Judge puts no win, no fee deals in doubt

By MATHEW DEARNALEY

No win, no fee deals for lawsuits are in doubt after an Employment Court ruling on a multimillion-dollar backpayment of meal money to thousands of Auckland hospital doctors.

Judge Barrie Travis has approved settlements of $7,243,690 for about 3500 junior doctors employed by Auckland's three district health boards since 1993 - less than half the employers' potential liability.

These are the last of a string of settlements reached with health boards, for a total of about $20 million, after the Resident Doctors Association successfully challenged in the High Court in 1991 the removal of free meals.

But Judge Travis refused to sanction an arrangement by which the union wanted to collect a 10 per cent "contingency" fee and pay half to a company that has run its secretariat for more than a decade.

Industrial advocates fear the court's rejection of contingency fees may deny redress to sacked workers otherwise unable to afford the legal costs of challenging their dismissals.

Contingency fees are often set as percentages of financial awards or settlements in civil cases, with advocates or lawyers agreeing not to charge anything if they lose.

The Chief Employment Court Judge, Tom Goddard, told the Law Commission during its preparation of a report to the Government that he did not see contingency fees "as a major problem", although some employers say these encourage frivolous claims.

The commission has proposed conditions for contingency fees, expected to be included in legislation next year, including a provision to review those charged by industrial advocates.

But Judge Travis cited the commission's report as evidence contingency fees were "void against public policy" and consequently illegal under the Illegal Contracts Act.

The union intends to challenge his decision in the Court of Appeal. It says its fee arrangement is needed to cover negotiating and legal costs and to trace former resident doctors and verify claims through often-outdated hospital staff records. This includes doctors who were never its members, about 20 per cent of those eligible.

It warns that the money may remain in limbo unless the arrangement is approved.

The union president, Dr Kate O'Connor, doubts whether it will be able to hire anyone else to do the work for less than its agreement with Contract Negotiation Services.

That company is owned by Dr Deborah Powell and her husband, Terry. Dr Powell is secretary of the doctors' union and of others representing medical laboratory staff and radiation therapists.

Auckland doctors had free meals reinstated in May last year but it has taken since then for Judge Travis to approve settlement deeds for the backpay, while he was questioning the union's subcontract.

Contract Negotiation Services stands to gain about $1 million of the total national value of the settlements, but there is a dispute about how much the Auckland boards knew of this.

The union's Auckland president, Dr Brigid Connor, said in an affidavit that the chiefs of the Auckland and Waitemata health boards accepted the fee structure at a meeting in April last year when they also represented Counties-Manukau.

Judge Travis noted that law firm Buddle Findlay had charged the union a 30 per cent contingency fee out of an initial High Court award of $1.06 million in 1991.

But he said he was satisfied that the Contract Negotiation Services fee did not form part of the latest settlement deeds, which stated only that the union should be entitled to no more than 10 per cent of the allocated fund, to cover proper costs.

Mr Powell told the Herald that he and his wife were scrupulous about making everyone aware of the fee because of eight-year-old convictions against them on fraud charges over a union ballot for sales representatives, which they still deny.

Dr O'Connor said the pair were not present when the fee was agreed to by the union's executive in 1995 before being endorsed by members at an annual meeting.