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Session 2006 - 07 Publications on the internet General Committee Debates Legal Services Bill [Lords] |
Legal Services Bill [Lords] |
The Committee consisted of the following Members:Hannah
Weston, John Benger, Committee
Clerks
†
attended the Committee
Public Bill CommitteeTuesday 26 June 2007(Afternoon)(Part I)[Sir Nicholas Winterton in the Chair]Legal Services Bill [Lords]4
pm
The
Chairman:
It is 4 o’clock and although we are
living in very interesting political times, we have to direct our
undivided attention to the Bill. I want no mention of other matters
during contributions to the debate and I always look forward to
progress when I am in the Chair. When the Committee adjourned, the hon.
Member for North Southwark and Bermondsey was moving his amendment. I
know that he has further words of wisdom to utter, so I ask him to
resume his
speech.
Clause 138Limitation
on value of directions under the ombudsman
scheme
Amendment
moved [this day]: No. 234, in clause 138, page 72, line 32, leave
out ‘£20,000’ and insert
‘£100,000’.—[Simon
Hughes.]
The
Chairman:
I remind the Committee that with this we are
discussing the following: Amendment No. 265, in clause 138, page 72,
line 32, leave out ‘£20,000’ and insert
‘£50,000’.
Amendment
No. 266, in clause 138, page 72, line 39, leave out subsection
(3).
Clause stand
part.
Simon
Hughes (North Southwark and Bermondsey) (LD): Thank you,
Sir Nicholas. We are very glad to welcome you back to the Chair. I know
that you have come here flushed with excitement at events elsewhere and
I would not dream of suggesting anything out of order, other than to
say that the amendment proposes a change far less unexpected than the
events of the past hour, which could be called the Lincolnshire
development.
The
Chairman:
Order. There can be no reason whatever for the
hon. Gentleman, who is a lawyer, to intervene at this
point.
Simon
Hughes:
A consensus of view was just about to break out in
the Committee. However, we will try to bring ourselves back to the more
mundane and predictable matters in hand.
The amendment would increase the
total amount that the ombudsman could decide was an appropriate remedy
in financial terms from £20,000, which is the figure in the
Bill, to £100,000. I hope that the Minister, refreshed by her
three hours in other places, will be as positive on this amendment as
she was earlier. The temperature is slightly warmer, and the
Minister’s perfume is still reaching this side of the room,
where it is very much appreciated. [Interruption.] Her
colleagues may not appreciate it, but we do. We hope that she will feel
generous in any event and because of our keenness to see her back in
her place.
The figure
in the amendment was not plucked out of the air, nor was it chosen just
for the purpose of having a debate. I have a very clear view that if we
limited the upper amount that the ombudsman could award for
everything—it is the inclusive, total amount, the aggregate
amount, as clause 138 goes on to describe—to £20,000,
that would be too low in many circumstances. If the Office for Legal
Complaints is to be effective and seen to be effective—if
justice is to be done and seen to be done—consumers need to know
that they can have decent redress for high-value
claims.
There are
various examples, but I shall give two obvious ones. Let us say that
something went terribly wrong in a personal injury action that someone
had taken; the solicitor had completely messed it up. It is well within
the realms of contemplation that £20,000 would be an entirely
inadequate remedy. If someone’s conveyancing was completely
messed up, it is very possible that the damage suffered would be worth
more than
£20,000.
It is
not clear why the figure of £20,000 was chosen. The Law
Society’s current limit is £15,000, but other ombudsman
schemes have significantly higher figures. Again, I have drawn on the
best parallel that we all have, which is the financial ombudsman
scheme, for which the redress limit is £100,000. There should be
a comparable starting
point.
There are
non-statutory regimes such as the ombudsman scheme for estate agents.
Incidentally, it is probably good to know that there is one. I was not
previously aware of it, but I can imagine people being angry with
estate agents, too, and feeling that they have been misled by them on
occasions. Even that non-statutory scheme has a maximum redress limit
that is higher than that proposed in the Bill—I think that it is
£25,000.
The
Minister will tell the Committee, if I do not, that clause 139 allows a
variation in the redress limit, on the recommendation either of the
consumer panel or of the OLC. In my honest view, that is to allow,
quite properly, for relatively small adjustments to take account of
inflation or other things. It is not intended to allow for a
significant change. Similar provisions have been made in other
legislation to allow for flexibility, but not for a fundamental change
of starting point.
I
propose that we start at a realistic level. If we do not, there will
soon be pressure to change it. It is better to set it too high and to
allow it to be the upper level from the beginning. Otherwise, there is
a severe danger that people will say that the legislation is a lot of
sound and fury signifying not very much when it comes to delivery. We
might get an apology or an admission of failure, but in a day and age
when, on Lewisham or
Borough high street, house prices do not start at £20,000 or even
£100,000, but at £200,000 or £250,000 for a
one-bedroomed flat, we need to compensate complainants at a realistic
2007 level for their financial loss.
Mr.
Jones:
In speaking to amendment No. 265, I am working on
the reverse principle of the one that I used as a trade union official.
The hon. Member for North Southwark and Bermondsey suggested a limit of
£100,000; I thought that I would be modest and say
£50,000, on the basis that the Minister, given some options,
might wish to accept the lower amount.
The hon. Member for North
Southwark and Bermondsey made some serious points. I can give an
example from my experience of a situation in which the £20,000
limit would be have been unacceptable and would have failed to deliver
justice to one of my constituents. I raised it on Second Reading. I
shall refer to the constituent as Mrs. X, because I do not
think that she wants her name in the public domain. She was a
miner’s widow from Stanley, in my constituency, who had the
misfortune to be involved with a solicitors’ firm in Newcastle
called Mark Gilbert Morse. She was making a chronic obstructive
pulmonary disease claim for her late husband. She is an elderly
lady—she is in her 70s—who does not understand the law or
the way that lawyers work, and she rightly expected the solicitors to
act in her best interest.
Last year, the Department of
Trade and Industry made an offer to Mark Gilbert Morse to settle the
claim for £42,000. Without Mrs. X’s knowledge
and without contacting her, the solicitors rejected that offer on her
behalf and said that they would like a higher figure. There was great
shock six months later, when the Department of Trade and Industry came
forward with its next offer, which was only £22,000. She
contacted me at that point. I must give credit to the Legal Complaints
Service, which investigated the complaint and shamed Mark Gilbert Morse
into paying the £20,000 difference between the higher and the
lower offers, so she got the original sum of £42,000.
Under the Bill, the
original figure would have been £20,000. People may argue that
there are other means open to individuals such as Mrs. X,
who could go to litigation, but there is no way in which she could
afford that process or would risk the possibility that she might not
get the higher figure. The figure as it
stands—£20,000—is too modest in the case that I
cite.
Mining
compensation cases have thrown up many cases in which solicitors have
clearly not only given bad advice, but have not always dealt with the
cases so the clients have had second best advice. I am worried about
how many people have had the same experience as Mrs. X, but
whose cases have not come to
light.
The figure in
the provision is modest and, as the hon. Member for North Southwark and
Bermondsey said, the financial services ombudsman can award
£100,000. I was not aware that there was an ombudsman for estate
agents, but he can award £25,000. If we do not initially put a
high enough figure in the Bill—I know that clause 139 allows the
Legal Services Board to increase the amount—the resistance of
the legal profession’s vested interests will prevent any great
increase in the compensation figure. The Minister has
said throughout the progress of the Bill that it should be about the
rights of consumers, and the best way of protecting those rights is to
set the figure at a high enough level to protect their interests. I
would not hold out a great deal of hope that it will rise substantially
over a period.
On the
broader issue of compensation, something that has frustrated many of my
constituents and those of my hon. Friend the Member for Bassetlaw is
the prevarication by some solicitors in trying to settle cases, and the
threats that they make. It never ceases to amaze me that in mining
compensation cases, which involve poor and vulnerable individuals,
arrogant solicitors do not seem to care how many threats they
issue—for example, that if clients do not pay up or agree to a
certain course of action, they may be held legally liable, even when
they may not in fact be held liable for further costs. It is important
to get the figure right now for consumers’ protection. If the
Minister does not concede that today, it should be considered on
Report.
I do not
intend to speak to amendment No. 266, so I ask the Minister seriously
to consider increasing the figure substantially
today.
John
Hemming (Birmingham, Yardley) (LD): The point to
recognise, particularly when dealing with claims against solicitors, is
that if the claim is not made through the ombudsman process, another
firm of solicitors must generally be employed. This area of regulation
is complicated because there are all sorts of
difficulties.
I shall
cite a couple of cases in which a firm of solicitors let down their
clients but monetary compensation was not the whole story. One of my
constituents, who suffered from mental illness, was imprisoned because
the court believed that he wanted a hospital order. He ended up being
imprisoned because the solicitor failed to notice certain things in the
paperwork. Oddly enough, I managed to draft an appeal, and the good
news is that it will be heard. The difficulty was that the solicitors
had clearly failed to do their job properly, and when they were asked
for the paperwork they did not respond in a timely manner. One
difficulty with appeals is that they generally have to be made within
21 days, and it causes great problems if people sit on the paperwork.
If they do so for more than 21 days, it is a greater problem.
In another example that I have
been looking at recently, it seems that some children were taken into
care and adopted because correspondence went to the wrong address. The
firm of solicitors involved is failing to respond to me, so I have
written to the Law Society to ask it to
intervene.
In such
cases, there is no easy way of quantifying the loss, but in cases where
someone will arguably have £1 million or £10
million—I was an expert witness in a case involving more than
£250 million—people can afford to go somewhere and
control the whole process. However, when it involves £25,000,
someone could easily lose out. If we consider that somebody may have
lost five years of their life in jail because of the incompetence of a
firm of solicitors in not doing some basic things, it is clear that the
system is quite difficult as it stands. Therefore the limit of
£20,000 is far too low and my hon. Friend’s probing
amendment—I presume that it is a probing amendment—is
very good.
4.15
pm
John
Mann (Bassetlaw) (Lab): I support the principle of
increasing the figure to £20,000, but I am not particularly
inclined to support the Liberal Democrat proposal because there needs
to be a balance between regulatory financial remuneration and other
actions that can be taken. It is important to recognise the need for
balance.
The
figure of £20,000 is a modest increase on the current limits for
solicitors, but is too low because it would not catch those people who
have lost out financially and do not want to trust another solicitor to
engage in civil action to sue for financial remedy. Indeed, the amounts
of money fall between what it is viable for a solicitor to present to a
client in terms of likely incentive gain, because £100,000 would
seem well worth fighting for through the courts if there was a loss. If
it is a much smaller amount, people are much less likely to consider it
worth fighting for. A balance must be drawn somewhere, but the figure
of £20,000 is too low.
I am dealing
with a number of ongoing cases in which the amount of financial loss
that can be quantified, aside from any compensatory loss, is between
£20,000 and £30,000. Those cases are in a range of
different areas—they are not all about industrial
disease—but they are the exception and in the majority of cases
the figure is much lower. The limit should incorporate the potential
exceptions to the rule precisely because that would provide the full
parameters and should not create any expectation of an upward drift
overall. There is no logic in suggesting that there would be an upward
drift. What the upper quartile of potential claims might be is
important.
I suggest
that £20,000 is not sustainable and that the figure needs to be
higher. I am attracted to the suggestion of £50,000 made by my
hon. Friend the Member for North Durham, but if the Minister proposes
something more realistic that might also be acceptable. However,
£20,000 is too low because there are too many cases in which the
individual would win, but would lose out financially. That is why the
figure needs to be increased somewhat to a more realistic
amount.
Simon
Hughes:
From the hon. Gentleman’s experience of the
sort of cases that he has shared with us, can he tell us about examples
where, in his assessment, there was the highest loss relative in what
someone was able to
obtain?
John
Mann:
The highest loss that I have dealt with without
having to go through regulation was £31,500. That was the actual
financial loss. I have a significant number of ongoing cases in which I
estimate the loss will average around £25,000. Therefore, in
that context, there is a significant difference between £20,000
and £25,000, and £20,000 and £30,000. Such losses
are significant, especially when they are the result of poor
representation of whatever form. People’s health might be
affected, so the money is not only compensation for a wrong, but a
remedy that is calculated to take account of
necessity.
Industrial
compensation payments is the best example of what happens when lazy
solicitors manage not to put
in claims. It might not be deliberate; a solicitor might not have said
“I won’t put in for that because I don’t get paid
much and I’m not bothered”. The laziness is of systems
and approaches whereby solicitors manage to tick boxes, but fail to ask
additional questions. The miners compensation scheme compensates people
for things that they will not be able to do in future because of their
industrial disease and amounts are calculated precisely. Financial
compensation is required for things that need to be done—it is
not a charitable donation or a sum in principle; it is for practical
purposes.
A maximum
of £30,000 would do in the cases that I know of, but there might
be cases that would require a higher figure. A maximum of
£20,000 would leave too many cases in which a person could win,
but would have the trauma of taking civil action and of going to
another solicitor. That is not sensible, both practically and with
regard to the profession’s
reputation.
Simon
Hughes:
I hear the figures. The hon. Gentleman is aware
that there are two sorts of loss: a direct financial loss of wages,
income, salary and pension; and a loss of the damages that compensate
for injury such as the loss of the use of a limb. Is he saying that, in
his experience, the total of the prospective claims would only be of
the order of £30,000-plus? I know of cases in which the
combination of loss of income plus damages would be considerably higher
than
£30,000.
The more
endemic problem is when the obvious part of the claim is put in, but
the less obvious parts are not. The more I investigate, the more that
that type of case appears to be endemic in the system. The average
necessary amount—the figure will vary—is around
£20,000 or £25,000. Therefore, the figure of
£20,000 is somewhat low, but there is no logic in setting the
figure too low. The figure of £20,000 has been set by updating
the current figure. That is rational, but it does not fully incorporate
what will, by definition, be exceptional cases of actual loss, rather
than compensatory loss for less quantifiable things. It would be
prudent and sensible to increase the maximum amount—both sides
of the Committee will feel that.
The
Parliamentary Under-Secretary of State for Justice (Bridget
Prentice):
Let me explain the rationale behind the
£20,000 limit. It is based on the current maximum of redress in
the Law Society, which was recently increased to £15,000. The
Bar Council figure remains £5,000. Taking into account the fact
that, on average, the awards made by both the Law Society and the Bar
Council are somewhere between £400 and £500, the
Government decided to increase the limit from £15,000 to
£20,000 to take account of the time between now and when the OLC
will be up and running. For the moment, that is an appropriate figure,
but that does not mean that it cannot be increased in the future. That
is why the hon. Member for North Southwark and Bermondsey mentioned
clause 139, which allows for the Lord Chancellor, by order, to increase
the limit if the board, the OLC or the consumer panel recommend it at
any time. It is perfectly possible, for example, for the consumer panel
on day one to make a recommendation that the limit be
increased.
I want to make it absolutely
clear that this rise is not just about dealing with inflation. It is
also about allowing the board and the other interested bodies to
increase the amount substantially if they thought that that was the
right thing to do. It is on that basis that I ask the hon. Member for
North Southwark and Bermondsey to withdraw his amendment.
It may be some comfort to the
hon. Gentlemen to know that I have no personal attachment to the figure
of £20,000. I hear the arguments that all parts of the Committee
are making. A figure of £100,000 would be going way too high to
begin with and if we look at some other ombudsman’s schemes, we
see that their upper limits are slightly higher than £20,000. It
may be worth considering the average figure of some of those
schemes.
I also add
that a series of groups gave evidence to the pre-legislative scrutiny
Committee and almost all were in favour of a figure above
£20,000, and I heard their arguments. Interestingly, the one
group that was not in favour was the Legal Aid Practitioners Group,
which said that it could not really imagine a situation in which the
redress would be of that scale, or far beyond it. However, that is not
the argument on which I am basing this limit.
As I said, I am not personally
attached to the figure of £20,000. I would be happy to look at
it again and to consider, across the board, other schemes to see
whether another figure is more appropriate. However, it is important
not to get too carried away, so that the consumer panel and the board
itself can respond with a figure that they think is appropriate at the
time; this measure is obviously not going to come into effect for a
little while yet. Having argued in this Committee about the flexibility
that we must give to the board, and so on, I do not want in any way to
undermine that flexibility now. However, I would ask the hon. Gentleman
to withdraw his amendment on the basis that I will look again at how
this figure of £20,000 compares with the upper figures of other
ombudsman’s schemes.
Simon
Hughes:
I hear what the Minister says, but I would like to
press her on one matter; I do not think that she addressed it, so I
apologise if she did and I missed it. Does she accept that the
Financial Ombudsman Service has a £100,000 upper limit, which is
the only absolutely comparable, or very nearly comparable, scheme? Does
she accept that that is the upper figure for that
scheme?
Bridget
Prentice:
The Financial Ombudsman Service certainly has
that upper limit of £100,000 and there is quite a good argument
as to why that scheme has that upper limit. However, I would like to
see how many cases have got anywhere close to that £100,000
limit and consider where the awards are being given. That might help us
to come to a better conclusion at a later
stage.
Simon
Hughes:
I am grateful to the Minister for that response.
Rather than us all trailing through the FSA’s ombudsman’s
track record, if the Minister would be kind enough to press her buttons
to produce that information, that would be really helpful.
I agree that, even if we get
those figures, they will not be absolutely comparable, because we are
talking about two different types of organisations and two different
types of issues. However, I am very clear that we need a higher limit.
I hear the Minister saying that she is not wedded to the current limit.
She has heard voices from her own party arguing, from different
perspectives, for a limit higher than £20,000. I sense that a
higher limit would be where the centre of gravity of the debate
is.
On the basis that
the Minister will give us the comparable figures from other schemes and
will then give us a chance to consider those figures and that she is
not closed to the idea of us increasing the limit on Report, I beg to
ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
138 ordered to stand part of the
Bill.
Clause
139 ordered to stand part of the
Bill.
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