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Clause 27

Conditional fee agreements

Mr. Vaz: I beg to move amendment No. 23, in page 18, line 14, after

'but', insert (subject to subsection (5))'.

Mr. Deputy Speaker: With this, it will be convenient to discuss the following: Government amendments Nos. 24 to 32.

Mr. Vaz: This group of amendments consists largely of technical amendments, either to ensure that new sections contained in clause 27 have the effect intended, or to make consequential drafting changes to amendments made earlier in the Bill's passage through Parliament.

I shall deal first with amendments Nos. 23 and 26. Part of the purpose of the changes that we have made to definitions of what constitutes a conditional fee agreement is to bring into statute two decisions of the courts from last year. The two cases in question are Thai Trading Co. v. Taylor and Bevan Ashford v. Yeandle. The full implications of the two judgments have been set out earlier in the Bill's passage and are described in the explanatory notes, so I will not recite them again at this hour. However, the present draft of the proposed section 58 in clause 27 goes further than simply taking those judgments into statute. It would have the effect of making unlawful agreements that are otherwise sanctioned by statute, known as non-contentious business agreements.

This type of fee agreement is intended to provide a way that lawyers can offer to work for clients who have business that will not come, or is unlikely to come, before the courts. There are very many services that lawyers undertake other than litigation in the courts, and the way in which they choose to offer their services--particularly the way in which their fees are calculated--was never intended to be encompassed by the provision in clause 27.

In moving the amendment, I recognise that there is great disquiet that non-contentious business agreements are used to allow solicitors to offer to undertake cases before the employment tribunals on the basis of a contingency fee. Contingency fees are payable only if the client is successful and are calculated solely by reference to the amount of the award made by the tribunal. They allow the lawyer to share in the proceeds of the action. This kind of fee would be unlawful and unenforceable if it were used to fund a case before the courts. My noble and learned Friend the Lord Chancellor has clearly set out his views: he does not believe that that kind of a fee should be used in employment tribunals. It is a quirk of the law that the work of this tribunal falls within the definition of non-contentious work.

The Government will be considering further whether such fees should be lawful in the employment tribunal as part of a review of the practices, rules and procedures of all tribunals that is designed to ensure that they meet the requirements of European Union law and comply with European convention rights. As regards the employment tribunal, it will inevitably require consideration of the present provisions that do not allow the award of legal costs--except in exceptional circumstances--to successful parties.

I think that I can deal fairly quickly with amendments Nos. 24, 25, 27, 29 and 31, which are to the same effect as those urged on the Government in Committee by the

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hon. and learned Member for Harborough (Mr. Garnier)--I am sorry that he is not in the Chamber to hear me lavish praise upon him. He sought a change in the proposed sections 58 and 58A of the Courts and Legal Services Act 1990 in clause 27 of the Bill. He asked--in a most eloquent manner--that, in place of the term "enhanced fees", we use the term most usually adopted to describe the additional payment due under a conditional fee agreement in the event of success: namely, a "success fee".

In committee, my hon. Friend the Member for Ashfield (Mr. Hoon) said that he had considerable sympathy with the hon. and learned Gentleman and agreed to seek parliamentary counsel's views. It was 11 May, and clearly a good day for the hon. and learned Member for Harborough because we accepted two of his proposals. As far as parliamentary counsel can see, it is possible to replace the term "enhanced fee" with "success fee". The change does not alter the substance, only the terminology.

Amendment No. 28 is little more than a drafting amendment, and follows on from changes made earlier in the Bill's passage to the new section 58 of the Courts and Legal Services Act 1990 contained in clause 27.

In response to concerns about the definition of the parties to a conditional fee agreement, which largely drew on the present definition in section 58(1), the proposed section 58(2)(a) was amended in another place. This subsection as currently drafted defines conditional fees solely in terms of the provider of services under the agreement, not the consumer. The subsection therefore encompasses the kind of collective agreements that membership organisations are likely to use when securing legal services on behalf of members. Amendment No. 28 to new section 58A(6) will ensure consistency with the revised section 58(2)(a).

Finally, amendments Nos. 30 and 32 are technical amendments to bring the language of the two clauses into line with the changes in name brought about by the introduction of the civil procedural rules on 26 April 1999.

I commend the amendments to the House.

Mr. Hawkins: In the temporary absence of my hon. and learned Friend the Member for Harborough (Mr. Garnier), it would be churlish if I did not acknowledge the praise lavished on him by the Minister. We spoke on another occasion about the fact that the term "garnishee order" is familiar to all lawyers. I know that the Minister referred to this as the Garnier amendment.

I am delighted that the Government have accepted the suggestions of my hon. and learned Friend the Member for Harborough. The Bill has undoubtedly been improved, as the term "success fee" will be more readily understood than the phrase "enhanced fee", which was open to possible misinterpretation.

On thanking the Minister earlier for his congratulations and welcome to me, I omitted to welcome him to his new post, as so many other hon. Members have done. May I remedy that omission by welcoming him warmly? I know that we shall have many amenable exchanges, even though we may disagree on some points of substance.

Mr. Burnett: I have made my views on conditional fee agreements known on many occasions during the passage of the Bill. Such agreements are riven with conflicts of

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interest. Does the Minister believe that it should be incumbent on any solicitor acting in a conditional fee agreement to disclose that to the solicitor to the other side--not just the existence of the conditional fee agreement, but the amount or the extent of the uplift in such an agreement?

Mr. Vaz: If the solicitor wishes to do so, I do not see why he or she should not.

Mr. Burnett: I am grateful to the Minister. Does he agree that it should be compulsory to make such a disclosure?

Mr. Vaz: The detail of whether or not that should be incumbent on a solicitor will, I hope, be one of the issues considered in the consultation process during the summer months. I am sure that the hon. Gentleman's remarks will be taken into consideration. I am glad to see that the hon. Gentleman is back to his usual statesmanlike approach.

Mr. Peter Bottomley (Worthing, West): I shall intervene briefly, as this is the only part of the discussion that is directly linked to conditional and success fees. I declare an interest. It is recorded in the Register of Members' Interests that I gave expert depositions in some civil liability cases in the United States, where I have seen the most appalling misuse of the courts process by lawyers.

I must be a little careful, as one case is still running. It has been said by others that there has been appalling misuse of the legal process by people who have enormous sums to gain. I do not think that that will happen to the same extent in this country.

I have a brother-in-law who is one of the pro bono solicitors who have been willing to take on cases that most others would not because their lawyer firms have a tradition of doing such work. The idea that we will find sufficient solicitors able to take on conditional fee work in such a way that will replace present legal aid is wrong. I have a current case in my constituency of an elderly woman, who is not the kind who wants to go money grubbing after an accident, who is finding it difficult to find a solicitor to take on her case.

I am not saying that all that would be solved by the amendment and I understand the sincerity of what the Minister has put forward, but many debates on amendments on Report are not just about what is going into present law but are about putting down markers for the next change.

What we are being asked to approve in terms of change to legal aid and the further opening up of success fees and conditional fees will have some benefit. In some ways it will help to restrict the unrestricted growth of legal aid. But it will also have many penalties and consequences which I hope that the Government will monitor. If they do that in association with the professional bodies, there will be much more to gain the next time the House returns to the subject. At the moment, few people would argue that consideration is fully satisfactory.

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