Is the Gov contemplating US-style contingency fees?

There are a few stories indicating that the Lord Chancellor is contemplating the introduction of US-style contingency fees. So the Telegraph, for example, quotes Mr Clarke on Law in Action saying:

“You should not have a situation where, regardless of however frivolous the claim is, the sensible thing for the defendant to do is to settle, get out, before the legal costs start running up. A very experienced judge, Sir Rupert Jackson, has come up with some very good recommendations which I find, and the government finds, very attractive. But they will involve perhaps moving toward the US system whereby some of the costs are recovered out of the damages which are awarded.”

What the quote does not show an awareness of is that Lord Justice Jackson did not recommend US-style contingency fees, he recommended Ontario style contingency fees. To oversimplify slightly, this is in fact a mixture of recoverable hourly fees (paid by a losing opponent) and a contingency fee covering the success fee (which the client pays out of their damages). Jackson made a number of recommendations to ameliorate the impact on damages (including increasing general damages and suggesting – again to oversimplify – that any recovery should come out of those general damages, not the compensation for other financial losses that a claimant would have occurred).

Both Ontario and US-style models involve some deduction from compensation, although the US system involves a greater deduction. We might see some sections of the press to start screaming blue-murder about US-style claims explosions driven by US-style fees: this would be a mistaken view (see a report I wrote with Senior Costs Judge Peter Hurst on the American System for a fuller view on this as well as my Modern Law Review piece). Nor I suspect will defendants stop complaining about legal costs forcing them to settle (they still complain in employment tribunals for instance where they are not responsible for the opponents costs. Both models will probably lead to fewer cases being brought. The Ontario model is harder to regulate from the consumer perspective. Ontario contingency fees are more complicated and there is thus a greater opportunity for lawyers consciously or otherwise to take some advantage of their clients when the agreements are complicated. Conversely, Ontario fees may have a less serious impact on access to justice (low value claims may still be economic under an Ontario model) and eat less into the clients’ damages.

So quite a lot hangs on what kind of contingency fee the Government is interested in. We must wait and see.

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About Richard Moorhead

Director of the Centre for Ethics and Law and Professor of Law and Professional Ethics at the Faculty of Laws, University College London with an interest in teaching and research on the legal ethics, the professions, legal aid, access to justice and the courts.
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