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No “No Win, No Fee” or Contingency Fee Arrangement in Hong Kong
1 July 2012

Many times as solicitors we have been asked if we would accept our fees on a contingency basis with some clients proposing a certain percentage share of the claim or damages that they hope to receive in the event of success of their claim. Whilst such a fee arrangement may be permitted in some other jurisdictions, it is still prohibited in Hong Kong. A recent Hong Kong Court of Final Appeal (“CFA”) decision of Winnie Lo v HKSAR [2012] HKEC 263 held that maintenance and champerty continue to be part of the law in Hong Kong.

Maintenance and Champerty

Maintenance has been defined as the giving of assistance or encouragement to one of the parties to a legal action by a person who has neither an interest in the action nor any other motive recognized by the law as justifying his interference. Champerty, on the other hand, is a form of maintenance that involves the maintainer having a share in the proceeds of litigation.

In Winnie Lo case, the appellant, a solicitor, was charged for conspiracy with another person to commit maintenance in connection with her conduct of a personal injury action in which she acted for the plaintiff. The plaintiff had suffered severe head injuries when a vehicle in which he was travelling as a passenger was involved in a traffic accident and rendered him mentally incapacitated. The action was brought through his mother as his next friend. The plaintiff’s mother had entered into an agreement with a 3rd party who offered consultancy services in the pursuit of the personal injuries action against the driver of the vehicle on a “no win, no fee” basis. It was champertous in that it stipulated that the consultancy firm would receive 25% of the compensation received.

The appellant was convicted by the District Court and sentenced to 15 months imprisonment. Her appeal to the Court of Appeal was dismissed and she appealed against both her conviction and sentence to the CFA.

It was argued on behalf of the appellant that the offence of maintenance is uncertain in its nature and scope and that its prosecution is constitutionally objectionable pursuant to Article 39 of the Basic Law which provides that the rights and freedoms enjoyed by Hong Kong residents “shall not be restricted unless as prescribed by law”, which expression has been interpreted as mandating the principle of legal certainty. The question arises as to whether the offences of maintenance and champerty are legally uncertain.

Referring to another CFA decision of Unruh v Seeberger (2007) 10 HKCFAR 31, the CFA noted that the scope of the offence of maintenance and champerty had been progressively narrowed over the years with the courts introducing certain exceptions to liability to reflect changed public policy considerations, for example, in cases that involve legitimate common interest, access to justice considerations and assignment by a trustee in bankruptcy to a purchaser for value of an action commenced in the bankruptcy. However, such exceptions did not render the offence to be constitutionally uncertain. The traditional legal policies underlying the offences continue to apply, with the mischief aimed at in the case of maintenance being “officious intermeddling” and for champerty, the sharing of the spoils of litigation to encourage the perversion of justice, to endanger the integrity of the judicial process or the trafficking in the outcome of litigation.

Liability of Solicitors

“Officious intermeddling” in someone else’s litigation denotes interfering with something that is not one’s concern. A solicitor acting in his or her ordinary professional role in conducting litigation which is mounted on good faith does not officiously intermeddle and does not commit maintenance. The CFA states that a solicitor may attract liability only when he transgresses his proper professional role, such as bringing an action in the name of a client when in reality it was for the solicitor’s own purposes, or when the solicitor commits champerty by taking a profit out of the client¡¦s action.

The CFA found on the facts that the appellant in the Winnie Lo case had simply discharged her duties as a litigation solicitor and received no more than her ordinary fee from the costs paid by the defendant. The finding of the District Court that the appellant knew of the champertous arrangement and had actively assisted in its implementation, which was affirmed by the Court of Appeal, was overturned as there was evidence to the contrary. Her conviction was quashed and her sentence was set aside.

Scope for Legal Reforms

The CFA judges in the Winnie Lo case recognize the need for legal reform in the laws in respect of maintenance and champerty in Hong Kong. The crime and tort of maintenance and champerty have long been abolished in England and Wales and the States of Victoria, South Australia and the New South Wales. It remains to be seen what direction of reform would take shape in Hong Kong and how it would impact on the development of litigation funding in Hong Kong.

Angela Wang & Co has a team of dedicated and experienced litigators who advise on a wide range of dispute resolution matters including HKIAC and CIETAC arbitrations. We possess solid experience, sharp legal analysis as well as strong business and commercial sense and are able to advise clients on the optimum strategy to resolve complicated disputes.

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