Can you afford to lose?
Wednesday 03 May 1995
The Lord Chancellor's "no win, no fee" proposals maintain the risk that the damages obtained may be wholly absorbed by legal charges. The Law Society will encourage its members to apply a voluntary cap, but a system that guaranteed a minimum result for the client would have been significantly preferable.
The new proposals will not, as many assume, be the US-style payment by results, while the potential will remain for a less competent lawyer to spend an inordinate amount of time achieving an inadequate result and yet be compensated handsomely. For the Lord Chancellor has linked the success fee payable by those who use "no win, no fee" not to the result achieved, but simply to the fact of a result.
This is peculiar, given that it is known that in the field of personal injury claims, which he uses as his test-bed, the rate of success is in any event exceptionally high. Under the US contingency fee system, the lawyer and client have a more obvious interest in the achievement of the maximum amount of damages in the shortest time at the least cost, because to do anything else diminishes the return for both client and lawyer. True, there are ethical problems associated with the US approach but they are little different from those associated with the Lord Chancellor's conditional fee scheme.
In particular, the primary concern that the lawyer's interest in the result will diminish the lawyer's objectivity applies equally to both systems. The objections to either disappear completely if we have confidence in our lawyers, and in this country there has been and remains a proud and ingrained tradition of professional integrity.
Once the Lord Chancellor had decided to shelve the ethical concerns, his decision to opt for conditional, rather than contingency, fees remains puzzling. Despite the best efforts of the United State's insurance industry's publicity machine, any informed observer knows they do not lead to a litigation explosion. Contingency fees may have led to a few high-profile, apparently speculative, claims but that may be more a reflection of social attitudes and values in the US than the system of contingency fees.
More importantly, contingency fees are easily regulated. Most states find no difficulty in imposing a cap - acceptable to lawyers and clients - on the maximum percentage of damages that can be taken in lawyers' fees. The Lord Chancellor's decision not to follow the US is the more puzzling when it is remembered that the concept of conditional fees comes from his native Scotland where "no win, no fee" has never been prohibited yet it has never been seen as a significant access route to justice.
If access to justice is what "no win, no fee" is about, contingency fees would appear to offer an altogether safer path than the uncertain stepping stone of conditional fees.
But the debate on "no win, no fee" obscures the real issue, which is the need to control the cost of litigation. The truth is not simply that parties cannot afford to litigate, but more that they cannot afford to lose, for we maintain in this jurisdiction the enshrined principle that the loser pays both sides' costs.
The Law Society has recognised the importance of this problem by securing an insurance arrangement for those solicitors offering conditional fees who are members of its specialist Personal Injury Panel which will protect their client if the case is lost. But few solicitors are members of this panel and awareness of the specialism that it represents has no doubt persuaded the insurer that the risk is commercially viable, at least in the short term.
If "no win, no fee" is to be extended beyond the personal injury test- bed into the wider disputes arena, the prospect of costs indemnity insurance being available will reduce, and the risk of losing will remain a obstacle to "no win, no fee" providing greater access to justice.
The author is a personal injury specialist and partner in the solicitors Russell Jones and Walker.
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