Has the time come for contingency fees?

Virtually all personal injury work is now done on a contingency fee basis as solicitors cap the enforceable element of solicitor and own client costs and the success fee to a fixed percentage, still generally
25 per cent, although 30 to 40 per cent is becoming common in many firms and cases.

District Judge Lumb made obiter criticism of contingency fees - and me - in A (1) & M (2) v Royal Mail Group [2015] EW MISC B24 (CC) when he suggested that a 100 per cent success fee with a 25 per cent cap in damages in each case was disturbing and 'dangerously close to a contingency fee, which may
be unlawful.'

'Contingency' is certainly
the 'c word' as far as many lawyers and judges are concerned.

However, the Court of Appeal took a very different view in Broadhurst v Tan and Taylor v Smith [2016] EWCA Civ 94 (23 February 2016). In discussing before-the-event insurance on the one hand and conditional fee agreements (CFA) on the other, the Master of the Rolls said:
'Both forms of funding typically provide for lawyers to charge on
a conventional hourly basis, but may cap their right to enforce payment with reference to the amount recovered.' The use of the phrase 'enforce payment' rather than 'charge' or 'bill' is significant.

In Harrington v Wakeling [2007] EWHC 1184 (Ch), the Chancery Division of the High Court held that a lawyer who agrees to forgo enforcement of entitlement to a fee will not be relieving the paying party of its burden of paying (that is, it does not fall foul of the indemnity principle).

Bolt Burdon Solicitors v Tariq and others [2016] EWHC 811 (QB) saw a Solicitors Act 1974 assessment conducted by a full High Court judge, itself significant, and was a rare opportunity for the court to consider a pure section 57(2) contingency fee agreement - not a CFA nor a damages-based agreement.

Such agreements are currently lawful only for non-contentious business and cannot be used once proceedings are issued, but the Underwoods Method of capping the enforcement of any charges under a CFA, both base costs and the success fee, by reference to damages does effectively turn a CFA into a contingency fee agreement.

Thus the issue is one of public policy.

The High Court was robust in its support of such agreements and pointed out correctly that contingency fee agreements protect clients more than pure CFAs 'because, in a CFA, costs are always tied to the work done, whereas in a contingency fee agreement costs are always proportionate to recovery.'

The judge gave an example
of a £200,000 base fee with a £200,000 success fee, giving a total of £400,000, as being satisfactory for a client who recovers £1m but not for a client who receives £50,000 and who would thus have been better off losing.

Thus it is the voluntary cap in a CFA that protects the client, something apparently not picked up by DJ Lumb.

There are issues in relation to contingency fees in cases where the main remedy is not financial, for example judicial review applications, but generally they are by far the best and fairest method of funding and reward talented lawyers, not by-the-hour time-servers.

Contingency fees are an idea whose time has come.

Kerry Underwood is senior partner at Underwoods Solicitors and a course specialist in qualified one-way costs shifting @kerry_underwood kerryunderwood.wordpress.com