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Lord Borrie: My Lords, I should like to express my support for the amendment to which the noble Lord, Lord Hunt, has just been speaking. He has explained the amendment so admirably that I do not feel that I need to add to his explanation. I shall simply express my support and point out that the amendment to which my name is attached is a constructive measure and one which will be helpful in trying to explain more clearly what we all believe is the intention behind the clause; namely, the way in which the ombudsman should determine the amounts that he might award.

I wish to speak about the other amendments in this grouping, which were spoken to by the noble Lord, Lord Saatchi. I shall leave one of those amendments aside--the one referring to negligence which would be unnecessary. It cannot be read along with the amendment to which the noble Lord, Lord Hunt, myself and others have subscribed. In my view, the other three amendments to which the noble Lord, Lord Saatchi, spoke are wholly retrograde and undesirable. They show either a misunderstanding of the ombudsman system that we have come to know over many years, or a distrust or dislike of the system. I do not know which it is.

Noble Lords will already be aware that the private sector ombudsman, starting with the insurance one, began in the early 1980s--so I suppose that it has reached its majority. The parliamentary ombudsman dates back to 1967 and is concerned with matters other than breach of the law. He also deals with maladministration, if I may use the omnibus word in respect of what that particular ombudsman deals with and, similarly, do so in respect of the other ones in the public sector. The reason why I suspect a certain misunderstanding of the ombudsman system is that all of them are concerned with what one might call fairness, reasonableness and equity; they are not just concerned with the narrow question of whether someone has broken the law or certain rules.

Clause 224(2) says that the ombudsman's determination shall be on the basis of what is,

That is disliked by the Opposition Front Bench, but it follows the precedent of ombudsman schemes that I have described. I must stress that it is not intended under existing systems--or, indeed, under this Bill--that the ombudsman scheme should be a court of law.

The noble Lord, Lord Saatchi, did not mention the fact that the compensation awards are limited. The Minister will correct me if I am wrong, but I understand that it is intended that the limit of what the ombudsman can award in this area is £100,000, even in the most serious cases. Of course, if someone wishes to pursue a legal claim for more than that, he or she has the right to go to court.

That brings me to the point of how important it is that the right to go to court should be retained. In my view it should be retained until the very moment when the complainant accepts an award that has been made

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by the ombudsman. I believe that it is quite wrong for the Opposition Front Bench to suggest that the complainant should be forced to choose--ex ante, as it were, before he approaches the ombudsman at all--between a court of law and the ombudsman.

I suggest that there is a misunderstanding here. All the ombudsman schemes, including the one in this Bill, are surely designed with the idea that people should be encouraged to use them rather than a court of law. This is achieved by making the ombudsman scheme informal, by not involving lawyers and costs and certainly not by doing what the noble Lord, Lord Saatchi, wants; namely, to impose a risk that if the complainant loses his case he may have to pay the costs and the costs of the lawyers engaged by the other side. Each and every one of the three amendments which the noble Lord, Lord Saatchi, has tabled in the group we are discussing are to my mind wholly retrograde to what I might call "ombudsmanship", if there is such a word. The whole essence of the ombudsman arrangements is informality. They seek to avoid the rule that costs should follow the event; that if one loses one pays the other side's costs; and the matter of being compelled to choose between an ombudsman and a court of law right from the start.

I remind the noble Lord, Lord Saatchi, that even in the courts lawyers have recognised, at least for 20 or 30 years, that the costs rule in civil cases often has a retrograde and discouraging effect on people taking perfectly good and reasonable cases to court because they are so worried that if they lose they will have to pay the uncertain, unknown figure of costs that the other side incurs with their lawyers. Hence in the 1970s--Conservative Lord Chancellors agreed with this approach--one could bring small claims to the County Court satisfied in the knowledge that if one failed one would not have to pay the other side's costs.

I find it amazing that in the year 2000 the noble Lord, Lord Saatchi, should want to apply to the ombudsman schemes a rule that has fallen into a certain amount of desuetude, and certainly dislike, in the ordinary courts of the land. I am extremist in my views on this group of amendments. I am wholly in favour of the amendment that is proposed by the noble Lord, Lord Hunt. Noble Lords will notice that it is supported by the Cross Benches, the Liberal Democrats and a Back-Bench Conservative former Cabinet Minister. It is wholly worthy of support. The amendments proposed by the noble Lord, Lord Saatchi, on the other hand, are wholly worthy of dismissal.

10.15 p.m.

Lord Newby: My Lords, I speak to Amendment No. 162, which stands in my name and that of my noble friend Lord Sharman. I wish to comment also on other amendments in the group that we are discussing.

Like the noble Lord, Lord Hunt, we on these Benches believe that the principles of informality, flexibility and speed should characterise the work of the ombudsman in this area, as with other

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ombudsmen. We believe too in the principles of ease of access and cost-free access. Those principles informed our view of all the amendments in this group and led to the tabling of the amendment in our name.

As our amendment has not yet been spoken to, I should remind your Lordships that it seeks to delete subsection (4), which allows cost awards to be made, to put it in shorthand, against a vexatious litigant. I am sorry that even in his extremism the noble Lord, Lord Borrie, did not speak in support of this amendment. Given the arguments that he made, it is an amendment that is worthy of his support.

As I understand the situation at the moment, there are a number of ombudsmen in the financial services sector and a number of ombudsmen in other sectors. As a general rule, costs are not awarded, in any circumstances, against anyone who brings a case to the ombudsman. Obviously in some cases it may be the view of the ombudsman--it may be the view of a reasonable man or woman--that the person bringing a case to the ombudsman is absolutely obsessed by something which has no merit. But it is a part of the role of the ombudsman to deal with such cases, as well as to deal with cases that are very well founded.

If we get to a situation where ordinary people--not only obsessives--when considering what action to take after being badly done by feel that they may run into a costs award against them, this will deter the very people who should be applying to the ombudsman for redress from doing so because they will be worried that they will not be able to pay the costs. In our view, it is not a part of the plan for the ombudsman to be draconian in this respect, but, as long as this provision remains on the statute book, it will deter from going to the ombudsman the kind of people the scheme is designed to benefit.

At the same time, it will do nothing to deter the obsessive. A person with a burning grievance will take it to the ombudsman; if the ombudsman turns it down, he or she will pursue it through the courts until they reach the end of every conceivable level of redress. Not only is it wrong in principle, but it will be ineffective in practice. It will not stop the vexatious litigant from applying to the ombudsman. I urge the Government to drop this measure.

As to the other amendments, it almost goes without saying that we oppose Amendment No. 161C, which would broaden the scope for making cost awards against people bringing cases to the ombudsman. We support Amendment No. 161A. It is constructive and clarificatory and we hope that the Government will support it.

I apologise for taking the amendments in reverse order. We oppose Amendment Nos. 161ZA and 161YA. Amendment No. 161ZA would exclude a raft of cases which fall under the general heading of "maladministration" rather than a formal breach of rules. If an ombudsman is there to do anything, he is there to look at cases of plain, straightforward maladministration which the "maladministrator"--if that is the right word--refuses to accept. We believe

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that Amendment No. 161ZA would unduly constrain the kind of case in which an ombudsman can make a determination.

As the noble Lord, Lord Borrie, said, Amendment No. 161YA appears to require a potential complainant to the ombudsman to decide, before making a complaint, whether to go down the ombudsman route or the court route. This is an unnecessary and unsatisfactory choice to require people to make. It may force some people to decide on a court route who would receive a perfectly satisfactory outcome through the ombudsman route, which must be a preferable way of dealing with these issues.

In moving this amendment, the noble Lord, Lord Saatchi, said that one of the thoughts behind it was that this was a compulsory scheme rather than a voluntary scheme, and that that put it in a different category from other ombudsman schemes. That is a complete red herring. I do not see the relevance of that argument at all. Everyone, including the noble Lord, Lord Saatchi, believes that this scheme should apply across the board in the financial services sector and therefore the broad principles which apply to ombudsman schemes elsewhere should apply to it. Therefore, I would not support Amendment No. 161YA. We look forward to hearing from the Minister that he is prepared to move that little distance by agreeing to Amendment No. 162.

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