Legal Profession (Amendment) Bill

Order for Second Reading read.

12.43 pm

The Second Minister for Law (Mr Edwin Tong Chun Fai): Mr Speaker, I beg to move, “That the Bill be now read a Second time.”

Sir, over the years, MinLaw has dedicated much effort to strengthening Singapore’s position as an international dispute resolution hub. We continually look for opportunities to drive work to Singapore and Singaporeans, keep abreast of developments in other jurisdictions and also update our regime so that we can continue to remain an attractive place for businesses to want to be at and to deal with and address their legal needs.

[Deputy Speaker (Mr Christopher de Souza) in the Chair]

These efforts have yielded results. Singapore is recognised as a premier legal services hub, in Asia and also the rest of the world. In 2020, Singapore’s exports of legal services exceeded $0.9 billion, which is more than 40% of the value-added (VA) of Singapore’s legal services. In 2021, Singapore was, for the first time, selected as the most preferred seat of arbitration in the world, alongside London, in the Queen Mary University of London and White and Case International Arbitration Survey. This is a fine achievement, especially during the COVID-19 pandemic, which has itself presented new challenges.

Even so, Sir, we cannot afford to rest on our laurels. It is imperative for us to continually review, strengthen and update our framework, in order to stay competitive and meet the needs of businesses and users alike.

The proposed amendments in this Bill are part of these ongoing efforts to further buttress and enhance our offering and our position as a legal hub.

There are two key sets of amendments in this Bill: first, to introduce a framework for allowing a conditional fee agreement (CFA) in prescribed categories of proceedings; and second, to refine the scope of representation of foreign lawyers in the Singapore International Commercial Court (SICC).

The Bill also makes a miscellaneous amendment to clarify the date certain provisions relating to the regulation of foreign lawyers and foreign law practice entities were operationalised following the transfer of relevant regulatory functions from the Attorney-General to the Director of Legal Services on 18 November 2015.

Sir, let me now speak on the first set of amendments relating to CFAs.

The introduction of a CFA framework builds on our reforms in the litigation funding space, to enhance our offerings as a dispute resolution hub. To set the context, I will provide some background on litigation funding in Singapore, before going into the proposed legislative framework for CFAs.

Broadly, litigation funding refers to methods of funding legal proceedings. In Singapore, lawyers’ costs are typically paid by the client, as we have, historically, been more conservative about litigation funding. This is due to traditional prohibitions against maintenance and champerty, concepts which we have ourselves inherited from the English common law system. These rules were originally developed to guard against officious intermeddling in litigation and potential conflicts of interest, which lawyers providing financial assistance may face vis-à-vis their duty to their own clients, who may be vulnerable litigants, and also to the Court.

However, we have been taking incremental steps and looking at the landscape holistically. As legal costs can be substantial, we have observed a growing trend of alternative funding methods internationally. We have, therefore, been studying how to better meet the needs of businesses and individuals and also enhance access to justice. We have taken into account what has been done elsewhere in other jurisdictions – the safeguards that have been implemented, some of the learned experiences that they have since implementing and working out how we can better contextualise them for use in Singapore.

One area of reform we have introduced is in third-party funding (TPF), where a party unconnected to the dispute funds the claim, usually in exchange for a share of the damages awarded if the claim succeeds. In 2017, we introduced a legislative framework to allow TPF in international arbitration proceedings. Since then, funders have reported an upturn in requests for funding in Singapore, with funding provided in some cases. The legal and funding communities also shared that the reforms have been useful and beneficial. We have, therefore, extended the framework in June 2021 to domestic arbitration, certain proceedings in the SICC and also related Court and mediation proceedings.

Apart from the above, we also observed interest and needs for TPF in certain insolvency-related matters before the Courts and various reforms were worked into our insolvency legislation. Given the positive feedback received from the TPF reforms, with few risks and downsides observed, we have continued to study other potential reforms in the litigation funding space. This includes CFAs, which are the focus of this Bill.

CFAs are arrangements where a lawyer receives payment of a part, or all, of his or her legal fees only in specified agreed circumstances, such as when the client’s claim is successful. CFAs may take the form of a “no win, no fee”, or “no win, less fee” agreement, depending on how the fees are to be paid to the lawyer if the claim is unsuccessful. CFAs and contingency fees are, currently, prohibited and unenforceable in Singapore, under the rules against maintenance and champerty, which I referred to earlier. However, allowing CFAs can bring several advantages. Let me outline them.

First, it updates our litigation funding framework and aligns it with developments and practices on the international front. This helps to enhance the competitiveness and vibrancy of our legal industry and landscape. While Singapore lawyers are currently not allowed to offer CFAs, other common law jurisdictions have already moved away from these traditional prohibitions. For instance, England and Wales abolished the prohibitions in the 1990s and, together with the United States, Australia and Canada, allow CFAs in various forms today. The proposed framework for CFAs in this Bill, therefore, helps to level the playing field for our Singapore lawyers in certain practice areas vis-à-vis foreign lawyers in these other jurisdictions. Oftentimes, our lawyers compete on an international front internationally with foreign lawyers. In other jurisdictions, they can offer CFAs whilst our lawyers are not able to offer CFAs as part of their engagement with their clients.

Second, allowing CFAs can also enhance access to justice. This is particularly pertinent with current business interruptions caused by the COVID-19 pandemic. Businesses with legitimate claims, but themselves facing cash flow problems, may not be able to put out full legal fees at the outset. CFAs will help provide such claimants with an alternative method of funding meritorious claims, which they may otherwise not be able to pursue.

In jurisdictions that allow CFAs, other advantages have also been observed. As lawyers are typically better placed to evaluate the legal risks of a claim, compared to clients, sharing of financial risks of litigation between client and lawyer can also be beneficial. Just as CFAs can enable pursuit of meritorious cases, they can also discourage the pursuit of weak cases and frivolous claims, as lawyers’ fees are contingent on the outcome of the claim

Sir, we studied the approaches taken in other jurisdictions and sought feedback from stakeholders via a public and closed consultations. Having carefully reviewed all the feedback received and looked at the landscape and studied the outcomes in various other jurisdictions, we have designed a framework for CFAs in Singapore as set out in this Bill which, we believe, best allows us to make an initial move on CFAs whilst, at the same time, studying the impact it may have on a broader litigation funding landscape.

Let me now take you through the key features of the framework, as well as the safeguards that we have built into this framework.

Clauses 3 to 6 of the Bill set out the overarching framework for CFAs, while further details and safeguards will be prescribed in subsidiary legislation. Broadly, Sir, clause 3 states that lawyers will not be prevented from entering into a CFA that complies with the new Part 8A in the Legal Profession Act (LPA), where the CFA framework will be housed.

Clause 4 amends existing section 111 in Part 8 of the LPA, to clarify that Part 8 of the LPA does not apply to an agreement which is a CFA that complies with the new Part 8A.

Clause 6 sets out the proposed Part 8A of the LPA, which will provide the main framework for CFAs in Singapore. The proposed Part 8A will have six new sections, sections 115A to 115F.

Section 115A defines key terms in the CFA framework and sets out the scope of Part 8A. In that regard, similar to Part 8 of the LPA, Part 8A will apply to Singapore law practices and certain registered foreign lawyers and foreign law practices.

Section 115B creates a statutory exception for CFAs that comply with prescribed requirements. To be clear, Sir, the statutory framework for CFAs is not intended to override existing common law principles on CFAs relating to impecunious clients, which can continue to provide access to justice for such litigants.

CFAs will be enforceable only in prescribed proceedings. As a start, we intend to prescribe the following proceedings by way of subsidiary legislation.

First, international and domestic arbitration proceedings; second, certain proceedings in the SICC; and third, related Court and mediation proceedings. These will be, as Members may recall, the same categories as the extended TPF framework that we have put in place.

As CFAs are a new development in Singapore, we are taking an incremental and measured approach, more cautious at the start, starting with proceedings where litigants tend to be more commercially sophisticated. We are concurrently studying the feasibility of allowing CFAs in other categories of proceedings, such as domestic proceedings. The rationale for an extension of the framework would be aimed at uplifting the legal profession to further enhance and pursue access to justice for more litigants, who may otherwise not have such access.

But as these proceedings may involve more vulnerable litigants, we will study it more carefully. We intend to closely consult all relevant stakeholders in the legal industry and other interested parties before making a move on this.

Section 115B(6) provides that the range of work that can be covered by a CFA include (a) work done for the purposes of, and before, contemplated proceedings, such as preliminary advice, negotiations or the settlement of disputes. Oftentimes, these are matters which are a precursor to the substantive work, and the framework provides that the CFA can cover this kind of work as well. This is even if those proceedings are not eventually commenced, or if the claim or dispute in those proceedings is settled. But, obviously, in those cases, the terms of the CFA must appropriately reflect the specific conditions on which the uplift or the additional fee structure can then be triggered.

Another key feature of the CFA framework is that “uplift fees” may be provided.

Section 115A(1) provides for a definition for this “uplift fee”, which are the fees payable to the lawyer in specified circumstances, that are higher than what would have otherwise been payable if there were no CFA. The lawyer and client may and should agree on the specific circumstances under which the uplift fee should be paid. These circumstances can be amended as the case progresses, if agreed, because basically, the CFA is an agreement between the parties – the lawyer and his client – and these agreements can be varied or altered from time to time, subject to there being consensus by the parties. As I have said, because the CFA is, in essence, a contract between a lawyer and his client, parties would be free to determine a mutually agreeable arrangement for the payment of fees, subject to the prescribed requirements in our framework. As in any contract, the parties should ensure that the terms are sufficiently clear, which may include scenarios for when such a contract might be terminated.

I also wish to make clear that the CFAs are not intended to replace traditional fee structures but, instead, provide an additional funding option between a lawyer and his client. Lawyers and clients can agree on a traditional fee structure in one area of work, and a CFA in another. So, it can be a combination of both free structures, or it might also seek to convert one to the other – either way, depending on the circumstances.

There is no impediment to usual payment practices, such as collecting deposits for fees, except that no deposit should be collected for the uplifted portion, which depends on the triggering of a condition which will take place on a subsequent occasion. Parties may agree to include or exclude the payment of disbursements from the CFA. So, that is entirely up to the parties' choice and the terms they seek to write into the CFA. Lawyers and clients should also discuss and provide for how and when a CFA may be terminated and the fees to be paid should the CFA be terminated prematurely. This is for obvious reasons so that you have clarity upfront because, sometimes, the client may decide to choose a different lawyer halfway through the proceedings and you do not want the fact that there is a CFA cloud the question as to what the appropriate amount of fees is to be paid at that juncture.

The Bill and subsidiary legislation will introduce safeguards to mitigate the risk of any potential abuse of the CFAs by lawyers. So, under section 115B, a CFA must meet certain requirements for it to be valid. First, the CFA must be in writing and signed by the client. Second, it must not provide for the remuneration and costs to be payable as a proportion of the amount recovered by the client. Let me just be clear about this. It should not provide for remuneration and costs to be a proportion of the amount recovered by the client in the litigation. So, for example, it cannot be a proportion of the damages that a client might recover. Such arrangements, which are often known as contingency fee agreements, will continue to be prohibited in Singapore. The reason for this is because the payment received by lawyers in such agreements has no direct correlation with the work done. The amount of damages that the client may recover is dependent on the client's particular circumstances and the damage and injuries that may be suffered. If you allow such proportions to be part of the CFA, this may give rise to added risks of conflicts of interests for the lawyer. We will continue to study developments in this area.

Third, the CFA must comply with the regulations that will be made under section 115B(7). These include: (a) information that the lawyer must provide to the client, for instance, how the CFA operates and how uplift fees are calculated in a particular case; (b) terms and conditions that must be included in the CFA, such as a “cooling-off” period after the CFA is entered into, during which the client or lawyer may terminate the CFA by giving written notice.

Sir, we emphasise that CFAs do not change existing obligations of solicitors under statute or common law, unless expressly stated. Lawyers will continue to be subject to the Legal Profession (Professional Conduct) Rules (PCR), including obligations to: (a) act in the best interests of their clients; (b) evaluate whether any consequence of a matter involving the client justifies the expense or the risk of pursuing the matter; (c) withdraw from representing a client in certain circumstances due to, say, ethical reasons – these are obligations and responsibilities which a lawyer will be very familiar with; and, finally, of course, (d) an obligation not to overcharge. This will be clarified in amendments to the PCR.

MinLaw will also be working with the Law Society to develop a Guidance Note on CFAs, with the aim of guiding the profession through these new developments. MinLaw will also continue to review the landscape and the use of CFAs in practice and may also develop additional and different safeguards for different categories of proceedings as may be appropriate.

Finally, Sir, apart from the features mentioned above, the proposed sections 115C to F provide for ancillary matters relating to the CFAs. They are adapted from the current Part 8 of the LPA but with modifications, and cover matters, such as: (a) the effect of the CFA on legal costs, (b) how the validity or effect of a CFA is to be assessed, and (c) the consequences of a change in, the death, incapacity or winding up of, a solicitor or law practice.

Let me highlight two points from this range of amendments.

First, section 115C provides that uplift fees will not be recoverable as part of legal costs from the opposing party, that means the uplifted fees that are triggered or payable as a result of a fulfilment of the condition in the CFA will not be recoverable as part of party-and-party costs, should the client be successful in the proceedings.

This seeks to avoid the issues of satellite litigation faced by other jurisdictions, where it has been noted that CFAs were challenged by the unsuccessful party, to avoid paying uplift fees to a successful party as part of legal costs. So, in other jurisdictions, if the uplifted fees are payable as part of party-and-party costs, it provides an opportunity for there to be additional litigation for the losing party to challenge the validity and application of the CFA. We want to avoid this.

Second, section 115D concerns questions on the validity and enforceability of a CFA.

In determining such questions, the Court will examine whether the requirements of a CFA as set out in section 115B have been met, and whether the CFA is void or voidable based on usual contractual principles, such as incapacity, mistake, misrepresentation and so on.

The Court will also have regard to the circumstances in which the agreement was made and the interests of all parties to the agreement, that is, the client and the lawyer, taken as a whole.

The Court should also consider the purpose and context of a CFA when determining its enforceability. As an example, the mere fact of an uplift should not call the CFA into question, although the amount of uplift should be commensurate with the risk undertaken by the lawyer.

As the CFA is a contract between the client and the lawyer, such an approach is based on well-established contractual principles and provides certainty to parties.

Sir, let me now move on to the next set of amendments.

Clause 2 seeks to refine the scope of representation of a foreign lawyer in certain proceedings in the SICC, particularly international corporate debt restructuring and insolvency cases.

In the last five years, we have made tremendous progress to our corporate debt restructuring and insolvency regime. Our laws have remained progressive, open and modern, whilst balancing the interests of creditors, debtors and other stakeholders, all of whom have an interest in particularly large, cross-border, complex insolvencies. As an indicator, Sir, in 2020 alone, there were more than 100 restructuring–related applications.

The proposed amendment seeks to build on this momentum and enhance Singapore as a premier centre for debt restructuring and insolvency matters both regionally, as well as globally, internationally. Such matters typically involve a multi-jurisdiction dimension and significant foreign elements, including proceedings in foreign courts, which may otherwise not be heard in Singapore.

The SICC was identified by the Committee to Strengthen Singapore as an International Centre for Debt Restructuring in 2016, as a conducive forum to hear insolvency matters with international elements and multi-jurisdictional issues.

The SICC was established in 2015 to hear transnational and commercial disputes. It broadens and complements existing dispute resolution options.

The proposed refinements leverage on SICC's strengths and attractive infrastructure and seeks to facilitate the efficient and effective presentation of arguments and resolution of debt restructuring and insolvency proceedings in the SICC.

First, the SICC's jurisdiction over international restructuring and insolvency cases was clarified by the Courts (Civil and Criminal Justice) Reform Act 2021. And in connection with that, clause 2 of this Bill proposes to refine the scope of a foreign lawyer's representation.

Corporate debt restructuring and insolvency work can be complex, and proceedings will often involve transnational and interconnected issues, with mixed issues of foreign and local law, along with mixed issues of law and fact.

The proposed refinements here seek to facilitate collaboration between local and foreign lawyers for the efficient and fair resolution of such cases before the SICC. In turn, it will benefit litigants and other stakeholders and support the growth of international cases being heard in Singapore.

Let me just briefly take Members through the proposed amendment.

First, a foreign lawyer with full registration may submit on matters in the prescribed proceedings, subject to the following restrictions: one, the foreign lawyer will only be allowed to submit on matters with permission granted by the Court; and two, the foreign lawyer will not be permitted to make a submission on a matter of Singapore law.

Second, subsidiary legislation may provide for the various categories of specified proceedings that these refinements will apply to; factors that the Court may consider in deciding whether to grant permission to the foreign lawyer; and exceptions to any of these restrictions. So, these are the points that will be dealt with in subsidiary legislation.

At this juncture, I would like to highlight that I am also moving an amendment to the Bill, at the Committee stage, to clarify that a foreign lawyer with full registration will be able to appear and plead, subject to the restrictions proposed by clause 2 of this Bill, in proceedings preliminary to the prescribed relevant proceedings and relevant appeals.

This will align this Bill with the Courts (Civil and Criminal Justice) Reform Act 2021 that I mentioned earlier, which introduced a further category of "preliminary proceedings" in section 36P(1) of the Legal Profession Act, in which a foreign lawyer with full registration may appear and plead in.

Sir, with the introduction of the refinements above, the Bill will further MinLaw's efforts to enhance Singapore's attractiveness as a dispute resolution hub. With that, Sir, I beg to move.

Question proposed.

Mr Deputy Speaker: Mr Murali Pillai.

1.06 pm

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 of extra legal factors, for example, the concern on the part of counterparties to stay out of courts. These factors are obviously frivolous on their own because we are talking about legal merits of the case. 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.

Mr Deputy Speaker: Mr Lim Biow Chuan.

1.15 pm

Mr Lim Biow Chuan (Mountbatten): Mr Deputy Speaker, like Mr Murali who spoke earlier before me, I declare my interest as a practising lawyer.

For many years, lawyers in Singapore are guided by the laws against maintenance and champerty. Section 107 of the Legal Profession Act provides for an express prohibition against a lawyer having an interest in the lawsuit of his client.

Section 107 says a solicitor must not (a) purchase or agree to purchase the interest or any part of the interest of his client or of any party in any suit, action or other contentious proceeding brought or to be brought or maintained; or (b) enter into any agreement by which he is retained or employed to prosecute any suit or action or other contentious proceeding which stipulates for or contemplates payment only in the event of success in that suit, action or proceeding.

Section 107(3) provides that "A solicitor is subject to the laws of maintenance and champerty like any other person."

In Rule 18 of the Legal Profession (Professional Conduct) Rules, it was stressed that "A legal practitioner or law practice must not enter into any negotiations with a client (a) for an interest in the subject matter of litigation; or (b) for remuneration proportionate to the amount which may be recovered by the client in the proceedings."

Sir, the rationale of these rules is based on the conventional wisdom that the “Advocate and solicitor must maintain his independent and professional standing (unaffected by any personal interest in the outcome of a matter) in order to act effectively in representing his client’s interests.”

As recent as in 2013, the Court of three Judges suspended a lawyer, Mr Kurubalan s/o Manickam Rengaraju, for six months for breaching section 107 of the Legal Profession Act and, at that time, Rule 37 of the Professional Conduct Rules because he entered into a champertous agreement with his client.

In the decision by the Court of three Judges, the Court went through the reasons for the law against champerty. At paragraph 40, the Court said:

"Maintenance is defined as officious intermeddling in litigation (see Hill v Archbold [1968] 1 QB 686 at 693) and champerty is a particular form of maintenance where one party agrees to aid another to bring a claim on the basis that the person who gives the aid shall receive a share of what may be recovered in the action".

Sir, I acknowledge that quite a few countries have abolished the law against champerty, for example, the UK, Australia and Canada. I also acknowledge the explanations given by MinLaw in its media release on 1 November 2021 explaining the Government’s rationale for amending the Legal Profession Act to allow for the Conditional Fee Agreement (CFA). One of the key principles which I agree with is that CFAs help enhance access to justice by providing business or individuals with additional funding to pursue meritorious claims, which they may otherwise not pursue. Another advantage is that it levels the playing field for Singapore lawyers in areas, such as international arbitration or SICC proceedings, where the counterparts in the other countries may have access to such types of funding.

Nevertheless, I also wish to express my concern that the rationale for the rule against champerty and maintenance are still very applicable today, even if some countries have already abolished the law.

One of the rules, as stated in Rule 4 of the Professional Conduct Rules, is the lawyer's paramount duty to the Court as an officer of the Court and this duty takes precedence over the legal practitioner’s duty to the legal practitioner’s client. Let me say that again. A lawyer as a paramount duty to the Court as an officer of the Court and this duty takes precedence over the lawyer's duty to his client.

So, may I ask the Minister, what are the safeguards to prevent a lawyer from subverting the course of justice if he has a vested interest in the outcome of the legal proceedings? As Lord Denning observed in a 1962 judgment “in Re Trepca Mines (No 2): "The common law fears that the champertous maintainer might be tempted, for his own personal gain, to inflame the damages, to suppress evidence, or even to suborn witnesses."

Sir, currently, the amendment defines "prescribed proceedings" to mean proceedings as prescribed in the regulations. However, later, if "prescribed proceedings" is extended to other forms of litigation in the future, will it result in more litigation suits because of the personal stake of the lawyers in the outcome of the lawsuits? In 2008, 21 people were arrested in Hong Kong for champerty, maintenance and conspiracy. These people were recovery agents "helping" accident victims on a "no win, no fee" basis. One of the people arrested in Hong Kong was a lawyer.

How would the Police deal with an unscrupulous lawyer or his agents in Singapore who may decide to stake out hospitals to look out for victims injured in road accidents or industrial accidents? I believe there are complaints by insurance companies against lawyers or sometimes their agents who are seen as what we call “ambulance chasers”. These people are quick to ask the victims to sue in order to claim for more damages and legal costs. Would this group of people be able to circumvent the law by asking the accident victims to sign the CFA?

Third, who will protect the interest of the vulnerable clients if the lawyer has an interest in the outcome of the suit? For example, if a lawyer wishes to settle the case because his legal costs are protected, then that lawyer may then insist on a settlement even though the client may disagree to the terms of settlement. In such a case, the interest of the client and the interest of the lawyer may no longer be the same.

Finally, like Mr Murali Pillai who spoke before me, I am concerned about the uplift fees. For uplift fees, will there be a prescribed range of uplift fees allowed? Under what circumstances would the uplift fee be subject to a charge for overcharging made against the lawyer? I hope that the Minister can clarify my concerns because the Court does sometimes look to the debates in Parliament to understand the intent of the law.

Mr Deputy Speaker: Mr Louis Ng.

1.22 pm

Mr Louis Ng Kok Kwang (Nee Soon): Sir, this Bill will take a landmark step in providing CFAs between lawyers and clients in certain cases. This will help level the playing field for Singapore lawyers in international dispute resolution and also increase access to justice. I have three points of clarification.

My first point is about the coverage of the Bill’s CFA framework. This Bill will establish a single framework for CFAs. For a start, it appears that CFAs will be permitted for international and domestic arbitration proceedings, proceedings before the Singapore International Commercial Court, and related Court and mediation proceedings. These are likely to be transnational, high-value commercial disputes.

The Ministry has indicated that it will continue to study whether CFAs can promote access to justice in other categories of proceedings, including domestic proceedings.

But the consideration for cases on the other end of the spectrum – domestic cases involving indigent litigants, will be different. In cases involving indigent litigants, there may be a greater need to be more protective of the interests of the litigant, as compared to those of parties in high-value commercial disputes who will likely be well-advised.

[Mr Speaker in the Chair]

In establishing the overarching framework under the Bill, can the Minister share what steps the Ministry has taken to ensure that the framework is sufficiently flexible to extend to all categories of disputes? The lessons learnt from initial applications of the CFA framework to high-value commercial disputes may have limited application to cases involving indigent litigants. How will the Ministry study the suitability of CFAs for enhancing access to justice for indigent litigants?

My second point is about plans for allowing CFAs to act in international mediation proceedings.

Singapore has taken steps to position itself as a global mediation hub. The passing of the Mediation Act in 2017 provided a framework for international mediation in Singapore. The Ministry has indicated that CFAs will be allowed, as a start, to international and domestic arbitration, certain proceedings in SICC, and related Court and mediation proceedings. Can the Minister clarify whether CFAs will be allowed to act in international mediation proceedings that do not arise from permitted categories of arbitration or litigation?

My third point is about the classification of cases that are transmitted to other forums. It is not unusual for cases to be transmitted for hearing before different forums. For instance, the current Rules of Court contemplate the transfer of proceedings from the General Division of the High Court to the SICC, and vice versa.

Given that CFAs will only apply to certain categories of cases for a start, can the Minister clarify how the CFA framework will take into account cases that are commenced in one forum, then transmitted to another forum? Is there a possibility under the proposed CFA framework that a case may be commenced in a forum where CFAs are permitted then transmitted to another where CFAs are not permitted? Sir, notwithstanding my clarifications, I stand in support of the Bill.

Mr Speaker: Mr Zhulkarnain Abdul Rahim.

1.25 pm

Mr Zhulkarnain Abdul Rahim (Chua Chu Kang): Mr Speaker, Sir, I rise in support of this amendment Bill. At the outset, I declare my interest as an international commercial disputes lawyer.

Singapore is a leading international dispute resolution hub because our legal profession, judiciary and laws are not only leading the cutting edge on the forefront of legal development, but they have also adapted to keep us ahead of the curve to meet the ever-changing needs of global legal demands.

I welcome this Bill which seeks to continue to firmly strengthen Singapore’s position as an international legal and dispute resolution hub.

I will be focusing my speech on CFAs. CFAs will increase access to justice for litigants. Since 2017, the law has already provided availability of Third Party Funding as an option in limited circumstances, for example, in international and, subsequently, domestic arbitrations.

There is already a growing trend of alternative funding methods for litigation and arbitration globally. This is especially important given the economic downturn and conservative outlook faced by many corporate clients all over the world.

On contingency fees, Prof Patricia Danzon, an American economist stated: "The common allegation that the contingent fees induces attorneys to bring claims with little legal merit has no basis in logic. The fact that the fee depends on winning provides an incentive to screen out issues with little legal merit. An incentive that is lacking with an hourly fee." Further, various studies have shown that CFAs or similar arrangements discourage lawyers to take on unmeritorious cases. The CFAs provide a financial disincentive not to commence frivolous suits or claims.

However, I do have five clarifications for the Minister.

Firstly, with parties left on their own to decide on the uplift or finer details of the CFA, will there be some practice guidelines on the quantum of the uplift within the CFA? The Bill itself seeks to address this by placing a restriction that the uplift or contingent fee cannot be a percentage of the claim or damages to be recovered. However, should there perhaps be a mandated cap on the uplift in certain circumstances? This is to prevent the uplift from being too disproportionate to what would have been reasonable standard of costs?

I appreciate and welcome the fact that lawyers may still be held liable for overcharging under the CFAs, pursuant to amendments under the Legal Professional Conduct Rules. However, as alluded to by Members Mr Murali Pillai and Mr Lim Biow Chuan, guidance as to how much of an uplift can also provide helpful guidance as to what is excessive or overcharging in a CFA. In the UK, contingency fees, or damages-based agreements (DBAs), have been permitted for contentious work in litigation or arbitration proceedings in England and Wales. This means that lawyers can conduct litigation and arbitration in this jurisdiction in return for a share of any damages.

Depending on the type of cases, there are differences in the limit of cap for such a contingency fee. In this regard, would the Ministry also consider in the future to finetune the cap in the principles of proportionality, for example, a 50% maximum cap of uplift from the agreed fee. If the CFAs are extended to other categories of disputes, then this cap can be adjusted downwards to reflect the greater consumer or client protection required or vulnerability of certain groups of clients in the future. A cap may also help offer the best balance to prevent legal costs from spiraling upwards and, at the same time, attract the optimal amount of disputes to Singapore.

My second clarification is in relation to the resolution of disputes in CFAs. The new section 115C states that the uplift fees will not be recoverable from the losing party in respect of party-and-party costs. Thus, the uplift fees will have to be paid from the pocket of the client to the lawyer. I welcome this amendment as it means that there is a lesser risk that CFAs may impact party-and-party costs and costs of litigation all around.

The Bill also allows that such uplift in CFAs can also be based on reduced hourly rates, instead of a lump sum uplift. This is very progressive and much welcomed.

In the UK, the permissibility of such "hybrid" arrangements was not clear within its legislation and was the subject of an English Court of Appeal case which only recently clarified the position.

Given the possibility of disputes arising out of the CFAs, can I confirm if lawyers and clients can still refer their solicitor-and-client fees in the CFAs for taxation in the case of a dispute? This will be more straightforward and cost-effective than filing a separate claim in Court or arbitration for a dispute under the CFA.

My third clarification is in relation to protection of lawyers entering into CFAs. May I ask and confirm that lawyers agreeing to CFAs would not be held personally liable for adverse party-and-party costs when acting under such CFAs unless, of course, if there are circumstances of personal or professional misconduct in which case that attracts personal liability for costs.

My fourth clarification is on the duty of disclosure. To what extent should such CFAs be disclosed by way of statutory or regulatory obligations, for example, through SGX announcements or audited yearly financial statements? This is because in an ongoing litigation or arbitration proceeding, such disclosures may cause a certain perception of pressure to succeed on the part of both the client and the party to that CFA. This may impact the dynamics between the two competing parties or conflicting parties in the dispute, for instance.

My last clarification is centered on the protection for the client. I understand from MinLaw's press release that safeguards will be implemented in the subsidiary legislation. What are these safeguards to protect a client entering into CFAs and how long, perhaps, would be the cooling-off period for a client in the CFAs? After a CFA has been entered into and, for instance, a client changes lawyers, or the lawyer withdraws from the case, what are the safeguards or guidelines to prevent a client being left in the lurch after having already entered into the CFA.

Perhaps the Ministry can consider a public awareness campaign to assist potential clients on the pitfalls of a CFA and what can be done in the event of a withdrawal or termination of the same.

Sir, CFAs may inadvertently evoke a diverse set of views and responses among lawyers and users of our legal system. Some view such arrangements as the salvation for the impecunious. Others fear that they open the floodgates of litigation of frivolous claims. However, one thing for certain, the calibrated approach towards CFAs as taken by the Ministry in this Bill will help cement Singapore as a leading dispute resolution hub in the world.

Notwithstanding my clarifications and comments, I stand in support of the Bill.

Mr Speaker: Mr Raj Joshua Thomas.

1.34 pm

Mr Raj Joshua Thomas (Nominated Member): Sir, I declare my interest as a practising litigation lawyer. And as a litigation lawyer, I have, from time to time, come across a situation in which a client with a genuine and reasonable commercial claim shies away from pursuing their claim due to the potential legal costs they could face if they were not successful in their action. Of course, all cases, regardless of the merit of the claim, have the potential of not succeeding due to various factors like the performance of witnesses or the introduction of new evidence or counterclaims. So, there is always a risk that a litigant could ultimately lose and be saddled with the costs of both its own lawyers and that of the other parties.

In this regard, conditional fee arrangements, or CFAs, will provide some comfort to potential litigants to pursue their claims as their lawyers fees will be contingent on them winning their case. A typical CFA in the UK, for example, stipulates that a lawyer acts on the basis that he will be paid nothing in fees if his client loses his case. In the event that the client succeeds, he would be paid his normal fees, and may also earn an uplift agreed in advance, over and above the normal fees. Importantly, the fee uplift must be based on lawyer’s normal fees, not the quantum of damages awarded. This same type of arrangement will now be allowed by the amendments to the LPA.

I support the amendment of the Act to allow for CFAs. As stated by the Minister, the amendments will help enhance access to justice, level the playing field for Singapore lawyers vis-à-vis other jurisdictions that already allow such arrangements and discourage lawyers from pursuing weak and frivolous claims, as they run the risk of not being paid in the event they do not win.

Aside from these, there are ancillary dimensions that the relevant authorities and lawyers should consider once CFAs are allowed. I will cover three areas. First, the ethical considerations in structuring and offering CFAs; second, After-the-Event Insurance; and third, ensuring that lawyers retain reasonable latitude to determine the terms of their CFAs.

As regards ethical considerations, lawyers are bound by duties owed to their client. These duties may sometimes create tension with the financial pressures of running the business of a law firm. CFAs may exacerbate these tensions as they give the lawyer a more pronounced financial interest in the outcome of the matter underlying the CFA. For example, depending on the terms of the CFA, a lawyer may find himself in a situation where although it may be in the client’s interests to accept a settlement offer, it may not be in his, because he may not get paid anything. The converse could also be true if a particular CFA treats a settlement essentially as a win – it may lead to the lawyer advising the client to take the settlement and to forego proceedings because there is a guaranteed fee to be earned as compared to going to trial or the arbitration hearing, which would still bear some risk. This could lead to undersettling, which is an issue that has been identified in the UK’s implementation of CFAs.

Ultimately, these approaches may lead to outcomes that are not the most advantageous to clients. Practice guidelines could be introduced to guide lawyers, for example, to reduce to writing their advice to clients as regards any settlement under a CFA, so that it is unambiguous as to what exactly was the advice provided by the lawyer in the event of a possible future lawyer-client dispute.

Another area of concern would be how the concept of CFAs are communicated by law firms to clients, including on their websites and advertisements. The use of the term "no win, no fee" may technically be correct as regards fees, but it obfuscates the fact that there would still be some cost incurred by the client, for example, filing fees and other disbursements. For arbitration, there would also be the costs of the tribunal.

In this regard, lawyers must be careful not to inadvertently mislead members of the public or clients that there is absolutely nothing to be paid if the litigant is not successful. Guidelines could be drawn up by the Ministry in this regard.

Clients are also unlikely to fully understand how a CFA works, especially the terms and conditions of what constitutes a "success" and when an uplift would apply. It is, therefore, essential that the Ministry sets out clearly the information that a lawyer would need to furnish its client when it is considering to engage a lawyer under the terms of a CFA.

The Ministry could, therefore, consider drawing up pro forma documents or templates in a form that would be easily understood by members of the public, that could be mandated for use by lawyers when they discuss CFAs with clients.

The hon Minister mentioned earlier that MinLaw will be drawing up guidance together with the Law Society and I hope that my suggestions above can be taken into consideration when drafting this guide.

Another area is the risk assessment that lawyers will themselves have to do when considering whether to offer a CFA to clients and on what terms. In this regard, I would also like to suggest that some training be provided, including in the Continuous Professional Development programme, for lawyers to pick up the knowledge required to undertake this type of risk assessment and how this risk will be translated into the terms of the CFA they offer including the quantum of uplift.

CFAs have been allowed in the United Kingdom since 1998, and I am moving on now to my next point on After-the-Event insurance. One feature that has emerged is the dependence of the CFA market on the existence of After-the-Event insurance or AEIs. AEIs are designed to assist litigants by allowing them to offset some of their legal costs in litigation, in particular, the costs of the other party’s lawyers if they lose their case. AEIs also allow a litigant who may have a perfectly viable case but limited financial means to obtain access to justice. Several insurers in Singapore already offer AEIs, not only for arbitration but for civil and commercial litigation as well. I am, however, unable to find statistics on how prevalent the use of AEIs are.

Nonetheless, AEIs are a useful feature for litigants to consider, as CFAs only ameliorate the risk of bearing their own lawyer’s fees if they lose their case, but not the opposing party’s costs. This will further the objective of access to justice, and the Ministry and the Law Society may wish to consider increasing public knowledge and understanding of this insurance. In this regard, the use of AEIs may increase with the introduction of CFAs. As such, it would also be important for the Ministry and MAS to monitor how AEIs are being offered, and whether it is necessary to introduce regulations on such insurance schemes to ensure that insurance companies do not occupy a gatekeeping position in the civil justice system.

Finally , Sir, the new section 115B(7) will empower the Minister to make regulations on CFAs. These include that the Minister may prescribe, amongst other things, the form, the terms and conditions of CFAs, the maximum limits on remuneration or costs including the uplift fee, information a solicitor must provide to a client before a CFA is entered into, and requirements as regards parties to a CFA. I would urge the Ministry to regulate the market with a light touch to allow lawyers to negotiate terms appropriate to the complexion of each case, for example, providing for the payment of basic or interim fees, or fees arising from ancillary proceedings that were not originally envisioned when the CFA was entered into.

Sir, on the whole, CFAs will support the development of the legal sector in Singapore and provide an avenue for litigants with limited means, as long as the ethical and commercial implications are addressed, through regulation where necessary. Provisions to make these regulations are also included in the amendments and will be rolled out by the Ministry accordingly. Sir, notwithstanding my clarifications and suggestions, I support the Bill.

Mr Speaker: Minister Edwin Tong.

1.43 pm

Mr Edwin Tong Chun Fai: Mr Speaker, Sir, I thank all the Members who have spoken in support of the Bill.

Before I go into addressing the specific queries raised by Members, let me just make three broad points.

The first is, we appreciate that in introducing the CFA Framework, we have moved away from some of the traditional structures that lawyers are used to – maintenance, champerty – Mr Lim spoke about it; Mr Murali Pillai as well. Which is why we have chosen to do this incrementally, cautiously. We set up a framework to deal with prescribed proceedings first, dealing with the scenario where in most, if not all, of those circumstances, the clients involved are likely to be sophisticated clients, understanding the commercial context and appreciating the need for this. And at the same time, putting our lawyers who compete with foreign lawyers for international work, on the same platform, so that they can also, like their foreign counterparts, go in to make a bid for work on the basis of using CFAs.

So, we start with that principle and to take up Mr Murali Pillai's point, as we study, and we have not completed our study – to extend this to other proceedings, we will carefully decide, we will consult widely – and in the same way as Mr Pillai has said we have done leading up to this Bill, we will continue to do so – all stakeholders.

We will decide at that stage whether an extension is appropriate and if so, with what kind of additional criteria as safeguards. As Members would know, even with this framework that we have put in a cautious manner for sophisticated clients, we are already putting in safeguards here. So, that is the first point that I would make about the framework.

The second point is that I have heard several comments about the agreement: should we regulate the agreement, should we put this in pro forma or should we put in some standard terms?

I also heard Mr Raj Joshua Thomas said earlier that we should also have a fee structure that allows lawyers to negotiate and that, in his words, is best "appropriate to the complexion of the case". This, really, is the raison d'etre behind the CFA – to let the parties decide what are the triggering requirements to allow a party to decide when an uplift would be appropriate, depending on the context of the particular case. And it is in this context that the interest of the lawyer and the client can best be aligned – not separated, but best be aligned.

Despite that, we continue to have oversight over the agreement because, just as we have done in Part 8 of the LPA for agreed fees, not CFAs but agreed fees, the Court continues to retain a discretion to have an inquiry into, and oversight of, these agreements. Likewise, in the context of the CFA, that remains the same. So, the Courts will still have oversight of the uplift, and in Mr Murali Pillai's words: "to determinate based on the reasonableness of the case, the context of the circumstances, the relevant weightage of the risks taken, the complexity of the case, the length of the case. All of these are factors which the Court takes into account. Which is why it would not be possible upfront to state, you can only uplift by X, or 2X, or 3X", because it may be appropriate in some cases, it may not be appropriate in other cases. So, that is the second point I will make.

The third point I will make is that throughout Members' speeches, I have heard that because this is a new development in our framework, we should be giving guidance. Certainly, we have committed to doing so upfront. That is the reason why we have consulted extensively, both open as well as closed, and we will continue to do so and work with Law Society to ensure that lawyers and users alike, clients, are familiar with the framework and, as far as we can, provide guidance which does not tie the hands of solicitors as they negotiate these CFAs but, at the same time, give guidance as to what the framework requires of the CFAs.

Sir, with that, let me now address the specific queries raised by Members.

Mr Louis Ng asked if CFAs would be allowed to act in international mediation proceedings that do not arise from permitted categories of arbitration or litigation. My Ministry is currently assessing standalone international and domestic mediation proceedings holistically, as part of a separate ongoing study of the CFAs. The potential benefits that CFAs can offer in the use of mediation have to be viewed against the interplay between international mediation proceedings and domestic mediation and litigation proceedings. So, for instance, at present, there is no clear delineation in existing legislation between mediation proceedings that are "international" and those that are "domestic". If parties to an "international" mediation do not reach a settlement, the dispute may proceed to be heard in the SICC or the High Court. As CFAs will presently not be permitted in the High Court, this may then create an ambiguity for lawyers and litigants, given that proceedings on one stream in the High Court will not be allowed for CFAs and those at the SICC will be allowed for CFAs.

Further, mediation proceedings that are more domestic in nature may involve litigants of a wide range of profiles that need differentiated treatment and protection, for the reasons I mentioned earlier. And so, this requires some further study and consideration.

For these reasons, to answer Mr Louis Ng's point, my Ministry has assessed that it would be prudent to consider standalone international and domestic mediation proceedings holistically, as part of an ongoing study of CFAs.

Second, Mr Louis Ng asked how the CFA framework will take into account cases that are commenced in one forum and transferred to another, and whether it is possible that a case may be commenced in a forum where CFAs are permitted and then transferred to another forum where CFAs are not permitted. The answer to this is as follows.

Where proceedings are transferred between two fora in which CFAs are allowed – for instance, from arbitration to related Court or mediation proceedings – then, obviously, the CFAs will continue in the case of the solicitor and the client. So, CFAs will be allowed in those circumstances.

Generally, otherwise, CFAs are not permitted in cases which are transferred from or to a forum where CFAs are not permitted.

So, in the particular example that Mr Louis Ng highlighted about the High Court and the SICC, for the time being, CFAs will not be permitted for proceedings that are transferred from the High Court to the SICC and vice versa. We will study this further and consider whether we should change this, but as a starting point, under this framework, as long as one of the proceedings, either from which it is transferred or to which it is transferred, does not allow the CFA, then the CFA will not be allowed.

This approach towards CFAs and the transfer of forums will avoid any unintended consequences and risks to litigants arising from CFAs, and we will make clear the position in subsidiary legislation.

Mr Murali Pillai asked about the circumstances of enforcement by the Court, with reference to the proposed section 115D(4) and (7) of the Bill he mentioned. The sections referenced by Mr Murali Pillai are aligned with the current 113(3) and 113(7) of the current LPA, in terms of the Court’s powers to deal with contentious cost agreements.

The CFA is, in essence, a contract. And I made the point earlier that parties should have freedom of contract to negotiate the terms of the CFA – and it should be enforced by the Court like any contract if the requirements in the proposed 115B of this Bill, which sets out the regulatory framework and the requirements of the CFAs in this case, have been complied with; and also, of course, if the CFA is not found to be void or voidable for one of the grounds listed in 115D.

On taxation of solicitor-and-client costs under the CFA, Mr Zhulkarnain Abdul Rahim asked whether the taxation process in Court will still be applicable in respect of solicitor-and-client costs under a CFA. He also asked if disputes regarding the validity of CFAs would fall under the scrutiny of taxation proceedings, or if they should be subject to separate Court or arbitration proceedings.

Generally, Sir, solicitor-and-client costs under a CFA are not subject to a taxation. This is provided under section 115C(5) of the Bill and it is similar to the position for contentious business agreements under the current section 112(4) of the LPA. If there are questions, however, on the validity or the effect of a CFA, parties should bring an application to Court under section 115D(2) of the Bill.

Under section 115D(5) of the Bill, if the Court finds that the CFA either does not satisfy the statutory requirements or is found to be void or voidable, then the costs under the CFA can then be assessed in accordance with the rules applicable to taxation.

Mr Zhulkarnain Abdul Rahim also sought confirmation that lawyers agreeing to CFAs would not be held personally liable for adverse party-and-party costs under a CFA, unless there are circumstances of personal or professional conduct that attracts personal liability for costs. That is correct. Under a CFA, a client will continue to be liable for any cost orders that may be made against the client. This will also be clarified in subsidiary legislation.

On Mr Zhulkarnain Abdul Rahim’s query about the disclosure of CFAs vis-à-vis regulatory obligations, such as SGX announcements or audited financial statements, let me reiterate again a point I made at the start of the reply speech, that CFAs really are an additional fee structure. It is an agreement that allows lawyers and their clients to work out a fee structure. CFAs are not intended to change, nor do they change, any existing statutory or regulatory obligations relating to disclosure, from what is expected if normal fee agreements are entered into by companies. So, in assessing whether you need to make an announcement, the usual criteria will apply, whether it is material in the particular context of the circumstances of that particular announcement. Companies and lawyers will still have to make an assessment and assess the extent to which a CFA will need to be disclosed, in the context of existing guidelines and the regulations governing disclosures.

Mr Murali Pillai asked how concerns relating to CFAs that had been highlighted in the past – I think Mr Murali Pillai cited some past speeches and examples – had been addressed.

First, dealing with potential conflicts of interest, I had again mentioned how, in the context of a proper CFA, in this case at least, the sense is that the interest between a solicitor and his client in the CFA can be aligned. But to Mr Murali Pillai's point about a potential conflict arising because of a direct financial interest in the outcome of the litigation, Mr Murali Pillai also asked whether the lawyer may advise on a settlement instead of litigation in order to settle the matter earlier and receive payment. This is notwithstanding that the client will receive a lower amount than what he may reasonably expect if the matter proceeds to litigation.

Mr Raj Joshua Thomas also highlighted a similar scenario. He used the phrase "under-settling". If parties have an agreement and you choose to decide that there will be a payment based on a settlement, then, obviously, if you define the terms of the settlement not below a certain amount, or at least containing these terms, that will protect the client's interest, to ensure that there is no under-settling in this case; not just any settlement, but a settlement that comports with the client's interest in the outcome.

Under a CFA, the standard expected of a lawyer in advising how a case should be conducted or proceeded on remains the same as that of a normal fee agreement. So, what I said earlier in my opening speech about the relevance of the legal professional (PCR) rules, they continue to apply.

Among others, Rule 17 of the PCR requires lawyers to explain a proposal of settlement clearly and properly to the client; or any other offer or position taken by another party, which affects the client. At the same time, the lawyer must also evaluate, together with the client, whether any consequence of a matter justifies the expense or the risk to be undertaken. So, if you choose to proceed with the case, there must be an assessment by the lawyer that this would be in the best interest of the client, bearing in mind, obviously, that, in litigation, there are various vicissitudes that you cannot control – points which Mr Raj Joshua Thomas and several other Members highlighted.

If there is a reasonable prospect of the client recovering a higher sum of money in litigation, as compared to settling the matter, such that pursuing litigation would justify the expense of doing so, the lawyer would be obliged to advise his client of the same. These are principles which many of the lawyers who have spoken would be familiar with.

Second, the prospect of increased frivolous litigation and raised litigation costs from CFAs – several Members have touched upon this. We expect that the introduction of CFAs would, on its own, per se, be unlikely to lead to an increase in frivolous litigation. In CFAs, the remuneration of lawyers depends on the successful outcome of the cases. Generally, lawyers are also rational economic actors and they would likely have little commercial reason to support frivolous or weak litigation. The risk of little or no likelihood of monetary return for their efforts would not be commercially justifiable.

Further, as the lawyers may have to fund the litigation until its conclusion, or at least a portion of it, there is likely to be less tendency to pursue all possible avenues at any cost and a greater tendency to be more cost-conscious on the contrary and cost-effective.

At the same time, to assuage Members, the experiences of other jurisdictions also lend support to this. Members might recall that I said earlier that we took a cautious approach. We studied the approach in other jurisdictions and learned from their experiences. For instance, in England and Wales, data suggests that CFAs have not caused an increase in unmeritorious cases. A study on the impact of CFAs in clinical negligence cases over a period of 10 years showed that there has been an increase in cases. But, over a period of 10 years from 2006 to 2017, even in Singapore, we saw an increase in cases. So, it is not because of the CFAs. But what is important is that the proportion of successful claims in this period did not change. In fact, there were more successful claims funded by CFAs.

This underscores the role of the CFAs in enabling the pursuit of meritorious claims. Studies in Australia have also showed that there had not been a significant uptick in unmeritorious suits since the introduction in their jurisdiction of the CFAs. And we believe that Singapore’s experience is not likely to be different. As mentioned in my earlier speech, we will also be implementing rules and safeguards to minimise the abuse of CFAs.

On whether litigation costs will be raised, let me reiterate that existing professional obligations continue to apply, and this includes the rules against overcharging. Even if the CFA provides for the payment of an agreed fees, the PCR prohibits overcharging – a point I made earlier – even in a context of today's rules on agreed fee without the uplift.

If the lawyer cannot in good faith charge the fee, taking into account factors, such as the nature of the work done or legal work concerned and the time necessary to undertake the legal work – points which Mr Murali Pillai made – then, these are factors which will be taken into account by the Court when assessing the veracity of the agreed fee.

We believe that legal costs will continue to be moderated and also adjusted by the market itself. If a client finds that a lawyer’s fees are too high, they are free to engage another lawyer who may offer a different range of fees and different uplift formula. Lawyers are also free to adjust their fee arrangements to better place themselves in competition. And Mr Raj Joshua Thomas had himself alluded to this, in urging for lawyers to be allowed to negotiate terms appropriate to the complexion of the particular case concerned.

Mr Murali Pillai asked what would constitute a fair amount for lawyers to charge as an uplift, so that this will not be viewed as a case of overcharging. I think I covered this in my initial remarks. And I think what we want to do is to say that we do not proscribe how parties may choose to structure the fee arrangement, their CFAs, but at the same time, have oversight by reasons set out in the framework, with requirements that they must fulfil, including the "cooling off" period, including the fact that it must be in writing, and also ensuring that parties do not agree a fee that is based on a proportion of the returns from damages or otherwise, in the case itself, which would then has no co-relation to the effort by lawyers.

But save for that, I think as Mr Pillai says, look at the reasonableness in the context of each case. I would say that the mere fact that there is an uplift is not a reason for setting aside the agreement. That is the whole raison d'etre behind the CFA.

I would add a further point that when you have limits on uplift fees in other jurisdictions, they are typically legislated because the fee arrangement in those jurisdictions extend to access to justice type of litigants. They help access to justice indigent litigants to access the courts. And in those cases, you will more likely find a cap on the amount to which you can uplift.

In this case, at least at the start of our framework, we do not apply the framework to those types of cases and those types of litigants. And so, in our case here, we do not need to put a limit on the fee arrangements and the uplift amounts. But as I mentioned earlier, if we extend our framework into other types of cases, this will be a fresh consideration that we will review at the appropriate time.

Mr Zhulkarnain asked about other protection mechanisms for litigants and what safeguards are available for a litigant who had entered into a CFA with a lawyer and thereafter changes lawyers; or whose lawyer decides to withdraw from the case.

My first response really is to ensure that, as you prepare the CFA, structure the terms which will cater for these eventualities. Sometimes, parties change lawyers; sometimes, there might be changes in the way in which the case proceeds. It is best to ensure that, as far as possible, in terms of an agreement, you cater for these scenarios upfront. So, lawyers and their clients should discuss and provide for how and when the CFA may be terminated, and if it is terminated before the conclusion of the case, how would the remuneration structure and what triggering conditions will apply in those cases. And this, I would say, is no different from current traditional fee agreement that is based on either time cost or conclusion of some milestones and so on. So, parties should deal with this as a matter of agreement.

Where a client changes lawyers after a CFA is entered into with the first lawyer, section 115F of the Bill contemplates this scenario and provides for the consequences of such change.

Either party can apply to the Court and the Court will have the same power to enforce or set aside the agreement as if the change had not occurred, having regard to the relevant terms of the CFA.

With regard to fees payable to the first lawyer, the Court may order the amount due in respect of anything done by the lawyer under the CFA to be assessed. So, there could be a scenario where, before the conclusion of the case, a lawyer is discharged but a substantial amount of work is done. The Court can then make an assessment as to what amount will be appropriate under the assessment, to be paid under the CFA for this lawyer.

The principles are largely similar to existing principles relating to contentious business agreements, as set out in section 115 of the Legal Profession Act.

Where a lawyer withdraws from representing a client under a CFA, existing rules under the PCR will also continue to apply. This includes obligations on the lawyer to take reasonable care to avoid foreseeable harm to the client, such as giving reasonable notice and cooperating with the client's new lawyers. None of these will change with the CFA.

Mr Thomas asked about the importance of guidelines and possibly training for lawyers. I think I had covered that. We will do so and we will ensure that there is sufficient guidance for the market once this is in place.

We will take into account the topics highlighted by Mr Thomas. Some of them will be addressed in subsidiary legislation. Others we can put up guidance together with Law Society, to ensure that lawyers and their clients will be aware of this.

Finally, as I mentioned at the outset, the Bill envisages the possibility of an extension of the framework, a point that I had also covered. But specifically, Mr Louis Ng asked how the framework will be flexible in catering to different categories of disputes. I think Mr Pillai asked how and what are the considerations we have as we consider the extensions of this framework to other types of cases.

Sir, the overarching CFA framework has been designed with the flexibility to enable the framework to be expanded incrementally, step-by-step, after we study and we take into account views by stakeholders.

The main tenets of the CFA framework will be set out and had been set out in the Bill, supplemented by safeguards to be prescribed under subsidiary legislation. The categories of proceedings permitted by the CFA framework will also be set out in the subsidiary legislation. And we took this approach as we anticipated that the profile of litigants would be different for different categories of proceedings and different types of cases. And hence, differentiated and targeted safeguards will be required. There will be flexibility to appropriately adjust the safeguards, as we continue to monitor and refine the framework.

To Mr Murali Pillai's point about the principal considerations, and whether the same level of public consultation will be undertaken, the answer is yes, there will be. The difference in terms of where we are now today on the current framework and where we may expand it to, for lawyers, obviously, when you deal with and compete on the international fora with other foreign lawyers, we want to put our lawyers on the same footing. That may not apply in the context of domestic proceedings.

For domestic proceedings, the main consideration now would be whether we can allow this so that there will be an enhancement to access to justice. Those are the principal considerations. There may be more as we consult but these are the driving considerations. And we will consult with key stakeholders as we look at the landscape and determine whether it would be appropriate to extend this framework to also other types of cases, to promote access to justice. In doing so, we will study also the profile of the likely litigants who will avail themselves of any such expansion and determine in those cases whether some additional form of protection might be necessary for the framework. And if so, we will also prescribe them.

Finally, let me address Mr Thomas' observations on After-the-Event Insurance and its correlation to CFAs, particularly in other jurisdictions. Let me thank Mr Thomas for his views and interest on the subject.

My Ministry is aware of the developments outlined by Mr Thomas and we will review these developments as part of a holistic study of the litigation funding landscape. I would add that After-the-Event insurance is not peculiar and not relevant only to CFAs. They are relevant across the board and generally, supplement and support the litigation funding landscape. So, we will study the After-the-Event insurance in that context and look at whether or not any moves need to be made on that front.

Sir, I believe I have covered all the queries raised by Members, both general as well as specific. My Ministry, as I have said, will continue to review the reforms proposed in this Bill for future expansion and what other safeguards will be necessary. But we believe that the introduction of a CFA framework in this form has the potential to bring multi-faceted benefits. It provides a further avenue for litigants to pursue meritorious claims and levels the playing field for our lawyers, particularly on the international setting.

It will also signal Singapore's progressiveness and our responsiveness to the needs and realities of the industry and further enhance Singapore's status as a premier, first-class dispute resolution hub. We will, at the same time, continue to monitor the impact of the various reforms, keeping our finger on the pulse of developments and lessons learnt in other jurisdictions and apply them contextually to Singapore.

I assure Members that we will continue to stay responsive and engage in active dialogue amongst all stakeholders as we study the progress of our initial framework and look at the extent to which this might be extended to our proceedings. Sir, with that, I beg to move.

2.09 pm

Mr Speaker: Any clarifications?

Question put, and agreed to.

Bill accordingly read a Second time and committed to a Committee of the whole House.

The House immediately resolved itself into a Committee on the Bill. – [Mr Edwin Tong Chun Fai].

Bill considered in Committee.

[Mr Speaker in the Chair]

Clause 1 inclusive ordered to stand part of the Bill.

Clause 2 –

The Chairman: Clause 2. Minister for Law.

Mr Edwin Tong Chun Fai: Mr Speaker, I beg to move the amendment* standing in the name of the Minister for Law, as indicated in the Order Paper Supplement. I had earlier in my speech explained the reasons and the rational for making this amendment.

*The amendment reads as follows:

"In page 2, line 13: after "relevant appeal", to insert ", or any proceedings that are preliminary to any relevant proceedings or relevant appeal,"

Amendment agreed to.

Clause 2, as amended, ordered to stand part of the Bill.

Clauses 3 to 7 inclusive ordered to stand part of the Bill.

Bill reported with amendment; read a Third time and passed.