Case studies

No win, high fee: case study one

Miss A was hit with a bill for the other side’s costs of nearly £15,000 by her law firm after her personal injury claim was unsuccessful, despite proceeding under what should have been a ‘no win, no fee’ agreement.

The bill came as something of a shock to Miss A. Not only did the firm agree to such terms, it had taken out after the event (ATE) insurance on her behalf to cover any costs – she thought all financial risks had been protected against. However, our investigator discovered that the firm had broken the conditions it had agreed with Miss A and her insurer by proceeding with the case despite it having less than a 50% chance of success. When the case lost, the insurance company refused to pay out. As a result the firm then tried to make Miss A pay for its mistakes.

Miss A was extremely upset. As far as she was concerned the firm had made it quite clear she wouldn’t have to pay anything if she lost the case. She was also worried about how she would afford it. She complained to the firm in the first instance but the firm claimed it had done nothing wrong. Miss A then contacted the Legal Ombudsman for help.

We resolved the dispute informally by asking the firm to honour its agreement and pay the other side’s costs. Miss A told us that she was happy and relieved that we could help.

PPI pain: case study two

Ms B instructed a firm to assist her with a claim for the mis-selling of a payment protection plan on a debt consolidation loan. At the outset she informed the firm that she had been declared bankrupt, meaning she couldn’t pay any fees. As a result the firm agreed to act for her on a ‘no win, no fee’ basis, taking a success fee if they won the case.

Upon agreeing the case, the firm noted that Ms B did not have any suitable insurance to cover her in the event that the other side wished to recoup its costs. The ‘no win, no fee’ agreement specified that a suitable insurance policy should be in place to protect her and so, having discussed this with Ms B on the phone, the firm agreed to put one in place.

As far as Ms B was aware matters with her claim were progressing and she provided information when requested by the firm. However, some time later the firm told Ms B that due to various circumstances she should discontinue her claim. This was confirmed in an email. Though disappointed, Ms B took their advice and thought that this was the end of the matter.

The firm then wrote to Ms B a short while later to say that the court had issued an order for her to pay the other side’s costs, which were in excess of £30,000. They asked if she had any means to pay them. Ms B responded raising concerns that she had not been made aware of any liability for costs and had only discontinued the matter on their advice.

After failing to sort the matter out with the firm directly, Ms B brought her complaint to the Legal Ombudsman.

Our investigator found that there had been poor service on behalf of the firm. It had failed to take out an insurance policy on her behalf, despite saying it would do so, did not advise her of the risks her bankruptcy would cause, and also failed to advise her about any costs associated with discontinuing her claim. Given this, we decided that the firm should waive the other side’s costs and that it should pay Ms B the sum of £600 in recognition of the considerable anxiety the matter had caused her.

Withdrawal woes: case study three

Mrs C had instructed a law firm via a claims management company in making a ‘no win, no fee’ personal injury claim following a road traffic accident.

Initially, the case had progressed well. However, the firm suddenly told Mrs C that they were withdrawing from the case as she had not told them that she had previously been involved in a similar accident four years before, leaving her to pay the other side’s costs of £6,000.

On investigation, we found that although the CFA agreement allowed withdrawal if the customer had concealed an important fact, the firm had never asked her about previous accidents and, on the balance of evidence, appeared to have used the issue as an excuse for withdrawing from a case with less than a 50% chance of success. The firm was ordered to pay the costs involved, together with a sum for the inconvenience caused.

Cost controversy: case study four

Mr D’s firm helped him to make a personal injury claim under a CFA based ‘no win, no fee’ agreement, which he understood to mean that he would not have to pay any costs - win or lose. He told us that he was delighted with the outcome of his case until he found out that the firm were keeping almost a third of the damages awarded to him to cover their costs as well disbursements. At that point he complained and came to the Ombudsman.

Our investigation found that the CFA had been written in such a way that it meant costs couldn’t be recovered from the defendant. However, we found that this wasn’t made clear to Mr D when he first instructed the firm. The firm may have been confused as a result of taking over an existing case – since the original firm had ceased business. Nevertheless, it should have been clearer about its costs and how Mr D should pay them. Our investigation concluded that Mr D had not been given a thorough explanation of how the firm’s costs would be recovered.

As a result, an investigator recommended that it would be fair for the firm to reimburse Mr D; returning an additional £7,500 of the compensation originally awarded. Mr D accepted the decision.

Money for nothing: case study five

Mr E instructed a firm to represent him in his litigation claim for unpaid contractual work.

The firm agreed to act on his behalf under a ‘no win, no fee’ agreement but withdrew representation two weeks prior to the court hearing. As a result, Mr E had to act as litigant in person. He was successful with his case and received an award of around £5,000.

However, despite it being the firm’s decision to sever ties with Mr E two weeks before the hearing, they contacted Mr E claiming that they had carried out £24,000 worth of work and that he should settle with them. Mr E felt that this was completely unreasonable as no such costs had been outlined in the contract he signed at the start of the case.

The firm threatened Mr E with legal action and so he brought his complaint to the Legal Ombudsman. When we looked at it we found that the agreement he signed stated only that he should pay disbursements in the event of winning, should the firm withdraw its services. We decided that they were not entitled to claim anything other than disbursements and that they should pay Mr E £200 for the distress and inconvenience it had caused him. Mr E accepted our decision.

Closure calamity: case study six

Mr F instructed a firm on a ‘no win, no fee’ basis to represent him in a medical negligence claim.

The firm began the work and commissioned medical reports to support his case. However, eighteen months after the case began, the firm ceased trading, leaving Mr F to pay the medical experts’ costs and the work carried out by the other side.

Mr F had nowhere else to turn and so he brought his problem to the Legal Ombudsman.

Following an investigation we found that the agreement Mr F had entered into made no reference to him having to pay costs in the event of the firm ceasing to trade. Unfortunately he had already paid out £10,000, having been uncertain where he stood on the matter. We therefore suggested that Mr F liaise with the firm’s indemnity insurers to see if there was any way in which he could recover his costs.