Speech On The 2nd Reading Of The Legal Profession (Amendment) Bill Introducing Conditional Fee Agreements

Last week, I spoke on the occasion of the 2nd reading of the Legal Profession (Amendment) Bill in Parliament. One of the principal aims of the bill was to allow lawyers to enter into conditional fee agreements (‘CFA’) in cases such as arbitration, mediation and certain international commercial dispute cases in the Singapore International Commercial Court. I spoke in favour of the CFA which basically is an agreement under which a lawyer will be only paid his fees if he secures a favourable outcome for his client. I felt, given the state of play in other international dispute resolution hubs, these amendments were timely to ensure a level playing field and enhance access to justice. I took the opportunity to seek clarification on the safeguards that will be put in place to ensure that the interests of litigants are not compromised. In particular, I focused on the uplift that a lawyer may charge as his fees if he secures a good outcome for his client. I felt it necessary to have some guidance on this so that the uplift charged will not be exorbitant.

Mr Murali Pillai (Bukit Batok): Mr Deputy Speaker, Sir, I declare my interest as a lawyer in private practice.

Today, Singapore has established itself as a premier international dispute resolution hub in the region. This has a direct positive repercussion on our economy. Using the words of the hon Minister, “it drives work to Singapore and for Singaporeans”.

But this position is hard-won and one which we must not take for granted. Adjustments must be made regularly to ensure that our country remains a trusted dispute resolution hub of choice, business-friendly and thick with legal talent and expertise.

It is in this context that I welcome and support the proposed amendments to the Bill to allow lawyers to charge their fees on the basis of whether they have secured a good outcome for their clients.

These agreements, known as conditional fee agreements (CFAs) will have the effect of providing a litigation funding arrangement for businesses and individuals who may otherwise be unable to commence action owing to lack of funds. This in turn can have the effect of enhancing access to justice in Singapore and also level the playing field vis-a-vis other dispute resolution hubs, and this is also the point that the hon Minister made.

It is noteworthy that MinLaw had consulted extensively with various stakeholders since 2019 before introducing this Bill in Parliament in November 2021. The effort put in by the Ministry is commendable.

I have three clarifications to seek from the hon Minister.

First, I seek clarification on the scope of the Minister’s power in clause 6 of the Bill that introduces the proposed section 115(B)(7) of the Act. This clause gives the Minister the power to prescribe proceedings to which lawyers may charge their fees pursuant to the CFA.

For a start, it is proposed that domestic and international arbitration, certain SICC proceedings as well as its related Court proceedings and mediation proceedings be prescribed.

This is precisely the same grounds upon which third-party funding is available under Civil Law (Third-Party) Funding Regulations 2017. I do not have an issue with the proposed prescribed proceedings.

My question relates to how the Minister intends to exercise his power in the future to extend the use of CFA in other proceedings. The hon Minister, in his speech, mentioned that he is seriously considering extending CFA to domestic litigation. My question is: what would be the principal considerations? And he mentioned access to justice is one of them. What are the other considerations?

I also welcome the hon Minister’s point raised in his speech just now that he would be consulting stakeholders. And if he could elaborate on exactly how he proposes to consult the stakeholders, that will be most welcome.

My next question relates to how concerns expressed by the Government previously, when this issue had been mooted in the past, have been dealt with.

When Senior Minister of State Indranee Rajah, as she then was, was asked in 2017 about the Government’s position on event-triggered fee arrangements, she stated that the Government was looking into the matter but was concerned about two specific issues.

The first concern was how to deal with the potential conflict of interest that may arise on the part of the lawyer since he has a direct financial interest in the outcome of the litigation. Take, for instance, the case of a lawyer who has cashflow issues. As a result, he may decide to negotiate a settlement with a counterparty for a lower amount than what he would reasonably get for his client through a Court judgment if the matter was litigated to the end. In this case, the case would have been closed earlier and he will get paid with an uplift under the CFA earlier too.

The second concern she expressed was the prospect of increased frivolous litigation and raised litigation costs. On this point, I agree with the hon Minister Mr Edwin Tong, that the no-win-no-fee structure should already make the lawyers think twice. But I believe that there could be situations where lawyers may engage in some form of sabre-rattling to deal with acts or maybe leverage on extra- legal factors, for example, the concern on the part of counterparties to stay out of courts. How do we deal with such prospects? I would be grateful if the hon Minister could please outline steps to address the concerns.

Finally, I have a query in relation to what constitutes a reasonable uplift under the CFA without attracting allegations of overcharging.

Currently, a lawyer owes a duty not to overcharge his client. If he does so, he would be liable for misconduct and may be hauled up for disciplinary action. This is provided specifically under Rule 17 (7) of the Legal Profession (Professional Conduct) Rules 2015, which the hon Minister referred to as well.

Under this provision, the legal practitioner must not charge any fee or disbursements, or render a bill, for an amount, which constitutes overcharging even if there is a fee agreement that permits the charging of the fee, disbursements or the amount.

I understand from the hon Minister that it is proposed the overcharging regime should also apply to a CFA. Under the CFA, a lawyer may charge an uplift should there be a favourable outcome. The question arises as to what will constitute a fair amount for the lawyers to charge as an uplift that will not be viewed as a case of overcharging.

Let me provide an example. Let us consider a case where a lawyer would have ordinarily charged $X for a case. Under the CFA with his client, it is provided that, if the lawyer loses, he gets zero. Should he win, how much can he charge as an uplift without being accused of overcharging? $2X? $3X? Would it make a difference if it is stated in the CFA that, if the lawyer loses, he may charge $0.5X instead of zero? And it seems to me that the hon Minister, by mentioning that the risk that the lawyer assumes can go into the issue of the reasonableness of what he can charge, that seems to be the case.

We need to guard against creating perverse incentives with price signals that do not reflect the true value of services. In these kinds of cases, it is not just a simple matter of “willing buyer, willing seller”. There must be a principled approach to determining the line between the uplift being viewed as a fair reward or unbridled profiteering that brings the profession to disrepute.

I also note that under the proposed section 115D(4) of the Act, the High Court is given the power to enforce a CFA in any manner that the Court thinks fit, even if the technical requirements of the CFA are met.

Under the proposed section 115D(7) of the Act, the High Court has the power to reopen the CFA and even order repayment of fees within a 12-month period after payment has been made under the CFA.

May I ask the hon Minister what are the circumstances in which the Court is permitted not to enforce the CFA on its plain words, even though all the technical requirements as set out in the Bill have been met and there are no vitiating factors, such as misrepresentation, duress and so on? Notwithstanding my queries, I support the Bill.