Singapore recently passed laws to allow for lawyers to enter into conditional fee agreements with their clients for certain types of cases. The purpose of such changes is to allow for better access to justice for deserving cases. The changes allow a flexible fee arrangement, in addition to the usual arrangements, between the client and the lawyer. As Second Minister of Law Mr. Edwin Tong SC said, CFAs are “not intended to replace traditional fee structures.”
First off, conditional fee agreements or CFAs are not allowed for all types of litigation or disputes cases. Only arbitration cases, whether domestic (Singapore dispute involving Singapore based parties) or international, and certain cases before the Singapore International Commercial Courts can CFAs apply. Matrimonial disputes and disputes that are decided by the domestic Singapore courts are excluded.
Second, conditional fees are not contingency fees. The key difference is that conditional fees is not fees based on the amount of damages or sums awarded. That is, it cannot be a percentage of the damages awarded to the winning party. Instead in a conditional fee agreement, there will be a base legal fee. If a client wins the case, the lawyer can charge an uplift fee that can be ‘x’ times that base legal fee. There can also be other creative fee solutions crafted between the lawyer and the client, just that it cannot be tied to the damages awarded.
Now that the basics are out of the way, let us deep dive into the world of CFAs.
In January 2022, Singapore passed a bill amending the Singapore Legal Profession Act by adding a new Part 8A to allow for CFAs. The amendments took effect on 4 May 2022 along with the related regulation, The Legal Profession (Conditional Fee Agreement) Regulation 2022 (“Regulation”).
Before the amendment, a lawyer in Singapore cannot enter into such arrangements with clients as they are considered a breach of the legal doctrine prohibiting champerty and maintenance. The aim of the doctrine is to preclude frivolous litigation. As one of the judges in a 1993 English case (Giles v Thompson) said: “In modern idiom, maintenance is the support of litigation by a stranger without just cause. Champerty is an aggravated form of maintenance. The distinguishing feature of champerty is the support of litigation by a stranger in return for a share of the proceeds.”
The Allowed Cases
CFAs are now allowed for: (a) international and domestic arbitration cases in and outside Singapore; (b) cases started in the Singapore International Commercial Courts (SICC) and remain in the SICC throughout the case; and (c) court and mediation proceedings related to the aforesaid.
CFAs can cover preliminary work done for such cases. As examples, the initial advice and pre-commencement negotiations to settle the dispute can be covered under a CFA. CFAs continue to apply even if the intended case is not started or is settled in the interim.
Personal injury cases started in a Singapore court cannot be the subject of a CFA nor can criminal or matrimonial cases.
The Part 8A of the Legal Profession Act requires that the conditional fee agreement be in writing and signed by the client. The CFA cannot have any clause that excludes the lawyer’s liability for negligence and the existing rules preventing a lawyer from overcharging continue to apply. It also cannot have any clause for fees to be payable as a percentage of the damages or other amounts awarded.
As the CFA is an arrangement between the lawyer and the client, it does not affect the costs obligation of any losing party in an arbitration or SICC case, that is the losing party will still be ordered to only pay reasonable costs to the winning party. The winning party cannot ask the losing party to pay more than that, in particular the losing party cannot be asked to pay any part of the uplift fee in excess of reasonable costs.
If a conditional fee agreement does not satisfy the requirements under Part 8A, it does not mean that the client need not pay to the lawyer any fees. The client will still have to pay the lawyer what is accessed as reasonable fees payable by clients to their own lawyers as if there is no CFA.
Under the Regulation, a lawyer must provide certain key information about the CFA to the client. They are information about: (a) the nature and operation of the CFA; (b) the client’s right to seek independent legal advice about the CFA; (c) the uplift fee not being recoverable from any losing party; and (d) the client still being liable to the other party for costs ordered against the client by the arbitral tribunal or the SICC.
The CFA must also set out:
(a) The circumstances or conditions under which the client has to pay to the lawyer his fees. This will include arrangements about the base legal fees, the disbursements and the uplift fee.
(b) How the uplift fee is calculated and an estimate of the range of the uplift fee. There is no prescribed limit to any uplift fee other than the usual ones concerning overcharging.
(c) A mandatory cooling off period of 5 days during which either party may terminate the CFA by written notice.
(d) That any changes to the CFA must be in writing and signed by all parties. The changes to the CFA that relate to costs must have a 3 days cooling off period.
(e) That, if the CFA (or its changes) are terminated by the client during the cooling off period, the client will only be liable for costs for work done by the lawyer during the cooling period that was expressly instructed or agreed to by the client.
CFAs are not suitable for all cases. Clients with a meritorious SICC or arbitration case but face temporary liquidity or cash flow issues (as an example, because of the pandemic) can work with their lawyers to craft a CFA that is a ‘win-win’ solution for all parties concerned. CFAs are also a tool for sophisticated commercial clients to work out alternatives with their lawyers to manage legal cost risks.
CFAs do not just benefit potential claimants of a case. With some creativity, CFAs can also be used for potential defendants of the right case to manage legal cost risks.
Although CFAs are new in Singapore, they are already used in many civil law countries and are expanding in several common law countries. We share the knowledge and experience of our PracticeForte Affiliates in such countries. Our clients can benefit from our shared knowledge and experience in this space. If you want to find out more, do contact us at email@example.com.
Lim Seng Siew is the co-director and Head of Civil Disputes and Technology Practice at OTP Law Corporation. For his full CV, please click here.