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13 July 2009
Consumers could soon be better protected in no-win no-fee legal proceedings if new government proposals based on research by Cardiff University researchers are adopted.
Research by Professor Richard Moorhead and Rebecca Cumming at Cardiff Law School has prompted government proposals for a new power to regulate contingency fees to protect consumers.
Both the Cardiff and Government reports identify a series of concerns about the complexity of ‘American style’ contingency fee agreements in employment tribunal cases, what the government now calls ‘Damage Base Agreements’. Professor Moorhead and Rebecca Cumming suggest that regulatory bodies, such as the Solicitors Regulation Authority and the Legal Services Board, should take a more active role in regulating the permissible approaches to litigation funding.
The use of these controversial Agreements in employment cases is one of the few areas of law in England and Wales where such fees are permitted. Contingency deals allow lawyers to take their fees from damages won for their clients, meaning that payment is only received if the claimant is successful.
The Ministry of Justice draws on the Cardiff Law School research - ‘Something for Nothing’ and ‘Damage-Based Contingency Fees in Employment Cases’ - extensively in a consultation paper accompanying the introduction of a new clause into the Coroners and Justice Bill last week. The report provides an investigation into claimants' perspectives of the main methods of funding employment tribunal claims (private payment, damages-based contingency fees, legal expenses insurance and trade union assistance), and looks at how damages-based contingency fees should be regulated.
The research found that no-win no-fee agreements were more complex than clients realised. This could lead to them being charged considerably more than they expected. Lawyer use of unfair settlement clauses in contingency agreements meant clients lost control over their cases without realising it.
Professor Richard Moorhead said: "Contingency fees are advertised as no-win no-fee agreements but the client often ends up paying more than they expect, win or lose. Contingency fees provide access to justice to clients who cannot afford to pay for lawyers any other way but this research suggests the rules need tightening to stop the abuse of client ignorance."
As well as problems with contingency fees, the report highlighted problems with lawyers funded by trade unions and legal expenses insurers. The research found that clients did not exercise any informed choice over their lawyer or how they paid that lawyer. Advice on alternative costs arrangements was either not understood or not given by the lawyer, even though this is required by professional rules.
The government is now seeking regulation in the following areas:
● the provision of clear and transparent information to consumers under damage based agreements;
● a maximum % of the damages that can be recovered in fees from the award; and
● the use of unfair terms and conditions (such as unfair settlement clauses).
1) The Cardiff Law School reports are:
● Something for Nothing: Employment Tribunal Claimant Perspectives on Lawyer Funding),
published by the Department for Innovation and Skills available at:
● Damage-Based Contingency Fees in Employment Cases: A Survey of Practitioners, published by the Law School and available at http://www.law.cf.ac.uk/research/pubs/repository/1996.pdf
The government consultation paper is at:
Damage-based agreements (DBAs) are a form of no win no fee agreement. They are the same as American-style contingency fees. The client does not pay any of the lawyer’s costs if they lose, but pays the lawyer a percentage of any compensation they receive if they lose.
DBAs are prohibited in court-based litigation put permitted in other cases, such as cases taken to the Employment Tribunal.
Conditional Fee Agreements (CFAs) are the more commonly used form of no win no fee agreement, and are best known for their use in personal injury litigation.
2) Cardiff Law School is known internationally for its work across a wide range of research fields and for translating its research into information for policy-makers and practitioners. The most recent independent assessment of the quality of research in British universities ranked the School joint 7th in the UK.
The School offers a range of undergraduate and postgraduate programmes and is home to the Centre for Professional Legal Studies, the leading provider of legal training in Wales. The Centre is one of only a handful of providers validated by the professional bodies (the Bar Standards Board and Solicitors Regulation Authority) to offer both the main vocational training courses for solicitors and barristers. Cardiff’s Legal Practice Course has consistently achieved the Solicitors Regulation Authority (formerly the Law Society) highest grade.
The library, one of the largest in the UK, has more than 100,000 volumes with subscriptions to over 200 current periodicals and law reports, supplemented by key legal databases such as Westlaw UK, Lexis Library and HeinOnline.
Public Relations Officer
Cardiff Law School
Cardiff CF10 4EL
Tel: +44 (0) 2920 875465
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