Reading Comprehension

PT139 · S2 · P4 · Q21 Contingency Fees in Western Australia

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In October 1999, the Law Reform Commission of Western Australia (LRCWA) issued its report, “Review of the Civil and Criminal Justice System.” Buried within its 400 pages are several important recommendations for introducing contingency fees for lawyers’ services into the state of Western Australia.

Topic

The Western Australia Law Reform Commission's recommendations for contingency-fee arrangements in legal cases and their implications.

Framework

Challenge Position

Main Point

The Law Reform Commission's proposal to allow contingency-fee arrangements only as a last resort and only for financially needy clients is overly restrictive, burdensome for lawyers, and unfair to other clients; there are good reasons to make such arrangements available more broadly. The Most Valuable Sentence: The final paragraph clearly summarizes the main critique, especially where it says,

P1: Background on the Recommendation

The passage starts by letting us know that Western Australia's Law Reform Commission has recommended introducing contingency fees—where lawyers only get paid if they win—in Western Australia, with the rationale that these fees are higher due to the lawyer's risk.

P2: Details and Restrictions of Proposed Arrangement

Here, the passage explains that the Commission is only recommending a specific kind of contingency fee (the "uplift" fee, which is a standard fee plus a bonus if the case is won), and only when other options are exhausted and the client can't otherwise afford to pay. These measures are supposed to prevent lawyers from exploiting the system and to keep compensation fair.

P3: Problems and Burdens for Lawyers

The author jumps in with criticism, pointing out that requiring lawyers to check the client’s finances before entering this type of arrangement makes things complicated and burdensome, because predicting all future costs in litigation is difficult.

21.

As described in the passage, the uplift fee agreements that the LRCWA's report recommends are most closely analogous to which one of the following arrangements?

People who join together to
Bad Match: proportional to contributions
In an uplift fee contingency agreement, the client and the lawyer aren't contributing to the costs of a trial together, in different proportions. The lawyer is doing work for free and only getting paid if they win the case. The payout in the end isn't "proportional to contribution"; it's regular fee + agreed-upon bonus.
5% picked this
Correct
A consulting firm reviews a
Why this is right
In an uplift fee contingency agreement, the lawyer is doing work for free and only getting paid if they are successful in winning the case. In this answer, the consultant is only getting paid if they are successful in reducing the company's expenses. The payout for the lawyer is their normal fee plus some agreed upon bonus (an additional percentage of that fee). The payout for the consultant is their normal fee plus 100% of their normal fee (that equals double their normal fee). It might seem like double is a bit excessive, but the passage seems to be suggesting that a lawyer would get their normal fee plus maybe a 30% bonus. But the passage doesn't get specific about what that percentage would be. The crucial point is that the bonus is an agreed upon amount ahead of time, and that the worker only gets paid if successful.
Skill tested: Analogy · how this choice captures the passage's function is the move to repeat next time.
76% picked this
The returns that accrue from
Bad Match: proportional to risk
In an uplift fee contingency agreement, the client and the lawyer aren't subjecting themselves to different levels of financial risk. The lawyer is doing work for free and only getting paid if they win the case. The lawyer is the only one undergoing any financial risk. If they lose the case, they make no money for all the time they worked on that case. Since the lawyer is the one undertaking all the financial risk, according to this payout scheme of "the returns will be divided in proportion to the financial risk assumed", that would mean that the lawyer would get 100% of the payout. But we know that's exactly the sort of unfair share of the rewards that the LRCWA was trying to avoid. The payout in the end isn't "proportional to risk"; it's regular fee + agreed-upon bonus.
5% picked this
The cost of an insurance
Bad Match
In this answer, someone is paying money for an insurance policy. In the event that something bad happens, they'll get some money back from the insurance company. But if nothing bad ever happens, then they'll just have paid the insurance company a bunch of money over the years. That's sort of the opposite of the uplift fee. The "customer" doesn't pay any money. The "company" (the lawyer) does all the work for free, unless something good happens (they win the case), at which point the company gets a bunch of money.
8% picked this
A person purchasing a property
Bad Match
This doesn't involve hiring someone to perform a service for you, and paying them nothing unless they do a good job (in which case they get their normal fee plus a bonus). This is buying a tangible object (property) from someone, while also asking them to loan you the money to buy it, and then being asked to pay money to a 3rd party (the insurance company) to guarantee the loan.
7% picked this

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