Law: Suffering from a serious condition: Sharon Wallach reports on mixed reactions to the Lord Chancellor's announcement of the introduction of contingency fees for selected cases

Sharon Wallach
Thursday 19 August 1993 23:02

THE ANNOUNCEMENT last week by the Lord Chancellor, Lord Mackay of Clashfern, giving lawyers the go- ahead to double their money for winning cases, has again put the issue of conditional fees in the spotlight.

Under the scheme, which will be available only for personal injury, insolvency and European Court of Human Rights cases, lawyers will receive nothing if the case is lost. In theory, it will encourage people to take action; in practice however, they will still be liable for the other party's costs if they lose their case.

The latest move by the Lord Chancellor's Department (LCD) was made following criticisms by the Law Society and others that the original maximum bonus of 20 per cent would deter many solicitors from gambling on so-called 'no win no fee' cases.

The increase, says the LCD, will encourage lawyers to take up a sufficient number of cases under conditional fee arrangements. But many practitioners are still expressing doubts about the system.

Some see it as the first step to American-style contingency fees, where lawyers take a percentage of the damages their clients receive. With the average level of damages in this country being less than generous, the plaintiff could possibly end up greatly under-compensated.

Like many solicitors, Alison McClure, head of the personal and medical injury litigation department at Blake Lapthorn in Fareham, has mixed feelings. The idea of contingency fees is a good one, she says, but the consequences have been ill thought out. 'Obviously 100 per cent is better than 20 per cent,' she says. 'It will perhaps encourage solicitors to take on litigation which they would not otherwise have done. My concern is that while the system may cover the risks for the plaintiff's solicitors, the plaintiff is still at risk of having to pay the defendant's costs.'

Much of her work involves medical negligence litigation, which is expensive. 'What is worrying, particularly in medical cases, is that we often need to do a lot of investigative work before we can form a view of the case's prospects of success, and whether we can take on the case,' she says. 'Who pays for that? Either the client, or the firm takes the risk.'

Mrs McClure estimates that these preliminary costs can amount to pounds 2,000 - 'and I'm talking the provinces here, not London. Most small firms could not bear that sort of amount as an overhead, and clients not eligible for legal aid can't meet it either.'

The conditional fee arrangement was intended to in some way alleviate the cuts in legal aid elibility, but it doesn't, Mrs McClure believes, help those least able to litigate. 'What I would like to see is solicitors freed from the current restraints, so that they can decide whether to offer a contingency arrangement and decide whether to take the risk, in which case they would have to charge the client more to take account of that risk.'

Alan Bannister, whose firm Jarvis & Bannister acts for defendants - in many cases insurance companies - takes the opposing point of view. He is in favour of the conditional fee, and the contingency fee system.

'Legal aid,' he says, 'must have a limited life with this or any government because of the resources it expends. While I have sympathy with those excluded from eligibility because of the changes, the overall expense can't be justified.'

There is no great enthusiasm among the public for legal aid, anyway, Mr Bannister believes. 'The access to justice argument is a curious one. Everyone says they want it, but most people don't need it. It is not an overall concept like public health.' Practitioners should stop complaining about contingency fees, he says. 'They will happen, because the Government wants them. They have already cracked a much harder nut in the shape of the health service.'

The problem with contingency fees is a commercial one - that the expected return has to be reasonable to make it worth the lawyer's while to take on the case in the first place.

'Average damages are probably no more than pounds 10,000, or even less,' says Mr Bannister. 'Many cases only hit the pounds 2,000 or pounds 3,000 mark; then there is not a great deal of difference between the damages and costs, so these cases are simply not worth running.'

Consumer groups are cautious in their welcome for the conditional fee system. Gillian Bull, senior policy and development officer at the National Consumer Council, says: 'It is a step forward and may provide answers for some people.'

But, she believes, the system needs to be monitored very carefully to see if in practice it does offer greater access to justice. There is also the question of whether the consumer wants to run the risk of paying the other side's costs. Another concern is whether the consumer will be fully informed. A current cause of complaint against some solicitors is that they do not properly explain their costs, says Ms Bull. 'I hope this isn't opening up a whole new area of possible dispute.'

The issue will be addressed by the Law Society, which is in the process of drawing up practice advice on conditional fees for the profession. According to Russell Wallman of the society's legal practice department, this will also concern itself with such questions as what happens if one party wants to continue an action while the other wants to accept an offer; if new facts come to light; and clear definitions of success, which cannot always be appropriately measured in terms of damages awarded.

The Consumers' Association believes it is no bad thing to have another way of providing access to the courts. But, agrees Ashley Holmes, acting head of its legal department, the problem of the other side's costs needs to be addressed. One suggestion under examination by the Law Society, is legal expenses insurance.

The Consumers' Association has told the LCD that it would like the scope of conditional fees extended to include damage to property in tort and in contract. The Law Society goes further. While repeating its view that legal aid eligibility should be improved, it calls for the extension of conditional fees to all commercial matters and for cases such as libel, where legal aid is not available.

(Photograph omitted)

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