No Win No Fee – you kidding?

No win no fee advocacy can provide access to the legal profession that some people could not afford but in removing the cost barrier are we actually opening up the system to misuse.

We have all seen the late night adverts promoting the services of the “No Win, No Fee.” Lawyer. Not all Employment Lawyers offering contingency services are this blatant. Most behave professionally and will provide the right advice for their client over and above the desire to earn a few bucks. For people with limited funds and a genuine grievance, the contingency system can provide legal representation that could otherwise not be afforded.

A recent case, The Order of ST John Midland Regional Trust Board v Greig demonstrated some of the issues that can arise. Greig had taken an unjustified dismissal case against his employer and used the services of a contingency lawyer. After only one days deliberation the ERA found in favour of the company and Greig lost his case, paying the lawyer $100 for his services. The ERA ordered Greig to pay $1500 towards the company’s legal costs which amounted to $20,000.00.

The Order of St John went back to court and asked for a greater contribution, maintaining that Greig’s contingency fee arrangement placed him at an advantage and gave no economic incentive to end the litigation or to limit the extent of the allegations. The company believed that imposing larger costs on an unsuccessful applicant who had used a contingency fee arrangement would discourage claims which could not be substantiated. The company also felt that the way Greig had conducted his case had significantly increased the costs to the company.

Greig argued that the existence of a contingency fee arrangement should not be taken into account when determining costs to be awarded believing that to do so would deny access to justice for many employees or former employees who would otherwise lack the resources to bring a claim.

The court considered that the case had taken considerable preparation due to the serious nature of the allegation, Greig had refused to make certain concessions until the day of the investigation hearing and the nature by which Greig had conducted his case had contributed significantly to the company’s costs. Greig had been unsuccessful in almost every aspect of the challenge. They increased the award for costs to $4500.00.

It could be argued that in this situation, and I have not doubt in many others, the use of an advocate on contingency fee basis changed the nature of the case. With the absence of actual statistical data it is difficult to be absolute but certainly anecdotal evidence suggests an increase in litigation thanks to an up springing of contingency lawyers.

As some of my clients have found, however, there is evidence that the use of these “ambulance chasers” can result in bully boy tactics. When faced with a personal grievance and potential legal action, employers “pay-out” rather than wear the cost of their own legal representation. This may be just what the contingency lawyer is banking on. The lawyer may be prepared to accept a smaller settlement for early closure and there may be more motivation to act unethically in order to earn a dollar.

There has been publicity surrounding some large amounts of money awarded in employment cases, in reality the amounts of money awarded by they ERA are relatively small, usually less than five thousand dollars. In many cases, the percentage fee arranged in advance for a successful outcome will go to pay the contingency lawyer for what can be basic work.

In my experience, most employers don’t set out to treat their employees badly; it’s often the procedure that they get wrong. While the employee has the advantage of no risk advocacy, the employer can be facing tens of thousands of dollars just to defend a case that may in fact have no real basis.

Employers have also seen the well publicised cases where large payouts have been awarded and they know how much their lawyer is going to cost them, there is a temptation to give in too soon and the contingency lawyer can take advantage of this temptation. The employer is understandably inclined to find some settlement before the case gets the ERA, whether or not they are actually at fault. Where’s the good faith in that.

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