Access to Justice—Litigation Funding and Group Proceedings: Consultation Paper

Contingency fees can open the doors of the legal system to persons who do not have sufficient resources to finance their legal rights.1

The financial interests of lawyers in the outcome of litigation may detract from their ability to give dispassionate and disinterested advice on the proceedings.2

Contingency fees transfer some of the risk from the client to the lawyer, who is better able to assess the risk.3

Lawyers acting under a contingency fee may have an incentive to settle early in order to generate the greatest return for the least work or be tempted to engage in unprofessional conduct in the pursuit of a successful outcome.4

Access to justice is enhanced if a variety of funding schemes are available to persons wishing to pursue arguable claims through the legal system.5

Contingency fees can have a negative impact on community perceptions of the professional role of lawyers. This can reduce public confidence in lawyers’ fiduciary obligations to clients and expectations about lawyers’ duties to the court.6

Contingency fees are routinely charged by litigation funders, some accounting firms, liquidators and companies providing services in connection with litigation. Contingency fees would allow lawyers to offer terms comparable to third-party funders.7

Removing a financial impediment to litigation may prompt an epidemic of unreasonable litigation against corporate defendants who may be willing to settle to avoid the nuisance of litigation.8

‘No win, no fee’ conditional agreements already exist and allow risk sharing between the lawyer and client, so contingency fees are a logical extension.9

If lawyers are entitled to a proportionate share of the outcome this may drive up the value of settlements or judgments and reduce incentives to use alternative dispute resolution.10

There is currently no prohibition on charging contingency fees in the form of a fixed lump-sum fee for the provision of legal services. Any such fee can be a proportion of the amount in dispute or the amount recovered.11

Contingency fees treat litigation as a financial transaction rather than the discharge of higher duties to the court based on skill and proper advice.12

Contingency fees provide unsophisticated clients with greater certainty and clarity regarding the amount of fees they will be liable to pay. They are less complex and more concise than fee agreements based on time billing.13

It is a feature of a profession for remuneration to be based on a fee for service. Fees should properly reflect the nature and extent of the legal services provided.14

Contingency fees offer an alternative and transparent billing method, allowing consumers to compare legal services fees and choose the most appropriate arrangement.15

Contingency fees as a proportion of the damages may generate large fees unrelated to the value of the work performed.16

The present ‘open-ended’ fee for service can result in fees which are disproportionate to the amount in dispute, and provide an incentive for inefficiency, over-servicing and a disincentive to early resolution of the dispute.17

The prospect of large proportionate fees may encourage lawyers to engage in more extensive and inappropriate advertising and only focus on high-value cases.18