Making conditional fees workable

Solicitors involved in litigation, and particularly personal injury cases, cannot fail to be aware of the uncertainty and difficulties which have beset the conditional fee regime throughout the summer.

Just as it appeared that a degree of stability had been reached following the judgment of the House of Lords in Callery v Gray, a new spiral of satellite litigation began regarding the enforceability of conditional fee agreements.

The Law Society is acutely aware of the insecurity and anxiety this has created for the many firms which conduct a substantial proportion of their work on a conditional fee basis.

There is a real fear that the courts may hold the agreements not to comply with regulations and thus to be unenforceable.

If the agreement is held to be unenforceable as between a solicitor and his client, it may well be that the defendants would escape liability because of the continuing operation of the indemnity principle.

The alleged breaches relate to the minutiae of the Conditional Fee Agreement Regulations of 1995 and 2000 and are in some cases purely technical.

The regulations were intended to protect the claimant client, frequently an injured and vulnerable person.

But the alleged breaches in no way prejudiced the claimant.

In these circumstances it would be particularly absurd for any technical breaches to provide a windfall bonus to the defendant.

It has been established Law Society policy for some time that the indemnity principle should be abolished.

The government accepted that and included provision in the Access to Justice Act to enable the rules committee to abolish the principle.

After initial hesitation from some quarters, the Law Society was pleased that following last year's Civil Justice Council costs forum - which included the senior judiciary - a consensus was achieved that the indemnity principle should indeed be abolished.

The present chaos affecting conditional fee agreements illustrates the urgency of the need for action.

All the decisions relating to the enforceability of conditional fee agreements are currently first-instance decisions.

There is a pressing need for authoritative judicial interpretation on a number of points.

The Law Society's civil litigation committee has been monitoring the situation closely and seeking practical ways to assist the profession.

The Society has now developed a strategy in relation to those cases where the paying party alleges that there is a formal defect in the actual agreements.

These cases include those where it is alleged that the model agreements produced by the Law Society in 1995 and April 2000 do not comply with the regulations.

The Society has decided to seek to intervene in two cases where this issue will be decided by the circuit judge, with a view to sustaining the intervention at Court of Appeal level should this be necessary.

The Law Society does not usually intervene at this level.

As a rule our policy is to intervene only when cases reach the Court of Appeal and the decision will be authoritative.

However, the overwhelming importance of these issues to the profession has prompted us to take this unusual step.

We are deeply concerned that this litigation is eroding confidence in the conditional fee system and undermining access to justice.

On a related issue, a decision is expected soon in a case where the question is whether arrangements that involve the employees of claims assessors providing advice to clients as to the effect of conditional fee agreements satisfy the requirements set out in the regulations.

This will provide welcome clarification to those firms which have accepted cases referred by assessor companies.

Whatever the result, the Law Society will continue to encourage the public to approach solicitors directly, emphasising that the referral agency is an unnecessary intermediary and its charges must come from the damages awarded to a client except where they are recovered from the other side.

Solicitors involved in cases relating to a conditional fee agreement which is alleged to be unenforceable should contact the Society's practice advice service in the first instance.

It will send out a fact pack and refer solicitors to a specialist policy adviser if necessary.

The Law Society needs to be fully informed about the nature and extent of these challenges so we can respond effectively in our efforts to ensure that conditional fees are a workable method of providing access to justice, as Parliament intended when it accepted the withdrawal of legal aid from most personal injury cases.

Janet Paraskeva is the Law Society's chief executive