The Adviser: No win, no fee

Tuesday 27 November 2018

Should lawyers be allowed to get a bonus if they win their client's case?

For Advocate Olaf Blakeley, the answer is yes - so long as both parties agree.

The Express columnist explained...

"Recently there have been reports in the media about access to justice and changes to the legal aid system in Jersey.

It’s the same old story: legal costs and how to ensure that those people who cannot afford legal representation can still have access to justice. It’s a difficult problem, and so quite how it is resolved is not an easy task. 

There are two fundamentally different types of legal case. There are criminal prosecutions in which a defendant must be afforded legal representation – they do not have a choice in the proceedings, because if the Attorney General decides to prosecute, the defendant must ‘participate.’ Then there is the civil type of case in which a person may have a claim against someone, and will need assistance in order to proceed with that claim, but they have a choice as to whether to litigate or not.   

Most people will have heard of the phrase ‘no win, no fee’ in which – in a civil claim – a lawyer represents a party but will only charge fees if there is a successful outcome. In other words, the lawyer takes the risk in the proceedings, working for nothing until the end, and will only receive payment if the case is ‘won.’ The more thorny question is whether a system in which a lawyer gets a ‘bonus’ if he wins the case should be permitted. I say it should.  

Pictured: In the US, lawyers not only get their normal fees but also a portion of what their client gets awarded if they win the case.

In the United States, lawyers often work on such a basis. They do not charge any fees at all and even pay for expenses (such as the costs of expert witnesses and reports); but if they win the case they not only get their normal fees, but they also get a portion of the monetary award made in favour of their client. So, for instance, if a client has a claim worth say, £100,000 the lawyer may be entitled to a percentage of that claim which can sometimes be as much as 50%. If you have read some John Grisham’s novels you will probably be aware of how the system works.  

I am aware the courts are currently against such a system. I think this is based upon a feeling that it is unfair, and could operate harshly upon some people. I can see how that may be a possibility. But, equally, in a jurisdiction in which the courts continually emphasise the sanctity of contractual agreements, it is difficult to see how a court can say that if a lawyer and client come to an agreement about payment, that agreement cannot be upheld. If the parties are truly in agreement, why should it not be allowed?  

I once represented a company which had a claim against a bank for £27 million. The company was on its knees financially, and asked me if I could work for ‘nothing,’ but that if I was successful they would pay me 40% of their damages awarded. I was not able to make this agreement (because it was not permitted). The company was close to deciding to give up its claim but eventually (and luckily) got funding from the shareholders, and the litigation proceeded. I won the case for the client, and it received damages of £27.5 million plus interest, which was just as much, making an award of just over £50 million. If I had been able to accept the ‘deal’ that had been offered I would have received £20 million, and the company would have been happy to pay it.  

Pictured: "If the parties are truly in agreement, why should it not be allowed?" says Advocate Blakeley.

I am not proposing the system be introduced, because I see a ‘pot of gold’ for lawyers; I am suggesting the system should be allowed to operate because it was only luck that the company I represented was able to scrabble together money to pay my fees. How unfair would it have been if the company could not proceed with its claim, and so lose out on money which was properly due to it? It would be unjust in my view.  

While there may be cases in which such an arrangement may not be suitable, I find it hard to imagine how it can be unfair when agreed by a commercial client. For a court to say that it ‘knows better’ and jumps into ‘protect’ such commercial clients is quite condescending. In fact, there are many other benefits by allowing such arrangements; clients may feel more comfortable that lawyers will be incentivised, as unless they put their all into the case, they stand to lose financially. It is no different to commissions paid to other professions, or bonus payments made to builders who complete works ahead of schedule. 

If we have a problem with legal funding we have to approach solving the problem in a variety of ways, and the system I have suggested is just one - but one that should be allowed."

This piece first appeared in Connect magazine, which can be read in full here.