Contingency Lawyering in India

By | December 8, 2019
Contingency Lawyering in india

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Abstract

The Article aims at familiarizing the concept of contingency lawyering and related topics. It also tries to have a detailed discussion about the apparent advantages and disadvantages of the system in its present form. Thereafter, the prospects of the system’s introduction and the possible outcomes of such an exercise are also discussed.

Understanding the Concept:

Contingency lawyering refers to the practice of awarding fees to the lawyer after the trial and on the basis of the results. Thus, the prospects of payment to the lawyer depend on whether the case is won or lost so, needless to say, if the outcome is negative the lawyer will have to forego his/her remuneration altogether. And a lawyer who has agreed to work on such an arrangement is called a contingency lawyer.

The practice is one of the most efficient models of arrangements which can if implemented properly may be an apt solution for many of the problems clogging the current legal setup. Besides the practice is largely in line with how such arrangements work in the rest of the services areas.

Contingency fee

Contingency fee refers to the remuneration charged upon the plaintiff by the lawyer who has agreed to work on a contingency basis; after the case is settled favourably. Contingency fees are often expressed as shares or percentages.

For example, the rate of the fee charged for an out of court settlement will charge anywhere between 20-25% of the compensation while that charged after going through all the legal maze will be a lot higher as it would have demanded greater effort and work from the part of the lawyer.

Thus, in general, the rate is anywhere between 5-50%. These large fluctuations of the rate of fees charged are largely depended upon a number of factors including; time and effort; the complexity of the case; the skill and reputation of the lawyer; and it is also to some extent dependent on the plaintiff as well.

It is thus not unfair to say that the lawyers tend to agree to work on contingency contract if they are sure that the case has a higher probability to win. Thus, they will evaluate the whether it is worth actually taking up the disarrangement require the plaintiff to enter into an agreement which will be the sole reference for future payment, such an agreement is called a contingency agreement.

Where is it applicable?

Contingency lawyering is a strict no-no in cases involving criminal offences or to appear for divorce cases as it would against professional ethics as it is like showing these sensitive matters such as divorce in a positive light. Also, the practice is discouraged in cases where an absolute win is guaranteed.

In that sense, contingency lawyering is limited to or is largely practised in cases involving personal injury. It is also applied to cases dealing with employment discrimination, sexual harassment, professional malpractice etc. These are usually mattering where the parties involved cannot be afforded to hire lawyers on a normal basis, thus necessitating a flexible approach from the part of the lawyer towards fees.

Similarly, the rate of the fee may also vary accordingly to the nature of case in the United States most personal injury lawyers charge 33 1/3% I f it is out -of court settlement and 40% if it’s otherwise. And Employment lawyer will charge a minimum of 40%.

Pros and Cons

  • Pros

The contingency Fee was an established feature of the American legal scene by the mid-nineteenth century. In his study of the personal injury litigation in New York City found that the application of contingency fee was well established by the period covering1870-1910.

Economically speaking since the system allows for leniency to those plaintiffs who cannot afford an out of pocket financing of the financially tiresome legal trials it ensures a more equitable dispensation of justice.

For a country like India where not only that its litigants are mainly from the financially marginalized sections there is also the added irritant of the surprisingly enormous time, it takes for any case to reach a final solution. The greater the time is taken for the settlement the larger will be the fees charged by the lawyer. Thus, contingency lawyering if applied will be a welcome relief and the first step towards judicial reforms.

Moreover, the system allows for rewarding those lawyers who are willing to take up risks keeping up with the capitalist ethos. By this, it meant that the lawyer is actually ready to forego his payment if the case outcome is negative. But on the other and if it does turn positive it proves the lawyer’s own judgement regarding that case and will reinforce further his/her risk-taking behaviour.

The next argument in support of this system is that it encourages the lawyer to give his maximum towards winning the case in contrast to the pre-payment system. As the prospect of his remuneration clinches on the victory of the case. Thus it is argued that of all the legal remuneration arrangements; contingency lawyering is the one which does utmost justice to the plaintiffs. It can also be said that such a practice may actually result in an improvement of competency among the legal fraternity.

Above all the practice of offering services on a contingency basis seems to enjoy a large amount of popular support in those countries where it is in practice. It is often seen as an essential requisite for the availability of civil remedies.

A 1982 Gallop Poll survey for the Insurance Information Institute conducted in the United States for gauging public Opinion regarding the best arrangements for paying a lawyer. The general people overwhelmingly supported the contingency fee. While business executives were not so favourable towards the practice and were only supported by a meagre 8%.

Generally, it is found that the those classified as the to educated and belonging to the elite strata does not have the same sentiments towards contingency lawyering as shown by the general public, reinforcing its status as people’s choice.

Cons

However, a simple reading of the scenario may make the contingency lawyering the much-awaited panacea that will successfully redeem any legal system of its major drawback which is the limited access to justice, a closer inspection may enlighten as that the this is not exactly the case.

An underlining principle according to which any lawyer in a contingency system selects his/her case is according to its ‘winnability’. This means that the lawyer will reject all the other cases if he/she thinks the odds stacked so high up against a case, it may be even worse the lawyer may refuse to provide his services if he senses the slightest chance of a setback.

This in essence simply bring as back to the original problem of limited access to justice, where even the prospects of even a case reaching the trial room before a judge rest largely upon the discretion of the lawyer.

Another major shortfall related to this type of settlement is that once the case is successfully adjudged the lawyer gets to get a high percentage share of the recovery amount which is awarded to the plaintiff as compensation by the court.

In effect, the plaintiff will be left with the amount minus the promised payment of the lawyer which could be negligible in the end and may even fail to serve its actual purpose to help the aggrieved person.

Another serious allegation comes from the ethical front, the fact that contingency lawyering encourages high risk-taking means that it injects an unnecessary commercial spirit to the judicial system where the primary motive, no matter what should always be the fair and just dispensation of justice to the wronged.

Contingency Lawyering in a global context.

 In most of the western countries the method is widely in practice such as the United States, almost all the provinces of Canada, while in New Zealand, the solicitors and barristers are allowed to charge upon a speculative basis. In Greece, the contingency fee allowed to charge upon the recovery amount is clipped to amount not more than 20%. There are similar arrangements in France and Japan albeit on a very limited scale.

Contingency Lawyering in India

The practice paying lawyers on a contingency basis is not allowed in India at present. That makes it one among the very few countries that have closed its doors so firmly against the system. The major impediment to its successful application comes from two fronts legal and ethical.

On the legal side:

The Bar Council of India Rules states in part VI, Chapter II, Section II, Rule 20, that;

“An advocate shall not stipulate for a fee contingent on the result of the litigation or agree to share the proceeds thereof”

Thus, the Bar Council of India which is the professional body that monitors and regulates the professional conduct of lawyers in India has strictly forbidden the process of engaging in contingency agreement. And it was this stance of the council that stifled any attempts to introduce the system into India.

Moreover, in the Gangaram v.  Devi Das (1) case, the court has famously remarked that they are void for they are in opposition to public policy and is not in compliance with the professional ethics standard of the legal fraternity. Similarly, in the case of B. Sunitha v. The State if Telangana& Amr (2) the court was unsparing in its criticisms of the exorbitant fee charged as well s reinforced the illegality of contingency agreements.

In yet another instance while considering the KL Gauba case (3) the court pronounced that when a lawyer becomes unduly interested I  the subject matter of the case by virtue of the fact the prospects of his payment depends on the outcome of the case, it will result in severe degradation of his/her profession and c such a situation cannot, therefore, be allowed.

However, it is a matter of common knowledge that the lawyers who are practising in the lower rungs of the judiciary do enter into a contingency agreement with their clients, despite such reticent stance taken by the judiciary. Though being illegal these agreements cannot be brought to the law simply because of the fact that these are often made on an informal basis in the oral format without any documentary backing.

Apart from the above mentioned legal blockages, a whole set of arguments are based on the ethical implications prime most of which is the selective bias a lawyer may display towards the cases the with higher probability to win.

Similarly, the lawyer may resort unethically exploit the client by exaggerating the weaker points and inadequacies unduly to make it appear like very difficult to win in order to demand a  very huge payment.

The Way Forward.

The present legal scenario existing in India does not allow contingency agreements of any form or kind by applying a blanket ban on the practice of charging contingency fee. Though there have been consistent demands for a change for the transition into the system to strengthen the efficiency of the Indian Judiciary and to democratize the access to justice.

These demands were supported by the successful models of many western democracies who have effectively realized such a transition .and the popular support in those nations have been overwhelming. It was found that a large majority of the population which belongs to the ordinary strata think the system as fair and efficient.

 It is true that an unregulated Contingency system may result in systematic exploitation of the ordinary people in whose benefit it is introduced. Which if allowed to function freely will definitely be a disaster. The solution is, however, is not to ban the system altogether but to customize it by introducing appropriate checks to prevent unethical and unprofessional conduct of the parties concerned.

A surer way to do so is by capping the maximum rate up to which a lawyer can charge from the recovery fee. Similarly, the reform may result in improved professional standards and speedy disposal of court cases by incentivizing the lawyers to finish off the cases efficiently instead of actually prolonging it.

References

Anyone Can Fall Down a Manhole: The Contingency Fee and Its Discontents by Marc Galanter, Volume 47 Issue 2, p 457, De Paul Law Review

Philip H Corboy, Contingency fees: The Individuals Key to Court House Door

Citations

  • Ganga Ram v. Devi Das 61 P.R (1907)
  • B Sunitha v. The State of Telangana& Amr Criminal Appeal no.2068 of 2017
  • KL Gauba Case 1955 1 SCR 490