Success fee agreements: analysis of consultation responses

Question 6: Do you think that any change in funding, whether from legal aid to a success fee agreement, or the other way about, requires formal Government regulation in relation to information/notification requirements or case-end formalities?

68. Twenty respondents either answered the question or commented on it. Eight respondents were in favour of formal government regulation and six against.

69. The ABI stated that there has been an increase in pursuers bringing claims against providers challenging the deductions made by the provider at the conclusion of a case. It considers that clear procedures set down by regulations are needed to prevent a further rise in satellite litigation focusing on success fee deductions.

70. A number of respondents, including APIL, Digby Brown and SLAB, raised the issue of situations where a solicitor has obtained a legal aid certificate for the client, and then the client changes solicitor. The current position is that in the event that a pursuer has had the benefit of a legal aid certificate, at any point during litigation, and for however short a period, then if there is any recovery of judicial expenses, these require to be paid to the SLAB. SLAB then distributes the expenses to solicitors and counsel, but technically has no power to pay any expenses to solicitors who have not acted under the legal aid certificate. This means that if a pursuer has an original solicitor who obtains a legal aid certificate but then transfers to solicitors who undertake the work under a success fee agreement, if the case is successful, the second firm will receive no payment for the work carried out by them, regardless of the fact they may have carried out the bulk of the work. SLAB went on to say: “It is thus of paramount importance to those entering success fee arrangement or concluding the formalities of a successful claim, that there is visibility and transparency as to what will or requires to happen, and that there is adequate provision for implementing these formalities. Solicitors need to be aware, as it has an effect on the remuneration procedure and outcome for them. Clients need to be aware as it may impact on their expectations. Quite separately for both it may have an impact for whether and how the case is concluded at all. The preferred options for what terms of settlement might be may be influenced by any legal aid consequences and formalities that will follow.”

71. SLAB considered that there are two areas that need thinking about. Firstly, how sufficient information, awareness and visibility of the legal provisions and their effects both generally and in the specific cases is achieved. SLAB takes the view that the most effective way of ensuring there is adequate provision is through regulations. Secondly, SLAB is concerned about how adequate and sufficient case-end procedures, mechanisms and formalities are established. It concedes there are a range of ways this could be done, but considers that regulatory provision would appear best as it would ensure the level of certainty that is important matter for the pursuer at the same time as safeguarding the proper stewardship of public funds. SLAB concludes: “In summary it is realistic to suggest that without a clear and defined regime, there will be clients involved, and solicitors acting, in successful cases in which sight may have been lost, or never adequately existed, as to legal aid consequences. It would be unfortunate if a client or a solicitor was unpleasantly surprised and impacted by recoupment where that was always capable of being known about and managed. There is also scope for misunderstanding of the legal aid regime even causing disputes which could be avoided with sufficient levels of information, awareness and transparency. A further benefit is the reduction of cost to the public purse, whether by recoupment or the avoidance of unnecessary costs of administration, and in some cases, enforcement.”

72. FOIL, FSCM, and Zurich linked the question to the issue of disclosure raised in the answers to question 4 above. They all consider that formal Government regulation is required for funding arrangements.

73. The Faculty was not convinced that formal regulation is necessary, but it needs to be clear to pursuers that it is possible to change from one source of funding to another, and in particular, that litigants can surrender a legal aid certificate and continue under another form of funding during an action.

74. Iain Nicol and the Law Society both considered that this “is a matter for the Legal Aid Board and the Law Society to issue appropriate guidance to the profession on. That should be entirely sufficient to achieve the desired aim. The more regulation issued by the Government, the less inclined lawyers will be to offer success fee agreements (as has happened in England where they are hardly used)”.

75. In summary, the responses to this question were split. Some, including SLAB considered that Government regulation was necessary, others were not convinced with the suggestion from one pursuer solicitor and the Law Society that guidance from SLAB and the Law Society was sufficient.