News — UPLIFT FEES: AN UNDERUSED APPROACH TO COSTS AGREEMENTS

In 2008, by way of section 284 of the Legal Profession Act 208, Western Australian practitioners were given the right to charge uplift fees when they successfully represented a client across a wide range of legal work.

 

An uplift is where the practitioner charges normal rates but can then charge a success fee at the completion of the matter. Uplift fees were restricted to conditional costs agreements where “some or all of the legal costs is conditional on the successful outcome of the matter to which those costs relate” (s283 (1)). Uplift fees can be up to a maximum of 25% of usual fees. In short, if the legal fees for a matter come to $100,000.00 the practitioner whose cost agreement permits it can charge a premium of up to $25,000.00 if the matter is successfully concluded.

An uplift fee is to compensate a practitioner for the risk of taking on a conditional retainer. This makes sense if the retainer is no win no fee as the practitioner risks not being paid at all and even if he or she is paid the money comes after and sometimes long after the legal works are commenced. That said, the current law as stated above allows a practitioner to enter into a conditional contract where only a portion of the fees are contingent on success.

Uplift fees were introduced in New South Wales in 1993 but abandoned in 2004. They proved to be very problematic as practitioners were charging them in matters where there was little or no risk. As many conditional retainers are used in actions against insurers for damages, and as most such actions settle, which is a form of success, practitioners were simply handed a pay rise.

Uplift fees are not recoverable from the unsuccessful litigant, so the client’s damages award was eroded. That erosion was particularly problematic if the damages award or settlement sum was small. The New South Wales commentators, in recommending the abolition of the right to charge an uplift, noted that “you would have been acting fraudulently against your client in negotiating a 25% uplift if there was no risk involved”. Perhaps somewhat oddly, uplift fees were re-introduced in New South Wales as part of the 2014 Uniform Law.

Western Australian practitioners do not seem to have rushed to adopt uplift fees. It may be that many of them are unaware that the right to charge them exists. However, the writer knows anecdotally of at least one firm that charged an uplift for an MVA matter where liability had been admitted. If an uplift is to compensate for the risk of not being paid at all such behaviour is simply fraud. That does not mean that uplift fees do not have their place.

As a rule, lawyers do not usually use conditional costs agreements for commercial transactions. However, there is certainly scope to do so. A transactional lawyer can enter into a conditional agreement where he or she agrees to accept a reduced fee if the transaction is not successful. That agreement would accord with s283(1). If the matter were successful, the practitioner would then charge normal rates and an uplift or success fee. In transactional matters, there is no issue with eroded damages and undercompensated litigants. Lawyers who work outside damages litigation should consider conditional costs agreements with uplift fees as a useful way to differentiate their practice and to attract business.

If you are interested in using conditional costs agreements with uplift Coulson Legal is able to assist with drafting agreements of this nature..