CHAMPERTY & CONTINGENCY FEE AGREEMENTS IN THE BAHAMAS

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Until recently we have encountered a number of inquiries regarding the provision of legal services based on a contingency fee arrangement, i.e. the payment of legal fees based on the successful outcome of a case, which has prompted a sudden need to bring clarity to this issue.

Contingency fee agreements serves as a way to access justice by the ordinary citizen. It is a practice exercised in a number of jurisdictions throughout the world, along with a number of from the more immediate means of using one’s personal finances, legal aid and other state funding programs, to legal expense insurance and shared funding via trade unions and professional bodies. Such methods are normally applied to contentious litigation, such as personal injury claims debt collection, and other civil claims.

The history of litigation financing goes far back the days of ancient Greece and the medieval times of England where nobles and royal officials would lend their names to bolster the credibility of doubtful and fraudulent litigation in return for a share of the property recovered, giving rise to the doctrine of maintenance, as described by Lord Chief Justice Coke as “…signifieth in law a taking in hand, bearing up, or upholding of quarrels and sides, to the disturbance or hindrance of common right.”(1) Champerty and Barratry are considered more aggressive subsets of maintenance (2), whereas champerty referring to the practice of maintenance for profit, while Barratry refers to a more serial form of maintenance, described as a common mover and exciter, or maintainer of suits and quarrels in the courts.(3)

In common law, both maintenance and champerty were both crimes and torts  but with the further developments of the law, exceptions to the general prohibition of maintenance were established, such as charitable efforts (4), or common legal interests between the maintainer and the maintained (5). Nevertheless courts would not enforce an agreement or other instrument which amounts to maintenance or champerty, and hold such agreements or instruments which were considered mischievous against good policy and justice and tending to promote unnecessary litigation (6).

Hence the agreement between a client and his counsel for the payment of a contingency fee or a conditional fee dependent upon the outcome of litigation, amounts to champerty and is illegal. Lord Denning would state that: “the reason why the common law condemns champerty is because of the abuses to which it may give rise. The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses (7). Other criticisms of conditional fee agreements is that such arrangements encourage litigation, as clients may be persuaded to bring an action even if it has little merit. These arrangements may encourage excessive billing practices as attorneys may be able to enforce an agreement for unreasonable success fees.

Whether contingency fee arrangements serve the public interest facilitate access to justice remains a debatable topic, however in The Bahamas the prohibition of contingency fees are entrenched in the Bahamas Bar (Code of Professional Conduct) Regulations which stipulates that the attorney should not “…enter into any agreement or stipulate payment only in the event of success in any suit, action or other contentious proceedings for which he is retained or employed to prosecute”(8). Any proposition of a contingency fee agreement or conditional fee arrangement leaves both counsel and client in a vulnerable position being governed by the terms and conditions of an unenforceable contract which could result in devastating consequences. In comparison to other legal jurisdictions the litigation process in the Bahamas remains far less streamlined. A seemingly straight forward law suit may encounter a number of interlocutory applications and other unforeseeable delays before the start of trial, leading to unexpected costs which an attorney would be reluctant to finance out of pocket.

Endnotes:

  1. 1 Coke Litt 368b, cited in Friston, M, Civil Costs Law and Practice (2nd ed), Jordans, ISBN 978-1846613128
  2. Lord Neuberger, ‘From Barretry, Maintenance and Champerty to Litigation Funding’ (Harbour Litigation Funding First Annual Lecture, Gray’s Inn, 8 May 2013), para 13
  3. Halsbury’s Laws of England (3rd Edition, Butterworths 1955), Vol 10, para 1196
  4. Halsbury’s Laws of England (3rd Edition, Butterworths 1955), Vol 1, para 82
  5. Lord Neuberger, ‘From Barretry, Maintenance and Champerty to Litigation Funding’ (Harbour Litigation Funding First Annual Lecture, Gray’s Inn, 8 May 2013), para 13
  6. Rees v De Bernardy [1896] 2 Ch. 437
  7. Re Trepca Mines Ltd [1962] 3 All ER 351 at 355, [1963] Ch 199 at 219–220
  8. Bahamas Bar (Code of Professoional Conduct) Regulations, Rule X (c)

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