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Session 2001- 02
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Delegated Legislation Committee Debates

Draft Community Legal Service (Cost Protection) (Amendment No. 2) Regulations 2001

Third Standing Committee on

Delegated Legislation

Monday 26 November 2001

[Mr. David Chidgey in the Chair]

Draft Community Legal Service (Cost Protection) (Amendment No. 2) Regulations 2001

4.30 pm

The Parliamentary Secretary, Lord Chancellor's Department (Mr. Michael Wills): I beg to move,

    That the Committee has considered the draft Community Legal Service (Cost Protection) (Amendment No. 2) Regulations 2001.

The regulations are made under section 11(3) and (4)(d) of the Access to Justice Act 1999, which enables the Lord Chancellor to make regulations that limit the circumstances in which costs may be enforced against a person receiving funded services, or define the liability of the Legal Services Commission to meet the costs of the opponent of a person receiving funded services. Such regulations are subject to parliamentary approval under the affirmative resolution procedure.

The change is part of a larger package of reform of the financial conditions for funding in civil cases, which will come into effect in December. The eligibility limits for all levels of publicly funded legal services will be further aligned, while a simplified means test that applies to all levels of service will be introduced. As part of the package, we are raising the income and capital threshold for legal help so that around 5 million more people can get the advice and assistance on everyday problems that they need.

The changes mean that significant assistance will be given to those on the lowest incomes. When resources allow, the Government propose to increase eligibility limits for these services further, bringing them to the same level as those for legal representation, which will mean a further 2 million people becoming eligible. The regulations will amend the conditions that must be satisfied for an order to be made against the Legal Services Commission for the payment of costs incurred by a party who has not received funded services. We seek to strike a fair balance between publicly and privately funded clients.

Often, people have to pay their own costs, despite winning their case against a funded client. A funded client's liability for costs is limited to the amount, if any, that is reasonable for him or her to pay, having regard to all the circumstances of the case, including the means and conduct of both parties. Funded clients, by definition, have very limited resources available to them. Consequently, if costs are awarded against a funded client, they are usually ordered not to be enforced without the leave of court and the client's liability is determined at nil. At any time in the next six years, the successful unassisted party can apply to vary the order if new information comes to light on the funded client's circumstances.

We appreciate the distress suffered by successful unassisted defendants who cannot recover costs from their publicly funded opponent. Defendants have no choice about becoming involved in legal actions, so it is right that they should be given some help with meeting costs that they have had no choice but to incur. If costs cannot be recovered from a funded client, it is possible for privately funded defendants to recover their costs from the Legal Services Commission. To do so at present, the funded client must have begun the proceedings, and the winner—the privately paying defendant—must show that he or she would suffer severe financial hardship unless the commission paid the costs.

The awarding of costs, and the decision as to whether severe financial hardship would be suffered, is a matter for the courts and not for the commission. By introducing these regulations, we will give the courts the power to order the commission to pay the costs of a successful unassisted defendant who would otherwise suffer financial hardship, relaxing the current test of severe financial hardship. We believe that that will strike the right balance between the interests of private litigants and those funded clients who, by definition, are among the poorest in society.

We have no plans to make it easier for the courts to award costs against publicly funded litigants, because we believe that to do so would deter people on low incomes with good cases from bringing them to court. Public funding exists to help those who need to pursue cases in court but are the least able to pay for legal representation. When assessing applications of funding, the commission does not decide the issue between parties. It considers whether there is a reasonable case that a private client of moderate means would want to bring to court at his or her own expense. We do not plan to allow claimants to seek costs from the commission under any other circumstances. The community legal service fund is inevitably limited, so to do so would restrict the available money for other deserving cases.

We believe that these are important amendments, and I commend the regulations to the Committee.

4.35 pm

Mr. William Cash (Stone): The regulations are a good example of what is happening these days. They amend other regulations and refer back to an Act—in this case the Access to Justice Act. As a matter of principle and in the interests of legislating, it would be helpful if explanatory notes, as with explanatory memorandums for Bills, were more explicit.

The Minister's explanation was welcome because it was full. However, merely because a particular statutory instrument is confined to subordinate legislation, it does not mean that it does not involve important matters. We should have a far fuller description of the implications not only of these regulations but of any statutory instrument. Otherwise, no one will be any the wiser until the Minister speaks, subject to the type of points that I am about to make.

I am glad that the amendments are being proposed, in particular the deletion of the word ``severe''. There was no question that the courts were put in a difficult position whenever questions of definition of severity arose. The Minister's other point about whether costs should be awarded against publicly funded clients is important. People on limited means should be protected, and that has always been the principle on which the old legal aid system operated; the new system should operate on that principle, too.

That is not to say that, if someone who is allowed into the system turns out to be engaged in vexatious or frivolous proceedings, the non-funded party might not be put in a disadvantageous position. It would be far better to ensure that, while the needy and poorer people are protected, the non-publicly funded person receives the deserved degree of protection. If someone is hell-bent on getting past the barriers of the application for aid and it then transpires that theirs is a vexatious or frivolous case, it leaves the person who is non-funded in a difficult position.

I was surprised that the Minister did not refer to the other two amendments, unless I missed something in his explanation. One new measure will amend regulation 5(3)(b) of the Community Legal Service (Cost Protection) Regulations 2000 by providing that,

    ``unless there is a good reason for the delay'',

the order will only be made if all the conditions set out elsewhere in regulation 5 are satisfied. The insertion of that phrase represents a sensible approach. Clearly, certain cases have prompted the new proposals. There must have been delays and no way around them for the party concerned. Will the Minister confirm that that is right? The amendment is sensible and provides sound reasons.

Regulation 5(3)(c) of the 2000 regulations states:

    ``as regards costs incurred in a court of first instance, the proceedings were instituted by the client''.

It is amended by adding the words:

    ``the non-funded party is an individual''

    ``the court is satisfied''.

    What is the object of making the non-funded party an individual? Does the Minister know of other circumstances and cases? What are they? Are partnerships or company arrangements involved? I do not know; the wording is insufficiently clear. I look forward to hearing the Minister's response.

4.41 pm

Norman Lamb (North Norfolk): This is the first time that I have led for my party, so I am pleased that we are debating a non-controversial measure. We support the changes introduced by the regulations. I should like to ask just to questions. First, the Law Society mentioned that these are two among a wider group of amendments. The Minister referred to that in his opening remarks. Why are those two picked off and dealt with separately from the others to be proposed before 3 December?

It is sensible to relax the three-month time limit when there is a good reason for the delay in making an application to the Legal Services Commission. What circumstances would amount to a good reason for delay? Subject to those two questions being answered, we support the amendments to the 2000 regulations.

4.42 pm

Mr. Wills: We have had a short but interesting debate and I should like to deal with the issues raised.

I agree with the hon. Member for Stone (Mr. Cash) about the importance of the regulations. I note his points about the explanatory notes and will take them into account. I hope that at the end of the sitting he will feel that he has had an adequate explanation of what lies behind the regulations.

It is worth pointing out that the defendant and the public purse share a common interest in stopping vexatious litigation—I hope that the hon. Gentleman recognises that. He asked about the addition of the words

    ``unless there is a good reason for the delay''.

They are necessary to deal with the practical problems that sometimes arise and to make it easier for the courts to administer. They allow some leeway when the non-funded party does not apply for costs within the three-month period allowed by the cost regulations. There may be a good reason for a little practical leeway, in which case it is allowed. As the hon. Gentleman said, we are trying to protect the individual. It is the individual who will suffer hardship, rather than a corporation or another organisation.

We are dealing only with the matter before us because, under the enabling legislation, it is subject to affirmative resolution. We have been concerned today only with the relatively narrow focus of the regulations. With the wider package of reforms that I mentioned, however, we are striking a better balance between the needs and interests of publicly funded and privately paying litigants. As a result of the increase in disposable income limits for legal help, about 5 million more people will become eligible for legal help in December. A further 2 million people will be eligible when the eligibility limits for income are equalised. We are committed to doing that as soon as it is financially prudent to do so. In addition, people will receive advice free of charge and will not have to pay a contribution.

We are relaxing the test of financial hardship, which is the key issue before us, to create a more level playing field for non-funded opponents who have to pay the costs of funded clients if they lose the case, but find it difficult to recover costs if they win. It is only right that non-funded opponents should be able to seek their costs from the community legal service fund if they have been defending litigation by a funded client. I commend the regulations to the Committee.

Question put and agreed to.


    That the Committee has considered the draft Community Legal Service (Cost Protection) (Amendment No. 2) Regulations 2001.

        Committee rose at fourteen minutes to Five o'clock.

The following Members attended the Committee:
Chidgey, Mr. David (Chairman)
Bailey, Mr.
Cash, Mr.
Coleman, Mr.
Cruddas, Jon
Cunningham, Tony
Lamb, Norman
Luff, Mr.
Mercer, Patrick
Moffatt, Laura
Roy, Mr.
Stringer, Mr.
Wills, Mr.

The following also attended, pursuant to Standing Order No. 118(2):

Jones, Mr. Kevan (North Durham)


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Prepared 26 November 2001