Client demand for conditional fees is increasing – and Hong Kong must start listening, argues Denis Brock

The legal profession in Hong Kong has long resisted it. Common law prohibits it. And professional sensibility makes many cringe at its very mention. But the local case of barrister Louie Mui has reignited the debate about conditional and contingency fees in Hong Kong.

For this lawyer at least, it's time to start listening to what clients want. 

Many of us have spent large portions of our careers advising clients on what they need rather than what they tell us they want, so I say this guardedly. However, demand for conditional or contingency fees is intensifying, partly as a function of pressure generally from clients for lawyers to provide viable alternative fee arrangements, and partly because clients are actively exercising their right to enter a debate previously off limits to all but a select few. 

(While the case for legal aid is often made, for those of us whose clients are large corporations or high-net-worth individuals, affordability carries little weight as a justification for conditional or contingency fees.)

In large part the naysayers highlight the potential for conditional or contingency fees to result in increased litigation and spurious claims. This should not be the case, though, where the litigation system retains a 'loser pays' method. Of course, that system needs to be supported by a sensible assessment of costs regime – a subject for another day!

The inherent fear is that a system that apparently incentivises lawyers to seek the best monetary outcome for their clients by way of damages necessarily drives inappropriate behaviour, dishonesty and a cavalier approach to conflicts of interest.

Clients rightly ask why this should be so when the conduct of the profession and individuals is so closely scrutinised and when our roles, at their essence, are invariably about ensuring the best outcomes for our clients where this relates to reputational, brand or shareholder value.

Indeed, clients who are sophisticated users of other professional services are known to favour the use of success fees where this is not proportionate to the award of damages. In the context of transactional or project work, risk and reward fee arrangements are commonplace and are seen as a means of driving the right behaviour and better results. 

As competition increases in the provision of other aspects of legal services, such mechanisms are increasingly common. The credibility of our judicial system lies not in the admission or prohibition of conditional or contingency fees, but in the efficacy of due process and the calibre of our advocates to adequately represent clients and the kinds of matters that warrant the attention of our courts.

At its core, the issue is one of choice. The recent decision to grant higher rights of audience to an initial group of 15 lawyers – of which I am one – is one step in the right direction. Challenging what is considered acceptable practice in respect of fee arrangements is another.

Much of the recent commentary, including that provoked by the Mui case, has also again focused on comparisons with other international systems citing the legitimacy or otherwise of conditional or contingency fees. While we still follow developments in England and Wales, the relevance of whether an approach works under a different system in other jurisdictions is frankly lost on many of us, particularly when the credibility or practices of some lawyers qualified in certain jurisdictions is questionable.

Few commentators stop to ask what is in our local clients' interests. We necessarily limit our clients' choices by adhering to an outdated and outmoded system that reinforces the perception that the profession is out of touch with the market and clients.

To date, the Hong Kong 'establishment' maintains that champerty is the most appropriate means of policing this mischief – ie simply making the arrangements sought by the clients unlawful. That seems to be outdated; in 2006 Australia's highest court held that such risks to the system are met by professional regulations: "If lawyers undertake obligations that may give rise to conflicting duties there is no reason proffered for concluding that present rules regulating lawyers' duties to the court and to clients are insufficient to meet the difficulties that are suggested might arise." The position is no different in Hong Kong.

Shouldn't we now give clients the choice they want – not because it's what they want, but because it is the right thing to do commercially?

Denis Brock is a disputes partner at King & Wood Mallesons.

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The Louie Mui case

In March, barrister Louie Mui, 53, was convicted of five counts of champerty and maintenance between 1999 and 2008 and sentenced to three-and-a-half years in jail for receiving HK$1.5m (£124,678) from his clients' damages. In addition, Mui was ordered to repay the money to four of his clients within four months and suspended for six months by the Bar Association pending any decision by it to disbar him. Mui is the first barrister to have been convicted of the offence in Hong Kong, although Winnie Lo became the first solicitor to be convicted of conspiracy to commit champerty and maintenance in 2009. Her conviction was subsequently quashed by the Court of Final Appeal in 2012.