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Lord Goodhart: I do not find that answer entirely satisfactory. I was well aware that there is a power to postpone enforcement of the charge. In the example I gave of the young couple thinking of having a family, I was concerned about the threat not to the house in which they were currently living but about the fact that when they needed to sell in order to move to a larger house because of their growing family they would be unable to do so because at that point the charge would bite. While the charge is postponed there is of course a continuing liability to pay interest at what will from now on be a market rate. That is potentially a cause of hardship sufficiently great to justify returning to the matter. However, I shall wish to see what the noble and learned Lord the Lord Chancellor has to say.

I should not be favourably impressed by an amendment that went no further than stating that the enforcement of the charge must compulsorily be delayed until the house was sold. The hardship could well arise when there was a need to sell the house, which could be not merely because of a growing family but, for example, the need to move to a different part of the country for work and so on. Therefore I should wish to see, as a minimum, a commitment to giving a discretion not to enforce a charge even on sale where that would result in hardship. However, on this occasion I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 134 to 137 not moved.]

Lord Clinton-Davis moved Amendment No. 138:

Page 7, line 40, at end insert--
("( ) The regulations shall provide that in any proceedings where a costs order is made in favour of any individual who has agreed to make a payment under subsection (2)(c), the costs payable to him shall include costs in respect of any payment he has agreed to make.").

The noble Lord said: Under Clause 10(2)(c) the Government effectively take reserve powers to set up a contingency legal aid fund. I understand that to be the case from paragraph 86 of the Explanatory Notes.

It is my understanding that the Government do not intend to use these powers immediately. They offer a fall-back if the CFAs fail to operate satisfactorily and

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open the possibility of a form of mixed public/private funding through hybrid legal aid CFA cases. I certainly welcome the fact that the Government are taking these reserve powers. It is a forward-looking step.

However, in the Bill the Government propose that in the case of CFAs the success fees should in future be paid by the losing party rather than by the client. I submit that the same principle should apply to a contingency legal aid fund so that legally aided clients would be on the same footing as those under a CFA. The situation would be that if costs were recovered from a non-legally aided party, those costs should include the success fee to be paid back into the contingency legal aid fund in the same way as under a private CFA. So this amendment would put clients whose cases are brought under a contingency legal aid fund on the same basis as those who bring cases under a CFA. I beg to move.

Lord Falconer of Thoroton: This amendment, which my noble friend explained very clearly, would create a duty on the Lord Chancellor when making regulations under Clause 10 to include in the regulations a requirement that costs awarded in favour of a person receiving funded services would include any payment that person had agreed to make under Clause 10(2)(c) which exceed the costs of the funded services. I believe that by itself this amendment might act oppressively and is in any event unnecessary.

At present the successful unassisted defendant cannot recover his costs from the assisted plaintiff, nor from the Legal Aid fund in practice, unless there is substantial hardship. Clause 11 broadly replicates that position for cases funded under the new community legal services fund scheme; that is, the status quo is to be maintained.

Under Clause 10(2)(c), provision is made for services to be on terms that, in the event of success, he is liable to pay the equivalent of a success fee into the fund. This would enable the legal services fund to establish a contingency legal aid fund if so directed. We have no present intentions to do that. This is a reserve power only.

The amendment would provide that if a contingency legal aid fund were set up in this way then the successful assisted person would be able to recover the success fee payable to the contingency legal aid fund in costs from the unsuccessful defendant. That, however, would operate unfairly for defendants who could not reciprocally recover their costs from the unassisted plaintiff or the fund when they succeeded.

If a contingency legal aid fund were ever to be established in this way, and what I say offers no expectation that it ever will, then Clause 11 provides very wide powers for the Lord Chancellor to make regulations which make provision about the costs in cases. In particular, Clause 11(2)(e) allows him to specify the principles to be applied in determining the amount of any costs which may be awarded to a party who is receiving funded services. I believe that these powers are sufficient, and indeed are intended, to allow the Lord Chancellor to make regulations that can specify what should be taken into account in determining the

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costs to be paid to a successful party supported by the commission. Under this power he could, for example, make the fund liable in these circumstances.

My noble friend's amendment would, however, oblige the court to make this payment recoverable whenever an agreement has been made under subsection (2)(c). That is too inflexible. Those of us with court experience know that courts, when exercising their discretion as to costs, can feel that because of, for example, contributory negligence, or perhaps the behaviour of the parties in the litigation they are not prepared to award the successful party all or any of their costs. There needs to be some flexibility in applying any scheme for recovering costs and in allowing the courts to exercise some discretion in arriving at the final amount to be paid.

If it will help my noble friend, I can tell him that I am fully seized of what he is trying to achieve and that I believe the Lord Chancellor could achieve this under the powers already contained in the Bill if he wished to do so. I shall carefully consider how to give effect to the aim of this amendment when we come to look at the regulations that may need to be made once the Bill passes into law. On that optimistic note I ask him not to press his amendment.

Lord Clinton-Davis: I am grateful to my noble and learned friend for that semi-encouraging note. I need to examine his reply carefully and to take advice on the matter. However, having regard to that situation, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 agreed to.

Clause 11 [Costs in funded cases]:

Lord Falconer of Thoroton moved Amendment No. 139:

Page 7, line 41, at beginning insert ("Where services relating to a dispute have been funded by the Commission for an individual as part of the Community Legal Service, his liability under an order for costs made against him in proceedings relating to the dispute shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances including--
(a) the financial resources of all the parties to the proceedings, and
(b) their conduct in connection with the dispute;
and, in assessing the financial resources of an individual for whom such services have been so funded, his clothes and household furniture and the tools and implements of his trade shall not be taken into account, except so far as may be prescribed.
(1A) Subject to that,").

The noble and learned Lord said: I move this amendment because, on reflection, I think it is preferable that the qualification on the right of unassisted parties to recover costs against a person receiving funded services should appear on the face of the Bill. Before I come to my amendment, it might be helpful if I explain what Clause 11 is intended to do.

The clause creates a general power for the Lord Chancellor to make regulations in relation to the legal costs of cases where one of the parties is receiving services funded by the community legal service. The

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clause goes onto define certain provisions which may in particular be included in regulations made under the power conferred in subsection (1).

The first three circumstances set out in subsection (2) relate to what are often referred to in the current Act as the cost protection provisions. These are presently contained in Sections 12, 13, 17 and 18 of the 1988 Act. They are designed to ensure, first, that those receiving publicly funded support are not deterred from proceeding with a legitimate claim by fear of the possibility of having to pay the costs of their opponent if they are unsuccessful in proving their claim (Sections 12 and 17). Secondly, the provisions protect the taxpayer by establishing the circumstances in which the commission might be required to pay the costs in place of the person receiving services (Sections 13 and 18).

The other particular circumstances in which the Lord Chancellor may make regulations are largely drawn from existing provisions contained in Section 34 of the 1988 Act. Essentially they deal with the way in which and by whom the amount of a costs order may be determined and that any costs recovered shall be payable to the commission or the body or person who provided the services. As we have set out in the explanatory notes, that is Annexe A, paragraphs 12 and 16 on pages 62 and 63. We intend to make two changes to the existing position in relation to cost protection. First, while we intend broadly to preserve the protection to those receiving assistance from the commission against having to meet a liability for costs we intend to allow the value of a person's home to be taken into account in assessing his means.

Secondly, we intend to relax the test before a court can order the commission to pay on behalf of the person and to support it. The present test requires the unassisted party to prove severe financial hardship. We intend to require the unassisted person to have to prove the lesser test of financial hardship in order to obtain payment of costs from the board. Moreover, as I said, we are taking a reserve power to establish a contingency legal aid fund. As I also said, I do not believe that I will need to use this power because the Lord Chancellor is confident that conditional fees will provide a substantial alternative to publicly funded assistance, particularly in the area of personal injury cases.

An assisted person would, however, if the reserve power were exercised, be required to make an additional payment to the contingency legal aid fund in the event of success. We believe that this payment ought to be recoverable in just the way that Clause 27 will make a success fee in conditional fee agreements recoverable from a losing opponent. In such a circumstance we believe it would be only equitable that unassisted parties should be able to recover their costs against the contingency legal aid fund in the normal way. We would therefore wish to use the regulation-making powers in Clause 11(2)(c) to ensure that this could be done.

The amendment which stands in the name of the Lord Chancellor will put the protection given to the person who is assisted by the community legal service on the face of the legislation. Given the importance of the protection in reducing the deterrent effects of

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potentially incurring a liability for costs that could not be met, the Government believe on reflection that it is better that this is set out plainly in the primary legislation. We continue to believe, however, that the protection afforded to the commission should be made by regulations, subject to the affirmative resolution procedure, so that we may respond to changing circumstances as necessary.

Consequently, Clause 11 is amended so that a new subsection (1) is inserted, which substantially carries into the Bill the protection provided by Section 17(1) of the 1988 Act. It is of course rare for costs orders to be made against assisted persons. The court, however, has a discretion to make an order by taking into account the comparative resources of both parties. If that discretion were to be exercised, then Clause 11(1) also specifies that personal goods and effects are to be disregarded in any assessment of the means of the assisted person to meet a liability for costs.

The existing subsection (1) is renumbered (1A) and made subject to the new subsection (1). The remainder of the clause is unchanged, save for an amendment to subsection (2)(a). It no longer needs to provide regulations which deal with affording the protection now provided by the new subsection (1). Rather, regulations under subsection (2)(a) will specify principles that will apply in any determination of the amount of any costs a person receiving funded services may be required to pay. In those circumstances, I move the amendment standing in the name of the Lord Chancellor. I am grateful to be reminded that in speaking to Amendment No. 139, I have also been speaking, with the leave of the Committee, to Amendments Nos. 140 and 205. I should have mentioned that earlier. I apologise for not having done so.

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