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VLRC greenlights contingency fees

VLRC greenlights contingency fees

By Karin Derkley

Access to Justice Litigation 


Lawyers should be able to charge contingency fees on approval from the Supreme Court, a report on litigation funding and class actions by the Victorian Law Reform Commission (VLRC) recommends.

Contingency fees, where a lawyer is paid an agreed percentage of the amount recovered in a dispute or litigation, would help provide an avenue of funding litigation for clients who would otherwise be unable to pursue a claim because of the cost, VLRC chair the Hon Philip Cummins says.

"Contingency fees used to be frowned upon, but times have changed and there is now more regulation and oversight. It really is time for contingency fees to be seriously considered as a means of improving access to justice, especially for the 'missing middle'."

The VLRC made the recommendation in its report Access to Justice: Litigation Funding and Group Proceedings tabled in state parliament this week.

The VLRC was asked to report on whether Victorian courts and regulators should have more power to regulate class actions and litigation funders to ensure people involved in class actions don't face unfair risks and excessive costs, and whether contingency fees should be permitted in limited circumstances.

The LIV has argued the ban on contingency fees should be lifted on the basis that it would increase access to justice for clients with valid claims who cannot afford legal representation and are not eligible for legal assistance.

The VLRC's proposal considered contingency fees as an alternative to funding class actions, which are currently generally funded either by No Win No Fee arrangements or by commercial litigation funders.

Bringing in contingency fees would allow for proceedings that held less interest for litigation funders, Mr Cummins  says.

Any such arrangement would need approval from the Supreme Court, he adds. "We have not recommended that lawyers can charge contingency fees based on their own judgment. The Court needs to be in charge of the process - it has to be done prudently and responsibly.

"It's quite a guarded, measured introduction."

Critics of contingency fees have pointed to the possibility that allowing them could unleash a deluge of US style litigation and a flood of invalid claims.

But Mr Cummins says the US experience was not relevant. "You need to look at Canada and the UK where contingency fees have been brought in with controls. There has been no so-called explosion of class actions there because of the adverse costs regime which does not exist in the US."

Of concerns about conflicts of interest for lawyers with a financial interest in the outcome of the case, Mr Cummins points out that a similar possibility could exist with No Win NO Fee arrangements.

"There's a lot of that around and some of it is very big numbers, but no-one seems to be too troubled about that.

"Of course, you have to be careful, but the situation can be monitored and supervised by the Court."

The LIV initially recommended a cap of 35 per cent on contingency fees, but Mr Cummins says the VLRC has not recommended a cap partly because it would need to be on a national basis "otherwise you'll get forum shopping".

Along with the recommendation to allow contingency fees, the VLRC says regulation of litigation funding should be at a federal level, rather than a state level, to ensure national consistency.

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