Where are we now on Conditional Fees? – or why this Emperor is Wearing Few, if any, Clothes
| DOI | http://doi.org/10.1111/1468-2230.00416 |
| Date | 01 November 2002 |
| Published date | 01 November 2002 |
Where are we now on Conditional Fees? – or why this
Emperor is Wearing Few, if any, Clothes
Michael Zander*
Conditional fees were first introduced by the Thatcher Government in the Courts
and Legal Services Act 1990, though it took another five years before they became
operational. Under the legislation1and the regulations2it became lawful for a
solicitor to agree with his client that in the event that the case was won he could
charge the client a success fee (sometimes called ‘uplift’) of up to 100 per cent of
his costs. The legislation legitimated ‘no win, no fee’ (or ‘win and I charge you
more’) arrangements that would otherwise have been unlawful as contrary to the
fundamental rule banning any arrangement that made the lawyer’s fee dependent
on the outcome of the litigation.
If one considers just the case itself, the success fee is pure profit. But success
fees must also cover the losses incurred in the very small minority of cases that are
unsuccessful.3
To support this new form of funding of civil litigation the insurance industry
started to develop products to enable the claimant to cover himself against the risk
of losing and having to pay the other side’s costs. And then to cap it all, in 1999
Lord Irvine’s Access to Justice Act made both the success fee4and the insurance
premium5recoverable by the successful litigant. (The writer has described the
whole story and its implications elsewhere.6)
Callery vGray7was the first case concerning conditional fees to reach the House
of Lords. The law lords were told that there were some 150,000 cases awaiting the
outcome! Leave to appeal had been refused by the Court of Appeal. It was granted
by the House of Lords – presumably so that it could provide general guidance to
everyone involved in conditional fee arrangements (CFAs). In the event, however,
the law lords decision answered little or nothing and gave no general guidance –
provoking the question, why did it give leave?
The case arose out of a straightforward claim for damages in respect of minor
injuries suffered in a road accident. At his first meeting with his solicitors the
claimant C entered into a CFA which provided for a success fee of 60 per cent. A
ßThe Modern Law Review Limited 2002 (MLR 65:6, November). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA. 919
* QC, Emeritus Professor, LSE.
1 s 58.
2 The Conditional Fee Agreements Regulations 1995, S.I. 1995/1675 and the Conditional Fee
Agreements Order 1995, SI 1995 1674. The 1995 order was revoked and replaced by the Conditional
Fee Agreements Order, SI 1998/1860 which in turn was revoked and replaced as from 1 April 2000
by the Conditional Fee Agreements Order 2000, SI 2000/823.
3
The agreement commonly provides that in that event the client will still pay disbursements, an eventu-
ality normally covered by insurance. So the losses in such cases are the unrecovered profit costs.
4 New s 58A(6) of the 1990 Act inserted by s 27(1) of the 1999 Act.
5 s 29 of the 1999 Act.
6 M. Zander, ‘Will the revolution in the funding of civil litigation in England eventually lead to
contingency fees?’, DePaul Law Review, forthcoming 2003, accessible in draft on
Depts/law>. The history is sketched in the Court of Appeal’s judgment and in the law lords’ speeches
in Callery vGray. See also the judgment of Schiemann LJ in Awwad vGeraghty & Co [2000] 3 WLR
1041, 1044. See also generally F. Bawdon, M. Napier and G. Wignall, Conditional Fees A Survival
Guide (The Law Society, 2nd ed, 2001).
7 [2002] ER UKHL 28, [2002] 1 WLR 2000, [2002] 3 All 417.
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