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Lord Wedderburn of Charlton: I rise to support my noble friend in her arguments for the amendment. I want to raise one or two points which, in my submission, show how important it is and how important the Government's lack of understanding on this matter appears to be.

As has already been explained by the Government, Clause 22(2), which deals with preparation time, suggests a payment which, I believe, is quite new. It is

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a derogation from the ordinary principle of law that a company is a separate person from its shareholders, managers and employees. We are faced with a new kind of legal "payment" which, as has already been established, although drafted to look even-handed, will impact especially and disproportionately upon employees who are claimants in the tribunals. Applicants can be made to,

    "make a payment to any other party"—

it could be a third party but normally an employer will be the respondent—

    "in respect of the time spent by that other party in preparing his case".

It is not costs, although the Government may one day, by regulation, make it applicable where costs are payable. We believed that that should be in the Bill if that is what they intend. There will be a limit on the maximum to the costs maximum of £10,000. That is not exactly compensation because it is not payable for actual loss. Compensation is for loss. However, the amounts will not be measured by loss; they will be bureaucratically predetermined by a scale of which the logic will be known only to the Department of Trade and Industry and the Secretary of State. The amount to be paid will not even be in the discretion of the courts or the tribunals, as is the case in any parallel in relation to costs—if there is one—in the High Court.

This is a new animal in the judicial zoo of penalty payments and it should, therefore, be examined very closely. I still await the answer to my question of 9th January about any parallel precedents in the ordinary courts, tribunals or planning inquiries on the matter of preparation time.

The CBI welcomed this proposal, while the TUC and a significant number of other respondents to Routes to Resolution did not. One respondent pointed out—I am citing the Government's response to the consultation—that such a change might encourage employers to spend undue time and resources in preparing their case. However, the Government's proposals apparently did not intend to limit recovery to cases where costs are recoverable—at least, not on the face of the Bill, which is highly relevant to this amendment. Instead, in response to the consultation, they said at page 36:

    "The Government believes it is right that those affected by weak and vexatious cases, applicants or respondents, to be compensated for the time spent preparing their case."

It says "weak and vexatious cases". Weak cases are not necessarily cases where costs are payable. The Government do not seem to understand the difference between weak cases, where you have to try the merits of the case to decide whether it is weak; or unreasonable and misconceived cases, where there is manifestly no cause of action at all; or vexatious cases; or cases conducted unreasonably, where a party goes on and on about a point that is obviously a failure. Those affected by weak cases—and we will come to the matter later in the Bill—are all to get their preparation time, according to the Government, which goes beyond the notion of costs.

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My noble friend has quoted the comment of the citizens advice bureaux, that the potential of this clause would be to strengthen the ability of employers' legal representatives to intimidate tribunal applicants with threats of an action—they say, for costs—quoting the maximum that may be available. The Minister, my right honourable friend Mr Alan Johnson, confirmed on 11th December, (col. 61), that new preparation time awards would apply even where the employer was legally represented. This is not limited, therefore, to cases of no legal representation.

The importance of the matter raised by our amendment is that there is a legal howler at the root of the new animal in the zoo. Most respondents to an employment tribunal hearing are employers who are registered companies. The first principle of the legal status of a registered company is that it is a legal person, totally distinct from the natural persons who own it, from the managers who manage its business and from the employees who work for it. As Lord Halsbury said in the great precedent of Salomon v. Salomon in 1897:

    "The company is a different person altogether from the subscribers"—

that is, subscribers who are shareholders. As many other cases have established, it is separate from the managers and it is separate from the employees.

Therefore, when the clause states, therefore, that the party can recover an award for time spent, "in preparing his case"—what it should say in terms of corporate bodies is "its case"—of whom is it speaking? The case prepared by the company—but who is that? Every time you have a corporate body in a section of an Act of Parliament, you have to decide who counts as the company.

Throughout the proceedings in another place and, indeed, even in government documents, it has been assumed that "his" case—or "its" case, as it should be—here means that the company includes every secretary, manager, executive, consultant who works on the case. That does not necessarily follow. As my noble friend explained, the company is already paying these people; they are already employed.

It may be that there has been a mistake and it really means cases where the company has no legal representative. I am interested in what the Ministers will say about that. However, even a litigant in person is not permitted in the High Court to claim costs incurred on his behalf by secretaries, consultants and assistants. His claim is capped to two-thirds of the amount he would have been allowed if he had been represented by a legal representative. That is in the rules of the Supreme Court; it is Rule 48 PD-003, in Section 52.4. The section goes on to say,

    "The amount which may be awarded to a litigant in person under rule 46(3)(5)b and rule 48.6(4)—

which are the relevant sections—

    "is £9.25 an hour".

Is that going to be the limit also in the tribunals, or is the company going to be able to charge more?

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I would like the Minister to answer that because the Government know what is going to be in the regulations. They will tell us that it will be in the regulations; of course it could not possibly go into the Bill because then we would know. It is going to be in the regulations, so is it going to be £9.25 an hour as in the High Court, or is it going to more?

On 11th December, the Minister in another place said that they were considering—he did not say they had decided—making the scale of recovery—this is the Department of Trade and Industry scale that we are going to have in regulations—

    "perhaps against average costs per jurisdiction". [Official Report, Commons Standing Committee F, 11/12/01; col.64.]

Therefore, it will not only be actual loss for time spent in preparing the case, it will be an average over cases in that jurisdiction. What possible justice is there in that?

The Minister also said,

    "We must find a way to calculate what an hour of a person's time is worth." [Official Report, Commons Standing Committee F, 11/12/01; col. 62.]

How are they going to do that? What sort of mentality goes into that approach?

The Routes to Resolution, and the associated document, that notorious Survey of Employment Tribunals 1998 (SETA), told us that cases which go to an employment tribunal hearing are said to involve a median of 27 hours for time spent by persons who act for employers. Even at £200 per hour, let alone £9.25, it would come to some £5,400 to £5,500 a case. What sort of approach to the actual sums involved is to be adopted in relation to this?

The legal howler at the root of the new rule is, of course, that nobody has explained why the case of a corporate respondent should include all the work done by a manager, executive, secretary or anybody else. They are all people, as my noble friend said, who get paid for the work they do anyway. The only possible rationale and justification for such an approach is that tribunal cases are special. The personnel manager will deal with it anyway, but it is so outrageous that there should be a case in a tribunal against a corporate employer, that the employee, if his costs are awarded or anything like it, must subsidise the defendant for the work for which the corporate body is paying anyway.

When we look at the impact assessment in the Government's response to consultation, they say at page 47 that:

    "costs awards will include".

I break off to say it is really rather confusing for the Government suddenly to say "costs awards". This is a different payment from costs awards, as my noble friend the Minister explained very well when we last met. They say that:

    "Costs awards will include costs of time spent by parties where cases or defences are weak. Awards will be possible against paid representatives where it is their behaviour which has triggered the costs award".

The proposals, they say, should discourage a small number of weak tribunal applications. Of course, this is the objective all the time. Under the banner of introducing workplace procedure, they aim to get rid

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of 40,000 employment tribunal applications. How many will this deal with? The Government also state that the proposal should discourage a small number of weak tribunal applications, about 100 to 500 a year. Is that right? Perhaps the Minister will tell us if that is wrong. How many cases is this going to discourage?

The response also says that in addition, more costs awards will be made providing more compensation to those at the receiving end of unreasonable behaviour. This passage is a terrible jumble. Costs are mixed up with compensation and the new animal of payment for time spent by parties. But all that is in breach of normal legal principles to save 100 to 500 cases a year. Is that right? The confusion has been confirmed in a letter which the Minister, my honourable friend Mr Alan Johnson, has written more than once, mainly to Members in another place, saying:

    "I am writing to you once more to set the record straight on the Employment Bill".

I refer to the Minister's letter of 15th February, which has been widely distributed and on which I have been consulted. It is very strange. It states,

    "we have already said that the compensation"—

that is, compensation for time spent—

    "will probably not relate to actual hours worked but to average amounts, this is because it would require parties to keep detailed records of their case preparation time and we do not wish to impose this requirement on either party".

That is a new explanation. Parties cannot be made to keep records of the time that they spend preparing cases and, therefore, a scale is going to be drawn up out of the air. I continue with the quotation:

    "We intend the implementing regulations to provide for tribunals to make these awards on the basis of guidance. Of course, we are aware of concerns that preparation time may impact harshly on applicants because respondents are in a position to rack up high costs. Consequently, as there are a number of ways to implement this proposal we intend to have a full public consultation to ensure that the specific details are right. For example, options include a cap on compensation for preparation time, and fixed costs to keep excessive claims at bay.

    I do not believe that this provision gives extra ammunition for intimidatory behaviour. We are told that it is the £10,000 ceiling on costs the tribunal may award which is being used to intimidate. This limit is not part of the Bill but we will examine further how to address these legitimate concerns. In the meantime an award made by a tribunal for preparation time would have to fit within it"—

that is, within the £10,000, which is quite a lot of money. I continue:

    "We believe that it is important to provide information for parties on the costs regime because the threat of high awards is not based on the facts".

Of course, we do not know that because we have not seen the scale which the Department of Trade and Industry has in its corporate mind. No doubt it includes its managers, secretaries and everyone else, but we do not know what will be put forward.

Our amendment would offset the novelty of this new type of payment—at least to the extent that an employing company should not be able to pay for persons for whom it is paying anyway and who, in the ordinary course of their duties, including overtime, deal with tribunal cases. Time spent by the company in

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preparing its case—or, as the clause states, "his case"—is said by most people to include a great deal of time spent by people who are employed to do the job anyway. It is bad in justice and it is bad in law.

The noble Baroness frowns. I must explain the matter again. It is bad in law because, if I say that the company can charge its expenses, then one has to make an imaginative leap to ask for whom the legal person—the company—is claiming for its expenses. Is it the expenses of the door-keeper, the secretary, the managers, the executives, the noble Lord, Lord Simpson, if he deals with it, or whoever deals with the case? Is a limit to be placed on this? It is no good saying, "Yes, there will be a limit. It might be set out in regulation". This point must be made more clearly to the Committee than we have done. It is our fault that we have not made it sufficiently clear in the past.

Primary legislation is for matters of principle. If primary legislation is to be changed, Parliament must consider it and Parliament can amend it. A regulation cannot be amended and a regulation is frequently—we all know this—not adequately discussed. A regulation is an easy way for the department concerned to change the law without too much trouble.

If there is to be a limit on who is the company for corporate parties to tribunal litigation, that should be in the Bill. No doubt our amendment's wording could be improved and we would be very happy for the Minister to consider it and take it away. If the Minister will take this away we can come back on Report and discuss a much better amendment if he puts one forward. At least there will not be an open-ended offer that anybody employed by the company who touches this problem of litigation can be charged for even when it is their job to deal with the matter in any event.

I very strongly support this amendment and hope that it will be considered favourably by the Minister.

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