Ashkhan Candey advocates access to justice for clients at risk of insolvency

Since 2009 CANDEY has striven to embrace contingency fees. First in the form of conditional fee arrangements and thereafter damages-based agreements. As a boutique firm we have always been able to onboard such matters quickly, with conflict checks and a decision to self-fund being made in a matter of hours.

Parliament dropped the ball when it came to drafting and so the unintelligible damages-based agreements regulations which could have been evolutionary have been avoided by most firms. Academic commentators observe that you would be crazy to enter into one. Sadly they are not written in plain English, have led to significant legal argument and if current Court of Appeal authority stands (CANDEY v Tonstate 2022), they discriminate against defendants as they are only available to claimants. This cannot be right or fair as the cornerstone of English law is that parties must always be on an equal footing. Except we all know that in a capitalist society parties are rarely ever on an equal commercial footing for unfunded claims (typically funders need it to be £5m+ to work as otherwise they take all the proceeds on success).

Thus the ordinary woman on the street may be eaten alive by the corporate she takes on, as absent bad publicity a loss is just a rounding figure for the corporate whereas for her she risks losing everything. Despite our advances as a society, the rich continue to have the upper hand in commercial litigation. In a civilised society this cannot be right, yet the government appears wholly disinterested in putting it right. Somehow it has been missed off the levelling up agenda. Whilst we read in the news about cases won or lost nothing is ever said about the vast majority of people for whom justice was never available as they could not hire a decent lawyer.

Leadership in this area is to be found in the Supreme Court. Lords Briggs and Leggatt and others are gravely aware of the moral inadequacy in our system and in a trio of ‘lien’ cases have championed the access to justice cause laying down and clarifying the ambit of an effective roadmap for lawyers to be paid first from the fruits of litigation. Whilst this does not address the risk of adverse costs, it does at least provide a litigant with a meritorious claim with the option of instructing solicitors and barristers on a no-win no-fee basis without having to rely on Dickensian forms of charity. Sadly the Tories have been asleep on the job or too busy on Brexit and the pandemic. Meanwhile Labour are disinterested in any policy that may appear to simply help lawyers get richer.

The fact remains that despite strides by the Supreme Court, those without cash remain unable to get before a judge. At the heart of the problem is the risk of insolvency. If litigants with meritorious claims were flush with cash, they would fund their own cases. But so often, they simply do not have the financial wherewithal to do so. Ironically, this is all too often a result of their opponent breaching obligations, contractual or otherwise, leaving them starved of cash and facing insolvency. It is at this critical point that the law, and the procedure that underpins it, should come to a litigant’s aid. But how can lawyers agree to act for them on a no-win no-fee deal if there is a significant risk that their client will go bust? We may have a wonderfully strong relationship with our trusted client but if on insolvency the lawyer is sacked and replaced by a disinterested administrator, liquidator or trustee then what? The officeholder is under no obligation to retain you. How can a firm protect themselves in that scenario from ranking as an unsecured creditor and recovering only pennies in the pound? The lien or equitable charge does not protect a lawyer who has not achieved a win. Unless they are subsequently held to have been instrumental the lawyer gets burnt. In CANDEY v Crumpler we protected our fixed fee by taking a floating charge in the BVI. In the High Court on the question of the value of our floating charge this was valued at £3.8m but on appeal and remission back to the High Court was found to be the lower hourly rate figure of time expended at just over £1m. In the intervening period we also argued in parallel proceedings that by retaining the discretion to be paid first we had reserved our lien. It is that application which ended up in the Supreme Court in 2022. The liquidators at KPMG in that case, whom we have fought for eight years (like a dog with a bone), would no doubt have sacked us immediately upon assuming office had they thought that we had a lien and used other lawyers on hourly rates instead. It was because they continued to use us to prepare for trial that we were able to invoke the lien once success had been achieved. As a footnote and by way of an interesting way of getting paid, the Court of Appeal in the first Candey and Crumpler Court of Appeal judgment (there were three) found that a payment by way of security for costs on success would revert to the client’s insolvent estate, would not be new monies generated by the liquidators, and so our charge could bite on those monies. Thus security paid into court provides a fund that can serve two purposes, to pay security for costs and in the event of success constitute a fund to pay the lawyers. As a further footnote there is old High Court authority to say that a lien would not bite on monies simply returned but I personally think that decision was wrongly decided.

Absent statutory invention by a government actually interested in access to justice the only real option as I can see it is to permit lawyers acting on a contingency to have a claim transferred to them in the event of insolvency. Obviously, the new fee agreement itself would have to survive the existing test of reasonableness, with independent advice required. It could not trespass over the existing rules for CFAs and DBAs, respectively, charging a maximum of double hourly rates or 50% of the winnings including counsels’ fees and VAT. It was thus that against the odds we fought the case of CANDEY and Miller (Court of Appeal 2022) in the hope that the Supreme Court would hear the case and determine that with the advent of contingency agreements the prohibition on champerty was dead and we should be able to have a claim transferred to us, where we had essentially been the funder, on insolvency. The Court of Appeal would have to follow existing case law forbidding transfers of claims to lawyers but the Supreme Court could depart. Sadly, the Supreme Court declined to hear the case so what could have been a revolutionary moment for access to justice fizzled out. For now.

As commercial lawyers we always stand accused of wanting to make a fast buck. We should make no apology for that. If we can help a client, take significant risk and be handsomely rewarded then what is the problem? Bankers, funders and entrepreneurs have always acted in the same way. Unlike judges, we are not civil servants. Most big firm commercial lawyers are paid very well, win or lose, so there must be an upside to incentivising lawyers to take risk, to help those who desperately need our help and must otherwise rely on the hope that they can find a pro bono lawyer. The national pro bono centre and judges such as Mr Justice Knowles have been wonderful in leading the charge to persuade lawyers to act pro bono but volunteers will never be a cure to a flawed system. Until such time that we as lawyers collectively exercise more muscle to reform the law we sadly retain the shame of a system that relies on Victorian charity or expects litigants in person to know the law and the White Book.

In the case of CANDEY v Bosheh (2022) the Court of Appeal narrowed the test of the iniquity principle: in that case we discovered that our client was not in fact our client but a dishonest solicitor who masqueraded as our client. To establish the fraud we relied on privileged communications relying on the iniquity principle but we got smacked by the court for doing so. In other jurisdictions such as the USA fraud is a clear exception to privilege, and it is immensely disheartening for the profession that that panel effectively granted immunity from prosecution to anyone who might defraud a lawyer. In this respect our rights as lawyers to assert our rights rank below that of everyone else, creating another barrier or disincentive to any lawyers prepared to depart from the hourly rate paid up front.

Judicial initiatives to cap legal costs might seem to be a good idea but they will have a dreadful impact. Whilst they admirably reduce the quantum of adverse costs the reality is that they will only be undertaken by call centre claims handlers. What would actually make a huge difference for the ordinary person would be to reintroduce the ability to defer and recover the insurance premium paid for adverse costs, typically around 35% of the actual sum insured. In that scenario on a win the loser would pay that premium.
For now, we as a firm fight on for lawyers’ rights convinced that absent government cash (which is not an option) only by advocating to protect lawyers who work and win on risk, can we broaden access to justice.

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