TRUE OPINION: No such thing as a free lunch when it comes to no-win, no-fee

TRUE OPINION: It sounds like a great deal on paper but the price of a ‘no-win no-fee’ arrangement may be the loss of full control of your litigation, writes unfair dismissal expert and lawyer Tom Häkkinen.

Just tell that fat b*tch to accept the settlement offer

— overheard in a plaintiff mediation somewhere (probably)

If there’s one thing that I’ve learnt as a plaintiff lawyer, it’s the wisdom in the expression “who pays the piper calls the tune”.

Please don’t misunderstand me, I am not suggesting for one instant that no-win no-fee arrangements are inconsistent with a solicitor’s professional duties. Nor that a solicitor is more likely to compromise their professional duties when acting for a no-win no-fee client. My concerns regarding no-win no-fee arrangements are more nuanced than that, but still very real.

For one thing, when you are running your own claim (and paying for it) you can be free to make irrational decisions, or to run your claim other than in your own commercial best interests. Of course, your solicitor may well advise you against certain steps—and if your instructions to your solicitor are unethical then your solicitor must refuse them altogether—but generally a solicitor will not stop you from taking risks that are yours to take.

Being a “mad” litigant obviously becomes a little bit harder when you are prosecuting your litigation using somebody else’s money (the solicitor’s or a litigation funder’s). A solicitor may well be the servant of the client, but a solicitor also has to make a living from their trade and cannot be expected to fund the follies, or the vanities, of their more passionate clients.

But greater freedom to act against your own best interests is not the end of the story. There can be other prickly issues that arise as well. For example, it is highly unusual for a settlement deed not to contain some type of confidentiality clause. Standard settlement terms in most employment disputes will usually contain a confidentiality clause and a non-disparagement clause, binding the parties not to say anything negative about each other in any medium. Even when explained to a client at the beginning of their claim this is often something that they will not properly understand until they have been presented with the agreement itself.

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On an emotional level, it’s much easier to reconcile yourself with having to maintain confidentiality over a dispute when you imagine that you will be getting paid a lot of money for your silence. But the majority of legal settlements in my experience have included a fair degree of compromise. In that case, when the actual settlement is for a modest amount of money, that additional obligation to keep your mouth shut about everything you know about the other side becomes a little bit harder.

Consider, if you had been chewed up and spat out by your former employer, would you want to keep their dirty secrets? Imagine you had given years of your life to a certain employer, working overtime, staying back late, coming in on weekends, giving up part of Christmas or Easter as the case may be, and then you find your life suddenly upended with only a week or two’s notice and bills to pay?

Oftentimes, there is an element of bullying and harassment in unfair dismissal matters as well. In such cases, the freedom to slag-off your former boss, to talk to others about your claim, to warn others against working for that employer, might have a very real value to you.

But the expectation in the industry is that a settlement deed will come with confidentiality and non-disparagement terms and negotiating a deed without those terms can be very difficult. Oftentimes an employer will simply refuse to consider any type of settlement which does not include binding confidentiality and non-disparagement provisions.

Now then, if you are paying your own way, you can generally turn-down any offer without too much heartache, your solicitor will not second-guess your instructions if it is clear that you have:

1. understood their advice;
2. are of sound mind;
3. are not asking them to act unethically or unprofessionally; and
4. are pursuing a claim with reasonable prospects of success.

In that case, the risk is yours to take.

But what if the risk isn’t only yours to take? What if your solicitor has assumed some or all of the risk by agreeing to represent you no‑win no‑fee? If your solicitor is the one covering the cost of your litigation, they may be much more likely to take the view that you are refusing a reasonable settlement offer. Don’t you want to move on with your life, why are you being so insistent on your right to disparage your former employer?

It goes without saying that you could still refuse the settlement offer. Whether on a no‑win no‑fee arrangement or paying your own way, your solicitor could never simply act against your express instructions. However, your solicitor may start thinking that it’s time for you to find a new lawyer if that’s going to be the case.

And is that realistic? How easy is it to swap horses midstream? How easy is it to find new representation in a matter that has already begun? Especially on a no-win no-fee basis. Is that fair?

Buyer Beware: No win, no fee (Image: Piqsels / Supplied)

This is an unavoidable reality of no-win no-fee matters. Consider the complaint from the solicitor’s point of view, it is easy for a client to refuse a settlement offer when the client is not personally carrying the cost of the litigation. It’s almost a no‑lose situation. In theory, a client could hold out indefinitely, waiting for a better offer, if the law firm were to give them unlimited credit to run their claim. In practice that’s never been my experience, but the moral hazard is undeniable.

So my advice? When possible, pay for your own legal services. Failing that, read any no-win no-fee arrangement closely so that you understand what you might be giving up. If you are concerned about things such as confidentiality terms being a part of any settlement you should raise those issues with your solicitor at the outset of your engagement. You should also make sure you are both in agreement as to what a reasonable settlement offer might look like.

Finally, consider keeping some cash spare so that if it came to it you could afford to seek a second opinion (on any part of your claim) from another lawyer. Crowdfunding can be another option, but at the present this seems like an option that is talked about much more than it is actually used. And of course, shop around: this won’t just help you get the best deal to begin with, but having done that research may well assist you if you ever have any disputes with the first lawyer that you choose.

My dream would be to see a secondary market develop for second‑opinions in the no‑win no‑fee space, especially the larger actions such as class actions. Believe me, litigation funders will not hesitate in obtaining a second opinion from that of the client’s legal team, so why don’t clients take this quite ordinary step more often?

Well, probably because most plaintiff clients can’t afford to pay for the first legal opinion, let alone a second opinion. But commissioning counsel to answer a question is generally much cheaper than running the entire litigation, so to my mind, it makes sense that even if a client cannot afford to litigate with their own funds that does not mean that they cannot afford a second opinion. Especially if we’re not just talking about a single client, but a class‑action where the lead-claimant is supported by an informal network of interested group members who might be able to pool their money or even conduct fundraisers.

Whatever your circumstances, don’t get lulled into complacency by the puffery and advertising jingles typical in plaintiff law, claims such as, ‘no financial risk’, ‘maximum compensation’, ‘we’ll take away the stress’ or ‘our experts will handle everything’.

Remember, there’s no such thing as a free lunch and there are sometimes hidden downsides to allowing someone else to fund or make decisions in your litigation.

The views and opinions expressed in this article are those of the author alone and are not a reflection of the position of Adero Law nor its clients. No client of Adero Law has been consulted on the content of this article and its publication cannot be attributed to any client’s instructions or benefit.

About Tom Häkkinen 1 Article
Tom Häkkinen is a Senior Associate at Adero Law. Specialties include employment law, class actions and general commercial litigation. The views expressed in this article are strictly his own.

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