Victorian law firms can legally pocket clients’ compensation payouts in move to US-style contingency fees

Personal Injuries & Compensation

Victoria has recently approved legislation that will allow law firms to pocket a proportion of their client’s own compensation payouts.

This makes it the only state in Australia where class action law firms can lawfully take a percentage of their client’s payouts, aligning itself to the way the US structures its contingency fees.

It’s a move the Law Council of Australia fears will compromise Lawyers’ ethical obligations.

MBA Lawyers Partner Mitchell Clark backs this fear.  Mitchell, who leads the Personal Injury and Compensation team, says this move was an extraordinary development for the Australian legal industry.

“Historically, Australia has resisted the US-style of legal charging,” he says.

“In fact, it is outlawed in every other Australian state as our law system was historically modelled from the UK where this was treated as ‘champerty’, an old English title for the criminal offence of a lawyer who profits financially from an unconnected party’s litigation.

“Queensland’s fee structure is based on the work performed.”

Both sides of the argument

Mitchell says the move has split the Australian legal industry and there is concern about what this could mean for the rest of the nation.

The Law Council of Australia told The Australian newspaper that percentage-based fee arrangements as a system would “only benefit large law firms by allowing them to generate a premium with no commensurate increase in risk”.

However in backing the move, the Law Institute of Victoria, says by removing the prohibition on law practices charging contingency fees would facilitate access to justice by providing another method by which legal costs can be agreed upon, therefore it would enable some claims to proceed which couldn’t before due to financial constraints.

Whichever side of the argument you’re on, this could be a turning point in Australian legal practice.

Helping our clients

As the head of our Personal Injuries and Compensation team, Mitchell’s reputation has been built on his caring nature towards his clients and genuine concern for helping them.

During his 30 year career, he has been part of several landmark court cases including a Supreme Court victory where QBE Insurance was ordered to pay his client more than $3.1M in compensation, which included additional money in penalty costs. These penalty costs effectively allowed the client to cover her legal expenses and retain the full compensation amount herself. In this case, Yamaguchi v Phipps, our client was a Japanese national who was seriously injured on the first day of her short holidays in Cairns when run over by a bus on a pedestrian crossing.

“We stand up for our clients and keep our focus on achieving the best outcomes for them,” Mitchell said.

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