The English Legal System

Conditional Fee Agreements

Introduction to Civil Procedure and Reforms

Aims

• The aims of this lecture are to:

1. Introduce the concept of Conditional Fee Agreements;

2. Analyse the desirability of providing funding for civil litigation in personal injury cases in this way;

3. To introduce the procedure for civil litigation in England and Wales;

4. To identify in more depth the criticisms of the old system of litigation and the desirability for reform in this area.

Learning outcomes

• By the end of this lecture you should be able to:

1. State what is meant by a Conditional Fee Agreement;

2. Describe the advantages and disadvantages of relying on such a method of providing funding in personal injury cases;

3. Describe in outline the system of civil litigation in England and Wales;

4. Identify the areas in need of reform before the introduction of the Civil Procedure Rules in 1998.

Conditional Fee Agreements

• AJA 1999 substituted into s.58 Courts and Legal Services Act 1990:

• “A conditional fee agreement is an agreement with a person providing advocacy or litigation services which provides for his fees and expenses, or any part of them, to be payable only in specified circumstances”

• All conditional fee agreements must abide by the legislation contained in and made under AJA 1999

• Almost all civil cases (except family) may now be conducted under CFAs

CFAs in practice

• No lawyer’s fee if the case is lost

• Client must still pay own disbursements and opponent’s costs

• Client will often insure against losing

Client wins case

• Client pays own legal costs but will hopefully recover from opponent

• Client pays own disbursements but will hopefully recover from opponent

• Client pays a success fee part of which may recover from opponent

Why a success fee?

• Lawyer is taking a risk of no payment

• Lawyer awaits payment until end of case

Success fee calculation

• Percentage uplift agreed at outset

• Cannot be more than 100%

• Basic costs multiplied by percentage uplift gives the success fee.

Example

• James is injured in a car accident and successfully obtains an award for damages of £8,000.

• James’s solicitor’s basic costs were £5,000

• The agreed percentage uplift on the agreement was 50%

• The success fee will be £5,000 x 50% = £2,500

Can legal aid be replaced by conditional fees

• Damages from client to lawyer?

• The success fee for risk is recoverable from the opponent

Can the very poor afford the insurance? Can they afford the expenses?

• Personal injury cases generally

• Clinical negligence case

• Can the insurance market make it work?

“The Government will be working with the insurance and banking industries to allow everyone, regardless of their financial standing, to bring cases using conditional fees. This combination of the experience of lawyers in this area of litigation together with developed insurance products is sufficient to allow these cases to be alternatively financed through conditional fee agreements” (Lord Irvine, Oral Statement to the House of Lords 4th March 1998).

What happens to lawyer’s professional ethics?

“Fortunately, when I was a trial judge, I never had two plaintiffs in front of me - the litigant and his lawyer. That is what one is faced with under conditional fee agreements.”

Lord Donaldson

The civil justice system

• Pre-action matters

• Criticism of the previous system

• The reforms to the system

• The role of the court

Settlement pre-action - evidence

• Most cases do not even get to a lawyer • Winn Committee(1968) told by the Coal Board: 17% of claims

actually commenced

• Winn Committee told by London Passenger Transport Board that 98% of claims settled without proceedings

• Pearson Royal Commission (1978) 86% settled without proceedings

• See Zander Cases and Materials

Don Harris et al, Compensation and Support for Illness and Injury (1984)

• 1711 accident victims

• 26% didn’t even consider a claim

• 14% actually went to a solicitor

• 12% actually got damages and only 40% of those cases issued proceedings

Most cases commenced do not reach trial

• Only 2.7% issued cases in the Harris study reached trial

• London High Court cases 1997: Approximately 98% of commenced cases settled without trial

Why do cases settle?

• Claimant’s uncertainty– evidence– law

• Costs risks

• Without prejudice negotiations

• Delay

• Commercial relationships

Reforms to Civil Litigation

• Civil Procedure Rules 1998

• 26th April 1999

• Changing the way in which litigation is conducted

Defects in the previous system

• Lord Woolf, Lord of Appeal, - Interim Access to Justice Report 1994 and Final Access to Justice Report 1995

• Identifying problems

• Identifying solutions that the new system is now based on

Defects in the civil justice system - Lord Woolf’s reports• Adversarial Environment

• Cost– Excessive– Disproportionate - In cases whose value is less than

£12,500, the average costs are more than 100% 0f claim value. Lawyers are therefore paid more than the successful litigant

– Uncertainty– Uncompetitive

Delay

• Supreme Court Taxing Office survey of issued cases 1990-1995: most cases had an overall duration of 20 to 35 months and personal injury cases lasted a median period of 54 to 61 months.

Unfairness

• Parties may have greater resources for fighting the case

• They could make tactical applications to the court to draw out proceedings and thereby try to deter a Claimant

• The hearing on the substantial point of law was, therefore often lost in procedural law

Uncertainty

• Costs – most litigants deterred from enforcing their rights through the courts because of the high costs

• Costs follows the event principle – rationale that loser pays

• However, can be grossly unfair when the law is uncertain

Undue complexity

• Helibron-Hodge Report – 1993, established by the professional bodies

• Identified that proceedings were not accessible to the client

• Huge body of case law had built up around the old rules which was extremely technical

• Lawyers had built the system up with no regard to the economic efficiency – Zuckerman

Criticisms of this analysis

• Professor Michael Zander

• “Neither Lord Woolf nor Heilbron-Hodge [another report into this area] conducted much research on the matter…the fact is that we have no solid basis for any statement about the proportion of cases in which there is undue delay nor...the reasons for the delay”

• “To base radical reform proposals, as Lord Woolf did, largely on unsubstantiated opinions is a recipe for getting things radically wrong.”

Summary of lecture• You should now be able to:

1. Describe how conditional fee agreements works;2. Critically assess the desirability of conditional fee agreements

as a means of funding personal injury and other litigation;3. Describe in outline the pre-action conduct of litigation and

identify why most cases do not proceed to trial;4. Outline the defects in civil litigation before the Woolf Reforms;5. State in outline how the reforms were supposed to improve the

system and the criticism which Professor Zander identified.

Further reading

• Zander, M., Cases and Materials on the English Legal System (London, Butterworths, 2003, 9th edition), chapters 2 and 6 (be selective in your reading, there are very detailed contents for these chapters)

• Slapper, G. and Kelly, D., The English Legal System (London: Cavendish Press, 2004, 7th edition), chapter 12.9 and chapters 7.1 and 7.2 only