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Lord Ackner: My Lords, the noble Lord has overlooked the fact that the main criticism as articulated has come from the advisory committee of the noble and learned Lord the Lord Chancellor. At the noble and learned Lord's insistence under the Courts and Legal Services Act, the majority of the committee are laymen. Therefore, to lay the blame for the criticism on the lawyers is hardly consistent with that situation.
Lord Hacking: My Lords, I am of course aware of the composition of the advisory committee. However, any of your Lordships who have listened to the debate and heard comments outside the Chamber will know that there is substantial opposition from the lawyers on the ground that the lawyers will abuse the system by dishonest practices because of their financial interest in the outcome of cases and by manipulating the uplift percentages so that costs will swallow the damages.
I have greater faith. There has always been an incentive to win cases. The noble and learned Lord, Lord Ackner, was a prominent and successful member of the Bar. Although he may be too modest to remember, I am sure that clients went to him and said words to the effect, "You have a great reputation for winning cases. I would like you to take on my case and do your best to win it". If clients went to the noble and learned Lord with those words, they were well judged, because my recollection from my early days at the Bar is that the noble and learned Lord was, indeed, very good at winning cases
Lord Hacking: My Lords, there has always been an interest in winning cases. Secondly, lawyers have always had some financial interest in the outcome of a case. I ask former and present members of the Bar to recall the many occasions on which they have had to advise a client whether to settle. Of course a lawyer has a financial interest in the continuing of a case; that is especially so for a member of the Bar who has cleared his diary for three to six months with no other court work booked.
The simple answer is that when faced with such issues there is only one judgment to makewhat is in the best interests of the client. I suggest that that is the judgment which the noble and learned Lord, Lord Ackner, used when he was at the Bar and I suggest that it is the judgment that any self-respecting barrister or solicitor makes
Lord Hacking: My Lords, I shall not give way now. I am moving on to the next point, which is costs swallowing up damages. That is already a problem. I am cautious about citing cases in which I have been involved because the noble and learned Lord, Lord Ackner, will proceed to recite them back to me in our next debate. However, I was recently involved in a case in which I was conducting a personal injuries claim on behalf of a client and in which considerable costs were involved because of a substantial and complicated loss-of-future-earnings claim. At a late stage the plaintiff received and accepted most generous redundancy retirement proposals. As a result, the loss-of-earnings claim went out of the window. My client was therefore left with a small personal injuries claim; so small that under taxation the uncovered costs would have exceeded the remaining damages.
I saw my client and told him that the good news was that he had won the case and that he had achieved damages of some £15,000. But I did not tell him that, in view of the uncovered costs, the bad news was that he would not benefit at all. I could have composed a letter which would have run something along the lines, "Dear Client, I am glad that I represented you in that case and it was a great pleasure to win it for you. However, that pleasure will result in you paying me because all the damages have been swallowed up and there are still costs owing".
No self-respecting lawyer would behave in that way. If he did so it would be highly damaging in the relationship between client and lawyer. It would quite likely visit upon him serious professional discipline. I remind your Lordships that under the Law Society code it is wrong and a breach of the Law Society rules to take advantage of a client or to overcharge for work done. Under those rules, it is also a requirement to give impartial and frank advice to clients. In any event, there is power in taxation to reduce or remove the uplift altogether. More fundamentally, the regulations and the Law Society model agreement will require these matters to be properly considered between the solicitor and the client as set out in writing.
When we last debated the issue the Opposition supped with a long spoon. I had hoped that today they would shorten that spoon by recognising the need for the scheme and by having greater faith in the professional behaviour of our fellow lawyers and in our professional bodies in exercising discipline. It was therefore with alarm that I heard the noble Lord, Lord Irvine of Lairg, say that we should notI hope that I repeat his words accuratelyrely on the good will of the legal profession for the scheme is for the exploitation of litigants for the benefit of lawyers. Is that the way we should be behaving?
Lord Campbell of Alloway: My Lords, I apologise for interrupting the noble Lord in the middle of his reading his autobiography. But I wish to ask him whether he thinks it is quite fair to criticise members of the Bar, of whom he was once one, by saying, "Well, if you do not have any work, you have to fight the case, but of course, if you are very busy, you settle because it is much better to settle and get on with the next case". That is just not a fair criticism of the profession of which he was once a member.
Lord Hacking: My Lords, my noble friend misjudges the comment that I made. As regards his reference to reading from my autobiography, one of the most important contributions that we can make in your Lordships' House is to give the benefit of our experience, and I willingly do that.
Lord Renton: My Lords, I did not put down my name to speak and did not intend to do so. I venture to intervene now only because one important matter occurs to me which I feel obliged to raise and which has so far not been mentioned.
The order before us relates to proceedings before the European Commission of Human Rights and the European Court of Human Rights and says that they should be specified proceedings for which conditional fee arrangements may be made with, if necessary, a 100 per cent. uplift. Section 58 of the 1990 Act does not mention any proceedings before an international court. Therefore, it seems to me that it may be that a question of ultra vires arises in relation to making this order put forward by my noble and learned friend the Lord Chancellor.
Quite apart from the narrow scope of Section 58, it seems to me that we have no power in our Parliament to make an order governing the rules of conduct, fee arrangements made, and so on, before an international court unless there has been at least consultation with the judges of that international court, just as there has been consultation with the Heads of Divisions in our country. I ask my noble and learned friend the Lord Chancellor whether there has been any such consultation and if so, what was the outcome of it.
But beyond that, we should think further. The question arises whether we have power to make such arrangements for conditional fees before an international court unless the other courts and parliaments which established that court by treaty, duly ratified, have been consulted, have agreed that we should do so, and, indeed, agreed that they would do so. Perhaps my noble and learned friend would be so kind as to comment on that.
Of course, if this order is in part ultra vires for either of the two reasons which I have given, it would seem to me that the whole order is ultra vires unless we amend it in addition to the way suggested by the noble and learned Lord, Lord Ackner. Perhaps I may say in passing that I fully agree with him.
There is only one other point which I wish to mention with regard to the proceedings before the European Court of Human Rights, and so on. "Specified proceedings" in the order in relation to our own courts are actions for damages for death or personal injury and winding up in liquidation proceedings. I believe that it is just possible to get an action going in the European Court of Human Rights for damages in some things but it is never heard of that that court has considered liquidation for winding up proceedings. Therefore, in the order we must turn to paragraph 2(1) (f), the last point, which refers to:
as described. It seems to me that all the proceedings before such a court can be made subject to a conditional fee order. I have not had the experience of appearing before international courts in the way that some noble and learned Lords, and others, have, but it seems to me a very strange situation, bearing in mind the very wide jurisdiction which the European Court of Human Rights hasalmost going into moral mattersthat we should have those conditional fee arrangements in operation, with the possibility of a 100 per cent. uplift.
Surely it must now be for Parliament and in particular for your Lordships' House, which has a wealth of both legal experience and expertise, to fight a battle in 1995 to try to ensure that this order and the regulations which go with it provide the best possible scheme for the public.
The time has passed when legal aid was available to virtually all those who needed it, and it will not come again in the foreseeable future. Other methods must be found to fill the gap which, as many other noble Lords have already said, is denying access to our system of law for those who are deemed to be too rich to qualify for legal aid but who are too poor to pay for it.
The noble and learned Lord the Lord Chancellor has been somewhat beleaguered this evening. In fairness to him, he has had to perform a difficult balancing act in trying to determine the correct level of the uplift by which fees may be increased. If he makes the uplift too low, solicitors will not bother to offer the scheme to the public. If he makes it too highI use another technical expression like the one used by the noble Lord, Lord Cocksthe public will find that the scheme is a con.
To put it frankly, "no win no fee" sounds mightily attractive, but if the result is to win and no damages or virtually no damages are received because the lawyer has pocketed the lot, dissatisfaction with both the lawyers and the legal system will rightly increase.
As others have said, the noble and learned Lord, Lord Mackay, proposed initially a 10 per cent. maximum uplift which he then raised to 20 per cent. In this order, he raises it to 100 per cent.; in other words, adopting double or quits. He maintains, as he did at the outset in introducing the order and regulations, that he has no reason to suppose that 100 per cent. will be the norm. He says that he has no power to impose a cap and if he did have power, he would not do so. He says that it is open to the parties to discuss the matter and reach their own agreement. But a lay litigant who is desperate for help is not in a strong position to bargain with a lawyer who he is anxious should pursue his case with energy and enthusiasm. If there is no cap and the uplift maximum is 100 per cent., there is no safeguard that that maximum will not become the norm and there is no safeguard that the whole of the damages will not be taken in costs and legal fees.
We were reminded by the noble and learned Lord, Lord Ackner, that the Lord Chancellor's Advisory Committee (which is independent of Parliament and of the legal profession with a majority of non-lawyers) says that 20 per cent. is the correct level to attract solicitors and to protect the public. These agreements must benefit the public and not the lawyers. It is because I am afraid that, as presently drafted, the order and the regulations do not do so that I must oppose the proposals of the noble and learned Lord the Lord Chancellor and support the amendment moved by the noble Lord, Lord Ackner.
I was the solicitor colleague, but my noble friend put the matter even more cogently than I could. I believe that legal costs are too high. I share the concerns expressed, among others, by the noble Lord, Lord Mishcon, that one must look at all possible measures to reduce them. I hope that the noble and learned Lord, Lord Woolf, will find alternative processes that will help to do so.
It is because I want the conditional fee scheme to succeed that I support the noble and learned Lord, Lord Ackner, this evening. My concern arises partly from my own experience. I accept that anecdotal evidence is often poor evidence, but it is only human to rely upon it to some extent. In negotiating the settlement of a dispute with an American lawyer I had the experience to find that the dispute was settled in a manner which I thought was very much to the disadvantage of his client. The lawyerand he more or less told me thiswanted to settle the case because he wanted to get his fee. Although I accept that there is no intention to transfer the American system lock, stock and barrel here in this country, one must at least recognise the fact that some lawyers will be affected by matters of cash flow, if not matters of amount, when forming a view and giving advice to their clients.
My other recent experience took place while I was negotiating, on behalf of an English client, a conditional fee agreement with another American lawyer. I should point out that it is such an agreement, although it has some elements of contingency. It has taken weeks to negotiate the agreement, necessitating pages of documents. It is so complicated that I believe it well shows the absurdity of the need for another lawyer to negotiate on behalf of a client with his overseas lawyer.
In mentioning the question of the agreement, I see from the monitoring arrangements proposed that it is anticipated that the agreement can be varied during the course of the proceedings. Indeed, there is a reference to that in the arrangements. However, I wonder about the effect of the possibility of renegotiating an agreement during the proceedings. Most of all I share the concern expressed about the maximum uplift and the possibility that it may quickly become the norm. We have talked about 100 per cent. and perhaps it would be appropriate to remind ourselves that the 100 per cent. is not a matter of doubling profit. I say that because the base fee, which may be doubled, contains in itself an element of profit. I would not like to mislead myself in that respect. I am sure that your Lordships will have taken the point, but I have tended to forget that it is in fact more than a question of an extra 100 per cent. profit.
As I said, I agree with the approach of trying 20 per cent. to see how it works and then, if necessary, looking at an increase. I agree with the noble and learned Lord, Lord Nicholls, about the effect of the market, although I am not convinced that shopping around to the extent practised by some clients is in fact to their benefit. My noble friend Lord Wigoder commented to me that there is perhaps an analogy with doctors in Harley Street: they do not seem to have reduced their fees even though there is quite a market in the area.
We have talked about taxation and its role in ensuring that fees are appropriate and proportionate. However, with taxation being assessed after the event I cannot help feeling that hindsight will be too tempting on some occasions to ignore. As regards the question of the cap, I am not convinced that it should be ruled out because it is more difficult, perhaps impossible, to apply in the case of a defendant. An attempt should perhaps be made to apply it where it can be applied for a plaintiff to see how it works.
There is also the question of insurance. I share the scepticism about insurance that has been voiced by some speakers. I would add to that the dangers that many of us will have experienced of an insurer finding a way to get out of paying what one thought was a certain sum of money from a policy that one thought would provide protection. There has been much experience recently in another field; namely, that of mortgage protection. House owners have tested their insurance arrangements only to find them wanting because the small print tends to protect the insurer more than it does the person who has taken out the policy.
I should be most unhappy if your Lordships were to think that I was suggesting that my firm would take advantage of clients. However, I shall report a conversation that I had this morning with a litigation colleague. I asked him what his view was about the proposals. After expressing concern about the unequal bargaining power between client and lawyer, he said, "If the system had been in operation for a while, I would have retired by now". In these days of charters, I hope that we shall see the best possible charter for the client and not what the public might regard as another charter for lawyers.
The Lord Chancellor: My Lords, I believe that your Lordships would be surprised if I were deliberately to introduce a system under which lawyers could properly exploit clients to the clients' disadvantage. In introducing the scheme it is not my purpose to do so. It has been said that the Advisory Committee that I appointed and whose services I greatly valuealthough not all of your Lordships who spoke today valued the committee in advancehas required me to examine closely the problems that it has raised. That I have done. It is one of the reasons why I have taken some time in arriving before your Lordships with the proposals, which, as I said, passed through the other place without a Division.
I sawand my noble and learned friend Lord Lowry addressed the pointthat there was a great danger that, if one did not approach this as a matter of principle, the uplift would be regarded as a tax. That is the way that my noble and learned friend approached itthat successful litigants would be taxed at some rate, 20 per cent. for example, in favour of the unsuccessful. That is not what this scheme is about. This scheme is about fixing an uplift for the particular case which is appropriate to that case.
The first point of my noble and learned friend Lord Ackner, seeking to reduce the uplift to 20 per cent., is not a device that will protect clients. It is a device that will limit the application of the scheme to cases in which the chances of success are of the order that would justify 20 per cent. I can see no justification for doing that at all. I learnt that as a result of the consultation, and I have heard no answer in principle to that this afternoon.
Obviously if I wanted a quiet life, which I must say I am as keen on as anyone else, I would have gone along with this. But surely I have to approach this as a matter of principle, and the principle is that the uplift should be related to the chance of success.
The noble Lord, Lord Mishcon, with his characteristic flair for advocacy, does not want to be a bookie. I can understand why. But the courts have had to evaluate the chances of success in actions. If a solicitor by chance forgets to raise an action in time, the amount of the damages will have as one of the factors the chances of success in the action as well as the amount of damages that the action would have incurred if it had succeeded. Therefore this idea that one has to evaluate the chances of success in an action is nothing new in the law. The noble Lord, Lord Mishcon, says it is new for taxing masters. If it was as easy as the question of my noble friend Lord Boardman would suggest, it would not be very difficult for a taxing master to see that, if one could get insurance for £100 against costs of £100,000, the chances of success must be pretty good.
This brings me to another fact. It has been said that the insurance covers all personal injuries. The insurance is a matter for the Law Society's negotiators who negotiated with an insurance company. But my understanding is that it does not cover all actions of personal injuries. It would be surprising if it did. It covers only some. Obviously, as the noble Lord, Lord Irvine of Lairg, said, a lot of personal injury actions are successful, which is why I was talking about a minimum originally. But there are other actions for personal injuries where the chances of success are doubtful. What is the correct measure of the limit to which one should go in allowing doubtful actions under this scheme? Surely it is that of 50:50.
Recently the Bar Council has given guidance to the profession about how it evaluates claims for the purposes of legal aid, because one of the fundamentals in legal aid is to find out what the chances of success are. The Bar Council put it in this way in its recent guidelines:
My submission to your Lordships is that it is absolutely proper for a lawyer to take an action in which the prospects of success are reasonable. If he does so and judges that the prospects are 50:50, he should charge that client what his services are worth. My noble and learned friend Lord Lowry said it should not be twice what they are worth. I say no because one has to take account of the risk which the lawyer is carrying, and therefore the services have to take account of that risk because if the risk turns out against the lawyer and the client, then the answer will be that the lawyer gets paid nothing based upon the chances of success in that particular case.
In my submission, as a matter of principle the maximum uplift that should be allowed, in the light of all the consultation, is 100 per cent. I have heard nothing that justifies reducing that. Of course I understand perfectly that, if someone charges a 100 per cent. uplift when it is a sure-fire case in which one can get insurance for £100, that is highly undesirable. I entirely agree with that. It is equally undesirable that he should charge a 20 per cent. uplift if that is the situation. There is nothing in a 20 per cent. upliftit makes it a little smaller perhapsthat justifies charging 20 per cent. if it is a sure-fire case. The argument of my noble and learned friend is obscuring this principle. The principle has to be that the actual uplift is measured by the chances of success in that particular case. Anything that obscures that and tries to spread it over the whole range of personal injuries, as if it were a statistic, is just nonsense. All of us who know anything about statistics know that statistics do not apply to the individual case. It is only if one has a large number of cases that the statistics apply.
The noble Lord, Lord Mishcon, for whose views, as he knows, I have great respect, gave us a most interesting argument, which of course is equally applicable to any form of the scheme. Your Lordships may recollect the argument, which was interesting and fascinating at the time but applies to any form of the scheme because I, and I think he, have the ultimate control of the taxing masters as regards any form of the scheme. As I said, the advisory committee took this view. I have of course discussed it with the committee. But the matter is one of principle and I am seeking to explain to your Lordships today what that principle is.
I hope that your Lordships will go along with the principle because, if you in any way fudge the principle, you will be teaching the legal profession that, instead of looking at the risks of the particular case, they should take the view that this is in the nature of a reasonable tax and a reasonable tax should be about 20 per cent. I am all in favour of reducing taxation, as your Lordships
The idea that the lawyer becomes a bookie if he gives odds seems to sit badly with the advice that the Bar Council has given to the barristers' profession that I read out to your Lordships. It is essential to be able to give a view about what the chances of success are. It is utterly wrong to suggest that insurance is available in cases where the outlook is of a 50:50 success rate.
My noble and learned friend the Lord Chief Justice asked: if the arrangement in Scotland is 100 per cent., why did I not start with that? I thought I had explained that, perhaps before my noble and learned friend was able to be in his place. I pointed out that the decision of the court in Scotland came in August 1992. I did not have sufficient vision to know exactly what it would decide under its powers. However, I was convinced by the argument and I thought that one of the aims of consultation was that, if a good argument was put to me, I was supposed to listen to it and give effect to it. That is what I have done. I went along with a principle and I would strongly ask your Lordships to be good enough to support me in that.
I understand all this about fudging. It is unfortunate that a lawyer should profit at 100 per cent. But if that is the lawyer's fair right, he should get it. I do not for a moment condone people taking more than they are entitled to. I think my record of trying to make changes in your Lordships' House to the legal aid system would bear that out. I am in favour of the client, but I am in favour of the client being able to take a case at 50:50 if the client wants to do that and is properly informed about the risks. I see no reason in the world why my scheme should exclude such clients, which is what in effect the scheme of my noble and learned friend Lord Ackner does. Of course it is always possible for a lawyer to take a 20 per cent. uplift in a 100 per cent. case. But then, if he is going to remain in business financially, he will have to recover that money from other people. That is the unfairness that I see in the fundamentals of what is proposed against me. It is utterly unfair to the clients who have a sound case to have to pay in this way.
The arguments that I have heard against me this eveningand I have discussed the arguments with the committeeare all based on that assumption. In my submission to your Lordships, it is a wrong assumption. It is a mistake in principle and it is damaging to fairness to the individual client in the cases to which the scheme will apply.
On the subject of the cap, I have taken the view that it is extremely difficult to apply a cap generally by regulation. I instance the case of the structured settlement. Your Lordships will know that a structured settlement is one in which a capital sum is payable immediately, with income payments made over a period. As an illustration, it would be difficult to apply a cap of 25 per cent. of the damages unless one gave the lawyer a pension. That would be an unworkable arrangement.
Those are the points of principle that I want to put before your Lordships. As my noble and learned friend Lord Hailsham of Saint Marylebone said in earlier debates, I believe that fairness requires that the system I propose should apply equally to plaintiffs and defendants. All the skill of the noble Lord, Lord Irvine of Lairg, was not able to show how the cap could apply in respect of defendants, unless it applied to costs alone. That would not be a fair arrangement if the plaintiff could incur costs up to damages plus costs and the defendant only costs. That would be utterly unfair.
Therefore, as a matter of principle, I have approached this as a matter of fairness. The 100 per cent. figure in Scotland was fixed by our judicial colleagues there. It is my understanding that the Scottish speculative system, with 100 per cent. uplift, is used to a considerable extent. The amount varies, but on Friday three leading firms in Edinburgh had between them 30 or 40 actions on this basis. The great thing about the scheme is that I have never known of a complaint.
That brings me to the last point that I want to make. The agreement is made at the beginning of the litigation. It is capable of being altered by agreement. It cannot be altered unilaterally once it has been made, but it can be altered by agreement. The kind of case to which the noble Lord, Lord Mishcon, referred would certainly be one which might arise for renegotiation. That already applies in relation to legal aid. A solicitor who suddenly discovers a cast-iron statement against him is supposed to advise the legal aid authorities so that they may reconsider whether legal aid should be granted. Noble Lords will know how often that happens.
Renegotiation is possible, but ultimately the only time the person has to pay out any money and anything is done to the detriment of the client is after the case has been successful. Therefore, the client has succeeded before that arises. In that connection, I want to remind your Lordships of a fundamental point; namely, this is an agreement between solicitor and client. If there is anything in it which is disadvantageous to the client, since the solicitor is always regarded as having influence over the client, unless the solicitor can prove that the agreement was a fair and proper one he cannot succeed in enforcing it on the ground of undue influence. Therefore, at the stage at which that arises, the client will have succeeded and, if the agreement is disadvantageous to the client, the burden of proof will rest on the solicitor to justify it. If he cannot justify it he will not get the benefit of the uplift.
I have dealt with the matters of principle. I ought to deal with the question of my noble friend Lord Renton. My understanding is that the law in this country disadvantages a lawyer who makes an agreement about going to service a case either in the European Commission or in the European Court of Human Rights. It is the law of this country which is dealt with. My orders are intended to deal with that aspect of the matter; namely, the enforceability of such an order in this country. Obviously, people could go from Scotland to the court in Strasbourg on the basis of the law there if the agreements were made there.
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