Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Ackner: My Lords, I am not sure whether I am being criticised for not replying in some detail to the point about ultra vires in this debate or in the previous debate. In the previous debate, on 12th June 1995, it is set out in considerable detail. I propose to refer to that when I come to reply.

Lord Hacking: My Lords, I leave it there. Under Section 58(2), the conditional fee arrangement is set as a percentage uplift of the amount of the lawyer's fees. If we look at Section 58(5) there is a reference to the same percentage. That percentage is only the percentage, and can only be construed as the percentage, of the uplift of the lawyers' fees.

Even if there were the power to make the order in the form that the noble and learned Lord urges, the linking of lawyers' fees to the amount of damages is moving us towards a contingency fee system which is undesirable. I agree with the views expressed by the noble and learned Lord the Lord Chancellor which were the views that he also expressed in another place before the Home Affairs Select Committee last October. His noble and learned predecessor put it well in the earlier debate in your Lordships' House on 1st November 1994, when he said:

23 Jul 1998 : Column 1111

It is impossible to see how the capping system could work in practice; for example, with a defendant or in the case of a structured settlement where moneys are paid by instalment over a period of time. There are practical and legal difficulties facing the noble and learned Lord's amendment. In those circumstances I hope that he will withdraw it.

8.23 p.m.

Lord Thomas of Gresford: My Lords, like motherhood and apple pie, all noble Lords, and certainly all lawyers, will be in favour of the proposition that access to justice should be increased. The issue is whether the conditional fee agreement should be the only route. The noble and learned Lord the Lord Chancellor said that the order is strongly supported by the Law Society. So it is. But conditional fee agreements are supported by the Law Society only as an alternative, and not in substitution for legal aid. I am with the noble Lord, Lord Hunt of Wirral, who said that there should be other routes of access to justice than that proposed by the Government. What one fears by the order is that the Government are closing down those routes and directing everyone into one flow of traffic.

I note that the noble and learned Lord the Lord Chancellor is still against contingency fees. In his evidence to the Home Affairs Select Committee in 1997 he described them as:

    "The most eloquent criticism of contingency fees is that by giving the lawyers a significant slice of the action they run the risk of polluting the fountain of justice at the source. The lawyers have too great an interest in the outcome".

The curious thing is that since the noble and learned Lord the Lord Chancellor said those words the Court of Appeal in the Thai Trading case decided that it is possible for contingency fees to be charged. I declare an interest in that I have settled a petition to your Lordships' House in relation to that case, challenging that decision.

The Legal Action Group which exists for the purpose of promoting equal access to justice, and which has some 8,000 members from the legal profession--solicitors and barristers who are engaged in litigation--said about conditional fees:

    "The experience of practitioners operating conditional fees in the personal injury field is that the voluntary 25 per cent. of damages capped on the amount of the success fee comes into play in most cases so that in effect a contingency fee of 25 per cent. is currently being charged".

Your Lordships will appreciate that if that cap is reached in every case, it becomes a contingency fee. The interest of the lawyer in settling the case below its value, or perhaps in interfering with the way in which that case is presented to the court, is in conflict with the interests of his client.

The order is now to extend the system to all proceedings. While the uplift is limited--the limitation has grown as the noble and learned Lord, Lord Ackner, said from 5 per cent. to 20 per cent. and now to 100 per cent. uplift on the success fee--the noble and learned Lord the Lord Chancellor is not prepared to extend it to a cap as a percentage of the damages. I wait to hear what the noble and learned Lord the Lord Chancellor

23 Jul 1998 : Column 1112

says in answer to the point raised by the noble and learned Lord, Lord Ackner, that he appears to have given conflicting views to the House on this issue as to whether it is ultra vires.

In an earlier debate on this subject I urged the noble and learned Lord the Lord Chancellor to hasten slowly--festina lente. No one doubts his courage in pressing on with reforms, as the noble Baroness, Lady Oppenheim-Barnes, said. But it is an area which should await primary legislation and debate. Reforms in this field should not be introduced piecemeal.

Primary legislation is required for a number of reasons. First, the criticism of the Joint Committee on Statutory Instruments, and its reservations that this is an unexpected use of powers under Section 58 of the 1990 Act, should not be lightly dismissed. It is forcing the language to say that all proceedings can now be brought under that head.

That is not such an important matter as others. The proposals to alter the legal aid system have, as I understand it, been delayed until primary legislation can be brought into effect. I should have thought that it would have been sensible for all the matters concerning access to justice to be dealt with in a single Act, covering those fields.

The noble and learned Lord the Lord Chancellor, encouragingly said to your Lordships tonight that it is reasonable to make the uplift and the success fee payable by the defendant, but your Lordships have heard the strong reservations that the noble Lord, Lord Hunt of Wirral, expressed on behalf of the defence side of litigation. The matter is not absolutely straightforward; it should be debated. The various interests should be balanced because there is a public interest on both sides: from the insurance premium payer to the injured litigant. It is not a matter, I respectfully suggest, that can be dealt with lightly.

However, the most important reason why there should be a delay--a hasten slowly to bring in this scheme--is that, as noble Lords have said, there has been limited research in this field. There has been no research as to whether solicitors overestimate the risk in order to justify an excessive uplift of the fees. There may be a doubling of fees now that 100 per cent. uplift is permitted. But the solicitor who is charging the fees, who determines that uplift, has to justify that uplift, assessing the risk himself. Is he doing it properly?

The effect upon the lay clients has not been surveyed. There has been no research into whether clients feel they have had a fair deal as a result of conditional fee agreements. There may have been 40,000 cases, but how many of those have gone to court? How many of them have been successfully completed to the satisfaction of the client? We simply do not know. There is a lack of monitoring of the services available at present in personal injury cases from the insurance industry. It may take four or five years to judge the success of the insurance cover that is provided to the client and from the point of view of the insurance company. If we are now to have conditional fee agreements extended to all other proceedings, it will take a long time to work out the level of premiums that insurance companies will

23 Jul 1998 : Column 1113

charge and in what type of case. Will those premiums be acceptable to the lay client? Will it be affordable litigation for him?

The answer to those questions--the protection for the consumer--lies in awaiting a comprehensive Bill, primary legislation, which could contain important safeguards. For example, if a solicitor enters into a conditional fee agreement with his client, at present that is entirely between him and his client. The degree of uplift is simply not known. Is it fair and appropriate? Whether the solicitor has assessed the risk properly is not clearly made out to the courts or to the public. A proper proposal for a Bill might be that a conditional fee agreement should be filed in court and be open for inspection by the court as the mitigation is commenced, so that the court can consider, should any problem arise, whether a proper risk has been assessed and whether the uplift charged is appropriate in the particular case.

Secondly, a provision could be made in primary legislation that the solicitor should make a file note of his risk assessment when he first sees the client and considers the problem placed before him. If the proposal that the noble and learned Lord the Lord Chancellor puts forward tonight comes into effect, and I support it--namely, that the uplift and the insurance premium be paid by an unsuccessful defendant--the defendant will want to have his say as to whether the uplift charged has been properly charged, and whether the risk that has been assessed and the insurance premium paid for that assessment, which will fall upon the defendant at the end of the day, was a fair and proper assessment in the first place.

Primary legislation could consider whether the Office for Supervision of Solicitors should have power to investigate the possibilities of malpractice that might arise in a delicate situation where, as the scheme is presently framed, the solicitor has an interest in the outcome of the proceedings.

To those of us who are trained as lawyers, there is something fundamentally wrong in the concept that lawyers should have an interest in the outcome. But if we are to accept that times have moved on, and that there is some advantage to be gained through having a personal stake in proceedings, then at least it should be possible for what the solicitor does to be investigated and for him to be before the Office for Supervision of Solicitors if he does something inappropriate.

I support the amendment of the noble and learned Lord, Lord Ackner. In the last case in which I appeared before the noble and learned Lord in which he gave the lead judgment, I was completely unsuccessful. But I have to tell your Lordships that the other side was completely unsuccessful; and their Lordships took their own view of the case we had presented to them. Neither side won at the end of the day. So I do not have the problems of the noble Lord, Lord Hunt, in supporting the noble and learned Lord, Lord Ackner, in his amendment.

With those comments, I invite your Lordships to accept the amendment that has been moved.

23 Jul 1998 : Column 1114

8.36 p.m.

Lord Kingsland: My Lords, so apposite and incisive have been the contributions of noble Lords and noble and learned Lords in this evening's debate that I hardly need do more than bang the drum in admiration.

As the noble and learned Lord, Lord Ackner, reminded the House, the notion that a lawyer should have a financial interest in the outcome of a case is wholly repugnant to our legal tradition, and has been for the past 700 years. Indeed, one of the ornaments of our constitution, with few exceptions, has been the incorruptibility of our legal profession. The introduction of contingency fees for civil matters on such a wide range can be justified only if it brings with it substantial benefits. In my submission, it is for the noble and learned Lord the Lord Chancellor to establish to your Lordships' satisfaction that these benefits are made out.

In that context I have three questions to put to the noble and learned Lord. First, does he believe that there is already hard evidence that the measures he proposes will substantially improve the access to justice of that category of persons he identified in his opening remarks--essentially the middle classes? Secondly, is he confident that the insurance industry is now ready with the right product at the right price on the right timescale to deliver the system that will meet his access to justice objectives? Thirdly, can he be sure that the new temptations that will be presented to the legal profession will be resisted? I shall briefly consider each of those questions.

On the question of access to justice, as short a time ago as 1995, in a document published by the Labour Party called Access to Justice, we read:

    "We regard conditional fees as an experiment to be monitored closely and in the light of the Scottish experience do not expect their introduction to make a significant improvement to access to justice. They are at present little more than a gimmick designed to mask the chaotic state of the legal aid scheme and the Court Service".

Noble Lords have heard the exegesis by the noble and learned Lord, Lord Ackner, on the one study that has been made on CFAs, and relating only to CFAs in the context of personal injuries cases. Your Lordships will be aware that the conclusions of the report were couched much more in terms of questions than answers. Are solicitors being too conservative about risks and asking for too high an uplift? What percentage of damages are really being paid disguised as fees? What effect will CFAs have on the inclination to issue proceedings? There are many more questions besides those.

We do not even know the answers to those questions in the context of personal injuries, yet now we are seeking to expand the system to all civil litigation. There is no comparable set of surveys in any other country to give us help.

If your Lordships were the Medicines Committee deciding whether to grant a licence to a new drug, would you really grant a licence on the basis of the evidence in front of you tonight in relation to contingency fees? I believe I know what your Lordships' answer would be.

23 Jul 1998 : Column 1115

The second question that I wish to address briefly is that of insurance. I turn to the statement made by the noble and learned Lord the Lord Chancellor, this time in the House of Lords Debate on 9th December 1997, when he stated:

    "The insurance industry is competitive. It is already developing the products that will be needed, including products where there would be no up-front costs and where lawyers could protect themselves from an unlucky run of losing cases by 'stop-loss' insurance".

The noble and learned Lord then went on to say:

    "The innovative capacity of the industry to match insurance cover to need should not be doubted. The industry has told me that it expects to move sufficiently quickly to develop and launch new products so as to have them available by the time the changes that I propose to conditional fees and legal aid are made".--[Official Report, 9/12/97; col. 45.]

We are now on the threshold of those changes. The noble and learned Lord has said a little more tonight about what he thinks the insurance industry might deliver. But we still do not know what the costs are and, above all, we still do not know when the insurance industry will be able to deliver. Until we know the answers to those questions it would, in my submission, be extremely dangerous to take the matter further.

The final set of questions relates to the legal profession itself. I described our legal tradition as one, I am happy to say, of incorruptibility. But there is no doubt that the onset of these CFAs will present new temptations for the legal profession. There will be temptations not to reveal documents which ought to be revealed. There will be temptations to say things to witnesses which ought not to be said. There will be temptations not to disclose things to judges which ought to be disclosed. How are we to be sure that the profession will not be tempted? With respect, I believe that the noble and learned Lord ought to be thinking about, for example, setting down careful and detailed rules about the contents of CFAs; about whether to institute a system whereby in High Court litigation Masters have to review on a regular and spot-check basis a percentage of these agreements; the kind of instructions that ought to be given to taxing masters; and in what circumstances the agreements ought to be subject to compulsory taxation.

Until we have the answers to those questions, it is my submission that it would be unsafe for your Lordships to allow these matters to proceed. The thing that worries me most of all about the noble and learned Lord's approach is the suggestion that somehow the legal profession ought to behave more like businessmen. Indeed, in a previous debate I heard the noble and learned Lord, Lord Hoffmann, subscribe to that proposition. I have to say to your Lordships in all frankness that I do not subscribe to it. The right parallel for our profession is not business, it is the medical profession. I believe that if the noble and learned Lord keeps that in mind he is likely to find his way through the deep undergrowth that lies ahead of him with a great deal more success.

8.45 p.m.

The Lord Chancellor: My Lords, at this hour I shall not address your Lordships at great length, but I shall

23 Jul 1998 : Column 1116

endeavour to cover the salient points. The noble and learned Lord, Lord Ackner, acknowledges that he is hostile to speculative litigation and that he regards proceedings under conditional fee agreements as speculative litigation. But I have to say he is fighting the battles of long ago, as he himself acknowledged when he said that all this was water under the bridge.

I submit that conditional fee agreements have been proved to work in the personal injuries field. In our extensive consultation, they have been virtually unanimously supported by our consultees. I submit that it is self-evident that they enhance access to justice. It is well known that only the very poor and the very rich can afford to litigate in this country because the risks of losing are too great. Middle England in Britain is left out in the cold and conditional fee agreements will bring it access to justice.

The Law Society supports the extension. So, too, do the National Consumer Council, the Consumers' Association, NACAB, the TUC, many trade unions, Victim Support and other bodies.

Legal aid is not to be removed pro tem. What I am proposing by the order is the extension of availability of conditional fee agreements--therefore, the freedom of the consumer and the potential plaintiff to use them--to the whole field, and removing nothing from legal aid. We are extending opportunities to people without removing any legal aid benefits.

I have indicated that when legislative opportunity arises I propose to make the success fee recoverable from the unsuccessful defendant. Despite the general reservations of the noble Lord, Lord Thomas of Gresford, I note that I had his support in that proposal. Perhaps I may reassure him that if the uplift is thought to be excessive it could be reduced for the benefit of the defendant via the unsuccessful defendant liable to pay it by an officer of the court, a taxing master, to a fair level. But I regard the recovery of the success fee as the answer to the point that uplifts are bad because they are at the expense of plaintiffs whose damages would otherwise be diminished.

I was gratified to learn that the noble Lord, Lord Hunt, favours conditional fees in principle, but he had particular concerns. Nothing that I say is intended to discourage individuals in their own interests from taking out before the event insurance. Of course that would be in their interests. Where I part company from him, however, is where he says that on the plaintiff's side no risk is run if the success fee can be recovered from the unsuccessful defendant in the event that the plaintiff wins. Of course the risk assumed by the plaintiff's solicitor and not the plaintiff himself, and which he continues to run if he loses, is that he recovers no fee. He has done a lot of work for nothing. That is what will ensure that only strong cases go forward. Indeed, it is only strong cases that should go forward. But where a strong case is won, I see no reason why a defendant should not in justice pay the success fee which the plaintiff has had to incur in order to establish a just liability against the defendant.

In the consultation process we are considering much of what has been said about the need for monitoring, and we are giving active thought to it. Meanwhile, we

23 Jul 1998 : Column 1117

are giving people an opportunity to bring proceedings under conditional fee agreements, extended very widely, if they choose. Monitoring could be achieved either by establishing a monitoring system in agreement with the profession or by commissioning research, which includes consideration of the fairness of uplifts. Essentially, we would seek to establish whether the success fees were commensurate with the risk in much the same way as insurance premiums are intended to reflect the risk to the subject of the cover. However, if we make the success fee recoverable--and I have not concealed that I am minded so to proceed--then the protection for the unsuccessful defendant would lie in the taxation process.

The noble and learned Lord, Lord Ackner, reminded the House of a view that I expressed on a previous occasion. I have considered Section 58 of the statute most carefully and I am now of the view that there is no power under Section 58(3) to (5), for the reasons that my noble friend Lord Hacking conveniently summarised, to impose a statutory cap on the damages. I noted--as did my noble friend Lord Hacking--that the noble and learned Lord did not meet the specific reasons that I gave in support of the view that I now have of the ambit of Section 58.

However, even if I were wrong in that respect and I did have the power--and I do not doubt that the noble and learned Lord, Lord Ackner, will tell me that my first thoughts are always right, however long ago they were expressed, provided that they accord with his current thoughts--I would not be minded to exercise it because I consider that the way through is to make the success fee recoverable from the unsuccessful defendant, so the argument that the plaintiff's damages are diminished by uplifts goes. I think it right in principle that unsuccessful defendants should pay all the costs that the plaintiffs have to incur in order to establish a defendant's liability. For all those reasons, I urge the noble and learned Lord not to press his amendment and indeed to withdraw it.

8.52 p.m.

Lord Ackner: My Lords, I accept that there are many things that I do badly and one of them is to dissemble. I do not hesitate in admitting to my dislike of conditional fees. Indeed, that is certainly the view of the majority of the judiciary. However, to suggest that I am fighting battles long ago when all I do is produce an amendment to the order proposed by my noble and learned friend--in terms that he himself had enthusiastically approved some three years ago--seems to me a little unkind as a suggestion.

My amendment is not a wrecking one. It has the support of the Law Society--

Next Section Back to Table of Contents Lords Hansard Home Page