Bermuda: Best Value For Money Contingency Fees?

Last Updated: 14 August 2001
Article by Dianna Kempe QC JP

Wherever one goes in the world, one is sure to hear a conversation about lawyers’ fees be it that hourly rates are too high, that timesheets are works of fiction or that the lawyers’ share of any award is unpalatable. Lawyers must find a way to structure their fees in such a way as to be acceptable to their clients whilst maintaining the ability of even the most impecunious client to have access to justice.

I am going to talk about lawyers’ fees from a plaintiff’s perspective and the advent of contingency and conditional fees into a jurisdiction that has traditionally outlawed any kind of champerty. Whilst contingency or conditional fees may be operated on behalf of a defendant, experience tends to find that a defendant will be a corporation or commercial entity who are (un)happy to pay on an hourly rate basis. However, be aware that the corporate defendant will be wanting to see value for money and there has been much discussion in the legal marketplace over this past several years of the introduction of value billing and fixed fee billing arrangements. This may all amount to revisiting the old way in which lawyers delivered their invoices for fees marked "for professional services rendered" and giving no indication of what work had, in fact, been undertaken. Forty years ago, corporate defendants, or any corporate entity involved in litigation, wanted to know precisely what its lawyers had done, how much time had been spent and who had worked on their particular case. The introduction of the timesheets and the detailed invoice passed into modern usage. Nowadays, computerised time recording is a way of life.

More and more corporate entities are looking to "partner" with their lawyers in the assignment. Corporations attempt to create incentives to reward lawyers for achieving the client’s goal in the manner that the client wishes. If speed to resolve the case is an important factor, the lawyer may be able to earn a higher fee if he should gain an earlier resolution. Fixed fee budgets are the most attractive to the corporate litigant but may not be as attractive to the lawyer. Much work must be done by the lawyer to establish whether or not the work and, more importantly, the unexpected twists and turns of any litigation can be accommodated for a fixed fee.

Lawyers and their clients should not be rigid with regard to the fixing of an alternative fee arrangement and should be creative, keeping in mind that the important goal of any fee arrangement is to meet the interests of the client and the lawyer. The clients’ interests are obviously paramount but the lawyer has to live!

So how does all this compare with the contingency fee arrangement? For an overview of the contingency fee system, one need look no further than the United States. Personal injury and product liability work have generated an enormous pool of fees for lawyers. Typically, a plaintiff litigant will instruct his lawyer to recover damages for whatever injury has been suffered. The lawyer will pay for everything with the case going forward. All expenses or disbursements will be discharged by the lawyer and his agreement with the client will normally provide the lawyer with one-third of the eventual settlement or award. From these sums, the lawyer will have to reimburse himself for the disbursements and expenses that he has laid out and so his net fee recovery is considerably less.

There have been benefits to society and the legal system by virtue of the contingency fee arrangement in the United States. There has also been the ever looming question mark as to whether the conflicts of interest have the dice heavily loaded in the lawyer’s favour.

The Pros:

  • Contingency fees provide access to justice for everyone. An injured person need not be intimidated by the might and wealth of a large corporate defendant.
  • By allowing the plaintiff’s lawyer, rather than the plaintiff, to assume the risk of financing of litigation, the contingency fee system levels the playing field, placing plaintiffs on a more equal footing with corporate defendants.
  • Businesses have been forced to pay greater attention to safety and quality1;
  • Consumers perceive that they are receiving products which are safer and of a higher quality;
  • Objective measures indicate that injuries and death as a result of accidents in both the workplace and home have declined, saving thousands of lives and millions of injuries;
  • The contingency fee system may actually deter unprofessional behaviour and frivolous filings in certain situations. Lawyers charging on an hourly basis may, with a claim lacking merit, have no incentive to avoid stretching out the claim because – regardless of the outcome – this will provide his fees. Lawyers would have no motivation to bring or pursue a case that has little chance of success. An unsuccessful claim will not bring the lawyer any income.
  • Contingency fee provides an incentive for the lawyers to analyse thoroughly and evaluate the merits of any claim before pursuing it.
  • The contingency fee arrangement can, however, be viewed negatively:
  • It may conflict with the lawyer’s duty to the court;
  • A temptation for unprofessional conduct;
  • Would lead to unmeritorious "blackmailing" actions;
  • Lawyers would lack independence from their clients;
  • Affords clients no protection against inter parties costs, expert fees and other disbursements;
  • Would lead to conflict of interest between the lawyer and the client.2

Perhaps one of the drawbacks of the contingency fee arrangement in the United States is the failure of the United States courts to award costs against the losing party. In the majority of other common law jurisdictions, the courts will award costs against the losing party.

Writing in the Law Times, James D. Zirin3 gave examples of what would appear on the face of it to be excessive recoveries to the lawyer under contingency fee arrangements. He cited the Houston trial lawyer who sought $108.9 million in fees and disbursement out of an award of $170 million in respect of a leaky pipe case brought by 37,000 home owners against Shell Oil and others. "The Texas Judge could not find enough words to express his displeasure". Perhaps this contingency agreement pales into insignificance to that of Joseph Jamail, best remembered for collecting $10.7 billion for Pennzoil in its 1987 battle with Texaco.

In some jurisdictions, particularly my own, Bermuda, there is a prohibition against charging contingency fees except in respect of undefended debt collections "or to an extent expressly permitted by the Bar Council". Specifically, the Barristers’ Code of Professional Conduct 1981 (Rule 96) prevents a barrister entering into a contingent fee arrangement under which his fees depend upon the results of a case or consist of a pre-arranged share of money recovered on behalf of the client.

This professional conduct rule was not too different from the position in England and Wales until 1990 when a limited form of contingency fee – conditional fee arrangements – were provided for. Now of course, England and Wales have almost entirely embraced the contingency fee arrangement for all actions save criminal and family work. However, the English Court of Appeal in November 19994 ruled that contingent fees agreements were only allowable where permitted by statute or common law. Otherwise an agreement would be unlawful and against public policy.

The contingency fee as we know it exists from the US model but in England and Wales the contingency fee exists in a more restricted form as a conditional fee arrangement.

Typically, the agreement reached with a client will provide for the payment of a "success fee" in the event of achieving pre-determined results of the outcome of litigation. The lawyer will charge his normal fee throughout the litigation and, if successful, will receive his "success fee" representing a percentage of his fee by way of uplift to a maximum of 100%.

In the event that the predetermined results are not met, then the agreement can provide for no fee or the reimbursement of expenses and disbursements.

I am led to believe by figures published in various law journals that the number of conditional fee agreements that have been entered into are equal to or are just about to exceed the number of legal aid certificates which had been issued in a year. England and Wales are withdrawing legal aid for all but criminal proceedings, and the trend to conditional fee arrangements is inevitably towards maintaining the access to justice that would have been available to those who had become eligible for legal aid.

Contingency fee and conditional fee agreements are potentially more lucrative in the area of multi-party actions.

One of the high profile conditional fee, multi-party action cases to be held in England during the last year was the infamous tobacco litigation in which law firm, Leigh Day Leigh, committed to a conditional fee agreement on a no win/no fee basis. Having spent two and a half million pounds of the law firm’s money, the lawyers were justifiably glum when a judge hearing a preliminary issue on causation dismissed the litigation. The law firm recovered no fees. As a condition of not pursuing the individual plaintiffs for costs, the defendants also extracted an undertaking from the law firm that they (the law firm) would not pursue the defendants for a period of 10 years in any other litigation.

Therefore, contingency fee and conditional fee arrangements do have their drawbacks and need to be entered into with the lawyers’ eyes open. Much greater attention must be paid to the case at an earlier stage to weed out unmeritorious claims and a proper risk analysis prepared which, in turn, will lead to a detailed management and cost analysis of the litigation. Not too many firms could afford to suffer a loss of two and a half million pounds!

An immediate plunge into the contingency fee world is not recommended. As in the model used in England and Wales, a gradual introduction of conditional fee may be appropriate to test the water – even – allowing a contingency fee on undefended debt collection work is a start.

The law firms should have consideration for access to justice and either be prepared to undertake pro bono work in a far greater proportion than they do at present, or look to a conditional fee arrangement and then, if successful, expand the cases in which contingency fees can be adopted.

There will be casualties along the way. There may be a tendency for some lawyers to reduce the amount of the contingency fee or success fee so as to gain work. If in large actions the expenses and disbursements are so high, the lawyer may face bankruptcy. One only has to look to the case of Jan Schlichtmann, the US lawyer fighting for compensation on behalf of Wobon Massachusetts residents against two of the United States biggest corporations – WR Grace and Beatrice Foods - and who was the subject of the book "A Civil Action" by Jonathan Harr which itself was the subject of the film "A Civil Action". Despite winning $8 million by way of a settlement from one of the companies, he lost his home, law firm and family. The contingency fee that he received was barely enough to pay the enormous expenses that the scientific evidence consumed and left only a few hundred thousand for the eight families of plaintiffs that he represented.


1 Consumer Federation of America Report 1987

2 UK White Paper "Legal Services: A Framework for the Future", 1989

3 Senior Partner in Brown & Wood, New York law firm, writing in the Law Times, 18 February 1997

4 Geraghty & Co -v- Awad Awwad [1999] – The Independent, 1st December 1999

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions