Contingency feesIt is time to take stock on the tricky subject of contingency fees in the light of two more high-level decisions, one of the Divisional Court - Wells v Barnsley MBC [1999], The Times, November 12 - and the other of a strong Court of Appeal presided over by the Lord Chief Justice - Geraghty v Awad Awwad [1999] 25 November (unreported).

Both decisions confirm that contingency fee agreements entered into before 7 January 1999 are champertous and thus unlawful.

Geraghty goes further and outlaws all contingency fee agreements other than those authorised by statute.The current interest in contingency fees began with the decision of the Divisional Court in British Waterways Board v Norman [1994] 26 HLR 232, which struck down a contingency fee.

In Thai Trading v Taylor [1998] 3 All ER 65, the Court of Appeal overruled Norman, holding that there was nothing wrong with a contingency arrangement whereby the solicitor, if successful, was entitled to no more than his ordinary profit costs.

The Divisional Court struck back with Hughes v Kingston [1999] 2 All ER 49 which held that Thai Trading had been decided per incuriam because it had not appreciated the statutory force of Rule 8 of the Solicitors Practice Rules 1990 which then outlawed contingency fees.

The decision left open possible arguments that Hughes itself had been decided per incuriam.The prospect of such an argument succeeding was diminished by the decision in Wells, which applied Hughes, - though not entirely ruled out, as the central reasoning of Hughes was conceded in Wells to be correct.

Geraghty puts the final nail in the coffin of contingency fees, the only ray of light being that leave was granted for an appeal to the House of Lords.Geraghty has gone further than the Divisional Court authorities and reversed Thai Trading completely.

The Court of Appeal has now said that 'acting for a client in pursuance of a [contingency] fee agreement, in circumstances not sanctioned by statute, is against public policy'.

The view of many, including the editors of the White Book Civil Procedure at para 47.14.15, that a contingency fee agreement entered into after the Practice Rule change on 7 January 1999 is lawful, has now been shown to be incorrect.

The only valid fee agreements dependent on a contingency are statutory conditional fee agreements.Formal conditional fee agreements under the Courts and Legal Services Act 1990 are available for most types of proceeding, but not family or criminal.

This provides no comfort to those who wish to assist an impecunious tenant in statutory nuisance proceedings of the sort which has given rise to most of these appeals; such proceedings are criminal and thus outside the scope of conditional fees.

The problems faced by solicitors for such tenants will be reduced when s.27 Access to Justice Act 1999, which permits conditional fee agreements for statutory nuisance prosecutions despite their criminal nature, is brought into effect.However, under the 1999 Act all these fee agreements, whether contingency, contingent (a new term favoured by some commentators) or conditional, are put into a single statutory framework which requires, among other things, that the agreement be in writing and comply with certain formalities to be prescribed by statutory instrument.

The bonus under the 1999 Act scheme, however, is that any success fee agreed will, subject to regulations, be recoverable from the losing party together with the premium on any policy of legal expenses insurance.Group litigationThe impact of the Civil Procedure Rules (CPR) on group actions was considered by Lightman J in BCCI v Ali (Costs: BCCI Employees No.4) [1999] 4 November (unreported).

Some 300 former employees of BCCI claimed damages for the stigma of having been associated with an employer guilty of fraud on a massive scale and, in particular, for losses resulting from the difficulty of obtaining alternative employment once the fraud was exposed.

The claims were all made subject to case management and five test cases were chosen to be trie d together in an attempt to resolve a number of issues common to many of the claims.

Although there had been discussion of a costs-sharing order at the interlocutory stage, none had been made.To simplify the result (reported at [1999] 4 All ER 83), the test cases succeeded in establishing breach by BCCI of the implied duty of trust and confidence, but failed to establish that such breach had caused them loss.They failed on that issue quite spectacularly, as the judge found that each one of them was unreliable and that two had fabricated evidence.

The greatest part of the trial had been taken up with issues of causation, though - since much of the evidence on liability had been agreed at a fairly late stage, thus saving time in court - time spent at trial did not necessarily reflect time spent in preparation for trial.Lightman J held that the overriding concern of the court under the CPR must be to make the order which justice requires, that awarding costs to the successful party would generally achieve that object but that the court should also now have regard to the success of parties on parts only of their cases.

The straight jacket of re Elgindata (No 2) [1992] 1 WLR 1207 had now gone, and the search for justice was untrammelled by considerations outside the CPR.

He added: 'For the purposes of the CPR, success is not in my view a technical term but a result in real life, and the question as to who succeeded is a matter for common sense.'In relation to group actions post-CPR, Lightman J had this to say: 'But [the old] approach no longer holds sway.

I can and should take a realistic view of the outcome of the litigation in deciding who in the particular context of this test action is successful.

This context is critical.

It has guided and shaped the litigation throughout for the benefit of all parties, and not least in the choice of claimants.

It is not possible or just to have regard only to the lack of success of the test case employees in establishing their personal loss.

That failure is only one half of the picture.

The full picture is that, whilst the bank has warded off all claims by the test case employees, the judgment .

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opened the door to possible successful claims by the other employees, and beyond this (for the benefit of all concerned and in fulfilment of the essential purpose behind the action) has cleared the way for a more expedited resolution of such claims.'He went on to make no order as to costs on the basis that, in effect, honours were even and this was the result that justice required.

He added that he would have been troubled to make an order for any costs against the test case employees, since he would then have had to make a similar order against the non-test case employees, and that might have stifled claims that were waiting in the wings for the outcome of the test cases.Penal interest and indemnity costs under the CPRThe first reported case on the effect of a successful claimant's offer under CPR Part 36 is Little v George Little Sebire [1999] The Times, 17 November, a decision of David Foskett QC sitting as a deputy.

In that case a successful claimant's offer had been made and the question was how the court should exercise its discretion to award indemnity costs and interest at up to 10% over base rate on damages and costs.

The judge held that, in view of the wording of R36.21(4), indemnity costs should be ordered and that, in relation to interest, one should start with the proposition that 10% over base should be awarded from the earliest date that it could, and then evaluate whe ther the effect of doing so would itself work an injustice or confer a disproportionate advantage or disadvantage on either side.

He held that this was the correct approach given that one of the purposes of the CPR was to encourage settlement and that this would only be achieved if the parties focussed properly on the strengths and weaknesses of their cases.

On the facts of that case he could find no reason to award less than 10% over base rate on damages and only made a lower award in relation to costs because he was asked to do so.A further point in the case was that the claimant was bound to fail on his case as pleaded up to the date of trial.

He only succeeded on the basis of a late amendment.

It was argued for the defendant in the light of Beoco v Alfa Laval [1995] QB 137 that the defendant should have the costs down to the date of trial.

This approach was rejected by the judge on the ground that, even if the amendment had been made at an earlier stage, the defendant would still have fought the case and rejected the claimant's Part 36 offer.While one can see the logic of that approach, it is tempting to say that parties ought to be encouraged to focus not only on settlement but also on the accuracy of their pleaded case, and that those who persist with a pleaded case which is bound to fail should bear the costs of doing so.Diminishing the importance of pleadings means anything can happen at trial and, in common with much else in the CPR, increases uncertainty for a litigant with an apparently good case.

This will encourage settlement, if only because the whole system has now become so uncertain that nobody in their right mind would litigate at all.

If reducing the number of trials is the sole aim of the CPR, then this tendency can be counted a success.

If securing the right result for litigants on the basis of the claims they put forward is a relevant aim, we are moving rapidly down the wrong track.