England's New Conditional Fee Agreements: How Will They Change Litigation?

Article excerpt

OVER the past IS years the proportion of the population of England and Wales eligible for legal aid, which is a state-sponsored innovation intended to assist impecunious litigants, has shrunk from 80 percent to less than half. Conditional fees therefore have been seen by some as enfranchising, for litigation purposes, people ineligible for legal aid or who are unsupported by trade unions or legal expenses insurance. The availability and ambit of conditional fee agreements is, however, severely circumscribed by the rules and by the terms of the "after the event" insurance on offer.

The new regime

The Conditional Fee Agreements Order 199S, which took effect in July 1995,' implements certain provisions of the Courts and Legal Services Act 1990 and sets out the types of proceedings that may be covered by a conditional fee agreement. These are personal injury and insolvency matters, as well as proceedings brought before the European Commission of Human Rights and the European Court of Human Rights. The order also sets the maximum allowable success fee at 100 percent of the solicitor's costs as they ordinarily would be calculated--in other words, "double your money."

Personal injury proceedings are defined in the order as:

Proceedings in which there is a claim for damages in respect of personal injuries or in respect of a person's death, and "personal injuries" includes any disease and any impairment of a person's physical or mental condition.

The words "in which" serve to extend the availability of conditional fees to the defense of

a personal injury claim and also to mixed claims, where the personal injury claim is but one element. The words "in respect of' operate so as to embrace professional negligence claims arising from the negligent handling of a personal injury case.

A second statutory instrument, the Conditional Fee Agreements Regulations 1995,(2) lists the elements that must be included in a conditional fee agreement if it is to be enforceable. Each agreement must describe:

(a) the particular proceedings or parts of them to which it relates, including whether it relates to any counterclaim, appeal or proceedings to enforce a judgment or order;

(b) the circumstances in which the legal representative's fees and expenses or part of them are payable;

(c) what, if any, payment is due (i) on partial failure of the specified circumstances to occur (i.e., if the case is lost); (ii) irrespective of the specified circumstances occurring (i.e., outlays/ disbursements); and (iii) on determination of the agreement for any reason;

(d) the amount or amounts payable in accordance with (b) or (c), above, or the method to be used in calculating the amount or amounts payable, and in particular whether the amount payable is limited by reference to the amount of any damages that may be recovered on behalf of the client (that is, a "cap").

The regulations also state that the contract must confirm that the solicitor has discussed specific points with the client immediately before signing. These are:

(a) whether the client might be entitled to legal aid in respect of the proceedings to which the agreement relates, the conditions on which legal aid is available and the application of those conditions to the client in respect of the contemplated proceedings;

(b) the circumstances in which the client may be liable to pay the fees and expenses of the legal representative in accordance with the agreement;

(c) the circumstances in which the client may be liable to pay the costs of any other party to the proceedings; and

(d) the circumstances in which the client may seek taxation of the fees and expenses of the legal representative and the procedure for so doing.

Considerations for plaintiffs' counsel

Matters which plaintiffs' lawyer will assess include:

* the length of time which will elapse before any payment is received;

* the complexity of establishing liability;

* split trials;

* difficulties on causation;

* limitation problems;

* the level of the firm's outlay on experts;

* the likelihood of an interim payment award;

* the expected recovery;

* the availability of counsel willing to work on a conditional fee basis;

* the impact of the "DSS clawback," that is, whether the Department of Social Security claws back benefit payments previously made;

* the appropriate percentage uplift for the success fee; and

* payment of the Accident Line Protect insurance premium. …