No-win no-fee lawyers: experts debate the issues

Equal pay is one area that offers no-win, no-fee solicitors the potential to scoop major rewards. It has also witnessed a dramatic rise in tribunal cases

  • More than 60,000 equal pay cases were accepted between April 2007 and March 2008 – one-third of all UK tribunal cases.
  • This was more than treble the number in 2005-06 and more than 10 times as many as five years ago in 2003-04 (4,412).
  • The total number of tribunal claims for 2007-08 was up by more than 40% on the previous year (132,000 in 2006-07 to 189,300 in 2007-08).
  • In 2003-04 there were just 4,412 equal pay claims. In 2007-08 there were 62,706. The only other jurisdiction to register such a jump is the Working Time Directive, which rose from 16,869 in 2004-05 to 55,712 in 2007-08.
  • There are now almost 100,000 more claims a year than five years ago.
  • 62,000 equal pay claims are in progress, while the EHRC estimates a further 150,000 will be lodged in 2008-09.

Source: Tribunals Service

Your take…

Linda Lee, deputy vice-president, Law Society:

The absence of legal aid for most of the population means that conditional fees are one of the few ways that ordinary citizens can seek justice before the courts. It must be remembered that solicitors are taking all the risk in these cases and receive no payment until after the event. Taking this risk merits significant additional payments on success. Besides, all contentious costs in relation to these claims are subject to the control of the court and there is ample opportunity for any party to challenge the fees if they choose to do so.

Helen Buczynsky, legal officer, Unison:

Contingency fees encourage solicitors to put in minimal effort for maximum reward. This is accentuated in equal pay claims, where no-win, no-fee lawyers can take a substantial proportion of the damages, often from low-paid vulnerable women. It is therefore essential that detailed regulation is put in place to ensure that claimants can make an informed decision about how to proceed, and if they enter a contingency fee agreement they are charged a fair, reasonable and justifiable amount. We hope the proposed regulations will also include linkage to early settlement and a mechanism that makes it possible to challenge the deductions and any unfair penalty clauses in the contracts.

Caroline Carter, head of employment, incentives and pensions, Ashurst:

It is debatable whether the proposed regulation actually provides any additional protection to claimants. The Solicitors’ Code of Conduct already requires them to give clients the best information possible about costs, including discussing various methods of funding, and it is arguable that a cap on the percentage of recoverable damages is unnecessary. Competitive market forces should prevent abuse and there is no evidence to suggest that excessive percentage fees are charged. As the proposed regulation simply codifies existing requirements and practices without increasing claimant protection, employers will still have to deal with claims being brought on a no-win, no-fee basis.

Paula Cole, partner, Beachcroft:

Opponents to damages-based contingency fees argue that the system is open to exploitation, through use of excessive percentages and terms that tie the client to the lawyer’s advice on settlement. However, the average fee charged is 31%, and the most common fee charged is 33%. This indicates that charges are generally not excessive, and supporters advocate that they are always, by definition, proportionate. Lawyers operating such charges also argue that flexibility about percentages is needed to take into account factors such as prospects of success, case complexity, duration and the amount of compensation. The introduction of a cap in this context could reduce access to justice through such arrangements.

Q What is the major problem with ‘no-win, no-fee’?

Jim Savege, lead officer on pay & reward, PPMA

No-win, no-fee activity is skewing the effectiveness of collective bargaining and the relationship between trade unions and employers. Unions are bringing in equal pay claims left, right and centre to protect themselves from no-win, no-fee activity. In Cumbria there are about 3,000 claims from the unions, and most are to protect themselves from being sued.

Victoria Phillips, head of employment rights, Thompsons Solicitors

The ability of unions and employers to negotiate has been constrained by looking over their shoulders at solicitors who are trying to get in on the action. These solicitors advise people to settle only after the clients have put a claim into the tribunal because then they get a cut of the damages. They simply won’t let them settle through their trade union, as then they don’t get any money. We have seen lots of instances where negotiations are at quite an advanced stage and the trade unions and employers are nearly at a deal, only for no-win, no-fee lawyers to suddenly set themselves up in town and encourage people to sign their names so they can take a cut of the damages.

Q No-win, no-fee solicitors claim they provide a valuable service for people who cannot afford to access justice. Do they have a point?

Savege: It is a very subjective issue, but you have to ask at what point does no win, no fee just become a commercial operation rather than a principled and valued option for people who want to access justice? You can’t undermine someone’s right to progress their concerns or inhibit access to justice, but we have primarily got our eyes on equal pay negotiations and having a less litigious environment would actually make things far easier to resolve.

Phillips: The way it has burgeoned in equal pay litigation is obscene. Our trade union clients receive a steady trickle of calls from people who have previously signed up with a no win, no fee solicitor and are very bitter about the amount of money they have lost out on from their damages. It has also had a chilling effect on things like equal pay as both sides are now so terrified of being sued that they can’t really move forward. This has cost implications for everyone as the unions are now putting their emphasis into gathering claims rather than getting on with negotiations. Plus, it doesn’t get people equal pay. It gets them compensation for past inequalities.

Q Do you believe that no win, no fee should simply be banned?

Savege: We are not against no win, no fee in principle, as it is sometimes an appropriate and almost essential way for people to find support and progress their circumstances. But it needs to be capped or curbed so that it is used only in the appropriate context and doesn’t compromise other infrastructure that could quite reasonably deal with the matters in hand. There needs to be a remedy to sort that out.

Phillips: It certainly needs to be more regulated – perhaps to the point that it’s no longer economic for the solicitors to operate. Lord Justice Jackson and others make the argument that it is a valuable way for people to find justice, but I am very cynical about whether people actually get any justice through it. Some people get some money they are entitled to, but not the full amount as someone else takes a huge slice.

Q Do you welcome the Ministry of Justice’s proposals

Savege: In simple terms we are supportive of the action as long as there is a commitment to take further steps if they prove to be necessary and appropriate. If there is this element of ongoing management of the situation then in time, we can be assured that it will be resolved.

Phillips: It is a very important step they are taking as it is a matter of concern, and putting forward proposals to tackle it is sensible. Of course, it is always good if more can be done, but overall the proposals are welcomed by our clients who fund legal services for their members, as this behaviour is completely undermining them. It will make things slightly better, but I don’t think it is radical.

Q Is there a better option?

Savege: We have to develop different routes for people so they don’t automatically jump into no win, no fee. There needs to be a framework for broader access to justice so that people make more conscious judgments. People also need to know how much of their claim they will have to pay to these people as at the moment the solicitors are kind of saying: ‘Do nothing, sit back and we will make you lots of money’, which is disingenuous to the point of being factually incorrect. People need to know exactly what they’re signing up for, and some legislation around this would be entirely welcome.

Phillips: There needs to be a wider look at the tribunal system and sources of funding – but it is a very tough nut to crack. At the root of the problem is a misconception that tribunals are still how they were when they were set up in 1971, but those days are long gone. The issue of funding needs to be dealt with and there may have to be a limit or even complete prohibition on people taking money from damages. Then it will not be economic for the people who do the work to carry on. Maybe we could then try to get people back to their local law centre, citizen’s advice bureau or Acas.

The sights that Jack Built

Justice secretary Jack Straw has set his sights on regulating ‘no-win, no-fee’ lawyers, claiming that “unregulated contingency fee arrangements have been stretched to breaking point by some ‘no-win, no-fee’ lawyers, who have exploited vulnerable clients by taking huge slices out of their damages, failed to provide them with proper information, and imposed unfair terms and conditions that have locked them into unreasonable deals”.

The Ministry of Justice will shortly publish a consultation paper seeking views on how it intends the regulate the arrangements. As things stand, the provisions include the following:

  • A cap on the percentage of damages that can be recovered by the legal representative
  • A requirement that they provide claimants with clear and transparent information on total costs
  • A requirement that they clarify the deductions made from the claimant’s award which are to go to the representative as their fee for taking on the case
  • A requirement that they provide explicit information on alternative methods of funding.

As well as regulating their existing use, the proposals will also allow the justice secretary to extend or restrict the use of these agreements in future, should the need arise.

Source: Ministry of Justice

 

Comments are closed.