A federal-state taskforce charged with reviewing the regulation of the legal industry is considering introducing new rules preventing law firms from avoiding the ban on contingency fees. Firms are not currently permitted to charge clients a percentage of any damages awarded, but this does not extend to the litigation funding industry.
According to a taskforce discussion paper, lawyers have been able to find ways around this ban. “Generally, practitioners should not be able to avoid these prohibitions by taking a financial interest in a litigation funder or by their associate or relative taking an interest,” the paper said. However, industry concerns that the taskforce would implement a ‘one-size-fits-all’ regulation into the fees that law firms charge clients appear to be misplaced.
While the taskforce is recommending new rules that would impose a positive obligation on lawyers to charge legal fees that are “fair and reasonable”, those working for sophisticated consumers of legal services would not be included. “The taskforce considers that placing a positive obligation on law practices to charge fair and reasonable costs would be a more effective consumer protection than the current provisions which place the onus on the client,” the discussion paper said.
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