This is not the same as the American system, where the lawyer takes a percentage of the winnings. Rather it is a no-win, no-fee system. The client does not pay his own lawyer if he loses, but would still be up for the fees of the other side.
The Melbourne firm’s action follows a recommendation in the Access to Justice report that came out in May, but it is not especially new. In Canberra, for example, firms have been quietly doing the right thing by poor clients for decades. It would be fair to say that in personal injuries cases in Canberra, no-one with a reasonable case would be denied legal representation just because they did not have enough money. The trouble is, lawyers have either not trumpeted their good works, or the rules about advertising have prevented them from making the practice more widely known.
The practice varies. Some say they will only charge if they win. Others say they will not require payment until the outcome is known (maybe years later), but clients will be required to pay if they lose. Also, the practice varies on disbursements (doctors’ reports and other out-of-pocket expenses). Barristers, too, often work on a no-win, no-fee basis.
With a poor client, of course, a loss means the lawyer does not get paid because the money is impossible to chase. Small firms find it harder than large firms to engage in the practice.
The question raised in the Access to Justice report goes wider. Should lawyers be allowed to charge a premium if they win a no-win, no-fee case? So upon winning, the lawyer gets, say 150 per cent of the scale fee to compensate for the risk and lost interest. This is called an uplift fee.
This is prohibited in Australia now, except in South Australia (and soon in Canberra). In South Australia lawyers can charge up to double the court scale. The client must sign a plain-English agreement before it is enforceable.
The reason the American percentage-of-winnings system is not applied is because American courts do not issue costs orders. Each pays his own no matter what the result. Further, Australia has inherited the English rules on “”maintenance” and “”champerty”. These rules made it illegal (a crime, tort or unenforceable contract) to make arrangements other than strict fee-for-service. The theory was that litigation is a bad thing and contingency arrangements (especially by third parties) should be discouraged.
In 1960, however, the High Court made it plain that it was legal for a lawyer to take a no-win, no-fee case, provided the lawyer did not charge more than the scale fee in the event of a win.
One problem with the uplift fee, is that it could become another tooth in the poverty trap. Just as the poor pay more for consumer credit, cannot afford to pay there HECS off in a lump sum so cop interest, pay higher bank charges and so on, with the uplift fee, they will ultimately pay more for their legal fees. Indeed, a lot of the no-win, no-fee work done now out of the Canberra profession’s sense of justice, could get diverted into the uplift scheme.
Another difficulty is that you need a scale fee against which the uplift percentage can be measured. The scale fees are set by the court and apply in the absence of an agreement to the contrary. The Access to Justice report called for the abolition of the scale fee because it inhibited competitive pricing, yet its other recommendation in favour of uplift fees requires scale fees to be retained.
The question of scale fees and uplift fees should become academic if the central recommendations of the Access to Justice and half a dozen other inquiries come to fruition: widespread freedom to advertise and to negotiate about fees which will engender a competitive spirit and a greater willingness to engage in public information and debate.
Now this Melbourne firm has publicised its new service, others will have to follow. When you have the legal profession by the chequebook, its heart and mind usually follows.