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Traditional ChineseSimplified ChineseText onlyPDARSS
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July 9, 2007

Law reform

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Conditional legal aid fund broached
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Paul Shieh & Edward Chen
Legal brief: Law Reform Commission Conditional Fees Sub-committee member Paul Shieh and Chairman Edward Chen unveil report details at a press conference.
* Media Link Real Link

A conditional legal aid fund should be set up as an alternative to the existing legal aid schemes to enhance access to justice, the Law Reform Commission says, adding conditions at this time are not appropriate for introducing conditional fees - a form of "no-win, no-fee" arrangement.

 

LRC Conditional Fees Sub-committee Chairman Edward Chen said about 30% of households are not eligible for assistance under either Ordinary or Supplementary Legal Aid Schemes. Conditional fees can open up the possibility of enabling the middle-income group to obtain proper legal advice and help.

 

However, he pointed out a successful conditional-fees regime requires the long-term availability of affordable insurance - also called "after-the-event" insurance - to cover the opponent's legal costs if the legal action fails. Responses from the insurance industry to an earlier consultation paper issued by the sub-committee suggested that this is unlikely to be the case in Hong Kong.

 

After-the-event insurance unlikely

"In the absence of 'after-the-event' insurance, we do not recommend the introduction of conditional fees because those in the middle-income group might not be able to absorb the other side's costs, and might face financial ruin if required to pay those costs," Mr Chen said.

 

Conditional fees are an arrangement in which, if the case is unsuccessful, the lawyer will charge no fees, whereas in the event of success, the lawyer charges his normal fees plus a percentage "uplift" on the normal fees. Conditional fees are different from the US form of contingency fee, where the lawyer's fee is calculated as a percentage of the amount of damages awarded by the court. 

 

At present, conditional fees, like other forms of "no-win, no-fee" arrangements, are unlawful in relation to a claim involving the institution of legal proceedings. The restriction has its origins in the ancient common law crime and tort of champerty and maintenance.

 

Eligibility limit should raise

On the other hand, given the widespread support for the consultation paper's proposal to expand on a gradual and incremental basis the existing Supplementary Legal Aid Scheme, the report recommends the Government first raise the scheme's financial eligibility limits to bring a higher proportion of households within the scheme's ambit, and then expand the types of cases covered by the scheme, having regard to maintaining the scheme's financial viability.

 

Mr Chen said applicants who are above the existing financial eligibility of $439,800 can be asked to pay a higher contribution rate, say 15%, rather than the existing 10%. The 15% contribution rate will be substantially lower than the rate of about 25-30% commonly charged by un-regulated claims intermediaries, he added.

 

As an alternative to the existing legal aid schemes, the report recommends the setting up of a conditional legal aid fund to screen applications for the use of conditional fees, brief out cases to private lawyers, finance the litigation, and pay the opponent's legal costs should the litigation prove unsuccessful.

 

The fund will engage the private lawyers on a conditional fee basis and will charge clients on a contingency fee basis. It should initially accept applications from claimants only, but the long-term goal is to cater for defendants after the fund has built up adequate reserves.

 

Fund details

Mr Chen said a feasibility study should be carried out into establishing the fund as a statutory body governed by an independent board.

 

On the fund's upper financial eligibility limit, the report proposes applicants should be subject to a means test which should have a generously set upper limit, but should not have a minimum financial eligibility limit.

 

To be eligible for the fund, applicants must also satisfy a merits test that there are reasonable prospects of success, and that the particular circumstances of the case could also satisfy the so-called "private client test".

 

The report suggests that mediation should be incorporated into the fund in view of its growing success and popularity, and the savings it could potentially achieve in legal costs. The fund should encourage litigants to use mediation and where the aided party consents to mediation and the fund considers mediation appropriate, it should fund the aided party's mediation costs.

 

According to the report, the report should cover at least:

* personal injury cases;

* commercial cases in which an award of damages is the primary remedy sought;

* product liability and consumer cases;

* probate cases involving an estate;

* employment cases falling outside the Labour Tribunal's jurisdiction and employees' compensation cases;

* professional negligence cases; and

* defamation cases.

 

Click here to read the full report and its executive summary. Copies are available on request from the Law Reform Commission Secretariat on 20/F, Harcourt House, 39 Gloucester Road, Wan Chai.



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