PT139.S2.P4.Q21

PrepTest 139 - Section 2 - Passage 4 - Question 21

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P1

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. ███████████████ ██████████ ████ ███ ███████ ████ ██ ███ ██████ ██ ██████████ ██ ███ █████ ███████ ██ ███ ████████ ████ ██ █████████ █████ ████ ███████ █████████ ██████ ███████ █████

Context · LRCWA introduced contingency-fee agreements
These are agreements where a lawyer is paid only if the case is successful. Because of the higher risk involved, contingency fees tend to be higher than regular fees.
P2

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LRCWA recommends uplift Fee · A type of contingency fee
"Uplift" in the sense that a lawyer's regular fee will be paid plus a fixed additional percentage.
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LRCWA Rationale · Prevent lawyers from disproportionate gain
And hence safeguards just compensation to plaintiffs.
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LRCWA Recommendation Details · Two requirements for uplift fees
1. This contingency-fee arrangement must be used only a last resort; 2. The lawyer must know that the client is unable to pay normal fee.
P3

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Critique · Too onerous for lawyers
Requires lawyers to investigate client's financial circumstances and estimate probable cost of litigation.
P4

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Critique · Unfair; limits freedom of contract
Why should contingency-fee agreements be available to only the least well-off clients?
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Critique · Main reasons for contingency-fee agreements apply to everyone
1. to provide a way to finance litigation; 2. to shift risk of loss to lawyers.
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Critique · Contingency-fee agreements better align interests
It gives lawyers skin in the game and so should increase their diligence and commitment.
Passage Style
Critique or debate
Show answer
21.

As described in the passage, ███ ██████ ███ ██████████ ████ ███ ███████ ██████ ██████████ ███ ████ ███████ █████████ ██ █████ ███ ██ ███ █████████ █████████████

a

People who join ████████ ██ █████ ███ █████ ██ ██████████ ███████ ███████ ██ █ ███████ █████ █████ ██ █████ ███ ████████ ████████ ████ █ ███████ ███████ ██ ██████████ ██ ███ ███████ ████ ███████████ ██ ███████ █████████ ███ ████ ████████

This arrangement is not analogous. (A) describes one group dividing profits instead of two groups (the lawyer and the client). In (A), multiple people pay before they win and agree to share potential winnings. But in the uplift fee arrangement, clients only pay after they win, and attorneys receive their usual fee plus an extra percentage of that fee.

4%
b

A consulting firm ███████ █ █████████ ███████████ ███ ██████████ ████ ████ ███████ ███████ ████ ██ ██ ███ █████████████ ██████ ███ █████████ █████████ █████████ ██ █████ ████ ██ ████ ██ ████ ██████ ███ █████ ████

This arrangement is analogous. The firm only gets paid if it reduces the company’s expenses, just like the lawyer only gets paid if she wins the client’s case. If successful, the firm gets paid double its usual fee— or, its usual fee plus an additional fixed percentage (100%) of that fee.

76%
c

The returns that ██████ ████ ███ ██████████ ██ █ █████ █████████ ████ ██ ███████ ██ █ ████████ ███████████ ██████ ██ ███████ ███ ██████ █ ███ █████████ ███ ███████ █████ ████ ██ ██████████ ██ ███ ██████ ██ █████████ ████ ████ ████████

This arrangement is not analogous. (B) describes one group (business partners) dividing profits instead of two groups (the lawyer and the client). The business partners divide profits based on how much risk they assume. In the uplift fee, the attorney assumes all the financial risk, since she only gets paid if she wins. But her payment is not based on that risk.

5%
d

The cost of ██ █████████ ██████ ██ ██████████ ██ █████████ ██ ███ ██████████ ███ █████████ ██ ██ ████████ ████ ███████ ██ ███ █████████ ██████ ███ ███ ██████████████ ███ █████████ █████ ████████ ██ █████████ ███ █████████ ███ █████████ ███████

This is not analogous. In (C), insurance fees are determined by risk and overhead costs. In the uplift fee arrangement, legal fees are determined by the lawyer’s usual fee plus an additional fixed percentage.

9%
e

A person purchasing █ ████████ ████████ █ ████ ███ ███ ████████ ████ ███ ███████ ██ █████ ██ ██████ █████ ███ ██████ ████████ ███ █████ ██ ███ ███ ██ █████████ ██████ ████ ████ ███ ███ ███ ████ ██ ███ █████ ██ ██████ ██ ██ ███

This arrangement is not analogous. In (E), the buyer must pay the seller no matter what. But in the uplift fee arrangement, the client only pays the lawyer if she wins. Also, the lawyer doesn’t ask the client to reduce risk, while the seller in (E) makes the buyer purchase insurance.

6%

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