HKLII

Hong Kong Law Reform Commission

[Index] [Table of Contents] [Search] [Help]

Preface

__________

 

 

 

Terms of reference

 

1.                     In May 2003, the Secretary for Justice and the Chief Justice directed the Law Reform Commission:

 

“To consider whether in the circumstances of Hong Kong conditional fee arrangements are feasible and should be permitted for civil cases and, if so, to what extent (including for what types of cases and the features and limitations of any such arrangements) and to recommend such changes in the law as may be thought appropriate.”

 

 

The Sub-committee

 

2.                     The Sub-committee on Conditional Fees was appointed in July 2003 to consider and advise on the present state of the law and to make proposals for reform.  The sub-committee members are:

 

Prof Edward K Y Chen, GBS, CBE, JP

  (Chairman)

President

Lingnan University

 

Mr William H P Chan

Deputy Director

Legal Aid Department

 

Mrs Pamela W S Chan, BBS, JP

Chief Executive

Consumer Council

 

Mr Andrew Jeffries

Partner

Allen & Overy, Solicitors

 

Mr Raymond Leung Hai-ming

Chief Executive Officer

C & L Investment Company Ltd

 

Mr Raymond Leung Wai-man

Barrister

Temple Chambers

 

Mr Kenneth S Y Ng

Head of Legal and Compliance

Hongkong and Shanghai

      Banking Corporation

 

Mr Peter Schelling

(from February 2004

  to June 2005)

 

Managing Director & CEO

Zurich Insurance Group

      (Hong Kong)

 

Mr Michael Scott

 

 

Senior Assistant Solicitor General

Department of Justice

 

Mr Paul W T Shieh, SC

Senior Counsel

Temple Chambers

 

Ms Sylvia W Y Siu

Consultant Solicitor

Sit, Fung, Kwong & Shum

 

Ms Alice To Siu-kwan

(from September 2003

  to February 2004)

Assistant General Manager

Technical Underwriting & Claims

Royal & Sun Alliance Insurance

      (HK) Ltd

 

The Hon Madam Justice Yuen, JA

Justice of Appeal

High Court

 

Ms Cathy Wan

  (Secretary)

 

Senior Government Counsel

Law Reform Commission

 

 

3.                     The Sub-committee considered the reference over the course of nine meetings since July 2003 and will hold further meetings to discuss and evaluate comments on this consultation paper.

 

 

What are conditional fees?

 

4.                     A conditional or contingency fee agreement can be described as an agreement between a legal practitioner and his or her client to the effect that the legal practitioner will charge no fees if the client’s court case is conducted unsuccessfully.  The fees charged under this type of agreement are sometimes referred to as “event-triggered fees”, and the basis for charging legal costs is known as “no success, no pay” or “no win, no fee”.  This type of fee arrangement is usually allowed only in civil litigation cases, although the scope of application differs amongst jurisdictions.  In most jurisdictions, the costs indemnity rule applies, meaning that the unsuccessful party has to pay the costs of the successful party.  Conditional or contingency agreements do not relieve the litigant from the risk of an adverse costs order to pay the other side’s legal costs if the litigation is unsuccessful.

 

 

Terminology

 

5.                     There are various ways in which event-triggered fees can be applied, and the amount of fees that become payable in the event of success will vary accordingly.  Terms used to denote these different methods of charging include contingency fees, uplift fees, speculative fees, and percentage fees.  These terms are not consistently applied in the literature on the topic.  For the purposes of this paper, these terms have the meaning ascribed to them below.

 

 

Contingency fee, percentage fee, “no win, no fee”

 

6.                     In some literature[1] the term “contingency fee” is given a wide meaning and includes any type of calculation on a “no win, no fee” basis.  However, in other contexts, “contingency fee” is taken to mean “percentage fee”, whereby the lawyer’s fee is calculated as a percentage of the amount awarded by the court.  This is the basis adopted in the USA.  For the purposes of this paper, we use the term “contingency fees” to mean only “percentage fees”, whereas the term “event-triggered fees” embraces all the different “no win, no fee” bases of calculation.

 

 

Conditional fee, uplift fee, success fee

 

7.                     The term “conditional fee” is sometimes loosely used to mean event-triggered fees.  However, in other contexts, and also for the purposes of this paper, “conditional fee” means an arrangement whereby, in the event of success, the lawyer charges his usual fee plus an agreed flat amount or percentage “uplift” on the usual fee.  The additional fee is often referred to as an “uplift fee” or a “success fee”.  Conditional fee agreements have been allowed in the UK since 1995, and also in the Australian jurisdictions of Victoria, South Australia, New South Wales and Queensland.

 

 

Speculative fee

 

8.                     Where a “speculative fee” is charged, the lawyer is entitled to charge only his or her normal fee in the event of successful litigation.  Where the action does not succeed, the lawyer is not entitled to a fee.  Speculative fees have been used in Scotland for a long time.

 

 

Layout of this paper

 

9.                     The first chapter sets out the sources of litigation finance in Hong Kong, and the rules which apply to the allocation of costs.  Chapter 2 examines the application of contingency fees in the USA, while Chapters 3 and 4 look at the development of conditional fees in England and recent problems and litigation there.  Chapter 5 turns to the experience of event-triggered fees in a number of other jurisdictions, and Chapter 6 deals with the arguments for and against conditional fees and sets out related issues for discussion.  The Sub-committee’s recommendations are set out in Chapter 7, while Chapter 8 contains a summary of the recommendations.

 

 

 

 


[1]              For example, South African Law Commission, Report on Speculative and Contingency Fees, Project No 93, November 1996.  Contrast, however, with Australian Law Reform Commission, Costs shifting – who pays for litigation (1995, Report No 75), footnote 20 on p 36, “A contingency arrangement provides that, if the action succeeds, the lawyer receives the usual fee plus an agreed extra amount.  If that amount is a flat amount or a percentage of the usual fee it is called an ‘uplift’ contingency fee.  If it is a percentage of the damages award it is called a ‘percentage’ contingency fee.”