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2.52 am

The Parliamentary Secretary, Lord Chancellor's Department (Mr. David Lock): As my hon. Friend the Member for Cambridge (Mrs. Campbell) acknowledges, I must respond to the debate with some delicacy in the light of the particular case that is before the court. I cannot comment on the circumstances or intervene in an individual case, and it would not be right or proper for me to do so, particularly as that case may be the subject of appeal or enforcement proceedings hereafter. Nothing that I say should be taken to express any view on the facts of the case, which I get only from my hon. Friend's observations.

I have considerable sympathy for anyone who brings a case before the court and is unhappy with the result. The role of the courts, however, is to adjudicate cases on the evidence before them and on the course of action presented by those facts, not to advise claimants or suggest other avenues of action for them to explore. That would be incompatible with the principle of judicial independence and the duty of the judge to remain strictly impartial as between the parties before him.

Default judgments in the civil courts, which my hon. Friend mentioned, have been available for many years. They are an important feature of the civil justice system. They enable claimants to obtain a judgment for money due to them in a relatively simple and easy way, while providing important safeguards for defendants. In essence, the process seeks to balance the needs of the parties in a proportionate manner, while dealing with cases justly.

I have listened carefully to my hon. Friend, but must tell her that the Government have no plans to reform the law on default judgments, not least because Lord Woolf's substantial review of the civil justice system considered the issue only recently. For reasons I shall detail shortly, the issue that my hon. Friend is concerned with relates not so much to default judgments as to agency.

Prior to the review, default judgments were available in the High Court and the county court, although the procedures differed slightly. In the High Court, judgment was available for both default of acknowledgement of service and default of defence. In the county courts there was no acknowledgement of service, so there was scope for judgment only in default of defence.

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Following the review, and as part of the civil justice reforms brought into effect in April 1999, unified civil procedure rules were introduced for the High Court and the county courts, including those covering default judgments. It might be helpful if I explain the default judgment procedure.

An admission, an acknowledgement of service or a defence must be filed by a defendant within 14 days of the service of the particulars of claim. Where an acknowledgement of service is filed, defendants have 28 days to file a defence. If a defendant fails to comply with those requirements, the claimant can, in the majority of cases, request or apply for a default judgment for a specific sum.

A default judgment is a devolved administrative act that requires no judicial input. It requires staff to check that there has been no reply as indicated in the claimant's request, and that the time for doing so, calculated from the date of service, has expired. Nor is there any issue about costs for judicial decision, as costs are fixed by rule according to the amount claimed. The claimant is required to tell the court of any payment that would reduce the amount claimed so that the defendant is not disadvantaged where a payment may cross in the post with the service of the claim form.

In cases where the claim is unspecified there is a clear need for judicial intervention, and the rules provide for that. That is the important distinction between claims for specified and unspecified amounts. On receipt of the request for application and providing the relevant conditions have been satisfied, judgment may be entered in default. A judgment may be for the full amount, for an amount to be decided by the court, for costs only or for specified amounts at specified periods. An interest claim from the date of the judgment may be included in certain circumstances.

Certain safeguards for defendants are built into the system. Defendants who feel they need more time to prepare their defence may be able to agree that with the claimant or may ask the court for an extension. Defendants who fail to acknowledge service or provide a defence will be aware of the implications. Notes for defendants that accompany the claim make it clear that failure to reply may result in a judgment being entered against the defendant.

If claimants subsequently become aware that a defendant had not received the particulars of claim when judgment was entered, they must ask the court to set aside the judgment or ask the court for directions. The claimant cannot seek to enforce a judgment until either the application to set aside or the application for directions has been disposed of.

That summarises the current law concerning default judgments. As I have said, I am not able to comment on the case referred to by my hon. Friend, but cases of this type can sometimes turn on the question whether an agent is sued rather than the real owner of goods--in law referred to as the principal. The law on agency in this context is not straightforward or always clear, but put broadly--I risk the danger of oversimplification; this may not be appropriate to the case of my hon. Friend's constituent--where a person has entered into a contract through an agent, whether he knew of the existence of the

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principal or otherwise, and where he obtains a judgment against that agent, he may not later sue the principal in relation to the same matter.

In addition, where a person elects to sue an agent and not a principal, although he knew at the time when the contract was made who the real principal was, or discovered it later, he again may not sue the principal in relation to the same matter. The question whether such an election has taken place is one of fact and depends on the circumstances of the particular case.

The fact that a judgment has been made against a company with no apparent assets does not mean that it is without effect. The company may well have assets in the form of claims against directors or other persons associated with it, or against linked companies if, for example, the directors have acted in breach of their fiduciary duty to the company at or about the time when assets are moved in relation to transactions involving the company or in any other related way. Therefore, a company that, on the face of it, has no assets, may none the less be a valuable entity that, through one mechanism or another, may provide a vehicle for enforcing a judgment, including any judgment for costs obtained in an action. That is obviously a matter on which my hon. Friend's constituent would have to seek advice, and I offer those remarks merely by way of guidance.

My hon. Friend referred to the conduct of solicitors. As she accepted, that is a matter for their professional body, the Law Society. Solicitors are members of an independent and self-regulating profession, and the Lord Chancellor, his Ministers and officials cannot intervene in specific cases or comment on complaints about members of the legal profession. The Law Society has the responsibility in the first instance to ensure that solicitors observe proper standards of behaviour when dealing with their clients, other solicitors and the courts.

The Office for the Supervision of Solicitors is a separate organisation set up by the Law Society to handle complaints against its members. The Law Society, through the office, investigates complaints of inadequate professional service and professional misconduct. Allegations of negligence will be reviewed by the office, which, as it cannot give legal advice, has set up a panel of independent solicitors to which such allegations may be referred. The panel solicitors will advise the complainant on whether a solicitor has been negligent

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and, if so, what action can be pursued. It is thereafter a decision for the complainant as to how to pursue the matter.

As my hon. Friend said, there are certain problems with the operation of the Office for the Supervision of Solicitors, but there is some indication of a commitment by the Law Society to solve them. I was heartened by the approach taken by the newly elected president of the Law Society, Mr. Michael Napier, immediately on his election. He stressed that sorting out the complaints system and improving the quality of client care are high priorities for his presidential year. I am sure that my hon. Friend will join me in welcoming that important statement. There must be a step change in the standard of client care by solicitors.

There is also a backlog and problems with quality at the Office for the Supervision of Solicitors. Both are being tackled, but, as I am afraid the report from the legal services ombudsman released earlier this week shows, there is still a very long way to go before we can be confident that the Law Society, through the office, has a properly functioning complaints procedure. However, in cases where it has established that a client has received inadequate professional service, the office can award compensation of up to £5,000. That issue was raised by my noble Friend the Lord Chancellor earlier this year.

I have considerable sympathy for Mr. Birch and his predicament, and appreciate that he will have to seek further legal advice if he wishes to pursue the matter. However, I can tell my hon. Friend only that, since May, all actions, with the exception of family cases, can be pursued by solicitors on a no win, no fee basis on what is called a conditional fee arrangement. If her constituent has a good case to pursue against the people who left him in this unfortunate situation, I am confident that he will be able to find a solicitor who will back his or her judgment, enter into a no win, no fee agreement and therefore perhaps provide him with an avenue for justice. However, he must pursue that matter and find his own lawyer, who will act wholly independently of the Government, as is right.

Default judgments are not the core of the problem that my hon. Friend has raised, though I hope that some of my observations may assist in describing one or two avenues that her constituent might wish to pursue.

Question put and agreed to.

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