Who Loses with "No-Win, No-Fee"?


American-style Lawyers' Fees Up for Discussion

An incompetent lawyer can delay a trial for months or years.  A competent lawyer can delay one even longer.

- Evelle Younger

Most people aren't appreciated enough, and the bravest things we do in our lives are usually known only to ourselves.
No one throws ticker tape on the man who chose to be faithful to his wife, on the lawyer who didn't take the drug money...

- Peggy Noonan

by Martin Kay

American-style "no-win, no-fee" payments for lawyers undertaking civil cases could become more common in New Zealand following the publication of a Law Commission discussion paper.  The paper calls for submissions on whether the practice of lawyers taking on cases on the basis they will be paid only if they win should be widened and more regulated.

The commission believes formalizing such arrangements will make it easier for the large number of people who are not eligible for legal aid, but who cannot afford to pay lawyers, to seek justice.  It said many of these people were either forced to go to consumer watchdog programmes such as Fair Go or disputes tribunals, which are limited to awards of only $7500 or $12,000 if both sides agree to the tribunal having a greater jurisdiction.

Law Society president Christine Grice said there was nothing stopping a lawyer from taking a case on a no-win, no-fee basis, provided their charges were "fair and reasonable".

But the Law Commission paper, Subsidising Litigation, points out that such arrangements have no weight in law, meaning lawyers are unlikely to be able to act against clients who refuse to pay.

It says the legal profession, consumer groups and other interested parties should consider whether to widen the scope of such arrangements, and recommends three possible models.

The first - the one most commonly used in New Zealand at present - would see lawyers agreeing to take only their normal fee if they sued successfully.  The second involved the normal fee plus a prearranged bonus while the third - the system most common in the United States - would see lawyers take a cut of any damages or awards.

Miss Grice said the Law Society wanted to see more formal arrangements governing no-win, no-fee cases.

Commission member Donald Dugdale said the paper took a deliberately neutral approach, and was at pains to point out the pros and cons of each option.

These included lawyers being tempted to settle cases out of court for less than the client wanted to ensure they secured a fee for their work.  There was also a danger that formalising no-win, no-fee arrangements could lead to an increase in litigation, but Mr Dugdale said the ACC system, which restricts the right to sue for personal injury, made it unlikely New Zealand would become the overly litigious society many perceived the US to be.

Submissions on the paper must be received by February 28.  They will be incorporated into the commission's recommendations to a Justice Ministry review of the legal aid system and the Law Practitioners Act.

Source: The Dominion Wednesday 13 December 2000

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