It is common knowledge that taking action in the courts against an opponent who disputes your claim can be stressful and expensive. Recently, alternatives to bringing court action, such as alternative dispute resolution and mediation, have become more common. Another option is to take action on a 'no win no fee' (NWNF) basis.
How Does NWNF Work?
One of the principles of English law is that the loser in a court case pays the costs of the winner in addition to their own. In NWNF, the solicitor agrees not to charge a fee unless the action is successful. This means that if you instruct a firm of solicitors on a NWNF basis, your risk as to costs is limited to the other side's costs plus any 'disbursements' (such as the cost of expert witness reports) incurred by your solicitors and the court costs. You can, however, buy insurance to cover these costs and it is generally recommended that you do so.
Running a legal action on a NWNF basis with costs insurance means the solicitor is taking the largest financial risk. Since a court case will only take place if both parties to the dispute think they have a good chance of winning, the solicitor will normally charge a 'success fee', which is an extra fee designed to compensate them for the risk that you may lose and they do not get paid. The success fee varies depending on how risky the case is thought to be. Provided the success fee is reasonable, the court will normally make the loser pay it as part of the winner’s costs.
The two forms of legal insurance you can buy to cover court costs are called 'after the event' (ATE) and 'before the event' (BTE). ATE insurance is bought when you are in dispute and need to cover your costs and the other side's legal bill should you lose. BTE insurance is commonly sold with house or motor insurance policies to cover your costs in the event of your being sued.
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