Government must reassure public over conditional fees

Marlene Winfield says conditional fee agreements must be seen to work, and only the Lord Chancellor can inspire public confidence.

Rumours abound about whether the Government will actually go ahead with plans to take legal aid away from personal injury cases. If it does, it will be on the basis that no win-no fee agreements (conditional fees) are an entirely safe substitute. But how do consumers know they are?

In theory, conditional fees should suit some people very well, particularly now that large chunks of their damages probably will not be eaten up by success fees and insurance premiums. The Lord Chancellor, Lord Irvine, has wisely decided to make both recoverable from the loser. In an ideal world, conditional fees will minimise risk to the client, who can insure against the costs of losing. Moreover, the prospect of getting no fee if they lose should concentrate the minds of lawyers wonderfully. But there is also the possibility that conditional fees will leave clients exposed to unexpected costs. For example, as I understand it, the insurance cover only begins once the claim is filed with the court. How many clients, when they lose, are facing bills for work they mistakenly thought their insurance covered?

That is only one of several unanswered questions. Who is calling the shots in no win-no fee cases – the client, the lawyer or the insurer?

What about success fees (the mark ups on the original fee the lawyer gets for winning)? If they are meant to reflect the lawyer's actual risk, how does a failure rate of 10 to 15 per cent in personal injury cases translate into an average success fee for solicitors (as far as we can tell) of 43 per cent? And how are the poorest clients paying up-front costs such as insurance premiums and experts' fees?

Lord Irvine and his ministers show a peculiar reluctance to find out the answers to these questions. Their complacency is reminiscent of a previous government's attitude to another complex product – personal pensions. That government was also inclined to let the market regulate itself with no supervision and thus failed to act quickly when problems came to light. The result was pensions mis-selling on a grand scale.

I am not for a moment predicting a similar disaster for conditional fees. But it would be a shame if the Government's “no news is good news” philosophy allowed conditional fees gradually to fall into disrepute, when a little stewardship might have maximised their chances of success.