Analyse the Advantages and Disadvantages of Conditional Fee Arrangements for Legal Aid
The legal aid system was introduced under the Legal Aid and Advice Act 1949 after the World War 2 which aim as explained by the government was “ To provide legal advice for those of slender means and resource, so that no one will be financially unable to prosecute a just and reasonable claim or defend a legal right and allow solicitors and counsel to remunerated - Analyse the Advantages and Disadvantages of Conditional Fee Arrangements for Legal Aid introduction. ” The Legal Services Commission runs the legal aid scheme in England and Wales which was established from AJA 1999.
Since the implementation of the Access to Justice Act 1999 which was designed to enable the implementation of a reformed scheme to meet the governments objective to promote and develop legal services that can be delivered within a controlled budget and targeted according to need, there was another 2 scheme was introduced , The Legal Services(for funding civil cases which are still allowed aid by the state) and the Criminal Defense Services(for criminal legal aid).
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However from the point of view of the state, the legal aid scheme had a large number of weaknesses in terms of the increasingly heavy burden imposed on the treasury that the Lord Chancellor’s department had set out to implement a major cost cutting drive. The main problem for the government is cost the Civil Legal Aid will only be allowed for family, housing, immigration and medical negligence cases while personal injury, disputes about inheritance and intestacy, trust matters, company matters, land and boundary disputes and cases pursued in the course of business will be funded under the Conditional Fee Agreements.
Conditional Fees were first introduced by the Thatcher Government in the Courts and Legal Services Act 1990, though it took another five years before they became operation. Under the legislation1 and the regulations2 it became awful for a solicitor to agree with his client that in the event that the case was won he could charge a client a success fee of up to 100 percent of his cost. The legislation legitimated ‘no win, no fee’ arrangements that would otherwise have been unlawful as contrary to the fundamental rue of banning any arrangement that made the lawyer’s fee dependent on the outcome of the litigation.
If one considers just the case itself, the success fee is pure profit. But success fees must also cover the losses incurred in the very small minority of cases that are unsuccessfull. To support this new form of funding of civil litigation the insurance industry started to develop products to enable the claimant to cover himself against the risk of losing and having to pay the other side’s costs. And then to cap it all, in 1999 lord Irvine’s Access to Justice Act made both the success fee4 and the insurance premium5 recoverable by the successful litigant.
This new scheme, The Conditional Fees Arrangement is of advantage to the client as per said in the The English Court of Appeal in Awwad v Geraghty & Co It does not, on its face at any rate, increase the potential liability for costs of the client’s litigation opponent should he in due course be ordered to pay the costs of the litigation as per the decision of Sarwar v. Alam and Designers Guild v. Russell Williams, where the court allowed a claim of a hundred percent success fee and justified it with the recognition that in these particular cases the solicitors had undertaken a substantial risk in entering into Conditional fees Agreement.
It is of potential advantage to the litigation opponent of the client in that, if such opponent is awarded costs against the client, the client’s assets from which those costs must be taken will be larger because they will not have been diminished by costs owed to the client’s own lawyer. The agreement does not involve any division of the spoils in the way that a contingent fee agreement does and in the way in which, arguably, a conditional uplift fee agreement does (since the winnings produced by the litigation will produce or swell the assets from which the uplift will have to be found).
There is therefore no extra incentive for the lawyer to stir up litigation. The amount of frivolous litigation would be reduced under a conditional fee system. Without the windfall gain and excessive fees of the contingency fee system, the lawyer would not have the excess funds to subsidize unmeritorious claims which nonetheless have a high nuisance value and the conditional fee system takes into account the number of hours worked and the lawyer’s hourly fees in calculating the success fee. This constitutes a check on the amount of legal fees payable, and lawyers must record the number of hours expended on the case.
These records provide a basis for the court to decide on the reasonableness of the fees. The temptation to the lawyer to act improperly is less than it would be if the agreement was a Conditional Fee Agreement which is in another favour of the client. On the other hand, If the lawyer’s client has no assets then a conditional fee agreement merely gives legal form to what is a practical reality – the lawyer only gets paid if the client wins. Yet it is accepted as laudable for lawyers to act in such circumstances.
There is nothing improper in the lawyer agreeing to act for the client for his normal fee whilst having it in his mind, for reasons of friendship or wishing to foster future work from that client, not to exact his fee if the client should lose. It seems odd that an open contractual statement of what is unobjectionably in a solicitors’ mind should render unenforceable an agreement which would have been enforceable had the solicitor not shared his thoughts with his client and promised not to change his mind. Situations can arise where initially a normal fee agreement is entered into between lawyer and client.
Thereafter the client, before the conclusion of the litigation, becomes financially unable to promise to continue to pay his lawyer even if he loses. It is manifestly undesirable for the lawyer to leave the client in the lurch. A conditional normal fee agreement covering the remainder of the litigation, perhaps the last day of a trial which has run for longer than expected, has much to be said for it. The distinction between waiver at that point and waiver after the conclusion of the case is a nice one. I. e Leave to appeal against the Thai Trading case was refused by the House of Lords.
Although in general the mere refusal of leave by the House lends no added authority to a decision of this court, had the Thai Trading case been perceived by their Lordships as permitting something which was illegal and against public policy then it is probably reasonable to suppose that leave would have been given. ” As we analyse the Conditioning Fees Agreement on Legal Aid we would able to view some disadvantages as pointed out by Michael Zander in his annual Denning Society Lecture delivered at Lincoln’s Inn – “certainly CFA’s is open to abuse – identified by all the Law Lords in Callery v. Gray. Lord Bingham in his speech said lawyers might charge excessive costs, knowing that the client would not have to pay them. The lawyers might equally set the success fee at a level that was disproportionate to any fair assessment of the risk of failure. And the insurers might set premiums that are higher than the risks being covered…. but as Lord Hoffman pointed out in his devastating analysis, the trouble is that the courts do not have – and cannot have – the material on the basis of which to make the sensible decisions. ”
But there is default in the conditional fees agreement where the public interest in the highest quality of justice outranks the private interests of the two litigants. This renders it particularly important that lawyers should not be exposed to avoidable temptations not to behave in accordance with their best traditions. The concept of a ‘normal’ fee is singularly elusive – some solicitors’ normal fees are a multiple of those charged by others for what on the face of it is the same work and Michael Zander have highlighted that: “There is an intrinsic conflict of interest in the method of calculating the success fee.
It is in the solicitor’s interest to over-estimate the risk of the case to justify a higher success fee. The study of clients in conditional fee agreement cases showed that they did not understand conditional fee agreements sufficiently to identify this conflict. The regulation of the scheme did not adequately ensure that solicitors related the success fee to the risk in the case. Regulation hinged on the right of clients to request taxation (now called ’assessment’) of the success fee by the courts but in practice this did not happen.
Competition was insufficiently strong to influence success fees. 6 A research by Yarrow7 showed that The vast majority of completed conditional fee agreement cases (93%) were successful in the sense of achieving a settlement or a judgment wholly or partly in favour of the client. This was in contrast to solicitors’ pessimism in an earlier study as to the likely success rate. A 41% average success fee would be appropriate to a case with a 70% chance of success, but in fact 93% of cases succeeded.
The success fee appropriate to a case with a 93% chance of success would be only 8%. 8 Another point of disadvantage of engaging in Conditional Fees Agreement is it would be very difficult and undesirable for the answer to the question whether or not an agreement is illegal to depend on a detailed examination in each case of solicitors’ costs structures. The mean success fee actually taken by solicitors (29% of costs) was lower than the mean success fee agreed in the conditional fee agreement (43% of costs).
In some cases, this may have reflected the voluntary 25% cap which applied at that time to the proportion of damages which should be taken. In a few cases, the solicitor may have shared the success fee with the barrister, while in others the solicitors may not have taken the full success fee to which they were entitled. If solicitors’ practices are set up, the bulk of whose business is conducted on the basis of conditional normal fees arrangements, then their normal fees would presumably have to be higher than they would have been had such arrangements not been normal in the firm.