27 September 2019
From 27 August 2019 to 8 October 2019, the Ministry of Law (“MinLaw”) is seeking comments on its proposal to allow conditional fee agreements (“CFAs”) for prescribed categories of proceedings in Singapore (“Consultation Paper”).
Singapore law currently prohibits CFAs and contingency fee agreements between lawyers and their clients, a prohibition originating from the English common law. England removed the prohibition in 1990. A CFA is an agreement where a lawyer representing a client in pursuing a claim undertakes to receive payment of his legal fees only if the claim is successful. CFAs may also provide that the successful lawyer receives an additional fee known as an “uplift” or “success” fee.
The Consultation Paper noted the increased use of alternative funding arrangements in disputes, such as third party funding, and that MinLaw has announced that third party funding will be extended to domestic arbitration proceedings and certain proceedings in the Singapore International Commercial Court (“expanded third party funding framework”).
The majority of the proposals set out in the Consultation Paper tracks provisions in the South Australia Legal Practitioners Act (which is similar to legislation in other Australian states, such as New South Wales and Victoria).
Scope of CFA framework
The Consultation Paper proposes a legal framework permitting CFAs in relation to international and domestic arbitration proceedings and certain proceedings in the SICC, including mediation proceedings connected with such proceedings (“proposed framework”). The proposed framework will be aligned with the expanded third party funding framework. A separate study will be conducted on whether CFAs will promote access to justice for categories of proceedings that are presently not being considered under the CFA framework.
MinLaw proposes to house the proposed framework in the Civil Law Act, in a similar manner as the framework for third party funding. The required Civil Law (Amendment) Bill will provide that, in prescribed categories of dispute resolution proceedings, CFAs are not contrary to public policy or otherwise illegal by reason only that they are contracts for maintenance or champerty. As set out by the Singapore High Court in Law Society of Singapore v Kurubalan s/o Manickam Rengaraju  SGHC 135, “maintenance” can be defined as officious intermeddling in litigation, while “champerty” is a particular form of maintenance where one party agrees to aid another to bring a claim on the basis that the person who gives the aid shall receive a share of what may be recovered in the action.
The Legal Profession Act will also be amended such that a solicitor who enters into a CFA with a client will not fall foul of the relevant restrictions.
The Consultation Paper sets out proposed safeguards which CFAs will be subject to, namely:
- CFA to be in writing and signed by the client.
- Client to be fully informed of the nature and operation of the CFA and confirm that he has been told of his right to seek independent legal advice before entering into the CFA.
- Provision of a “cooling off period” during which the client may by written notice terminate the CFA.
- Parties’ definition of what constitutes a “successful outcome”.
- If there is an “uplift” or “success” fee, to state the basis of calculation of the uplift fee and provide an estimate of the amount. It is also proposed that if a successful party in the proceedings has a CFA with his solicitor, an order for costs made against the losing party shall not include any part of the “success” or “uplift” fee which the successful party may have to pay to his solicitor under the CFA.
- Acknowledgment by the client of the client’s continued liability for any costs orders that may be made by the court or arbitral tribunal.
MinLaw seeks views in particular on whether there should be any cap to the “uplift” or “success” fee and if so, what that cap should be and why. The Consultation Paper also asks for views on whether any additional requirements should be imposed and the consequences of non-compliance with the requirements.
Professional conduct obligations
MinLaw informs that, in keeping with the third party funding regime, professional obligations on the conduct of solicitors entering into CFAs with clients are also proposed. The proposed obligations are as follows:
- Disclosure obligations placed on solicitors to disclose the existence of the CFA to the court or tribunal and to every other party to those proceedings.
- Reinforcing the lawyer’s duty to act in the best interests of the client and that the client should retain control over the conduct of the litigation, including the decision whether to settle.
The following materials are available on the Ministry of Law website www.mlaw.gov.sg: