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Lord Renton: In spite of the wisdom of the noble and learned Lord I must inform the Committee that I

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do not know the motive of the noble and learned Lord, Lord Simon of Glaisdale, in tabling this amendment. Presumably he did so because he thought that it was necessary. However, he will read the Official Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11, as amended, agreed to.

Lord Goodhart had given notice of his intention to move Amendment No. 142:

After Clause 11, insert the following new clause--

("The Public Interest Litigation Fund
Public Interest Litigation Fund

.--(1) The Commission shall establish and maintain a fund known as the Public Interest Litigation Fund.
(2) The Lord Chancellor--
(a) shall pay to the Commission the sums which he determines as appropriate for the funding of services by the Commission out of the Public Interest Litigation Fund, and
(b) may determine the manner in which and times at which the sums are to be paid to the Commission and may impose conditions on the payment of the sums.
(3) The purpose of the Public Interest Litigation Fund shall be to finance the provision of services of any of the kinds specified in section 5(1) to a person who is or may become a party to legal proceedings if the conditions in subsection (4) are satisfied and the Commission thinks it appropriate to finance the provision of those services.
(4) The conditions referred to in subsection (3) are--
(a) that the proceedings give rise to an issue of substantial public importance,
(b) that the person seeking the services is not entitled to have those services funded out of the Community Legal Service Fund or as part of the Criminal Defence Service, and
(c) that neither the person seeking the services nor any other person having a similar interest in the proceedings can reasonably be expected to pay for such services out of his own financial resources or resources which may be made available for that purpose from another source.
(5) Regulations may be made for the implementation of this section.
(6) In this section "proceedings" include prospective proceedings and any step in proceedings.").

The noble Lord said: In the absence of my noble friend Lord Lester of Herne Hill, I do not propose to move this amendment on this occasion.

[Amendment No. 142 not moved.]

Lord Goodhart moved Amendment No. 143:

After Clause 11, insert the following new clause--

("Conditional Legal Aid Fund
Conditional Legal Aid Fund

.--(1) The Commission shall establish and maintain a fund known as the Conditional Legal Aid Fund.
(2) The purpose of the Fund shall be to provide help in the conduct of legal proceedings by entering into conditional legal aid agreements.

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(3) For the purposes of this section a conditional legal aid agreement is an agreement between the Commission and a person providing advocacy or litigation services and his client which provides--
(a) for the costs of the client of the proceedings and any costs ordered to be paid by him to any other party to the proceedings to be paid out of the Fund;
(b) for any costs of the proceedings recoverable by the client from any other party to the proceedings or from any other source to be paid to the Fund; and
(c) for a further sum to be payable by the client to the Fund in specified circumstances.
(4) A conditional legal aid agreement shall be enforceable.
(5) For the purposes of the making of any order for payment of costs in the proceedings, the fact that any costs are being paid out of the Fund shall be disregarded.
(6) Regulations may provide for--
(a) the categories of person with whom (as client) the Commission is authorised to enter into a conditional legal aid agreement;
(b) the categories of proceedings in relation to which the Commission is authorised to enter into a conditional legal aid agreement;
(c) the computation of any money payable under subsection (3)(c);
(d) the administration of the Fund; and
(e) such other matters as may be appropriate to ensure the effective functioning of the Fund.
(7) The Lord Chancellor shall pay to the Commission such sums by way of loan or grant as he determines to be appropriate for establishing the Fund and may guarantee payment of any liabilities of the Fund.
(8) Regulations under subsection (6) may provide that, with a view to ascertaining the demand for conditional legal aid agreements, they shall be entered into for a trial period only with persons resident in a specified part of England and Wales.
(9) The Lord Chancellor may by order repeal this section and provide for the winding up of the Fund if, having regard to experience in the conduct of the Fund, he is satisfied that--
(a) there is insufficient demand for conditional legal aid agreements to justify the continuation of the Fund; or
(b) the Fund is not, and is unlikely to become, financially self-supporting.
(10) Any power under this section to make an order or regulation is exercisable by statutory instrument, and no order shall be made under subsection (9) unless a draft order has been laid before, and approved by resolution of, each House of Parliament.").

The noble Lord said: Amendment No. 143 is a very important matter because it raises--unfortunately relatively late in the proceedings--the question of setting up a conditional legal aid fund. This fairly lengthy amendment would require the legal services commission to set up as a separate fund a conditional legal aid fund. I do not move this amendment in any great expectation that the noble and learned Lord the Lord Chancellor will accept it, but it is an important subject that requires ventilation and discussion. I believe that there are enormous and unrecognised virtues in a conditional legal aid fund.

What is a conditional legal aid fund or CLAF? From the point of view of the clients it is very like a conditional fee agreement (CFA). The clients will not pay their own legal costs if they lose. They will have to pay the mark-up on their own legal costs if they win, subject to any power of the court to order recovery of the mark up from the losing party. The vital difference

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between a CLAF and a CFA is that in the case of a CLAF the risk is borne not by the lawyers but by the fund. Lawyers will receive their normal costs, win or lose, without a mark-up. The fund will pay the client's legal costs if the client loses. The fund will receive the mark-up if the client wins.

The CLAF idea was floated by Justice in 1966 from a report on road accident cases, and was developed further in the report of a working party which I chaired in 1978. If one has CFAs, why have a CLAF? There are two reasons. First, CFAs present an element of danger to the public interest. If lawyers are at personal risk of losing fees, they will be reluctant to disclose the unexpected document damaging to their case which turns up late in the proceedings.

The noble and learned Lord the Lord Chancellor may say--indeed, he has said frequently--that lawyers should put their money where their mouth is. If that is carried too far, it turns the legal profession into speculators. Doctors have never expected payment by results. If lawyers do so, they will become a different and a worse profession. The noble and learned Lord the Lord Chancellor said earlier today that the legal profession should take risks like other businesses. Of course we take risks. For example, any solicitors' firm has to hire office space, buy computers and other equipment necessary to a modern office, and employ staff. If they do not obtain the work to meet the costs, they will go bust; and from time to time they do. But lawyers, like doctors and accountants, expect to be paid for the work they do. The only professions which operate on a no success, no payment basis are those paid on commission. Those include, for example, estate agents and insurance brokers. With all respect to the many honourable, honest members of those professions, are they the professions with which lawyers should seek to compare themselves? I believe very firmly that they are not.

The second reason for having a CLAF is that many lawyers will not wish to accept CFAs. Some firms will specialise in CFAs--for example, those with a large personal injuries business. They will have a large throughput which will enable them to carry the risk involved in any one case even if that risk, as sometimes it may be, is quite substantial. But, frankly, many firms of solicitors will not be willing to fund their client's litigation and they will prefer the certainty of payment of a CLAF to the risk involved in a CFA even if that were potentially profitable. Firms unwilling to enter into CFAs should have no objection to acting under a CLAF agreement. Therefore a CLAF will widen the choice of lawyers available to the clients. The CLAF has been tried in Hong Kong and worked effectively. It does not mean that CLAFs will necessarily work in England. But I believe that the case for CLAFs is sufficiently strong to justify an extended trial.

Perhaps I may outline briefly the new clause. It speaks largely for itself. Subsection (1) requires the commission to establish the conditional legal aid fund. Subsection (2) states that the purpose of the fund is to help in the conduct of legal proceedings by entering into conditional legal aid agreements. Subsection (3) defines a conditional legal aid agreement. Subsection (4) states

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that it is to be enforceable, because there would be doubt in existing law as to whether it is enforceable. Subsection (5) states that the fact that any costs are being paid out of the fund is disregarded when making an order for costs.

Then there is a provision for regulations. Subsection (7) requires the Lord Chancellor to grant or lend the start up costs, the intention being that the fund should be self-financing. Subsection (8) provides for a trial period. Subsections (9) and (10) allow the Lord Chancellor to wind up the fund on specified grounds; either if it turns out that there is no demand following the pilot scheme or that it is not financially worth doing.

I have already pointed out the advantages of CLAF over CFAs as a matter of public interest and the reason why many lawyers prefer it. From the client's point of view, CLAF financing is equally as attractive as the CFAs. CLAF will involve an extra level of administration because the fund will need to be administered, but the greater capacity and its management on a non-profit basis should allow it to offset administrative costs by offering a narrower risk margin than any single firm. It has been suggested that some firms may cherry-pick by keeping the best risks for themselves while passing on poor risks to CLAF. If that is thought to be a risk, and it may be, it can be suggested that firms which offer CFAs for any category of case should not be eligible for CLAF funding in the same category. One would have to choose whether to provide CFAs or CLAF.

I believe that many solicitor's firms which would be unwilling or reluctant to enter into CFAs would prefer CLAF funding. I believe that the Bar would much prefer CLAF. Few barristers, particularly young ones, can afford to expose themselves to the risk involved when a large part of their practice is conducted under CFAs; nor can they afford the delay in payment if payment is never available until the case is finally decided. I believe that the Government should commit themselves to a significant CLAF trial funded by them. CLAF agreement is not currently legitimated by Clause 27 so that under the present law it seems very unlikely that even a privately funded CLAF scheme could be tried. If the Government are not prepared to go as far as I would wish, it will be necessary to come back with a further amendment to Clause 27 which would enable a privately funded CLAF scheme to be tried out.

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