Novel approach: Conditional Fees Sub-committee Chairman Edward Chen hopes to get as much feedback as possible on the innovative proposals.

Views are being sought on the Law Reform Commission's proposals to set up a non-government contingency legal aid fund and allow lawyers to charge conditional fees in certain types of civil litigation.

Among the 13 proposals set out in the consultation paper published today, the Commission's Conditional Fees Sub-committee recommends lifting existing prohibitions against the use of conditional fees for certain types of civil litigation, so that lawyers may choose to charge conditional fees in appropriate cases.

Conditional fees are a form of "no-win, no fee" arrangement. If the case is unsuccessful, the lawyer will charge no fees. In the event of success, the lawyer charges his normal fees plus a percentage "uplift" on the normal fees. Conditional fees are different from the American form of contingency fee, where the lawyer's fee is calculated as a percentage of the amount of damages the court awards. 

At present, conditional fees, like other forms of "no win, no fee" arrangements, are unlawful for civil legal proceedings involving the institution of legal proceedings. The restriction has its origins in the ancient common law crime and tort of champerty - bargaining for a share of disputed property - and maintenance.

Healthy balance

"Given the high cost of litigation in Hong Kong, those in the middle-income group whose means are above the limits set down by the Legal Aid Scheme and the Supplementary Legal Aid Schemes would have difficulty financing litigation," Sub-committee Chairman Edward Chen said.

"Financial considerations mean the middle-income group either have to abandon their claim or bring civil proceedings without legal representation. Last year, over 40% of civil proceedings did not involve legal representations."

He said the 13 proposals bear three key features, such as ensuring all people have the right to access legal justice, avoiding nuisance claims, and devising an efficient conditional fee regime by capping the success fee level through legislation. According to overseas experience, the success fee level is 12.5% to 100% of normal costs.

The sub-committee suggests lawyers should be allowed to use conditional fees in certain types of civil litigation, including personal injury cases, family cases not involving the welfare of children, insolvency cases, employees' compensation cases, professional negligence cases, some commercial cases, product liability cases and probate cases involving an estate.

However, it should not be extended, at least initially, to defamation cases, criminal cases, and cases in which an award of damages is not the primary remedy sought.

To maintain a healthy balance between the rights of claimants and defendants, Mr Chen said there should be some mechanism to safeguard defendants against nuisance claims.

"We are therefore recommending that a claimant utilising conditional fees should be required by law to notify the defendant of this fact, and that the court should have discretionary power to require security for costs in appropriate cases," he added.

Non-gov't contingency legal aid fund

The sub-committee also noted that conditional fee arrangements cannot function properly without the availability of "After-the-Event" insurance.

It is normal litigation practice that a claimant who loses his case would be required to pay a reasonable portion of the other side's legal costs. "After-the-Event" insurance provides cover for this potential liability. However, the indications are that it is possible that "After-the-Event" insurance may not be available at an affordable level and on a long-term basis in Hong Kong.

To cater for the possibility that conditional fees cannot be successfully launched without "After-the-Event" insurance, the sub-committee recommends the Government raise the financial eligibility limits of the Supplementary Legal Aid Scheme, as well as expanding the types of cases the scheme covers.

It also recommends setting up a non-government contingency legal aid fund, probably run by an independent body. Applicants will have to satisfy a "merits" test in respect of their proposed litigation, but will not be subject to any means test. The scheme will take a share of any compensation recovered, so that it will be self-financing. 

Lawyers working for the scheme will be paid on a conditional fee basis. The scheme will also pay the defendants' legal costs in unsuccessful cases, in effect taking over the role of  "After-the-Event" insurance. 

"We realise that this is a novel approach and we would like to get as much feedback as possible. The consultation process is very important and we hope to be able to fine-tune our recommendations in the light of the public's response," Mr Chen said.

He stressed the proposals are intended to operate in parallel with, rather than to impact, the existing legal aid system.

For details of the consultation paper, click here. Copies are available at the Commission's Secretariat, 20^th floor, Harcourt House, 39 Gloucester Road, Wan Chai.

Views and comments should reach the Sub-committee's Secretary by November 15 by emailing hklrc@hkreform.gov.hk, faxing 2865 2902 or mailing 20^th floor, Harcourt House, 39 Gloucester Road, Wan Chai.