The
Committee consisted of the following
Members:
Chair:
Mr.
Greg Pope
†
Bellingham,
Mr. Henry (North-West Norfolk)
(Con)
†
Davidson,
Mr. Ian (Glasgow, South-West)
(Lab/Co-op)
†
Hamilton,
Mr. Fabian (Leeds, North-East)
(Lab)
†
Holmes,
Paul (Chesterfield)
(LD)
†
Howarth,
David (Cambridge)
(LD)
†
Jones,
Helen (Vice-Chamberlain of Her Majesty's
Household)
†
Kilfoyle,
Mr. Peter (Liverpool, Walton)
(Lab)
†
Kirkbride,
Miss Julie (Bromsgrove)
(Con)
†
Malins,
Mr. Humfrey (Woking)
(Con)
†
Mullin,
Mr. Chris (Sunderland, South)
(Lab)
†
Prentice,
Bridget (Parliamentary Under-Secretary of State for
Justice)
†
Sheridan,
Jim (Paisley and Renfrewshire, North)
(Lab)
†
Touhig,
Mr. Don (Islwyn)
(Lab/Co-op)
†
Walker,
Mr. Charles (Broxbourne)
(Con)
†
Watson,
Mr. Tom (West Bromwich, East)
(Lab)
†
Wright,
Jeremy (Rugby and Kenilworth)
(Con)
Mark Oxborough, Committee
Clerk
† attended the
Committee
First
Delegated Legislation
Committee
Tuesday 30
March
2010
[Mr.
Greg Pope
in the
Chair]
Draft
Damages-Based Agreements Regulations
2010
4
pm
Mr.
Humfrey Malins (Woking) (Con):
On a point of order,
Mr. Pope. It is a great pleasure to serve under your
chairmanship. My point of order will be brief. You will know that the
Ministry of Justice consultation paper, which came out on 19 January,
amazingly and wrongly reduced the consultation period from three months
to a bare four weeks, with no adequate reason given. The result was
that all those, particularly those at the Bar Council and solicitors,
who should have been able to provide proper responses were simply
unable to do so. Much as they begged the Government to extend the
consultation period to enable them to do their job properly and
respond, the Government utterly refused to do
so.
In
view of that disgraceful approach by the Government, is it within your
power, Mr. Pope, to say to the Minister today that she must
not—I repeat, must not—bring the matters
before the Committee until there has been a proper period of
consultation? I very much hope that it
is.
The
Chair:
I am grateful for that point of order,
Mr. Malins. Strictly speaking, it is not a matter for the
Chair. It may be regrettable that the consultation period was
contracted, but the Minister will no doubt address that matter in her
comments to the
Committee.
4.1
pm
The
Parliamentary Under-Secretary of State for Justice (Bridget
Prentice):
I beg to
move,
That
the Committee has considered the draft Damages-Based Agreements
Regulations
2010.
The
Chair:
With this it will be convenient to consider the
draft Conditional Fee Agreements (Amendment) Order
2010.
Bridget
Prentice:
It is a delight to serve under your chairmanship
for the first time, Mr. Pope; it is also certainly the last
time.
The
Damages-Based Agreements Regulations 2010 prescribe the regulatory
requirements for such agreements in employment matters. The Conditional
Fee Agreements (Amendment) Order 2010 seeks to reduce the success fee
in some publication proceedings to 10 per cent. of the base costs. Both
seek to make changes in limited circumstances to protect the public
interest, and they were both debated and approved in the other place on
25 March.
The
damages-based agreements regulations are made under section 58AA of the
Courts and Legal Services Act 1990 and prescribe certain requirements
for damages-based agreements, or DBAs, relating to employment matters.
Section 58A was inserted by section 154 of the Coroners and Justice Act
2009.
A
DBA is a type of contingency or no win, no fee agreement, under which a
representative agrees to act for a client in return for a percentage of
any damages recovered by the client. If damages are not awarded,
the representative is not paid. Such agreements are
different from conditional fee agreements—CFAs—which are
typically used in court proceedings and allow for an uplift
or success fee on top of the representative’s usual
fee.
DBAs are not
permitted in court proceedings or litigation, and the regulations will
not change that. They are, however, commonly used by solicitors and
claims managers in proceedings before employment tribunals. We are
concerned about the unclear and unfair DBAs in employment tribunals,
which can lead to consumer detriment. The regulations prescribe
specific requirements for representatives which will help to address
those
concerns.
Section
58AA of the 1990 Act, as amended, now controls the use of DBAs to
claims that are capable of being heard by employment tribunals, and the
regulations are the first to be made under the new
provision.
Mr.
Peter Kilfoyle (Liverpool, Walton) (Lab):
Further to the
point of order made by the hon. Member for Woking, Mr. Pope.
It is a great pleasure to serve under your chairmanship for the first
time; happily, it is also the last—but there we go. The Minister
has made reference to section 58AA of the 1990 Act, but the explanatory
memorandum
states:
“The
Ministry of Justice carried out a full 12 week
consultation”.
That
leaves people such as me a little in the dark; on the one hand, Her
Majesty’s Opposition say that the consultation was only four
weeks long, but on the other, a bald statement in the explanatory
memorandum says that it took a full 12 weeks. Can you enlighten
me?
The
Chair:
Again, I am grateful for the point of order.
Interesting debating point it may be, but it is not strictly a matter
for the Chair. The Minister may choose to respond to it during the
debate.
Bridget
Prentice:
I reassure my hon. Friend that there was a
12-week consultation on the DBAs. The hon. Member for Woking was
talking about the second set of regulations, for which there was a
four-week
consultation.
Mr.
Malins:
Why was one set of regulations subject to 12
weeks’ consultation and the other subject to four
weeks’?
Bridget
Prentice:
I intended to explain that point when I reached
the CFAs, but I am concentrating on the damages-based agreements. In
essence, it was because we were going through a review and, at that
stage, it seemed appropriate to look quickly at that small area of
work. Some people were not happy about it, and I understand that;
nevertheless, the Secretary of State
and Lord Chancellor was keen to see that we moved quickly on the matter.
Several consultations have taken place over the years on such work, so
none of it was particularly new to those who are now crying that they
did not have quite enough time to consider
it.
I
return to the damages-based agreements. The regulations specify for the
first time certain requirements with which the agreements must comply
in order to be enforceable. The key emphasis is on the provision of
clear and transparent information for the client before the agreement
is signed. They require a representative, usually a solicitor or a
claims manager, to inform the client about alternative means of
resolving the case or financing the proceedings, such as legal expenses
insurance or trade union membership.
Importantly,
the representative must inform the client about the services offered by
ACAS before the agreement is signed. He or she must also give an
estimate of all costs and expenses for which the claimant may be liable
and must explain to the claimant why he or she thinks that the
percentage fee that they are charging is reasonable. I understand that
that might be tricky for some representatives, but it is something that
is done very much to protect the
client.
The
regulations prescribe that the payment to the representative cannot be
more than 35 per cent. of the claimant’s damages, including VAT.
That is to protect claimants from unscrupulous representatives who may
seek an unjustified proportion of damages in
fees.
David
Howarth (Cambridge) (LD):
The figure has caused some
controversy. Apparently, the Government’s justification for the
35 per cent. is that it is an average of the cases that Professor
Moorhead of Cardiff looked at. His position is that the fees come in
three bands: a low band, a middle band and a high band. There is a fear
that, in complex high-band cases, having the maximum at the average
will prevent claimants from having access to
justice.
Bridget
Prentice:
The hon. Gentleman makes a reasonable point. We
consulted originally on a 25 per cent. cap, but I say clearly to the
Committee, before anyone suggests that when consulting we do not listen
to what is being said to us, that as a result of that consultation
several worries were expressed that encouraged us to increase the cap
to 35 per cent. That is inclusive of VAT, but it excludes
counsels’
fees.
Although
the cap is the prescribed maximum, we are concerned about a risk that
it could become the norm. We were painfully aware of that risk in CFAs
when, in some cases, the 100 per cent. became the norm—a matter
to which I shall return. The higher the cap, the greater the risk of
detriment to individuals who use DBAs. We therefore believe that 35 per
cent. is a fair level to set. The regulations also set out conditions
to be complied with if the agreement is terminated.
I should also
make it clear that the provisions relating to termination are without
prejudice to any right of either party under the general law of
contract to terminate that agreement. I know that there have been
concerns about the conditions relating to termination—for
example, the Law Society thinks that the provision does not go far
enough in protecting its representatives, whereas the Bar Council
thinks that there should be no restrictions
at all on the client’s right to terminate. With the regulations,
therefore, we have tried to find a middle way between two opposing
views.
DBAs
are different from ordinary retention agreements between
lawyers and clients. The clients agree to pay a percentage of their
damages if the claim is successful, so it is right that the
representatives should be entitled to that percentage if the claim is
successful. DBAs are founded on the premise that if the representative
upholds their end of the bargain and the claim is successful, they are
entitled to receive the agreed percentage of damages.
To reiterate
the point that I made earlier, the provisions are without prejudice to
any right of either party under the general law of contract to
terminate the agreement. I am grateful for the detailed consideration
given to the regulations by the Merits Committee. We have carefully
considered the points raised in the Committee’s 14th
report, published on 18 March, and we took on board its concerns in
revising regulation 6(5). I strongly believe that the regulations are
necessary and proportionate in achieving their objective, which is to
put in place specific statutory protection for claimants using the
agreements in employment tribunals. They try to balance carefully the
views raised on consultation, and they represent the best way
forward.
The
Committee will know that on 14 January Sir Rupert
Jackson delivered his wide-ranging report, “Review of Civil
Litigation Costs”. Among 109 formal recommendations, he
recommended that contingency fees be permitted in civil litigation with
appropriate regulation. He knows, as I hope the Committee does, that
fresh primary legislation would be required should the Government
decide to implement that recommendation; I have already had discussions
with him about that. We are actively considering his recommendations
and will set out the way forward in due course. However, I want to
emphasise that any proposal on extending the use of contingency fees to
litigation would be subject to full public consultation and legislative
scrutiny by Parliament.
The
Conditional Fee Agreements (Amendment) Order 2010, made
under section 58(4) of the 1990 Act, amends the Conditional Fee
Agreements Order 2000 to set a new maximum success fee percentage of 10
per cent. for conditional fee agreements relating to some
“publication proceedings”. Publication proceedings, for
the purposes of this order, are within the meaning of rule 44.12B of
the Civil Procedure Rules 1998. The definition covers defamation,
malicious falsehood or breach of confidence involving publication to
the public at large. For ease of reference, I will refer to them as
defamation proceedings.
CFAs allow
lawyers to take on a case on a no win, no fee basis. If the case is
lost, the lawyer does not get paid. If it is successful, the lawyer can
charge his normal base cost as well as an additional uplift or
“success fee”. That fee is currently recoverable in full
from the losing side. The Conditional Fee Agreements Order 2000
prescribed the maximum success fee that lawyers can charge at 100 per
cent. in all categories of case. That 100 per cent. maximum
was intended to allow lawyers to cover the costs of cases that were
lost with a success fee from those that were won. However, we have
become concerned about the high legal costs in defamation
cases.
David
Howarth:
I was worried when the Minister pointed out that
the order covers privacy as well as defamation, which is quite
different. What evidence does she have about the costs of privacy
cases?
Bridget
Prentice:
As I said, the order covers defamation,
malicious falsehood and breach of
confidence.
David
Howarth:
That is privacy.
Bridget
Prentice:
The hon. Gentleman uses that term in a wide
sense. I do not think it is nearly as wide as he suggests. We are
trying to get the balance right and cap the amount of fee that
individuals have to pay. In particular, we have been concerned about
academics, scientists and others, for example, who are trying to
publish material but are finding it difficult to do so due to the high
costs incurred—so much so that a lot of information material
that should be in the public domain is not put there because people
fear the costs that they might incur if they do
so.
David
Howarth:
I am also worried about those cases and want to
see the reform of libel law to protect scientists in that position.
However, what the Minister said was that it all goes beyond those cases
to privacy cases—to breach of confidence—where there is
publication to the public, which is an entirely different sort of
case.
Bridget
Prentice:
I disagree with the hon. Gentleman. We have kept
the two particular publication proceedings. It is a narrow definition
because we are aware that not only do we have our own ongoing general
libel review, but we have Sir Rupert Jackson’s review of costs.
There is still a lot of information that has to be gone through in some
detail. As I said earlier, the Secretary of State is concerned about
the chilling effect of our libel laws on the system at the moment in
this particular area. That is a specific part that we are trying to
deal with—admittedly quite quickly and ahead of a whole series
of other reforms in the future.
High legal
costs have been exacerbated by the 100 per cent. success fee. It has
had a harmful effect on the freedom of expression, affecting the
media—particularly those with limited budgets such as the local
press—and scientific and academic debate. A number of concerns
have been raised to us by members of the scientific community and
others that the current law on libel, including the high costs
involved, has a harmful effect on their freedom of expression within
scientific or academic debate. Colleagues in the Committee will be
aware of the announcement on the reform of the law on libel by my right
hon. Friend the Lord Chancellor only a few days ago, and they should
see the changes in that broader
context.
There
have been previous attempts to control success fees in defamation
cases, but sadly they were relatively unsuccessful even though there
was widespread and urgent concern about the impact. Therefore, this
January, we consulted on a specific proposal to reduce the success fees
to 10 per cent. in defamation cases. Some of the respondents to the
consultation who disagreed with our specific proposal accepted that a
100 per cent. recoverable success fee should not
continue.
I
have already mentioned Sir Rupert Jackson’s remarkable and
substantial report, which was published in January. He recommends the
complete abolition of the recoverability of success fees in all cases
where CFAs are used. We are
considering his report and will set out our way forward in due course.
The recent report by the Select Committee on Culture, Media and Sport,
on press standards, privacy and libel, suggested that the
recoverability of success fees should be limited to 10 per cent. in
defamation cases. We will also respond to that report
shortly.
There
is a substantial body of opinion that recoverable 100 per cent. success
fees should not continue. Reducing the maximum success fee to 10 per
cent. is an interim measure, so that the specific concerns on high
costs in defamation cases can be addressed urgently while we consider
other options for longer term reform. I am aware of the concerns raised
by the Merits Committee on the order and on reducing the success fee to
10 per cent.
Mr.
Malins:
Does the Minister accept the force of the argument
that if the fee is reduced to 10 per cent., many people will be denied
access to justice, as it will not be worth taking on such cases? There
will therefore be a lack of access to justice—a point that has
been put by many
respondents.
Bridget
Prentice:
That point was made by a number of respondents,
most of whom are lawyers who will see their success fees reduced from
100 per cent. to 10 per cent. Those representing the consumer—my
constituents and his—do not feel that they have access to
justice in such cases at the moment. For example, the Which? response
did not see the measure as a problem at all and, in fact, was quite
supportive of our intentions. Yes, of course there are people who will
want to prevent the change from happening, but they are the ones who
will lose out financially as a result and not the ones who lose out at
the moment because they do not have access to
justice.
As
I said, the measure is interim so specific concerns around the high
costs can be addressed urgently. We shall consider other options for
longer-term reform. Defamation-related proceedings are a discrete
category of case in which special considerations apply. They are
relatively few in number and, as I have mentioned on numerous
occasions, of relatively high cost, especially when compared with other
civil proceedings. Therefore, based on the available evidence,
including that presented during the consultation, we judged a maximum
success fee of 10 per cent. to be
appropriate.
I
therefore commend the draft regulations and the order to the
Committee.
4.21
pm
Mr.
Henry Bellingham (North-West Norfolk) (Con):
It is a
pleasure to serve under your chairmanship, Mr.
Pope.
I
declare an interest as a former practising barrister. I believe that
over my career I was involved in one defamation case, which I lost, and
I had completely forgotten all the law that I learned about libel and
defamation until I carried out a certain amount of revision in the
light of the debate about libel law
reform.
It
is a pleasure to be in Committee with the Minister for perhaps her last
time. I put on record my gratitude for her unfailing courtesy and
professionalism as she has handled both primary and secondary
legislation. The vast majority of the secondary legislation that she
has presented has been well thought out, and well and widely consulted
on, but unfortunately those attributes do not apply to the measures
that we are considering today. I suggest that there has been a woeful
lack of consultation, especially on the conditional fee arrangements
order, and that point has already made by my hon. Friend the Member for
Woking and, indeed, by the hon. Member for Liverpool,
Walton.
The
draft Conditional Fee Agreements (Amendment) Order 2010 was the subject
of a Ministry of Justice consultation published on 19 January that was
to last only four weeks. That is a breach of the Minister’s own
departmental code, which lays down the minimum time for a consultation
period as three months, unless there are exceptional circumstances. I
do not understand the exceptional circumstances in this case, apart
from the fact that there is an election coming up. Perhaps
the Government are so concerned that they will lose the election that
they want to rush through the statutory instruments, but surely that is
not the case. We have a statutory instrument on contingency fee
arrangements, but the Government have tagged on the conditional fee
agreements order in a way that has caused a great deal of consternation
in the professions and among many other groups and
practitioners.
Professionals
and others involved in this aspect of the law have certainly not had
enough time to carry out proper research, which is a great pity. The
chairman of the Bar Council stated in a letter to the
Committee:
“As
one head of a leading set of media lawyers pointed out, it was
impossible to assemble such figures in the time available—not
least, because client consent needed to be
obtained.”
Lawyers
must of course obtain client consent, so when those libel lawyers were
trying to assemble facts and figures for the consultation, they were
simply unable to use some of the material available to them because
they did not have the necessary client permission. The Government
definitely overlooked that
point.
The
conditional fee arrangements order caps success fees at 10 per cent. Do
we have a real problem with what is going on at the moment? I would
suggest that there is a problem with escalating costs. Many small media
companies, local newspapers, small independent radio stations and small
publications have been sued for defamation by lawyers acting on behalf
of plaintiffs in a conditional—no win, no fee—arrangement
with a 100 per cent. success fee uplift. That has obviously
been driving costs; indeed, plaintiffs in such arrangements often have
no incentive to keep costs down. If the defendant—in this case,
perhaps a small newspaper—loses the case, they will have to pay
the 100 per cent. success fee uplift. As the Minister said, that can
have a chilling effect, and it can lead to people settling cases in
advance for fear of paying such an amount. However, going from 100 per
cent. to 10 per cent. is to make a very big reduction, and one has to
look at the other side of the coin, which is access to justice for our
constituents.
Mr.
Tom Watson (West Bromwich, East) (Lab):
I think that I am
right in saying that the 100 per cent. success fee becomes available to
lawyers only if the case is not settled within 42 days. Will the hon.
Gentleman comment on that?
Mr.
Bellingham:
The hon. Gentleman makes a good point. He is
talking about staged success fees. Under the current arrangement, what
he describes does not apply,
although it could indeed apply if we had a system of staged success
fees. There might be a success fee of 10 per cent., 50 per
cent. or 60 per cent. at an early stage; there are various
configurations. Messrs. Carter-Ruck and News International agreed a
protocol to put in place what was basically a private staged success
fee arrangement for that group of newspapers. The hon. Gentleman is
absolutely right that there are other ways of proceeding without
reducing access to justice, and I will come to that in a
moment.
First,
however, I want to say a word or two about the Jackson report. A moment
ago, I said that there was a problem with escalating costs, and that
was exactly what Lord Justice Jackson was asked to look at and report
on. He put together a quite remarkable piece of research. His report,
which ran to about 900 pages, was the result of a huge amount of
consultation. He went around the whole country talking to people and
organisations on all sides of the profession and to many other
organisations as well.
The
Government rightly said that they needed to look carefully at Lord
Jackson’s 100-plus recommendations and to reflect on and
evaluate them. We should bear in mind that if they were implemented,
they would probably constitute one of the most far-reaching reforms of
civil litigation for a generation. No Government would want to rush
into implementing Lord Jackson’s report, and this Government
rightly adopt that stance.
The
Opposition have said that we will evaluate all aspects of the report.
We will feed into our review the other aspects of civil litigation and
civil law reform, as well as a number of Law Commission reports. We
will then be in a position to tell whether we need to introduce a
number of statutory instruments or new primary legislation. We will
proceed on the basis of full consultation with all interested parties,
but we will move quickly with a view to having a decision, and perhaps
draft Bills or draft SIs, before the end of the year. That is surely
the way to proceed, rather than cherry-picking individual bits of Lord
Jackson’s report and saying, “Right, we’ll rush
ahead with
this.”
The
libel law reform group has waged a very effective campaign and it
rightly flags up the problems of scholars, academics and scientists. We
all strongly feel that they need a right to freedom of expression. They
need to be able to feel that they can publish fair facts and research
without running the risk the whole time of being muzzled by an action
against them for defamation. However, the campaign might not have put
enough emphasis on the fact that many of these scientists and academics
have been sued in the past by large corporations and commercial
interests. We are, therefore, talking not about an individual using a
conditional fee arrangement to sue a newspaper, but about large
corporations that would not use conditional fee
arrangements.
It
is also worth bearing in mind that there are many examples of
scientists who have been sued using conditional fee arrangements to
defend themselves. The briefings that we received from a number of
organisations pointed out that, in four recent cases, scientists or
academics being sued by large corporations used conditional fee
agreements with a 100 per cent. uplift to defend themselves. It
happened with the British Chiropractic Association v. Simon
Singh, GE Healthcare v. Thomsen and Charman v. Orion
Press.
In all those
cases, a CFA was used not by a plaintiff suing a small media outlet but
by a defendant being sued by a large corporation. Obviously, it is
important to ensure that we strike a balance between the right to
freedom of expression and the right of access to justice for
individuals who are libelled or defamed. What we have at the moment is
certainly not totally satisfactory, but if we move from a 100 per cent.
success fee uplift to 10 per cent., we could be depriving our
constituents of access to justice. That concerns me, particularly as
the Government have moved swiftly and without proper consultation,
cherry-picking one part of Jackson. Jackson himself was by no means 100
per cent. certain that that approach was the right route. He discussed
using statutory instruments to cap success fees and after-event
insurance premiums, for example, but he said that his proposals should
be considered as an overall package, rather than one or two bits taken
in isolation.
The
Government have moved at breakneck speed on the conditional fee order.
Although I accept that libel law reform is problematic, my party has
said that we will give the Government’s libel law working party
added impetus if we win the election. We will include in our manifesto
a commitment to reform libel law and, if elected, we will give the
process added impetus and come up with conclusions by the end of the
year. That would be a good way to proceed as far as general,
substantive libel law is concerned. The order relates to only costs,
and the two aspects of costs and the substantive law must be kept
separate.
The
damages-based agreements regulations are, obviously, different from the
conditional fee agreements order, because they deal with contingency
fee arrangements, which are based not on a success fee but on a lawyer
saying to a client, “If we win this case, I will take a
percentage of the damages that you get.” A success fee, which is
an uplift in the base cost, is not involved. Interestingly, contingency
fees are used a great deal in America, but they are prohibited here for
all contentious litigation except in tribunals. They are used only in
tribunals, and regularly in tax and employment
tribunals.
I
suggest that there are a number of concerns about how damages-based
agreements operate. Litigants have occasionally been inconvenienced and
unfairly affected by the contingency fee taken by the lawyer but, on
the other hand, is there evidence to suggest that it is a major problem
or that fees should be capped at 35 per cent.? I am not 100 per cent.
sure. It appears that the proposals before us are based mainly on
research by Professor Moorhead of Cardiff university that considered
only a small sample of cases.
Furthermore,
it is telling that although the Ministry of Justice has used Professor
Moorhead’s findings to justify the statutory instruments, he has
said since then, as was made clear in the Merits Committee of the House
of Lords, that there is no strong argument for reform. There is
certainly no definite strong argument for a 35 per cent. cap. Professor
Moorhead went even further, and pointed out that if there was a cap at
35 per cent., there could be a problem with access to justice. The very
academic upon whom the Government have been relying has somewhat
changed his views and his advice to them, which I find a little
concerning.
The Law
Society and various petitioners have had things to say. One petitioner,
whose name I will not mention for obvious reasons—he sent a
confidential missive—pointed out to me, when talking about how
access to justice could be damaged,
that
“Professor
Moorhead…was concerned that the imposition of any cap would have
a potential detrimental impact on access to
justice”
for
vulnerable people—our constituents up and down the
country—who are fighting their cases in tribunals. The
petitioner
concluded:
“I
do not believe you will find a finer example of bad law making,
ultimately to the detriment of many thousands of claimants who are
generally without jobs, without resources and so heavily reliant upon
Damages-Based Agreements to get any sort of justice. I guess these are
the unintended consequences that the Merits Committee alerted the Lords
to”—
so
there we have
it.
I
suggest to the Minister that there is an alternative approach, and I
ask her to explain to the Committee, before we vote on or pass the
statutory instruments, why the alternative approach, which is
recommended by the Law Society, the Bar Council and a large number of
petitioners, does not meet with her favour. They say that there is a
problem with the contingency fees and that although it is not a huge
one, there have been examples of clients being let down, cases being
settled early because of the desire of a lawyer to have the contingency
fee, and cases being settled that otherwise would not be. Although
there are problems, surely the way forward is for the Ministry of
Justice to work with the Solicitors Regulation Authority and other
bodies to seek a regulatory solution. There is a regulatory solution
out there, but the Government have not grasped
it.
Once
again, the simple answer would be to not rush the instruments through
but to say that we will await the consideration of the Jackson report,
which is the most far-reaching and impressive report on civil
litigation ever. The Government have pledged to evaluate that report in
detail and to come up with proposals. We will not stand in the way of
the measures, because we understand the Government’s desire to
press on with libel law reform and we understand that there is a real
problem with the current situation, but we strongly suggest to the
Minister that she listens to what people are saying. Bearing in mind
that we have had exactly four weeks’ consultation and are right
at the end of this Parliament, surely the sensible course for the
Minister would be to say that she has listened to the debate and will
delay the measure and come back to it in the context of Lord Justice
Jackson’s report. We should move quickly at the end of the year
so that we do not have just a piecemeal reform of these two parts of an
obvious problem, but ensure that we get the reform
right.
All
too often, the Government have rushed into measures, coming up with the
wrong solution, and we have had to return at a later stage with other
legislation to correct the problems and the faults with the earlier
measures. I urge the Minister to listen to what people are saying.
There will be absolutely no shame involved if she concludes that there
has been a strong argument in favour of parts of the statutory
instruments, but that the argument has not been completely overwhelming
and the time has come for her to say, “We’ll just put
this on hold for the time being and come back to it at a later
stage.”
4.39
pm
David
Howarth:
It is a pleasure to serve under your
chairmanship, Mr. Pope, for what is, I am afraid, the last
time. In common with many members of the Committee, I am not standing
at the election. In view of what the hon. Member for North-West Norfolk
said, perhaps I should declare an interest. He started to talk about
academics and scientists, and I will shortly be going back to being an
academic.
As an
academic, at this time of year—March, April, May—I would
be teaching the law of libel. In the later part of my teaching career,
the libel part of the course expanded to include the law of privacy. I
had not realised before the debate started that the change that we are
discussing, which reduces access to justice on the part of claimants,
applies not only to libel—we all admit there is a problem with
that and that changes and reforms have to be made—but to
privacy; the Minister said, “breach of confidence involving
publication to the public”, which is privacy law.
The order
will result in lawyers not taking cases in which someone’s
private life has been wrongly exposed by the newspapers. That is
different from a libel case. Private life should not be exposed. The
effect will be that only very rich people will be able to protect their
private lives—people who can take cases on the normal basis of
paying their lawyer’s fees themselves and taking the risk of
losing the case and paying the other side’s costs. CFAs give
access to justice to people who cannot afford to do that.
We have all
seen someone’s private life used as entertainment in a Sunday
newspaper. People in public life or entertainers can afford to take
their cases in the normal way on a straightforward fee basis, but
ordinary people whose lives are used simply to sell newspapers cannot.
If they cannot get legal redress, the newspaper will do it
more.
Perhaps I
should have picked up the fact that the order covers privacy as well,
but I did not. Having realised that it does, I am very concerned about
the effect of the order. It illustrates the problem of the very short
consultation period, because such points need to be picked up. That is
why we have 12-week consultation periods, to pick up what the
implications of such legal changes might be. Privacy is a key
point.
There is a
problem with libel law and with large commercial interests using it to
suppress protests against them and scientific and academic discussion
of their activities. I am sure that the Committee will remember the
McDonald’s libel case. That corporation attempted to use libel
law to crush a protest against it. Ever since then, I have thought that
there was a need radically to reform the libel law, especially the
removal from corporations of the right to sue in libel.
Corporations
do not have the relevant sort of interest. Libel law is about
protecting people’s ability to associate with other human
beings. Their reputation is valuable to them, not for monetary but for
social reasons. If a person’s reputation goes, their friends go
and their ability to have a social life is damaged. Corporations do not
have that relevant interest and should not be allowed to sue in libel.
Of course, they cannot sue in privacy for the same reason. They can sue
for malicious falsehood, as the Minister mentioned—that is a
commercial tort—but I do not see why they should be allowed to
sue in libel.
Mention of
cases to do with scientific criticism brings me to another possible
solution to the problem. The law of qualifying privilege, which means
that malice has to be proved to get a case going, should undoubtedly
apply to scientific criticism. That would be a better way forward for
those cases than anything that has been suggested here today. What is
being suggested is that lawyers, when looking at cases that come in
through their e-mails or their door, will say, “Well, 100 per
cent. uplift means I can take a 50:50 case” instead of,
“In order for me to take this case, it has to be 10:1
on.” If it is not a 10:1 on case, lawyers will not take it. That
means that someone who cannot afford to take a case on in the
traditional, fee-based way, as well-off people can—they can take
the risk themselves—has to have a 10:1 on case just to get any
legal help. What sort of access to justice is
that?
Mr.
Ian Davidson (Glasgow, South-West) (Lab/Co-op):
Am I
correct in the logic of that position? If we offered the 500 per cent.
fee uplift instead of the 100 per cent. fee uplift, people would have
more chance of getting a lawyer to take on their
case.
David
Howarth:
Of course that is the logic, but the logic is
also that we could choose any figure between 10 per cent.
and 100 per cent. and ask what the reasonable figure is, which comes
back to another point about consultation. In other types of case, the
figure is 12.5, 20 or 25 per cent., each of those numbers representing
a policy decision by the Government about the odds they think are in
the public interest to have lawyers thinking about. Why 10 per cent.
and not 20 or 30 per cent.? The Government have put forward no evidence
at all as to why the figure should be 10 per cent., why it should not
be 25 per cent. or
whatever.
We
have a real problem with the lack of consultation. Other members of the
Committee have referred to other ways of doing things—sliding
scale methods, in which the percentage uplift increases with the
complexity of the case, and all sorts of other options—which
have not been thought about or discussed. All we have had is an attempt
to force through a particular idea in record
time.
I
do not think that we should go ahead with the measures. We need more
time to think about them and to discuss exactly what the percentage
should be. There is a problem with the cost of libel cases, which is
too high. However, what shall we do about it? Shall we pick this
figure, that figure or another figure? We might pick not a particular
figure but a sliding scale—we have all sorts of questions to
ask. In the end, my attitude comes down to the fact that I was
surprised and even shocked to hear from the Minister that the
provisions cover privacy as well. If they cover privacy as well, we
should think
again.
4.47
pm
Mr.
Kilfoyle:
I hope that the hon. Members for North-West
Norfolk and for Cambridge will not take offence when I say that
normally, when lawyers begin to speak, my eyes glaze over and I get a
ringing sensation deep inside my skull. I have no axe to grind with
lawyers, although I tend to describe them in pejorative
terms—one of which is thinking of them collectively as a
“fee” of
lawyers. The rapaciousness of some members of the profession is beyond
the pale. I am mindful of what Voltaire once said about having twice
been bankrupted in court—once when he lost at law and once when
he won. We are facing up to such things in a small way, in some of the
arguments I have heard
today.
I
found some of those arguments persuasive; I, too, am concerned about
access. Although I have no wish to see lawyers making disproportionate
amounts of money out of anyone, I would be concerned if people were in
some way debarred from going before the courts or attaining their
rights in whatever forum that ought to be done. Another concern,
expressed by the hon. Member for Cambridge, was about privacy. I hope
that the Minister answers that question; the issue is very important
and, given the evidence here,
unaddressed.
I
also hope to hear something from the Minister about the
evidence—although I might be missing something, because I am
getting a bit old now. For example, point 2.19
states:
“Research
conducted by Professor
Moorhead”—
he
was cited
earlier—
“found
that the average…percentage currently charged by representatives
was 33 per
cent.”,
and
it goes on to mention the different bands. The very next paragraph
states:
“A
fee cap of 35 per cent....is designed to sit at the lower end of the
current fee level
spectrum.”
Perhaps
I am missing something, but unless we are talking about two entirely
different things or some mathematical definition that I cannot see is
hidden in the two paragraphs, it seems to me that 35 per cent. is far
from
being
“at
the lower end of the current fee level
spectrum”
on
the basis of the evidence provided. I would like to hear from the
Minister why those two statements are juxtaposed as they are as part of
the evidence.
At the end of
the day, I am equally concerned about a throwaway line in the
introductory remarks made by the Minister, for whom I have the greatest
personal regard; I think that it was a rhetorical question about why
the measure is being brought in now. She said that one of the reasons
is that the Secretary of State wants it. I am afraid that that is not
good enough. With the greatest respect to anyone who holds the high
office of Secretary of State, it is not good enough that something
should be done on their whim. A far greater justification than that is
needed, and the thing seems to be riddled with
inconsistencies.
I am not
happy with either of the measures before us, and I would be inclined,
given the opportunity, to vote against
them.
4.50
pm
Mr.
Watson:
Through you, Mr. Pope, I apologise to
my hon. Friend the Minister for the vagaries of the Committee system
that put me in a Committee considering a matter on which I have just
done a three-month inquiry, as a member of the Select Committee on
Culture, Media and Sport, which has been examining libel reform. I
shall try not to detain members of the Committee by describing the ways
in which the proposals do not match the Select Committee’s
recommendations.
My hon. Friend
raised two central points. One was about the Jackson report. I think
that everyone agrees that the cost of High Court litigation, including
defamation and privacy claims, is too high. The aim of the
recommendations in Lord Justice Jackson’s report on costs was to
look at ways to reduce costs and preserve access to justice and a fair
balance between the parties. The question that we must ask ourselves
today is whether the Jackson test has been met. Will we drive down
costs and give access to justice too?
I must say
that the proposals would probably remove every one of my constituents
from libel justice and probably mean that the libel courts would go
back to the bad old days of being the preserve of just the rich and
powerful. I cannot understand why the arbitrary decision to move from
100 per cent. to 10 per cent. was made so quickly. Why not 25, 50 or 75
per cent.? That came up in the House of Lords debate last
week.
On both
counts—driving down costs and access to justice—the
proposal fails. The House of Lords Merits of Statutory Instruments
Committee is made up of some very wise heads, and in bringing the
matter to the attention of the Lords it said that the proposals
may
“imperfectly
achieve their policy
objective”,
and
also
commented:
“We
regret that insufficient time has been allowed to produce a solution
based on more robust evidence or on which there is broad
agreement”.
The
second point that my hon. Friend discussed was the sense of urgency in
the system, because some very famous cases brought by big corporations
against hard-working and poor scientists are detaining the courts.
Simon Singh, in particular, has been outrageously treated by the
British Chiropractic Association for daring to suggest that
chiropractic is a pseudo-science, or hokey medicine. He has been
intimidated by that process, but as the hon. Member for North-West
Norfolk said, he is defending himself using the CFA.
I am not sure
whether I am required to make a declaration, but if not, this may be an
explanation for colleagues: I have used the CFA to get justice in the
libel courts and I am pretty convinced that, had the proposals before
us been in place at the time, I would not have been able to obtain the
justice I got without risking my entire financial livelihood, meagre
though it is these days. Who would risk their children’s and
family’s future in such
circumstances?
I
hope that those points will help to bring a sense of sobriety to the
debate. There are other science cases that have been won under the
existing system but would not have been taken under the system put
forward by the proposals. There is a very famous case of a Danish
professor called Henrik Thomsen, who was sued for defamation in London
by three multi-billion dollar companies, which were part of the GE
Healthcare group. The claim against him was in respect of a talk that
he gave to 30 people at a conference in Oxford.
An article
was published in the professor’s name in a specialist magazine
that was circulated to about 1,000 health care professionals
in England. It was about a case concerning one of GE
Healthcare’s products, which was called Omniscan. It is a
contrast agent that is injected to obtain enhanced images with MRI
scans
and it has been linked with a very rare but horrible disease. It is also
the subject of litigation in the US. I do not think that Henrik Thomsen
would have received justice if these proposals were in place, and I am
very concerned about that.
So I hope
that my hon. Friend the Minister will listen to some of the comments
made by other colleagues in the Lords. Lord Thomas of Gresford has
spent many years campaigning for libel reform, and he said last
week:
“The
solution that the Government have hit upon is utterly unthinking. It is
not the recommendation of the Culture, Media and Sport Select
Committee.”
In
other words, it is another recommendation. Lord Thomas went on to say
of the 10 per cent. success fees:
“It
makes it impossible for the ordinary citizen to protect his reputation
or defend himself against unmeritorious
claims.”—[Official Report, House of Lords, 25
March 2010; Vol. 718, c.
1164.]
It
is therefore with very great regret that I must say to my hon. Friend
the Minister that, for the first time in nearly a decade, I will have
to oppose a recommendation by the
Government.
4.56
pm
Bridget
Prentice:
Wow! Well, as I said earlier, this is my last
statutory instrument Committee—thank God for
that!
Let
me begin with Sir Rupert Jackson’s recommendations, which
included the conditional fee arrangements proposals and also
after-the-event insurance premium recoverability and increases in
damages. The proposals would affect all categories of cases brought
under CFAs and not just defamation, so the views of a significant
number of very different stakeholders would need to be considered
before we could determine the way forward and primary legislation would
also be needed. Of course, that would take some time.
My hon.
Friend the Member for West Bromwich, East is a member of the Culture,
Media and Sport Committee. The Committee’s report also agreed
that costs in defamation cases were too high. It suggested reducing
success fees to 10 per cent. as an interim solution to an urgent
problem. I say to my hon. Friend the Member for Liverpool, Walton that
that was the reason why the Secretary of State was concerned to act
with some urgency, and that is why we are taking the measure
forward.
The hon.
Member for North-West Norfolk, who has been on more SI Committees with
me than anybody else I know, will know that I always try to give as
clear answers as possible. If I should fail to respond to any of the
comments that have been made, I will of course write to you,
Mr. Pope, and the rest of the Committee to address
them.
Hon. Members,
including the hon. Member for North-West Norfolk, said that the
four-week consultation period on CFAs was too short. However, the hon.
Gentleman then went on to discuss Sir Rupert
Jackson’s consultation and research, which took a
year to complete. The Culture, Media and Sport
Committee’s review also lasted about a year. The
Department consulted on defamation in 2007 and again in 2009, I think,
so there is a wide basket of information
available, and people with an interest in this subject will have had an
opportunity, in all those different ways, to assemble their
evidence.
Mr.
Bellingham:
Is the Minister aware that neither the
Culture, Media and Sport Committee nor Lord Justice Jackson made a
specific recommendation to reduce the cap from 100 per cent. to 10 per
cent? They made many other recommendations, but no recommendation about
that. Given the specific proposals in the order, we should have a much
more lengthy and normal consultation
period.
Bridget
Prentice:
I understand that the Culture, Media and Sport
Committee suggested 10 per cent. as being appropriate, although, as the
hon. Gentleman rightly said, Sir Rupert Jackson did not make a specific
recommendation. When we proposed the figure of 10 per cent.
and people said that it might not be appropriate, we asked them to
produce further evidence to show why it was not appropriate. We were
never given complete evidence. For example, some defamation lawyers
say, “If we lose cases, we lose this amount of money,”
but they do not stand up against how much they gain when they win
cases. We received partial evidence from them about uplifting the
figure further.
Indeed, Sir
Rupert Jackson looked at 154 cases, none of which was won by the
defendant. In a sense, that is quite a powerful argument for saying
that there is a
problem.
David
Howarth:
It is extraordinary if the Minister is claiming
that claimants would win 100 per cent. of libel cases. Claimants cannot
possibly win 100 per cent. of libel cases. Is that what she is
saying?
Bridget
Prentice:
No. Of the 154 cases that Sir Rupert Jackson
looked at, none of them was won by the defendant. That gives a
distorted view, but it also shows that there is a problem, which is why
something must be done about the 100 per cent. uplift. All the evidence
shows that very few defendants
won.
The
hon. Member for North-West Norfolk asked about defendants using CFAs.
The risk is much higher for the defendant, so the CFAs used by
defendants are probably less common. My hon. Friend the Member for West
Bromwich, East will confirm that the Culture, Media and Sport Committee
recognised that, too. However, it is as well to put on the record that
we are not suggesting the abolition of CFAs. They will be available
both to defence and
claimant.
Miss
Julie Kirkbride (Bromsgrove) (Con):
I am listening
carefully to the Minister’s argument. It seems that she is
worried about lawyers’ incomes and whether they are too great.
She is concerned about people who have libelled others and how they are
losing the libel case to the other person, who now has a right to take
that libel to court. She is not interested in the access to justice
aspect that was so well put by her Labour colleagues, which seems the
most important argument in our
discussions.
Bridget
Prentice:
Right up until the hon. Lady’s last
point, I disagreed with her entirely. However, she is right: access to
justice is the most important aspect of
the proposal. It is something with which I and the Ministry of Justice
have been heavily involved for a long time. I am not particularly
concerned about exactly how much money individual lawyers take home,
but I am concerned about whether they are serving their clients as well
as they ought to be. Sadly, that is not always the
case.
I
do not think that the hon. Lady was in the room when I referred to
evidence from Which?, the biggest consumer organisation in the country.
It said that, for the ordinary person who cannot afford massive legal
fees, as opposed to celebrities who can—they probably do not
need CFAs anyway—it did not consider the change to be
detrimental. That, to me, is as powerful an argument as any other that
has been put
today.
Mr.
Bellingham:
Even Which? accepted that it had been sued on
several occasions by individuals whom it had featured in articles.
Although it took the view that 100 per cent. was probably too high, it
did not say that there was an overwhelming argument for moving the
level down to 10 per cent. It was also concerned about access to
justice.
Bridget
Prentice:
The hon. Gentleman is absolutely right that the
organisation did not specify a particular percentage. As a major
consumer organisation in the country, which occasionally finds itself
on the wrong end of a case of litigation, it pointed out that in a
sense it felt that it was indirectly protecting the ordinary consumer
because it was taking on board litigations that individuals would take
out against it. On that basis, it welcomed what we are trying to
do.
The hon.
Gentleman also mentioned Professor Moorhead’s research. As I
said earlier, our consultation in 2009 was not limited to the
professor’s research—important though it is. As the hon.
Gentleman will know, the Law Society also felt that Professor
Moorhead’s research was limited in many ways, but it
helped to identify some areas of concern. The hon. Gentleman asked that
we work with the Solicitors Regulation Authority, which we will
do—we consulted it. DBAs are not restricted to solicitors, but
will involve claims managers who are not regulated through the SRA. The
legislation therefore regulates the agreement rather than the
representative. Of course, we will continue to work with the SRA and
others in ensuring that the legislation works
properly.
Mr.
Bellingham:
Would it not be better to evaluate how a new
protocol with the SRA works for perhaps a
year before taking the action the Minister is
proposing?
Bridget
Prentice:
Both measures will be reviewed within a year.
Before that 12 months is over, if we—not me, but whoever my
successor will be—are in a position to move forward with many of
the other aspects of the changes in Rupert Jackson’s report and
the general libel review, there is no reason why that review cannot
take place earlier. I wish whoever it will be all the best in taking
the matter forward. I shall watch with some interest—or not, as
the case may be.
The hon.
Member for Cambridge is concerned about privacy cases. He is right that
they raise the same issues as defamation cases. There is a case before
the European
Court of Human Rights specifically on the issue of excessive costs,
which we will watch with some interest. However, we have used our
definition because it is the one used in civil procedure
rules.
A
number of colleagues asked why 10 per cent. was used. It was felt to be
an appropriate interim measure. Of course, it could have been anything
between 10 per cent. and 100 per cent., but as I said earlier, the
problem with CFAs is that once the cap was at 100 per cent., there was
a tendency to keep to that and not go any lower than that. We feel that
going to the lower end of the spectrum will give people a better
result, which is why we have gone there. My hon. Friend the Member for
Liverpool, Walton asked about the 33 per cent. and 35 per cent. issue.
I will be able to give him an answer in a
minute.
Professor
Moorhead found that the average percentage currently charged was 33 per
cent. Most of the respondents to his survey operated in the lower band
between 25 and 30 per cent. and an upper band of 40 to 50 per cent. We
thought that 35 per cent. including VAT would sit at the lower end of
the current fee level. That is in order to provide an incentive to
improve cost-efficiency on the part of claims managers and lawyers, as
well as an incentive to consider one of my
hobby-horses—alternative dispute
resolution.
Mr.
Kilfoyle:
Of course the Minister has read what is in the
advice note: the figure is designed to sit at the lower end of the
current fee level spectrum. I am saying that if she accepts
Moorhead’s 33 per cent. figure, that is obviously an absurd
statement. It is not at the lower end; it is above the
average.
Bridget
Prentice:
My hon. Friend is right, quite frankly. Even
when I was at school, 33 per cent. was lower than 35 per cent. If I
may, I shall come back to the Committee on this point. Someone will
explain to me what modal average means and perhaps that will enlighten
us all. Having said that, I shall move
on.
I
hope that I have covered all the questions that hon. Members asked. If
not, I will come back to them later. I give an assurance that the
matter will be reviewed within 12 months at the latest and that those
people with concerns will be welcome in the Ministry of Justice to talk
through why we are proceeding in this way. We do not believe that the
proposals have been rushed. There have been a number of reviews
already. We think that we need to deal, in an interim way, with an
urgent problem, and we want to ensure that access to justice is
available to all who need it. I hope, on that basis, that the Committee
will approve the
regulations.
Question
put.
The
Committee divided: Ayes 8, Noes
6.
Division
No.
1
]
AYES
Davidson,
Mr.
Ian
Hamilton,
Mr.
Fabian
Jones,
Helen
Mullin,
Mr.
Chris
Prentice,
Bridget
Sheridan,
Jim
Touhig,
rh Mr.
Don
Watson,
Mr.
Tom
NOES
Holmes,
Paul
Howarth,
David
Kilfoyle,
Mr.
Peter
Kirkbride,
Miss
Julie
Malins,
Mr.
Humfrey
Walker,
Mr.
Charles
Question
accordingly agreed to.
Resolved,
That
the Committee has considered the draft Damages-Based Agreements
Regulations
2010.
Motion
made, and Question
put,
That
the Committee has considered the draft Conditional Fee Agreements
(Amendment) Order 2010.—(Bridget
Prentice.)
The
Committee divided: Ayes 5, Noes
9.
Division No.
2
]
AYES
Davidson,
Mr.
Ian
Hamilton,
Mr.
Fabian
Jones,
Helen
Prentice,
Bridget
Touhig,
rh Mr.
Don
NOES
Holmes,
Paul
Howarth,
David
Kilfoyle,
Mr.
Peter
Kirkbride,
Miss
Julie
Malins,
Mr.
Humfrey
Mullin,
Mr.
Chris
Sheridan,
Jim
Walker,
Mr.
Charles
Watson,
Mr.
Tom
Question
accordingly negatived.
5.15
pm
Committee
rose.