If we accept that there should be provision for an adjudicator to order that the loser pay the winner's costs, what would be the implications? First, contingency fees would be an undesirable development – not for lawyers, but for clients. If the successful party in adjudication recovers its costs but then pays an uplift to its adviser, it is paying an additional penalty for bringing the claim. This runs contrary to the rationale for adjudication (reiterated by Sir Michael Latham in Building on 20 July, page 31).
The only solution would be to allow recovery of the contingency or conditional element of the fee, but that could be difficult. Without a judicial limit on the contingency or conditional element, a party with a good claim can agree a very high uplift to further penalise its opponent.
The courts are currently struggling to resolve similar issues in relation to personal injury litigation. Few readers of Building can have failed to notice the glossy advertisements encouraging people to bring personal injury claims on a "no risk" basis.
So is there a safe way of addressing fees? The evident risk with conditional or contingency fees is that the parties will end up paying more in costs than under the current system. We should not lose sight of the fact that a party to a construction contract does not have to adjudicate. Litigation or arbitration are alternatives with different cost implications.
There are also inherent risks in structuring fee recoveries in ways that encourage speculative claims or claims brought to put financial pressure on the other party to settle.
The risk is that the adviser will underestimate the real prospects of success to justify a large uplift
Further, such fee structures alter – some would say distort – the role of the professional adviser. This is more problematic when a forum such as adjudication allows parties to be represented by an adviser who may have no formal professional qualification, or whose professional body may not be concerned with regulating conduct in dispute resolution scenarios. The pressures such advisers come under, especially when the whole of their fee together with any uplift depends on the result achieved, are enormous. This can only heighten adversarial tensions.
The basic facts are well known. From the client's point of view, there is little benefit in entering a conditional or contingency fee if the claim is fundamentally sound. The risk is that the adviser will underestimate the real prospects of success to justify a large uplift. If the claim is bad or speculative, the client should be advised as much – not persuaded to bring it anyway by an adviser who may pick up a large uplift if an unexpectedly good result is achieved. The risk of paying the opponent's costs remains, and insuring against that risk will be almost impossible when the claim is speculative.
And what of the uplift? In an industry notorious for complex claims that are costly to resolve, the real risk is that paying lawyers more will substantially erode if not extinguish the benefits of bringing a claim. Hardly an attractive way of improving access to justice.
One element of the Woolf reforms that Dominic did not mention was the summary assessment and immediate payment of costs. Under this process, the court decides who should pay the costs of an application, assesses what they are and orders that they be paid immediately. This keeps parties appraised of the real costs of litigation and brings home to the speculative litigant at an early stage the cost of bringing a speculative claim or running bad arguments.
James Bessey is a partner specialising in construction dispute resolution at Hammond Suddards Edge, Birmingham.