In America, lawyers can take a percentage of litigation proceeds. Here we regard that practice as reprehensible. But are English fee arrangements really so different?
Not long ago, litigation lawyers in England were not allowed to structure their fees so that they were paid more if an action was successful. The old rules of maintenance and champerty prevented this. Maintenance means the giving of assistance or encouragement to a litigant by someone with no legitimate interest in the litigation. Champerty is a particular kind of maintenance whereby the maintainer gives help in exchange for a share of the proceeds of the action.

Maintenance and champerty were once criminal offences and could also result in tortious liability. However, those days are long gone. Further significant inroads have been made by the Courts and Legal Services Act 1990. It is now possible for conditional fee agreements, or CFAs, to be made.

The underlying objection to champertous agreements seems to have been the idea that a lawyer might bend the rules and compromise their professional integrity if they were in line for a bigger fee. However, there are often greater pressures to bend the rules, such as when a lawyer is acting for an important client knowing that if the action is unsuccessful, the client will take their business elsewhere. At the same time it was seen as necessary that justice should be available to people with limited means. No win/no fee agreements and CFAs were seen as practical ways to achieve this.

As was pointed out by Lord Justice Schieman in Awwad vs Geraghty there are different ways in which a lawyer may seek a reward for success in an action. For example, in the American style they may simply ask for a percentage of the litigation proceeds. This is often called a contingency fee and it is still not permissible in England. Alternatively, the lawyer may say that they want their normal fees if the action is successful but none if it is not: a straightforward no win/no fee. A further variety is where the lawyer recovers normal fees but with an uplift in the event of success. To be enforceable, any such agreements must comply with somewhat convoluted statutory regulations. And for some proceedings they are banned completely: for example in criminal and matrimonial cases.

It was seen as necessary that justice should be available to people with limited means

The recent case of Benaim (UK) Ltd vs Davies Middleton and Davies Ltd concerned a CFA which provided for an uplift of the basic legal costs in the event of success in an arbitration. The agreement was structured so that the greater the amount recovered in the arbitration by DMD, the greater the success fee of the lawyers. If recovery was up to £200,000, the success fee would be 40% of the basic costs, rising in stages to 100% of the basic costs if more than £1m was recovered. A limit was imposed so that the success fee could not exceed 25% of the amount recovered.

Benaim was unsuccessful in the arbitration and was ordered to pay DMD's costs, which included the success fee as provided above. Benaim objected, contending that the agreement between DMD and its lawyers was not enforceable. It argued (unsuccessfully) that, although this CFA met the statutory requirements, it should still be held unenforceable since it contained a champertous element. The objection was that the success fee was linked to the amount of the recovery. There was a direct relation between the level of recovery and the level of fees. Benaim said that if such an agreement was enforceable then a straight contingency fee agreement should be as well.

Postscript

Tim Elliott QC is a barrister specialising in construction at Keating Chambers.