fee costs agreements is that the person making a claim may be vulnerable to a costs order against them from the other party. That is, if the other party succeeds in a Court hearing, an order may be made for the injured person to pay the other party’s costs.
Most claims for personal injuries in Queensland are regulated by three pieces of legislation which prescribe a pre-Court process (Motor Accident Insurance Act 1994 (Qld), Personal Injuries Proceedings Act 2002 (Qld) and Workers’ Compensation and Rehabilitation Act 2003 (Qld). It is unusual for the need for an application or Court hearing to arise in the course of the pre-Court stage of a claim. That is, injured persons who make claims for personal injuries are more vulnerable to costs orders once a claim becomes litigated because once a claim becomes litigated, Court hearings and applications along the way, arise more frequently.
Overall however, the likelihood of a person proceeding all the way to hearing and being unsuccessful, is fairly low. The majority of claims for personal injuries settle outside of Court and in Queensland each year there are fewer than around six judgments against injured persons in the whole of the State.
Recovering Costs from the Other Party
The amount of costs which an injured person may recover from the other party in a claim for personal injuries will depend upon a number of factors including:
- the stage at which the claim is resolved;
- the legislation which regulates the claim;
- the amount of any settlement or judgment, by way of damages.
It is easier to recover costs from the party at fault in public liability, medical negligence and motor vehicle accident claims. It is most difficult to recover an amount for costs in claims for workers’ compensation common law damages.
The range of possible outcomes for an injured person, in terms of recovering costs from the other party include:
- recovering $nil amount for costs;
- recovering a fixed amount for costs (of around $3,000);
- recovering 40% to 60% of the costs incurred;
- recovering 80% to 90% of legal costs.
In many claims, it is not possible to provide advice to an injured person about the amount that they are likely to recover for costs until closer to when settlement negotiations are to be undertaken. Even then, the attitude of the opposing party can impact upon the amount which the injured person recovers in legal costs.
Only when a claim proceeds all the way to final hearing and the injured person achieves a successful outcome beating all previous offers of settlement are they likely to achieve recovery of their legal costs in the range of 80% to 90%. In the majority of claims, injured persons recover between around $3,000 and up to 60% of their legal costs in a no win no fee personal injury case.
Costs are generally awarded by the Court on either a:
- standard basis; or
- indemnity basis.
The legal costs recoverable on a standard basis are all costs necessarily incurred for the attainment of justice. These were previously called, ‘party and party costs’. Standard costs generally represent the legal costs incurred in necessarily advancing the case and communicating with the other party, together with all reasonable disbursements, outlays and office costs.
Indemnity costs are, ‘all costs reasonably incurred’. Provided that the injured person ‘reasonably incurs’ their legal costs, they will generally be recoverable. For this reason, a person awarded costs on an indemnity basis generally recovers the majority of their legal costs. The usual award made by Courts in litigation is for costs to be paid on a standard basis. However, in certain circumstances, it is appropriate for an award of indemnity costs to be made and if an injured person beats a formal offer which is made under the Court Rules then they may achieve an award of indemnity costs for the whole of their proceeding. Costs are ultimately within the discretion of the Court, however, there is always a degree of uncertainty as to the outcome which might be achieved by an injured person if a matter proceeds all the way to final hearing.