Session 2009-10
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General Committee Debates
Delegated Legislation Committee Debates

Draft Damages-Based Agreements Regulations 2010
draft conditional fee agreements (amendment) order 2010

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

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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. 

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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

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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

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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. 

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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

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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

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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,

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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. 

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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. 

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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.” 

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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. 

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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

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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 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. 

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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

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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

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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

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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

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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 ]  


Davidson, Mr. Ian   

Hamilton, Mr. Fabian   

Jones, Helen   

Mullin, Mr. Chris   

Prentice, Bridget   

Sheridan, Jim   

Touhig, rh Mr. Don   

Watson, Mr. Tom   


Holmes, Paul   

Howarth, David   

Column number: 21 

Kilfoyle, Mr. Peter   

Kirkbride, Miss Julie   

Malins, Mr. Humfrey   

Walker, Mr. Charles   

Question accordingly agreed to.  


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. 

Column number: 22 

Division No. 2 ]  


Davidson, Mr. Ian   

Hamilton, Mr. Fabian   

Jones, Helen   

Prentice, Bridget   

Touhig, rh Mr. Don   


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.  

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Prepared 11:39 on 31st March 2010