A committee has been established by the Department of Justice (DOJ) to look into the viability of introducing a conditional or contingency fee system in Hong Kong. A public consultation process is expected to follow the review, in 2003.

The Working Party, headed up by Sit Fung Kwong & Shum consultant Sylvia Siu, was set up in light of concerns over rising court and legal aid costs, and parties going unrepresented.

The DOJ review follows the adoption of similar systems in other legal jurisdictions around the world. The UK adopted a conditional fee system similar to the US contingent fee system in 1995, for personal injury, insolvency and human rights cases. It is believed the merits of the UK system are to be closely examined as part of the DOJ review.

News of the Government’s decision to consider the introduction of a ‘no win, no fee’ system in Hong Kong has received a mixed response.

The larger law firms argue that replacing fixed fees with contingency fees would eat into their profits and attack their bottom lines. The volume of litigation would also sky-rocket, they say.

But the smaller firms, who have suffered from the emergence of ‘Do It Yourself’ law, would likely welcome such a system. Their bottom lines have been hardest hit by the loss of ‘bread and butter’ work such as probate and conveyancing.

Wilkinson & Grist partner John Budge says: “The larger firms are going to steer clear of contingency fees, but if some of our clients say they would like to do it, then we would have to look at it.”

Contingency fees are unlikely to see the light of day in Hong Kong without support from insurers, some of whom have introduced an ‘after the event’ policy indemnifying a litigant against costs incurred in losing a case. Budge describes conditional fees as “a handy device in certain cases where liability is not an issue”. “It is an alternative funding arrangement that could be very useful”, he adds.

Other practitioners believe the introduction of such a system, more importantly, would be a vital step towards improving access to justice in Hong Kong. Colin

Cohen, name partner at Boase Cohen & Collins, says it would be “very much in the interests of clients here in Hong Kong”. But, he warns, “conditions need to be carefully foretold and limited to certain cases”.

There are fears that the introduction of a conditional fee system could be a precursor to the abolition of legal aid in civil cases. Budge says: “It would have to be as an addition to, not a substitution for legal aid.”

The prospect of not having to pay legal fees if a case is unsuccessful is likely to attract litigants who, under normal circumstances, would not have the money to pursue action through the courts. Without such a system, injured people lacking sufficient financial resources could not have their cases heard in court and would be forced to accept whatever the defendant offered in compensation.

Budge says the types of litigants who stand to benefit from a conditional fee system are, “liquidators, trustees of estates – where the money has disappeared but they have some good claims – and personal injury victims who do not satisfy the legal aid requirements”.

To qualify for Legal Aid, an applicant’s annual disposable income and total assets cannot exceed HK$169,700, which would exempt many potential litigants. The Supplementary Legal Aid system, available to those with financial reserves under HK$471,600, requires a successful litigant to pay all legal costs incurred together with 12% of any damages awarded. An administration fee of HK$1,000 and fixed contribution of HK$471,600 is also involved.