SAY 'contingency fees' and a collective shudder will ripple through the legal establishment. The introduction of an unlimited no-win, no-fee basis for the payment of lawyers' costs along American lines would lead, say critics, to a flood of purely speculative cases.
One of the Green Papers published as the groundwork to the 1990 Courts and Legal Services Act (CLSA) was devoted exclusively to the subject of contingency fees. Opponents to such a system - largely the Bar and the judiciary - believed that it would pose a threat to the integrity of the administration of justice, inviting problems in connection with the lawyers' financial stake in the outcome of a case, possible conflict of interest between lawyer and client, and a temptation to unscrupulous lawyers to invent evidence to secure their fee.
The Law Society, the solicitors' professional body, opposed contingency fees - whereby lawyers receive a percentage of any damages won by their clients - but accepted the principle of conditional fees. Under this system, lawyers would receive no fee if the case were lost, and a normal fee, or more probably an 'uplift' over a normal fee, if it were won. This approach was adopted by the Government and on enactment, the CLSA included a provision for the limited introduction of conditional fees. They could be used only in certain categories of cases - personal injury in particular - and not in criminal or matrimonial proceedings, or in those concerning children.
Scepticism was voiced in some quarters about the Government's motives for introducing conditional fees. It was thought that their existence might provide an excuse for reducing legal-aid eligibility. However, an amendment to the Bill, guaranteeing that legal aid could not be refused on the grounds of availability of a conditional fee arrangement, went some way towards reassuring the sceptics.
'Contingency and conditional fees were the only bit of the legislation to have much popular appeal, but they haven't even got off the starting blocks,' says Walter Merricks, head of communications at the Law Society. 'So it seems sensible to go back to basics, and re-examine the arguments about contingency fees and all aspects of insurance-related funding. What they all do is shift the risk of funding cases from the litigant to the lawyer. In return the lawyer gets a commensurately larger fee if the case is won.'
The arguments, says Mr Merricks, are that on the one hand the lawyer is better placed to assess the risks than the client. 'The counter argument is, why should a client with a perfectly reasonable case suffer deductions from his damages, in effect to subsidise the lawyer's losses in other cases? The amount lopped off damages would be based on the strength of the lawyer's judgement about which cases are well-founded,' Mr Merricks says.
'One immediate advantage of such a system would be to open up the courts to the middle classes. Even if some deduction were made from any damages awarded, at least they would have some chance of litigation. And if the lawyer is prepared to take the risk for the client, why shouldn't he be allowed to?
'It is now clear that the legal-aid fund, far from being expanded, is on the road to limitations of one kind or another, so there is little chance of the middle classes being considered.'
Mr Merricks says that the society's courts and legal services committee is to embark on a review of the Act: 'It will be looking not only at personal- injury litigation, but also at other areas such as environmental, planning and libel cases, where the issue of conditional fees is strong.'
Solicitors no doubt have mixed views about contingency fees, but many, Mr Merricks believes, are 'comfortable with the speculative no- win, no-fee idea where cases are soundly based.'
Clive Boxer, of the City firm Davies Arnold Cooper, is more than comfortable with the concept. 'While we have litigation based on a principle that whether you win, lose or draw the lawyers get paid, there is not much incentive for getting to the heart of problems,' he says.
The answer lies in properly controlled contingency-fee litigation. 'The losing party will always have to pay the winning party's costs. But those costs should be funded by the lawyer who supported the action,' Mr Boxer suggests.
He believes that solicitors should 'put their money where their mouths are' and, when acting for plaintiffs in civil actions, guarantee costs. 'It wouldn't half cut down the cost of litigation,' he says.
'Solicitors should be more forthcoming about looking for ways to relieve the burden on the legal-aid fund,' Mr Boxer says. 'More funds must be made available for good criminal defence, and how can the Lord Chancellor go across to the Commons and say 'Can I have more money for lawyers'? The legal profession is not perceived to be poor.
'All the resources of legal aid should be devoted to providing proper and adequately rewarded defences to those accused of crimes. It is for the lawyers administering civil litigation to find a way of providing legal assistance to those who cannot otherwise afford it.'
Mr Boxer accepts the fact that his system would lead to only the very best cases being adopted. 'But it would have the opposite effect to that in the United States: the only cases to come to court would be those where people feel very strongly indeed,' he says.
In its guide to the CLSA, the Law Society wrote that the Act 'may do little more than legitimise the way in which some solicitors already help clients who have a very strong case but inadequate resources . . . It is unrealistic to suppose that the Act will do much to improve access to justice for those financially ineligible for legal aid.'
Whatever their outcome, the proposals have yet to be introduced. 'The Lord Chancellor has gone to sleep on contingency fees,' says Mr Merricks. 'He is talking about access to justice, but no alternatives are being offered. The only things we are hearing are noises about cuts.'
A spokesman for the Lord Chancellor's Department says, however, that the way forward has now been decided. 'We hope to issue a draft order for consultation soon,' the spokesman says. 'We have a statutory obligation to consult the Law Society, the Bar Council and the judiciary, but we will go wider than that.'
The spokesman added that once agreed, the order would be subject to the affirmative resolution procedure in the House of Commons and the House of Lords.
Join our new commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies