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Hong Kong: The Legal Profession

Fees and Disputes

Solicitors are generally under no duty to explain to a client the amount of fees he will be charged, or the basis on which they will be charged.

Solicitors' fees relating to non-contentious work (such as the sale and purchase of a flat) are charged according to the standard scales laid down by a statutory committee. The committee is chaired by a High Court Judge. Half of the members are solicitors. At the time of writing, a person buying a flat for $3 million, with a 70% mortgage, would pay scale fees of about $36,500.

Conditional fees were not permitted in Hong Kong until 2005 (see below). Notarial fees, where relevant, are included in the final bill to the client.

There are some hundreds of complaints every year about solicitors and barristers in Hong Kong, and these are handled by the Law Society and the Hong Kong Bar. However the guidance to solicitors provided by the Law Society, and the Bar's Code of Conduct, do not contain requirements in respect of "client care", i.e. the information to be given to clients about the cost of services, and procedures for dealing with complaints.

The two professional bodies do not have a general power to provide a remedy for shoddy work that does not amount to professional misconduct. The English Law Society has had such a power since 1985 and the English Bar plans to create a similar power. In addition, English solicitors are required to have complaints-handling procedures. It is proposed that the two professional bodies in Hong Kong should have the power to provide a remedy for shoddy work, and solicitors' firms should be required to establish complaints-handling procedures.

A consultation paper released in September, 2005, by the Law Reform Commission (LRC) of Hong Kong recommended that existing prohibitions against the use of conditional fee arrangements should be lifted for certain types of litigation, thereby helping improve access to the law for middle income groups.

Conditional fees are a form of "no-win, no fee" arrangement. If the case is unsuccessful, the lawyer will charge no fees. In the event of success, the lawyer charges his normal fees plus a percentage "uplift" on the normal fees. Conditional fees are different from the American form of contingency fee, where the lawyer's fee is calculated as a percentage of the amount of damages awarded by the court.

At present, conditional fees, like other forms of "no win, no fee" arrangements, are unlawful for civil legal proceedings involving the institution of legal proceedings. The restriction has its origins in the ancient common law crime and tort of champerty and maintenance.

Given the high cost of litigation in Hong Kong, those in the middle-income group whose means are above the limits set down by the Legal Aid Scheme and the Supplementary Legal Aid Schemes would have difficulty financing litigation.

The consultation paper recommends that lawyers should be allowed to use conditional fees in certain types of civil litigation, including: personal injury cases, family cases not involving the welfare of children, insolvency cases, employees' compensation cases, professional negligence cases, some commercial cases, product liability cases and probate cases involving an estate.

The paper cautioned against the introduction, at least initially, of conditional fee arrangements for defamation cases, criminal cases, and cases in which an award of damages is not the primary remedy sought.

To maintain a healthy balance between the rights of claimants and defendants, the sub-committee also recommended some mechanisms to safeguard defendants against nuisance claims.

The consultation paper points out that conditional fee arrangements cannot function properly without the availability of "After-the-Event" insurance ("ATE insurance"). However, the indications are that it is possible that ATE insurance may not be available at an affordable level and on a long-term basis in Hong Kong.

To cater for the possibility that conditional fees cannot be successfully launched without ATE insurance, the sub-committee recommends that the government should increase the financial eligibility limits of the Supplementary Legal Aid Scheme, as well as expanding the types of cases covered by the scheme.

The sub-committee has further recommended the setting up of a "non-government contingency legal aid fund" ("CLAF"), which would probably be run by an independent body, and that applicants would have to satisfy a "merits" test in respect of their proposed litigation, but would not be subject to any means test. The scheme would take a share of any compensation recovered, so that it would be self-financing. Lawyers working for the scheme would be paid on a conditional fee basis. The scheme would also pay the defendants' legal costs in unsuccessful cases and so would, in effect, take over the role of ATE insurance.

Professor Edward K Y Chen, chairman of the LRC's Conditional Fees Sub-committee stressed that the recommendations in the consultation paper were put forward for discussion and did not represent the sub-committee's final conclusions.

The Administration's response to the proposals in the LRC's July 2007 report on Conditional Fees was set out in papers presented to the Legislative Council's Panel on Administration of Justice & Legal Services in June and October 2010.

The Administration's June 2010 AJLS Panel paper considered and rejected the LRC's proposal that a privately-run CLAF be established, together with a new body to administer the CLAF and to screen applications for the use of conditional fees, to brief-out cases to private lawyers, to finance the litigation and to pay the opponents’ legal costs should the litigation prove unsuccessful. The Administration referred to the concerns about the proposal expressed by the Bar and the Law Society and concluded:

"Since a privately-run CLAF could only operate with the support of the legal profession, there appears no prospect of establishing a CLAF in Hong Kong for the time being. In the circumstances, the Administration does not propose to take the recommendation of the Report that a CLAF be established any further."

On the proposed expansion of the scope of the Supplementary Legal Aid Scheme (SLAS), the Home Affairs Bureau's October 2010 AJLS Panel paper advised as follows:

"To complement the SLAS review soon to be completed by the Legal Aid Services Council (LASC), and to benefit more people from the middle class, the Government will earmark $100 million for injection into the SLAS fund when necessary to expand the scheme to cover more types of cases, such as claims for damages for professional negligence in a wider range of professions, and claims to recover outstanding wages and other employee benefits.

The Home Affairs Bureau was due to report to the Panel on Government's specific proposals on the expansion of SLAS in the first half of 2011.



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