The Cayman Islands Parliament has taken a significant step towards improving access to justice in the Cayman Islands by passing for a second reading, the Private Funding of Legal Services Bill, 2020 ("Bill").
The key elements of the Bill are as follows:
1) Attorneys and their clients will be permitted to enter into a Contingency Fee Agreement ("CFA") for legal services to be provided where the attorney's fees are contingent, in whole or in part, on the successful disposition or completion of the matter. CFA's will be permitted for all types of legal services except for proceedings under the Penal Code (2019 Revision), any other criminal or quasi-criminal (i.e. traffic offences) proceedings, or legal services relating to the care of a child or any order under the Children Law (2021 Revision); and
2) Third-party litigation funders will be permitted to fund, in whole or in part, the provision of legal services by an attorney to a client outside of the liquidation context (third party litigation funding is permitted within liquidation proceedings due to a special statutory exemption).
Contingency fee arrangements and litigation funding agreements are currently illegal in the Cayman Islands pursuant to the doctrines of maintenance and champerty and are contrary to public policy, thus limiting an impecunious litigant's ability to pursue legitimate legal actions.
Maintenance involves the act of a person directly or indirectly providing monetary assistance to another person where the person providing the financial assistance lacks any lawful interest in a legal action or lawful justification to interfere in a legal action (i.e. an attorney working for a client on the basis where their fees were contingent upon the results of the legal action). Champerty is similar to maintenance but involves the act of a third party providing financing and sharing in the proceeds of the litigation (i.e. litigation financing).
The Bill will repeal the common law offences and torts of maintenance and champerty.
Contingency Fee Agreements
In its present form, the Bill sets out the following key features and requirements for contingency fees:
1) Attorneys can charge a success fee which is a fee higher than an attorney's normal fees, as long as the success fee does not exceed 100% of the attorney's normal fees (i.e. if an attorney charges $500 per hour, the success fee can be no more than an additional $500 per hour, for a total of $1,000 per hour inclusive of the success fee).
2) Attorneys will be permitted to charge fees based on a percentage of the total dollar amount awarded or the value of property recovered in an action or proceedings which shall not exceed the maximum prescribed percentage (it is expected the regulations accompanying the Bill will set the maximum prescribed percentage at 33.33%).
3) Attorneys may be permitted to charge a higher fee or percentage (up to a maximum of 40%) than those outlined in items 1 and 2 only upon approval of the Grand Court which will consider various factors including the nature and complexity of the action or proceedings, the expense or risk involved, and any other factors the Grand Court considers relevant.
4) The CFA must be in writing and signed by the attorney and the client or the client's appointed guardian, trustee, attorney under a power of attorney, or the client's authorised personal representative.
The Bill provides various protections and mechanisms for clients and attorneys related to a client's withdrawal from the CFA, restrictions on contracting out of liability and professional obligations, the determination of disputes under the CFA, and the enforcement of a CFA.
Litigation Funding Agreements
The Bill permits parties to enter into a litigation funding agreement ("LFA") where a funder agrees to fund, in whole or in part, the provision of legal services by an attorney to a client, under which the client agrees to pay a sum to the funder as set out in the LFA.
LFA's must be in writing and comply with the prescribed requirements (as set out in the regulations, if any). Unlike with the provisions for CFA's, the Bill does not place a limit on the fees to be charged or measures of compensation payable.
The Bill is subject to further revisions and debate by the Parliament of the Cayman Islands. HSM Chambers will update you as and when the Bill is enacted.
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.