Loss Prevention Alerts

Alert 22:  How Expert Witnesses Can Be Paid

This loss prevention alert has been produced by the Loss Prevention Working Group (LPWG) of the AGS. It highlights issues that the LPWG considers may be of relevance to members. It is not intended to provide a definitive response to any issues and before taking action members should consider carefully whether they need to seek independent legal advice.

In a recent case, R. (on the application of Factortame) v. Secretary of State for Transport, Environment and the Regions (No. 2) [2002] All ER (D 41), the Court of Appeal allowed the accountancy firm, Grant Thornton, to charge for litigation services on a contingency fee basis. As a result of this, firms of solicitors may put pressure on expert witnesses to take on work on this basis. However, as is explained here, it is highly undesirable for an expert to charge anything other than on an hourly basis.

The difficulty arises through the common law notion of champerty. Champerty occurs where a party acts to maintain the litigation of another so that the maintainer has a share in the proceeds of that litigation. Clearly, an arrangement (for example) where an expert agrees that he will receive 10% of the damages awarded to his client in litigation would be champertous.

These principles have, in practice, operated to restrict the ways in which solicitors charge their clients for litigation services. It is helpful to think in terms of two different charging regimes:

a)   A contingency fee is where a solicitor agrees to accept a percentage of the damages his client recovers. If the client recovers nothing, then the solicitor earns nothing.

b)   A conditional fee arrangement under which a solicitor can recover his hourly rate plus an uplift if he achieves success (however the parties choose to define that term) or, again, nothing or a reduced fee if his client is unsuccessful.

The English legal system continues to frown on contingency fee arrangements even though the practice is commonplace in the United States. However, in 1990 conditional fee arrangements became potentially enforceable: the regime is now contained in the Access to Justice Act 1999. This legislation provides for the agreement of "litigation funding agreements" where a funder agrees to fund another person's litigation in return for the litigant's agreement to pay a sum to the funder in specified circumstances.

Under the 1999 Act the agreement to provide services under a conditional fee agreement can only be made by a person providing advocacy or litigation services and a client. There is an argument that expert witnesses provide litigation services and so, provided the provisions of the legislation are met, can work under a conditional fee arrangement. Alternatively if experts are not truly providing litigation services (as defined in the legislation) then it may be contended that there is a specific provision to working for a conditional fee.

The obstacle for experts is the Woolf civil justice reforms which reinforced the point that the expert's primary obligation is to the court and not to the party by whom he/she is instructed. Surely it is inconsistent with that duty that the expert is in a position to receive a financial benefit if the litigation is successful?

These were some of the factors that were relevant in the Factortame litigation. There, Grant Thornton, the accountancy firm, represented the Spanish fishermen in the quantification of damages in their epic dispute over Spanish fishing quotas. The accountancy firm had won a tender for the work but only on the basis that it was done on a contingency fee as opposed to an hourly basis. The courts recognised that they were looking to weigh competing public interest factors: firstly, that parties should have access to justice which, in certain circumstances, might mean that they are allowed to share financial risk with experts and lawyers; secondly, that the interests of officers of the court should not conflict with their duties to the court. In that case, the court allowed Grant Thornton to enforce its contingency fee agreement.

Lord Phillips in Factortame said that it was "always desirable" that an expert should have no interest in the outcome of the proceedings in which he gives evidence, "but such disinterest is not automatically a pre-condition to the admissibility of his evidence".

The advice to AGS members who are approached to do expert witness work for a conditional fee must be, in the first instance, to refuse to work under such an arrangement. Should the matter proceed to trial, the expert may be cross-examined on the financial interest he has in his client's success. At the very least, this would cause severe professional embarrassment.

In any event, where AGS members are contemplating working on a conditional fee basis they should take independent legal advice. Consideration should be given to disclosing the matter to the other side early in the proceedings and also to warning the client that there is a real risk that the expert's evidence will be given less weight that it would have been given had the expert been paid on a normal hourly rate basis.

Prepared for the Members of the AGS by Steven Francis, DLA

Date of Issue: 12 May 2003