Advantages And Disadvantages Of Conditional Fee Arrangements Law Essay

UK legal aid system has undergone tremendous changes and reforms ever since its introduction in 1949. Its purpose of the act was “to provide legal advice for those of slender means and resource, so that no one will be financially unable to prosecute a trust and reasonable claim or defend a legal right and to allow solicitors and counsel to be remunerated. [1] Due to its popularity, legal aid expenditure imposed a heavy burden on the government. In solving this problem, the UK legal aid system undergone various reforms. Conditional Fee Arrangement (hereafter “CFA”) was a result of one of these reforms after half a decade when legal aid act created. Ever since its introduction in 1990, CFA has been a controversial topic among legal educators. In determining the success of the CFA system, it cannot be easily determined purely by its utility rate, but ethics issue must also looked into. The numerous pros and cons of the scheme opened the door for criticism and professor to criticize.

The history of legal aid dates back to 1949. After Second World War, it was recognized that equality of access and the right to representation before the law was fundamental to a just society. Hence, the Rushcliffe Committee made a number of recommendations that led to the establishment of the first legal aid scheme by the Legal Aid and Legal Advice Act 1949. The purpose of the legal aid scheme, as Lord Steyn once said is “a principle of our law that every citizen has a right of unimpeded access to a court.” [2] Generally, the legal aid scheme was a success. It achieved its purpose in ensuring that the public obtains access to justice. However, from the view of the State, the scheme was imposing heavy burden on the government. It is worth to point out that legal aid funding is placed very low in the political agenda as generally it does not favor anyone as compared to medical and education funding. As a result, Lord Irvine suggested capping a ceiling on legal aid funding. Since capping the budget for criminal legal aid is against human rights, the only choice will be to first cover all cost in Criminal legal aid and civil legal aid will be funded by the leftovers. [3] In view of this, Lord XXX introduced CFA in the Court and Legal Services Act in 1990.

The CLSA Act provided a statutory basis for parties to litigation to enter into CFA for a limited number of proceedings. Not until the Conditional Fee Arrangement in 1995 that it was released to different types of proceedings including personal injury, bankruptcy, insolvency and human rights cases. In 1998, subsidiary legislation has greatly widened the range of proceedings where CFA are permissible to cover most of the civil cases except for those specified in the CLSA act, which are mostly related to crime and family legislation. Today, majority of personal injury cases are funded by CFA under the amendment of Access to Justice Act 1999.

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CFA is an alternative to legal aid. It enables those without the necessary resources or with risk averse tendencies to take forward claims for compensation. It is an agreement whereby a lawyer and a client can agree to share the risk of the litigation by coming to a financial arrangement on the fee payable based on the outcome of the litigation. In the event of losing, the client will not be liable to pay any fee to their lawyer, but if the case is won, normal cost are payable. Although the client is required to pay the fee when winning the case, but it may be recoverable in full or in part from the losing party. Unlike Contingency Fee Arrangement, which is common in USA, CFA does not allow solicitor to claim a percentage of the winning. Instead, lawyers are allowed to charge the usual rate plus uplift if the case is successful.

Conditional fee arrangements developed as a result of the proposed reduction in public funding for civil litigation and the fear that the abolition of legal aid would reduce access to justice for many.

“Access to justice is when people do need help, there are effective solutions that are proportionate to the issues at stake. In some circumstances, this will involve going to court; but in others, that will not be necessary. Someone charged with a criminal offence should have access to proper legal advice and representation, when the interests of justice require it. But in civil matters, for most people, most of the time, going to court is, and should be, the last resort. It is in no-one’s interest to create a litigious society. People must make responsible choices about whether a case is worth pursuing; whether to proceed by negotiation, court action, or in some other way; and how far to take a relatively minor issue.”

This is one of the major advantages, which is also the purpose, of CFA and the legal aid system. A conditional fee agreement is therefore a very useful method of funding litigation as in many cases the prospective litigant may not have the financial resources to fund the case and may not qualify for legal aid. It is particularly important in personal injury cases as these claims cannot be funded by legal aid and as such many litigants would not have had legal redress owing to the lack of funding. Given the high cost of litigation in Hong Kong, those in the middle-income group whose means are above the limits set down by the Legal Aid Scheme and the Supplementary Legal Aid Scheme would have difficulty financing litigation.

The second advantages of CFA is that it could reduce the cost of legal aid funding and that it could “refocus legal aid by removing cases which can be financed in some other way and promoting access to justice for the need by directing the aid budget to priority areas. This will allow the Government ultimately to concentrate publicly funded support on legal services towards helping people secure their basic rights such as a decent home, appropriate social security benefits and challenging officialdom through judicial review, and towards assisting cases that raise issues of wider public interest. The present system does not allow the Government to do this. It allows no assessment of the importance of classes of cases or any way of targeting help towards priority needs. The government simply pays for the amount and type of legal services that lawyers wish to provide.” The reduction of legal aid fund of removing all personal injury cases to CFA was significant.

The third advantage of CFA is that weak cases will be weeded out. frivolous claim Because the solicitor is taking the risk of the charge, they will for sure assess the chance of success of each case before they accept it. This way, all weak cases will be weeded out. Also, under the CFA scheme, litigant are required to disclose to the other party. Disclosure of a CFA to the other party may encourage earlier settlement because the other party’s cost exposure will increase in line with the level of the success fee.

Although there are significant contribution, CFA also brings up lots of problems. .

Traditionally, solicitors were restricted to change on a conditional or contingent basis. They have been restricted by case law, statutes and practice rules. The two main common law principles related to this are Maintenance and Champerty. Maintenance is where someone who is not a party to the action and has no interest in it, funds or otherwise supports one of the litigants. Such an agreement was generally held by the courts to be void for reasons of public policy and was also grounds for making an order for cost against a non-party funder. In entering CFA, lawyers may tend to put their duty to the court second to their desire to secure a win to guarantee fee, which may lead to suborning evidence, coaching witness, failing to give discovery of documents. This restricted the ability of solicitors to act either contingently and conditionally as they risked significant cost liability. A CFA gives the lawyer a financial interest in the litigation and he therefore takes control of the strategy and resolution of the litigation. As Lord Denning once mentioned, in Re Trepca Mines Ltd. (No.2) 1963 CA, if legal advisors had a personal interest in the outcome of litigation they might be tempted to “influence the damages, to suppress evidence or even to suborn witness”

Champerty is an aspect of maintenance where the third party not only supports a litigant but also takes a share of the damages awarded, e.g. contingent fee arrangement and success fee. Champerty has been held to be contrary to public policy and thus champerty agreement is void.

Last but not least, Claimants may not be able to find a solicitor who’s willing to take risk. Even if the case is strong, some solicitors may demand an unreasonably high chance of success to take the case. The decision in Calley v Gray and Halloran V Delaney have made solicitors less willing to take on the risk of CSA when success have been pegged at 20%. Further confusion has occurred after later decision of Sanwar V Alan and Designer’s Guild v Russell Williams, where the court allowed a claim of 100% success fee and justified it with the recognition that solicitor has taken a substantial risk in entering into CFA.