Fees Policy No Winner For Clients, Says Judge
Article courtesy of Brisbane Times – JOEL GIBSON LEGAL AFFAIRS
July 16, 2010
LAWYERS acting on a ”no win, no charge” basis are compromised in their ability to provide the best objective advice to their clients, a senior NSW judge has warned.
Justice Patricia Bergin, the chief judge of the Supreme Court’s equity division, said the controversial but widespread practice of charging contingency fees was ”fraught with difficulties” and liable to produce ”unsatisfactory byproducts” for clients.
Justice Bergin made the statements in a case where a firm threatened to stop acting for a client if he did not accept a settlement offer, causing him to become ”emotionally distressed”.
A week before Alan Spence’s hearing and after 2½ years of work on his case, Gerard Malouf and Partners discharged itself from acting for Mr Spence, refused to release his file and claimed he owed $240,000.
Justice Bergin criticised the firm – whose principal was found guilty two years ago of professional misconduct for illegal advertising – ordering it to release the file and pay Mr Spence’s costs.
”It is clear to me that the solicitors were very concerned that if they did not secure a settlement they would not be paid any fees or costs. I am satisfied that this concern caused the highly inappropriate threat to be made,” Justice Bergin said.
”In a ‘no win, no charge’ retainer, when solicitors’ livelihoods and incomes are bound up with, and dependent upon, the client taking a particular step in litigation, it seems to me that the capacity to provide the client with objective advice about taking that step is compromised. The greater the amount of fees to be lost, the greater the prospect of compromise.”
The president of the Law Society, Mary Macken, said the concerns were valid and clients needed to consider carefully what constituted a ”win” for firms that claim almost 100 per cent success rates.
”A technical win may see the client walk away with very little … A lawyer taking on a spectrum of cases which includes extremely difficult cases would find it hard to maintain a 98 per cent success rate,” Ms Macken said.
Lawyers should make it clear to clients that ”if the case is lost, they may have to pay the costs of the other party”, she said. ”Or, indeed, if the case is technically ‘won’ but costs are significant, the win may be pyrrhic.”
Mr Spence’s solicitor, Shaye Chapman from the firm Lawjet, said the case ”puts it back on firms to make it clear in their agreements with clients the basis of when they are entitled to their legal fees”. But Jnana Gumbert, the NSW branch president of the Australian Lawyers Alliance, which represents many personal-injury firms, said: ”By and large, lawyers don’t allow those considerations to affect the advice they provide to clients.”
Contingency fees provided a community service for thousands of victims of accidents who would otherwise be fighting large insurance companies by themselves, Ms Gumbert said.
Gerard Malouf and Partners, which markets itself as having the ”triple-C attitude – compassion, commitment and competence towards our clients”, did not respond to requests for comment.