Contingent fee
Encyclopedia
A contingent fee or conditional fee (in England and Wales
) is any fee
for services provided where the fee is only payable if there is a favourable result. In the law
is defined as "[a] fee charged for a lawyer's services only if the lawsuit is successful or is favorably settled out of court...Contingent fees are usually calculated as a percentage of the client's net recovery.".
In the English legal system
is generally referred as No win no fee. Being this a conditional fee agreement between a law firm and a client. The usual form of this agreement is that the solicitor
will take a law case on the understanding that if lost, no payment is made.
However if the case is won the lawyer will be entitled to his normal fee based on hourly billing, plus a success fee. The success fee in England must be as a percentage no greater than 100% of the normal fee, provided this contrasts with the contingency fee in the USA which gives the successful attorney a percentage of the damages awarded in favor of his client.
This makes it easier for the poor to pursue their civil rights, since otherwise, to sue someone for a tort
, one would first have to be wealthy enough to pursue such litigation in the first place. However, because of the high risk, few attorneys
will take cases on a contingency basis unless they feel the case has good merit.
According to a 2004 book by law professor Herbert Kritzer, contingent fees were allowed as of that year in the following countries: Australia
, Brazil
, Canada
, the Dominican Republic
, France
, Greece
, Ireland
, Japan
, New Zealand
, the United Kingdom
and the United States
. They are also allowed in personal injury actions in Lithuania
. Recently they have been allowed in Belgium
as well.
fees are subject to compliance with the statutory scheme.
Contingency fees do not guarantee civil justice, or even access to the courts. Lawyers sometimes "cherry pick" only the strongest claims which are most likely to succeed. Not all cases are immediately transparent. Some require extensive investigation before the chances of success can be properly assessed. Such cases might be turned away because even the initial assessment of their strength is costly and risky.
Your solicitor will be able to identify if a client holds this type of policy and complete the necessary claim form.
The 2008 report from the Ministry Of Justice found that in 2007, 48% of those who took part had BTE Insurance incorporated into their car insurance, 35% had BTE Insurance as part of their Home insurance policy and a further 17% had the insurance as part of their Travel Insurance.
This insurance covers any legal expenses in addition to costs for pursuing a personal injury claim and cost for legal expenses from the other side if the client's claim is unsuccessful.
(Alberta, British Columbia (except in family law cases involving child custody or access), Ontario and Quebec among others). In other Canadian provinces, an attorney may collect a percentage of recovery in case of a victory, but must charge an hourly fee otherwise.
, conditional fees had caused much controversy in the 19th century, especially in the Swynfen will case
, as they were held to offend ancient prohibitions against champerty and maintenance
. However, they were introduced by the Courts and Legal Services Act 1990
(section 58), but the relevant statutory instruments were not made until 1995. Initially, the success fee was not recoverable from the losing party, but on 1 April 2000 section 27 of the Access to Justice Act 1999 amended the Courts and Legal Services Act 1990 to allow recovery of success fees from the losing party. The regulations that accompanied this change in the law (the Conditional Fee Agreements Regulations 2000) were far from clear, and the result was that a great deal of satellite litigation took place. On 1 November 2005 these regulations were revoked, and now it is much easier to enter into conditional fee agreements than was previously the case. The chances of having a case accepted on conditional fee are greatly increased if the case is investigated by a legally qualified professional.
On 29 March 2011, Justice Secretary Kenneth Clarke
announced plans to reform contigent fee arrangements, as part of reforms to the justice system prompted by a review of civil litigation costs carried out by Lord Justice Jackson. The changes were prompted by large rises in litigation costs and the proliferation of ambulance-chasing advertisements and claim farmers. The National Health Service
has been forced to pay out hundreds of millions of pounds in recent years.
The position is different in Scotland, where it is lawful to agree that the lawyer gets paid only if the case is won (the speculative action) but not to fix a percentage of the client’s winnings as the amount of the fee. It has however been legal since 1990 for the lawyer and client to agree a percentage increase in the former’s fee in the event of success in the action (Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 s. 36). But this of course assumes that an initial fee has been agreed by lawyer and client.
or criminal
cases, as made clear in Rule 1.5(d) of the Model Rules of Professional Conduct of the American Bar Association. In the United States, contingency fees are the standard in personal injury cases and are less common in other types of litigation.
In rare cases, the contingent fee is equal to or more than 100 per cent of the recovered damages. These rare cases, criticized by some as an inappropriate vehicle for vengeance, result from a greater desire on the part of the injured to punish the defending party than in order to personally recover damages, so that they offer a very large contingency to their attorney in order to assure the highest chances of winning. However, these arrangement are exceedingly rare, and indeed illegal in many jurisdictions.
A notable exception is Nevada, in which it is common vehicle for prosecution, by casinos, of petty thefts against them. In these cases a fractional contingency fee would not represent sufficient motivation for their attorneys, with the casinos motivated more by the fear of losing these cases than in recovering the petty damages involved.
Any fees higher than the normal fees of the legal practitioner concerned may not exceed such normal fees by more than 100%. But in claims sounding in money, the total of any such success fee payable by the client to the legal practitioner may not exceed 25% of the total amount awarded or any amount obtained by the client in consequence of the proceedings concerned, which amount may not for purposes of calculating such excess, include any costs.
England and Wales
England and Wales is a jurisdiction within the United Kingdom. It consists of England and Wales, two of the four countries of the United Kingdom...
) is any fee
Fee
A fee is the price one pays as remuneration for services. Fees usually allow for overhead, wages, costs, and markup.Traditionally, professionals in Great Britain received a fee in contradistinction to a payment, salary, or wage, and would often use guineas rather than pounds as units of account...
for services provided where the fee is only payable if there is a favourable result. In the law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
is defined as "[a] fee charged for a lawyer's services only if the lawsuit is successful or is favorably settled out of court...Contingent fees are usually calculated as a percentage of the client's net recovery.".
In the English legal system
English rule (legal term)
In the field of law and economics, the English rule is a rule controlling assessment of attorneys' fees arising out of litigation. The English rule provides that the party who loses in court pays the other party's attorney's fees...
is generally referred as No win no fee. Being this a conditional fee agreement between a law firm and a client. The usual form of this agreement is that the solicitor
Solicitor
Solicitors are lawyers who traditionally deal with any legal matter including conducting proceedings in courts. In the United Kingdom, a few Australian states and the Republic of Ireland, the legal profession is split between solicitors and barristers , and a lawyer will usually only hold one title...
will take a law case on the understanding that if lost, no payment is made.
However if the case is won the lawyer will be entitled to his normal fee based on hourly billing, plus a success fee. The success fee in England must be as a percentage no greater than 100% of the normal fee, provided this contrasts with the contingency fee in the USA which gives the successful attorney a percentage of the damages awarded in favor of his client.
This makes it easier for the poor to pursue their civil rights, since otherwise, to sue someone for a tort
Tort
A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
, one would first have to be wealthy enough to pursue such litigation in the first place. However, because of the high risk, few attorneys
Lawyer
A lawyer, according to Black's Law Dictionary, is "a person learned in the law; as an attorney, counsel or solicitor; a person who is practicing law." Law is the system of rules of conduct established by the sovereign government of a society to correct wrongs, maintain the stability of political...
will take cases on a contingency basis unless they feel the case has good merit.
According to a 2004 book by law professor Herbert Kritzer, contingent fees were allowed as of that year in the following countries: Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
, Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
, Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, the Dominican Republic
Dominican Republic
The Dominican Republic is a nation on the island of La Hispaniola, part of the Greater Antilles archipelago in the Caribbean region. The western third of the island is occupied by the nation of Haiti, making Hispaniola one of two Caribbean islands that are shared by two countries...
, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Greece
Greece
Greece , officially the Hellenic Republic , and historically Hellas or the Republic of Greece in English, is a country in southeastern Europe....
, Ireland
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
, New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
, the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
and the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
. They are also allowed in personal injury actions in Lithuania
Lithuania
Lithuania , officially the Republic of Lithuania is a country in Northern Europe, the biggest of the three Baltic states. It is situated along the southeastern shore of the Baltic Sea, whereby to the west lie Sweden and Denmark...
. Recently they have been allowed in Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...
as well.
Fee structure
A client is not charged attorney fees if he loses the case. If the client recovers damages from settlement or a favorable verdict, the attorney receives a fee from the recovery. The attorney's permitted fee varies depending on the country, and even local jurisdictions. In the US, for example, the fee is generally based on the contractual agreement between the attorney and the party, but is also limited by local rules for "reasonableness". See e.g., Miss. Rule of Prof'l Conduct 1.5. The fee is calculated as a share of the eventual damage judgment or settlement won by the client. The percentage allowed is subject to the ethical rules of professional conduct, and in many circumstances, statutory limitations. In the UK, on the other hand, the client is liable for normal fee (based on hourly billing plus a profit element) plus a success (or bonus) fee. The amount of the success is limited to 100 per cent of the normal fees. Most lawyers charge a success fee which is much less than this, between 25 and 50 per cent. In English lawEnglish law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...
fees are subject to compliance with the statutory scheme.
Advantages and disadvantages
A contingency fee arrangement provides access to the courts for those who cannot afford to pay the attorneys fees and costs of civil litigation. Contingency fees also provide a powerful motivation to the attorney to work diligently on the client's case. In other types of litigation where clients pay the attorney by the hour for their time, it makes little economic difference to the attorney whether the client has a successful outcome to the litigation. Finally, because lawyers assume the financial risk of litigation, the number of speculative or unmeritorious cases may be reduced.Contingency fees do not guarantee civil justice, or even access to the courts. Lawyers sometimes "cherry pick" only the strongest claims which are most likely to succeed. Not all cases are immediately transparent. Some require extensive investigation before the chances of success can be properly assessed. Such cases might be turned away because even the initial assessment of their strength is costly and risky.
Legal expenses insurance
This can also be referred to as "before the event" insurance (BTE), and is insurance that the client may already hold as part of Household contents or Car Insurance, either free or for a small fee. Some credit cards also include BTE insurance and it can also be taken out as a separate insurance policy. BTE insurance may pay for the legal costs when making a claim for compensation, whether the client wins or loses.Your solicitor will be able to identify if a client holds this type of policy and complete the necessary claim form.
The 2008 report from the Ministry Of Justice found that in 2007, 48% of those who took part had BTE Insurance incorporated into their car insurance, 35% had BTE Insurance as part of their Home insurance policy and a further 17% had the insurance as part of their Travel Insurance.
This insurance covers any legal expenses in addition to costs for pursuing a personal injury claim and cost for legal expenses from the other side if the client's claim is unsuccessful.
Legal Aid
Legal Aid is financial assistance which is funded by the Government. It is not usually awarded in cases of personal injury unless under extreme circumstances. But through all the circumstances it is still available for Clinical Negligence cases.Paying for own Legal costs
Due to the assistance that is available through insurance policies it is rare that an individual will fund their own personal injury claim although it is possible. As with all Legal fees if the client's claim is successful they will be in a position to claim back the cost of their expenses from the other side. If their claim is unsuccessful they will lose the money that they have paid out.Canada
Contingent fee agreements are legal in some provinces of CanadaCanada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
(Alberta, British Columbia (except in family law cases involving child custody or access), Ontario and Quebec among others). In other Canadian provinces, an attorney may collect a percentage of recovery in case of a victory, but must charge an hourly fee otherwise.
United Kingdom
In English lawEnglish law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...
, conditional fees had caused much controversy in the 19th century, especially in the Swynfen will case
Swynfen will case
The Swynfen will case was a series of English trials over the will of Samuel Swynfen that ran from 1856 to 1864 and raised important questions of ethics in the legal profession.-The case:...
, as they were held to offend ancient prohibitions against champerty and maintenance
Champerty and maintenance
Champerty and maintenance are doctrines in common law jurisdictions, that aim to preclude frivolous litigation. "Maintenance" is the intermeddling of a disinterested party to encourage a lawsuit...
. However, they were introduced by the Courts and Legal Services Act 1990
Courts and Legal Services Act 1990
The Courts and Legal Services Act 1990 was an Act of the Parliament of the United Kingdom that reformed the legal profession and Courts of England and Wales...
(section 58), but the relevant statutory instruments were not made until 1995. Initially, the success fee was not recoverable from the losing party, but on 1 April 2000 section 27 of the Access to Justice Act 1999 amended the Courts and Legal Services Act 1990 to allow recovery of success fees from the losing party. The regulations that accompanied this change in the law (the Conditional Fee Agreements Regulations 2000) were far from clear, and the result was that a great deal of satellite litigation took place. On 1 November 2005 these regulations were revoked, and now it is much easier to enter into conditional fee agreements than was previously the case. The chances of having a case accepted on conditional fee are greatly increased if the case is investigated by a legally qualified professional.
On 29 March 2011, Justice Secretary Kenneth Clarke
Kenneth Clarke
Kenneth Harry "Ken" Clarke, QC, MP is a British Conservative politician, currently Member of Parliament for Rushcliffe, Lord Chancellor and Secretary of State for Justice. He was first elected to Parliament in 1970; and appointed a minister in Edward Heath's government, in 1972, and is one of...
announced plans to reform contigent fee arrangements, as part of reforms to the justice system prompted by a review of civil litigation costs carried out by Lord Justice Jackson. The changes were prompted by large rises in litigation costs and the proliferation of ambulance-chasing advertisements and claim farmers. The National Health Service
National Health Service
The National Health Service is the shared name of three of the four publicly funded healthcare systems in the United Kingdom. They provide a comprehensive range of health services, the vast majority of which are free at the point of use to residents of the United Kingdom...
has been forced to pay out hundreds of millions of pounds in recent years.
The position is different in Scotland, where it is lawful to agree that the lawyer gets paid only if the case is won (the speculative action) but not to fix a percentage of the client’s winnings as the amount of the fee. It has however been legal since 1990 for the lawyer and client to agree a percentage increase in the former’s fee in the event of success in the action (Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 s. 36). But this of course assumes that an initial fee has been agreed by lawyer and client.
United States
Most jurisdictions in the United States prohibit working for a contingent fee in family lawFamily law
Family law is an area of the law that deals with family-related issues and domestic relations including:*the nature of marriage, civil unions, and domestic partnerships;...
or criminal
Crime
Crime is the breach of rules or laws for which some governing authority can ultimately prescribe a conviction...
cases, as made clear in Rule 1.5(d) of the Model Rules of Professional Conduct of the American Bar Association. In the United States, contingency fees are the standard in personal injury cases and are less common in other types of litigation.
In rare cases, the contingent fee is equal to or more than 100 per cent of the recovered damages. These rare cases, criticized by some as an inappropriate vehicle for vengeance, result from a greater desire on the part of the injured to punish the defending party than in order to personally recover damages, so that they offer a very large contingency to their attorney in order to assure the highest chances of winning. However, these arrangement are exceedingly rare, and indeed illegal in many jurisdictions.
A notable exception is Nevada, in which it is common vehicle for prosecution, by casinos, of petty thefts against them. In these cases a fractional contingency fee would not represent sufficient motivation for their attorneys, with the casinos motivated more by the fear of losing these cases than in recovering the petty damages involved.
South Africa
Contingent fees have been allowed in South Africa since 1997 and is discussed by K.G. Druker in The law of contingency fees in South Africa.Any fees higher than the normal fees of the legal practitioner concerned may not exceed such normal fees by more than 100%. But in claims sounding in money, the total of any such success fee payable by the client to the legal practitioner may not exceed 25% of the total amount awarded or any amount obtained by the client in consequence of the proceedings concerned, which amount may not for purposes of calculating such excess, include any costs.