Contingency fees must not become 'blot on the landscape'

Increased use of contingency fees under the LASPO Act must not become “yet another blot on the landscape of civil justice” as a result of satellite litigation, Lord Neuberger has warned.

The Master of the Rolls said the new rules governing contingency fees, which the Act would permit for the first time in the civil courts, must be as “simple and straightforward as possible”.

Speaking at the Association of Cost Lawyers annual conference, he said that nobody could afford for satellite litigation over contingency fees to become “as common, and detrimental, a feature of litigation” as it was over conditional fees.

A Civil Justice Council working party, chaired by Michael Napier, met for the first time last month to examine how contingency fees could operate in the post-LASPO world (see solicitorsjournal.com, 17 April 2012).

Lord Neuberger said it was not the task of the working party to prepare a “standard form” contingency fee agreement, which “may well” be a matter for the professional bodies, but the group would consider the elements which a contingency fee agreement ought to contain.

He referred to the ‘Ontario model’, Lord Justice Jackson’s preferred approach, in which the winning litigant would recover costs from the other side on a conventional basis and pay the rest of the contingency fee from their winnings.

“Those regulations specify that a valid agreement requires, among other things, a statement that explains the nature of the contingency and how the fee is calculated, a record of the fact that the client has discussed with the solicitor different fee options available, and a reminder of the client’s right to have the solicitor’s bill reviewed by the court.

“It will also be very important to understand how the projected regulations, and agreements made under them, have operated in practice since 2004. It may be the case that as many problems have arisen in Ontario as arose here under the Conditional Fee Agreements Regulation 2000.

“On the other hand they may well have operated without any problems at all. Again, we need to learn from practice and not simply theory.”

Lord Neuberger said he hoped contingency fees would act as a “spur to innovation”, which would see fees being set “according to something other than the traditional hourly billing model”.

He said that, given the choice between a solicitor who only offered CFAs and one who offered CFAs and DBAs at better prices, and perhaps with costs calculated by way of fixed fee rather than hourly billing, clients could “reasonably be expected to appreciate” where their interests lay.

“In other words, the brave new world of DBAs may well help to encourage a more genuinely competitive marketplace, in which solicitors are having to become ever more client, or consumer, focused.”

Lord Neuberger said it was unlikely that the Jackson reforms would be “the end of the story” and the “reforms to legal aid may well play the part which CFAs played for the Woolf reforms”.

He went on: “What can be said with certainty is that by building on the Woolf reforms, and undoing the negative effects of the current CFA system, the Jackson reforms represent the boldest attempt to cure our costs problem yet attempted.

“Should they fail to reduce costs, it seems to me that we will face a stark choice: The rejection of the English costs rule and the adoption of either a US-style costs rule or a German-style fixed-costs regime.”