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The Lord Chancellor: If that is the first slip that I have made in the course of a long day perhaps that is not too bad. I entirely recognise that the costs to be recovered are subject to taxation. I have had that very much in mind in considering making the uplift recoverable from the unsuccessful opponent. His protection will be in taxation if the amount of the uplift is unreasonable.

Lord Goodhart: I regret that the noble and learned Lord, while giving slight ground on this, is unable to be more substantially forthcoming. However, at least for tonight, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 222 not moved.]

Clause 27 agreed to.

Clause 28 [Recovery of insurance premiums by way of costs]:

[Amendments Nos. 223 to 228 not moved.]

Clause 28 agreed to.

Lord Clinton-Davis moved Amendment No. 229:

After Clause 28, insert the following new clause--

Rules for assessing costs

(" . Rules of court shall provide that when assessing costs payable by another party no account shall be taken by the court of any funding agreement between the receiving party and their legal representative.").

The noble Lord said: In moving this amendment it is for the convenience of the Committee if we also discuss Amendment No. 230. I can be quite brief. Under the Bill as presented to the Committee there is a liability remaining for the client to pay the solicitor's and his own costs if there is any shortfall between the fee agreed in the event of a win and the fee recovered from the loser. Even if the lawyer subsequently agrees to waive the shortfall, he cannot do it in advance because at common law the client would not then be entitled to recover any fees from his losing opponent because there would be nothing to indemnify.

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Therefore, the Bill should provide to enable lawyers to agree in advance with clients to charge what can be reasonably recovered from the opponent by agreement or on taxation. That could benefit individual clients who agree with their lawyer that they pay nothing, win or lose, and other lawyers providing services through trade unions and also legal expense insurers. The amendment seeks to achieve that purpose by divorcing the right to recover costs from the losing party from the funding arrangements between the winning party and his lawyer. I beg to move.

The Lord Chancellor: As I understand these amendments they seek to abolish what is known as the indemnity principle for costs. Put at its shortest, the indemnity principle provides that where one is successful in an action and awarded costs against the opponent, one may not recover more in costs from him than one is liable to pay to one's own solicitor. The principle goes back a long time in case law.

Recent case law has made the operation of the principle on taxation very difficult and conditional fees, legal aid regulations and fixed costs in fast track trials, together with other matters, have, to some extent, disapplied the operation of the indemnity principle in recent years. The time may well have come to consider whether that principle should be abolished.

However, the principle is central to the present basis upon which costs are taxed by the courts, and it does operate to place some limit on the sums that can be recovered. Its absolute removal might well lead to costs inflation because of the removal of the limitation on the sum that can be recovered under that principle.

My response to the amendment is to say that I would wish to carry out a proper consultation exercise before deciding what, if any, rules of court might be needed to retain the beneficial effects of the indemnity principle once the principle enshrined in the common law had been abolished. Therefore, I should like to consider most carefully the precise terms of any amendment. I am not saying that I will be able to come back on Report in relation to this proposal, but I am saying that, in effect, I intend to reflect upon the ramifications involved and to consult widely. On that basis, I invite my noble friend not to press these amendments at this stage.

Lord Clinton-Davis: In view of the fact that no Member of the Committee wishes to speak to Amendment No. 230, I can respond to my noble and learned friend. I am grateful to him for indicating that he is prepared to carry out this consultation. In the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 230 not moved.]

Clause 29 [Replacement of ACLEC by Consultative Panel]:

Lord Clinton-Davis moved Amendment No. 231:

Page 17, line 9, leave out subsection (1).

The noble Lord said: I can deal with this amendment extremely briefly; indeed, almost as briefly as the noble Lord opposite dealt with his. Simply put, I believe that

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the proposals made by the Government to abolish the Advisory Committee on Legal Education and Conduct, both in respect of its composition and its tardiness in coming to conclusions, could be dealt with by reform rather than by abolition. Perhaps my noble and learned friend would like to comment on that proposition. I beg to move.

Lord Falconer of Thoroton: When I first saw this amendment, I guessed that my noble friend Lord Clinton-Davis had tabled it as a probing amendment in an effort to discover why we are abolishing ACLEC and replacing it with the new legal services consultative panel. I assume--I hope, correctly--that no Members of the Committee want two quangos doing the job that one currently does, which, strictly speaking, is what the amendment would achieve.

ACLEC has had a succession of exceptionally distinguished chairmen, many of whom are Members of this Chamber; and, indeed, many distinguished memberships over the years. Its present chairman is a most distinguished lawyer and it has been ably served by loyal staff. Nevertheless, it has, in some senses, failed. It is a large, rather unwieldy committee whose members have often fallen into predictable camps, resulting in stalemate over important issues. I believe that it has failed to foster the expansion of legal services. To some extent, ACLEC has been a prisoner of the procedures created around it by the Courts and Legal Services Act. These have proved exceptionally complex and time consuming, with the result that important applications for the approval of rule alterations have sometimes taken years to resolve.

The most striking example of delays and problems caused by the current statutory procedure concerns that part of the Law Society's application for rights of audience in the higher courts which related to employed solicitors. The application took no fewer than six years to resolve, and was considered by ACLEC at least three times and twice by the Director General of Fair Trading, the Lord Chancellor and the designated judges. ACLEC initially gave defective advice, urging that the Courts and Legal Services Act should be amended, and had to be directed by the then Lord Chancellor to reconsider the matter. When ACLEC gave its final advice, it was split down the middle. Eight members and the chairman advised against allowing employed solicitors to appear in the higher courts; the other eight members criticised the way that their colleagues had approached the issue and advised that the Law Society's amended application should be granted.

The results of six years of painfully slow debate, consultation and advice about what rights of audience employed solicitors should have in the higher courts were in practice negligible. The then Lord Chancellor and the designated judges granted the Law Society's application in a very limited form, allowing employed solicitors to appear in substantive proceedings in the higher courts if they succeeded in obtaining the Law Society's higher courts qualifications, but only if led by an advocate in private practice. An employed solicitor

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can appear as the sole advocate only in preliminary proceedings which do not dispose of the merits of a case.

This Bill will change those procedures, but it is also time to replace ACLEC and appoint a different body in its place. ACLEC is not cheap to run. It is a large quango with paid members and its own staff and offices and it costs the Lord Chancellor's Department the best part of a million pounds a year. The Lord Chancellor wants and values independent advice on legal services and legal education, but thinks this could be better provided by a smaller, more focused and more flexible body whose members were appointed solely for their individual expertise and not as representatives of particular organisations or interest groups. The Lord Chancellor will of course take account of the desirability of ensuring that the panel represents different perspectives, including those of the consumers of legal services, as well as the providers. The next group of amendments will give us the opportunity to discuss how the panel members should be appointed. I see the Committee waiting in expectation for those later amendments.

The legal services consultative panel's programme of work and research will be agreed by the Lord Chancellor so that it can be tied into the department's priorities. He wants to be sure that this valuable and expensive resource is tackling the questions that he needs answered. The panel will be a leaner organisation than ACLEC, which will cost the taxpayer less while providing advice that is no less independent and no less expert. The creation of a body independent in mind and approach is not solely a matter for legislation: it depends in large measure on the appointments that the Lord Chancellor makes.

Let me make it clear on behalf of the Lord Chancellor that he expects the panel to give him advice of the highest quality and of the greatest independence. He wishes it neither to be swayed by what it takes to be his views, nor by any vested interests. He will be under a statutory duty to make available to the panel appropriate administrative support. This means that the secretarial support which will be provided by the Lord Chancellor's department will be sufficient to meet the panel's needs. The panel will also be able, through the Lord Chancellor's department, to commission research in line with the agreed programme of work. The Lord Chancellor is confident that the panel will be of sufficient strength to let him know if it ever feels that its work is being under-resourced.

I should add that the Lord Chancellor will bring forward an amendment to enhance the status of the panel in conducting its work by making it clear that, in performing its duty of assisting in the maintenance and development of standards in the education, training and conduct of persons offering legal services, it may seek information from or give advice to any body or person.

I hope that the detailed explanation given sufficiently reassures my noble friend and that he will withdraw the amendment.

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10.45 p.m.

Lord Clinton-Davis: I am most grateful to my noble friend. Clearly, he has presented a case of an organisation that has not worked efficiently and that is not worth trying to fix. I am completely convinced that the course he has outlined is the right one. There was some benefit in tabling this amendment: it has flushed out the Government's thinking on this issue. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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