Rob
Marris: I certainly agree with the Minister. If the court
is to be assisted, potentially, why is the court not to be given the
power to require such bodies to attend? The provision simply says words
to the effect, in lay terms, that they can come along if they want to.
If they are to be of so much assistance to the court, which I agree
they would be, why does the Bill not say that the court can require
them to come
along?
Ian
Pearson: I cannot answer my hon. Friend immediately about
the legal drafting of the clause, but I can tell him about the policy
effect. We want the FSA, the Office of Fair Trading and the Financial
Ombudsman Service to be able to provide information to the courts that
enables them to make decisions. I do not think that there will be any
reluctance to do so. That is clearly the policy intention, which I
believe the legislation before us is effective in achieving, but if
there are any drafting points, I shall go back to my officials and make
sure that the legislation does what we want it to do in policy
terms.
Mr.
Hoban: I am grateful to the Minister for his response. He
clarifies ably the purpose of having the Financial Ombudsman Service
here—it is not because it is a regulator, but because it will
have access to information that will help the court decide whether such
a case may proceed. I am sure that the ombudsman’s work will
help inform some of the conclusions that a court may wish to reach
about the best process for resolving such
matters. In
recent years the ombudsman has become more involved in the resolution
of multiple claims with a single cause, moving away from its position
of simply looking at individual, isolated cases. For the court to be
able to use that knowledge in determining how a case should be managed
is right. I suspect that there would be no need to compel the ombudsman
or the others to take part in such proceedings, because regulators
should be jealous of their role in trying to resolve the
issues—they would see a court solution as a welcome one. They
would all want a resolution, even through the ombudsman’s
alternative dispute resolution vehicle, while the OFT or FSA would want
to demonstrate to the court what they can do to resolve the matter.
Otherwise, increasingly, questions would be asked about the
effectiveness of the regulators, so they would want to be in the court
to say
what they have done and how they can resolve it. Compelling those bodies
to attend the court would probably not add much to the process. Having
heard the Minister’s explanation, I beg to ask leave to withdraw
the amendment. Amendment,
by leave, withdrawn.
Mr.
Hoban: I beg to move amendment 62, clause 22, page 25,
leave out lines 22 to
29. Clause
22 sets out the Treasury’s regulation-making power in the Bill,
in connection with collective proceedings. There is an issue about who
should determine the ground rules for such cases. I expect the hon.
Member for Wolverhampton, South-West fully to support the amendment, on
the basis of his comments on amendment 58, where he accused me of
giving power to politicians. In this case, I want to take power away
from politicians by restricting the Treasury’s right to make
regulations in three areas. Those areas are: what matters the court
should have regard to; the circumstances under which the court may make
an order; and in paragraph (d), I do not believe that the regulations
should provide for what collective proceedings may or may not include.
I argue that that should be done by court rules rather than by
regulation-making powers. The risk is that the Treasury will get too
involved in the detail of what happens in court and the way that the
cases are handled, and I am not sure that that would be entirely
appropriate.
Rob
Marris: I do not anticipate supporting the amendments, and
I say to the hon. Member for Fareham that they are different from
amendment 58. Amendment 58 set up a politician, the Lord
Chancellor, as a gatekeeper regarding who would have access to exercise
their legal rights. The subsections that the hon. Gentleman seeks to
delete do not set up a politician as a gatekeeper in individual
cases.
Ian
Pearson: It might be helpful to the Committee if I
explained what we seek to do in the lines that the hon. Member for
Fareham proposes to delete with his amendment. The idea is to have a
reserve power to make regulations that set out extra criteria for the
court to take into account. I will explain why we feel that reserve
power to be necessary. First, I agree with the hon. Gentleman in that I
expect the main criteria to be in the court rules. Those will be
generic in nature, and are intended to apply to class actions
generally. It may be necessary to tailor the effect of the court
rules—once they have been finished—to the characteristics
of financial services. That might mean adding supplementary
requirements to those set out in the court rules, which is why a
reserve power may be necessary.
I am confident
that the court rules will be comprehensive and contain the necessary
safeguards to prevent nuisance claims. The rules will also seek to
eliminate any possibility of the new process being open to abuse.
However, if any additional safeguards are needed for financial
services, the clause allows the Treasury to supply them. For example,
we expect that the court rules will have tests to ensure that
litigation is a last resort, that costs are addressed, that the
representative is appropriate and that a class action is the most
appropriate way to
resolve the issues that claimants have in common. Looking beyond that,
it may be necessary or desirable to put into Treasury regulations a
requirement for the court to examine the merits of a case before
authorising it; or for the court to have regard to any particular
action being taken by the regulator. Another area
that may be addressed by the Treasury via the power is the criteria for
eligibility to bring an action. For example, the Treasury might wish to
use the power to restrict the category of persons who can act as
representatives, something that we touched on earlier when we said that
we would want to consult. We will want to consider carefully whether
representatives should be restricted to public interest bodies or those
who would not earn a fee for their services, a point that we have also
mentioned
before. I
appreciate the point made by the hon. Member for Fareham when he said
that the court rules are not yet in existence and that we are talking
about a framework. The rules committee is expected to consult on the
draft rules in due course, so it is not possible to say exactly what
the Treasury might want to specify in our regulations as we first want
to look at the court rules to see whether they provide sufficient
safeguards and then consider whether further or different provision is
needed for class actions relating specifically to financial services.
It is prudent that we have a reserve power, and accepting the amendment
would reduce the flexibility of the Treasury to tailor collective
proceedings to the particular features of financial services. Both
consumer groups and the industry would want to make sure that our
approach is properly
tailored. As
is the normal procedure, we would, of course, consult on the
regulations if we decide that it is necessary for them to be introduced
to ensure that they work well in conjunction with the court rules.
Because the amendment will remove potentially needed flexibility, I
hope that the hon. Member for Fareham will withdraw
it.
Mr.
Hoban: I have to say that, as the debate continues, I have
become more wary and perhaps uneasy about the measures. That is not
necessarily because I disagree with their principle, but because no one
is actually sure where they will end up. The Minister referred to the
powers as reserve powers to tighten up the rules made by the court, but
I am interested to know whether reserve powers will be needed because
the rules committee has not come up with the draft rules yet and,
because we do not have them, we cannot have draft regulations. It
sounds as though we are in a territory where the Government want as
much power as possible just in case the court does not do what they
expect it to
do. The
hon. Gentleman talked about tightening up the eligibility criteria or
changing the rules governing who can be a representative, but if the
Treasury believes that it needs to override the rules committee, are
there adequate safeguards to ensure that there is proper parliamentary
scrutiny of the Treasury’s ability to take such action? Under
subsection (6) of clause 22, the regulatory-making powers are subject
to the negative resolution procedure. If the power is a reserve power
to tackle what the Government regard as being inappropriately loose
rules drawn up by a court, why should they be able to interfere with
those rules simply by issuing an order that goes through the negative
resolution procedure?
There should be
much greater safeguards governing the exercise of the use of what are
apparently reserve powers under the Bill than is currently set out in
the clause. There is nothing in the provisions that tells me that the
powers are secondary to the court rules. There could be circumstances
in which the Government say that the powers take precedence over court
rules. What provisions in the Bill will ensure that the powers are
reserve powers, to which the Minister referred? Nothing tells me that
that is the case. There is a weakness in the drafting of the clause as
it seems to give the main power to the Treasury, not the court. We
should receive greater clarification of the matter in the Bill.
However, as that proposal does not relate to my amendment, which would
delete paragraphs (b), (c) and (d), I cannot press it further. I beg to
ask leave to withdraw the
amendment. Amendment,
by leave, withdrawn.
5.15
pm
Mr.
Hoban: I beg to move amendment 63, in clause 22,
page 25, line 30, leave out paragraph (e) and
insert— ‘(e) suspend any
limitation provision applicable to members of a class represented
within the collective
proceedings,’.
The
Chairman: With this it will be convenient to discuss
amendment 64, in clause 22, page 25, line 35, leave out subsection (3)
and insert— ‘(3) Regulations
made by virtue of subsection
(2)(e)— (a) shall
provide that any applicable limitation period will be suspended in
favour of a class member on a specified date and will resume running
against the class member on the occurrence of specified events,
and (b) may make similar
provision with respect to the period within which any appeal in
collective proceedings is being finally
determined. No provision may be
made about periods before the commencement of collective
proceedings.’.
Mr.
Hoban: The amendments continue the theme in clause 22 on
the apparently reserved powers that the Government have sought. It
relates to limitation, and in clause 22(2)(e) the Treasury has the
power
to “modify
the effect of any limitation
provision”. Amendment
63 takes out paragraph (e) and
inserts “suspend
any limitation provision applicable to members of a class represented
within the collective
proceedings.” Amendment
64 gives more detail about what the regulations might be able to cover.
The origin of the two amendments goes back to the recommendations of
the Civil Justice Council. They probe why the Government seem to have
strayed from the CJC’s recommendations on collective
proceedings. We have here the power to change the effect of limitation
provision. The explanatory note tells us that the powers could be
used “to
stop time running in respect of claims made in respect of collective
proceedings”. Paragraph
(e) currently allows the Treasury
to “modify
the effect of any limitation provision”.
Subsection (3) gives
some detail on what the modifications might entail. They can prescribe
cases where no account is taken of any limitation provision and, among
other things, enable the court to take no account of any specified
period.
The Civil
Justice Council outlined the principle on limitation provisions in its
report. It
says: “It
is recommended that limitation should be suspended when a putative
representative party issues a claim which seeks certification as an
opt-out collective action. At that point all the members of the
represented class are potentially before the court by way of
representation and have therefore potentially issued a claim by
representation. The suspension of limitation should be lifted and time
should start running for the class members where certification is
refused or they opt-out of the
action.” In
a sense, it says that, while the action is taking place, while cases
are being heard within the collective action, the limitation should
stop. The time should not tick on the clock. However, if a party
decides for some reason to opt out during the case, or the
certification is refused, the limitation should continue to run. The
recommendations
continue: “Equally,
the suspension should be lifted if the claim once certified is then at
a future stage decertified or if on certification the court draws the
boundaries of the class on a narrower basis than the representative
party had originally drawn them in the claim as issued or the class
member for some other reason ceases to be part of the
class.” It
is therefore looking for more detailed guidance about the circumstances
in which the limitation can be suspended. When that suspension stops,
it looks at examples from overseas and gives an example from the
Australian federal collective action scheme, which
reads: “Suspension
of limitation
periods (1)
Upon the commencement of a representative proceeding, the running of
any limitation period that applies to the claim of a group member to
which the proceeding relates is
suspended. (2)
The limitation period does not begin to run again unless either the
member opts out of the proceeding under section 33J or the proceeding,
and any appeals arising from the proceeding, are determined without
finally disposing of the group member’s
claim.” The
breadth of the drafting in the Bill gives the Treasury the discretion
to depart from the principles. My amendments take the Bill closer to
the safeguards set out by the Civil Justice Council. It would appear
that the council’s recommended safeguards reflect best practice
elsewhere, so I am keen to understand why the Government have sought to
move away from them.
Ian
Pearson: First, on amendment 63, I am not sure that it is
necessary to clarify that the provision applies to members of a class
action, as that is self-evident. I think that the main bone
of contention is amendment 64. I am glad that the hon. Gentleman
recognises that it might be necessary to preserve an
individual’s right of action if their claim would be timed out
before a group action concludes. That is one reason why subsection
(2)(e) is needed. It will deal with claimants who began their
individual claim before a class action began. They should not be
exposed to hitting a time bar while a class action proceeds, and they
might need a grace period before resuming action on their
claims.
There might be
other circumstances not reflected in the proposed amendments in which
it is appropriate to suspend limitation: for example, when a class
action ends before a final judgment. Separate claims represented may
then be brought in their own right. Limitation could be suspended for a
period to allow represented claims to begin separately in their own
right. Again, they might need a grace period before resuming
action.
The amendments
do not cover all the possible circumstances in which limitation might
need to be varied for strictly technical purposes. Instead of
specifying a list of circumstances in which limitation may be varied,
it seems more effective and flexible to have a general provision. That
is what we propose. It is clear on the face of the Bill. If we were to
specify in the Bill the circumstances in which limitation can be
modified, we might find in future circumstances in which it is
appropriate to suspend limitation that we cannot do so. That is why I
am reluctant to put more detail into the Bill, although I recognise the
hon. Gentleman’s points.
However, I
reassure the Committee that the power can be used only in connection
with collective proceedings. It cannot be used to disregard periods of
limitation for any other purpose than securing an effective and fair
consideration of a collective proceeding. For those reasons, I believe
that the amendments are not necessary, and I urge the hon. Gentleman
not to press them.
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