30 Jan 2012 : Column 1321

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House of Lords

Monday, 30 January 2012.

2.30 pm

Prayers-read by the Lord Bishop of Norwich.



2.36 pm

Asked By Lord Teverson

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, my honourable friend the Minister for Europe, David Lidington, has spoken to both his Hungarian counterpart, Ms Eniko Gyori, and to Commission President Barroso's chief of staff, Johannes Laitenberger, about recent developments in Hungary. Mr Lidington outlined the UK position that we support the upholding of EU laws and encourage constructive Hungarian engagement to address any concerns raised as a result of the Commission's analysis of recent legislative changes.

Lord Teverson: My Lords, I thank my noble friend for that encouraging reply. However, rather than just making technical changes to Hungarian legislation, as occurred when there was a problem with its media laws, can the European Union do something more substantial on these fundamental questions of democracy in Hungary to ensure that the principles of the European Union, and Hungary's membership of it, are fortified rather than diluted?

Lord Howell of Guildford: I think that the intervention and the position taken by the Commission reflect some of that concern. As far as the UK is concerned, we urge the Hungarian authorities to be constructive and flexible and to honour their international obligations, as indeed we would urge any other fellow member of the European Union to do in similar circumstances.

Baroness Bakewell: Is the Minister aware of the degree to which the new Government in Hungary are already cracking down on free speech? The mayor of Budapest has sacked the director of the New Theatre there and appointed someone from the Jobbik party, and that same party is now challenging the country's National Theatre. Some 70 figures in this country's arts world have voiced their protest against such censorship. Will the Government back them?

Lord Howell of Guildford: We certainly recognise all the concerns that the noble Baroness has put forward, and it is right that we urge change. The European

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Commission released its analysis of the compatibility of Hungarian legislation with the EU treaty obligations on 17 January. The acute concerns that the noble Baroness has mentioned are valid. We submit that the Commission's approach is a sensible and constructive handling of the situation. That is our position.

Lord Hylton: My Lords, Hungary is also a member of the Council of Europe. Do the Government consider that the new constitution is compatible with the European Convention on Human Rights, particularly as regards freedom of conscience and freedom of association?

Lord Howell of Guildford: That is an important matter to consider and we will consider it. Obviously, a number of processes are at work here. We are dealing partly with the European Union and the Commission and partly with the track that the noble Lord has outlined and pointed to. We will focus on that as well.

Lord Tomlinson: Does the noble Lord, following on from the last question, recognise that we in the United Kingdom are in a unique position at present as we hold the presidency of the Committee of Ministers of the Council of Europe? Does he share the views expressed last week in the plenary session of the Parliamentary Assembly by the Secretary-General, Mr Thorbjorn Jagland, who said that the situation in Hungary shames us all?

Lord Howell of Guildford: I certainly share the concerns, and I also share the hopes reflected in the noble Lord's question-that in our chairmanship position we will be able to carry these concerns forward. The noble Lord is quite right to draw attention to that.

Lord Hughes of Woodside: My Lords, given that Hungary went through years of dictatorship under Nazi occupation and then through years of dictatorship under the Soviet regimes, would it not be surprising if the people of Hungary were not aware of that past and willing to fight very hard for their freedoms, and should we not assist them when they do?

Lord Howell of Guildford: Of course we should. Certainly speaking for myself, one of the turning points in my lifetime was when these countries, which were in effect enslaved under communism, came into freedom in the latter part of the last century. That was a wonderful thing. We played a good part in bringing it about and we must continue to fight for those freedoms. I agree with the noble Lord.

Baroness Williams of Crosby: My Lords, given that there are prospects for further enlargement of the European Union-we have had much discussion about Turkey and other countries-would it not be appropriate to take a very strong line indeed with Hungary? Its Prime Minister has, in fact, played games with nationalism and democracy for quite a few years now, even before he became Prime Minister, through his party. The more clearly that the Council of Europe can give an

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indication that this is not acceptable for a member of the European Union, the more likely it is that other countries will look very carefully at it before deciding whether to move towards membership.

Lord Howell of Guildford: My noble friend is right that there is concern here, and it is a matter that both aspiring and current members of the European Union should closely follow and be engaged in. Hungary is a nation of many virtues and has been through many difficulties. We want it to continue and prosper as a free nation and not to be constrained by undesirable and unsavoury laws. We recognise that, and we have to work very hard on that basis.

Lord Sewel: My Lords, although it is right and proper to be positive and constructive in our relationship with Hungary at this difficult time, ultimately, what sanctions are available to the EU?

Lord Howell of Guildford: The sanctions are those that are available to the European Union as an organisation which requires certain standards that we adhere to very strongly-standards of behaviour, and moral, legal and social standards-throughout the European Union. That is the sanction available on that side. The Council of Europe also has powers to censure, and, indeed, challenge the continued membership of organisations within it. These are powerful pressures that need to be used in a balanced way and with the right approach. That is the situation which we are now grappling with.

Lord Stoddart of Swindon: My Lords, is there not a problem here which has to be resolved? On the one hand, the people of Hungary have decided to have a Government and a new constitution that do not fit in with the rest of Europe. On the other hand, the European Union cannot possibly accept a Government of Hungary who have a constitution that is not in accordance with its views and background. How do we resolve the problem? Who is going to win in this-the electorate of Hungary or the European Union?

Lord Howell of Guildford: I do not quite see it in that sort of Manichean analysis between the European Union and Hungary. I see that there are certain objective standards of good government and free government, and the freedoms that we all fought for during all our lifetimes, and that these should be upheld. The European Union is a repository of those freedoms, as is the Council of Europe. When those standards are being departed from or flouted in any member state-indeed, we can extend this to organisations outside Europe, such as the Commonwealth-then all pressure should be brought to bear. It is not just a question of the European Union versus Hungary; it is a question of the proper rule of law, good governance, democracy and the core values and principles that we stand for and have fought for being adhered to in every possible way.

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Energy: Tariffs


2.44 pm

Asked by Baroness Smith of Basildon

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Lord Marland): My Lords, we estimate that the Government have incurred costs of approximately £66,400 to date. This includes the cost of the recent Appeal Court hearing. However, if the Supreme Court agrees to hear our case, we will incur more costs.

Baroness Smith of Basildon: My Lords, I am slightly thrown by that Answer from the Minister, because exactly the same Answer was given a week ago to my right honourable friend Caroline Flint in the other place. At that stage, the Government did not know that they had lost the appeal. They have now lost the appeal and have to pay the costs of the other side as well, and have incurred additional costs at the Supreme Court. My Question asked,

I think they will be significantly higher than the figure of £66,000 or so which the Minister has just given me.

Even at this late stage, does the Minister really think that it is good use of government money to keep chasing this merry-go-round of court decisions that the Government are losing? Would it not be better to sit down with the industry and negotiate a way forward? Everyone accepts that there need to be some cuts, everyone accepts that there need to be changes, but should we not try to do this in a way that does not cost jobs and that protects the industry?

Lord Marland: My Lords, I must admit that I was hoping that the noble Baroness would say well done on incurring only £66,400 of costs. It is a curious old world when we save the consumer £1.5 billion at a cost of £66,400 and are told that we should declare to the nearest penny. Let us look at what we are taking to court. This is one of the most ridiculous schemes that have ever been dreamt up. It is already going to cost the consumer £7 billion for £400 million of net present value.

The Chancellor of the Duchy of Lancaster (Lord Strathclyde): Ridiculous!

Lord Marland: Exactly; it is ridiculous. That is on a product where you need electricity when the sun does not shine. It will produce 0.1 per cent of our electricity supply and it does not target the needy or consumers. This is one of the most ridiculous policies ever dreamt up. Guess who did it: yes, the dying embers of the Labour Government.

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Lord Strasburger: My Lords, I should declare that I have recently sold some solar PV panels, but before the December deadline, so I have no financial interest in the current controversy. I have two questions for the Minister. Why did the Government show such contempt for the consultees by attempting to implement the tariff changes before the end of the consultation period, and then add insult to injury with this futile appeal? Secondly, why do the Government seem to be doing their very best to kill off the solar PV industry, an industry that generated 30,000 jobs over the past two years by first delaying and then botching the announcement of the new feed-in tariffs?

Lord Marland: My noble friend has a point. We are certainly not trying to kill off the solar PV industry. Only today, I received a letter with a cheque for £960 for the Government. That shows that it is alive and well. Perhaps I can help my noble friend by telling him that I received an e-mail on 18 January. I know I am not much good at anything, but-

Noble Lords: Addressed to you?

Lord Marland: Addressed to me. Thank you very much; you are warming to the theme. It read:

"Start a lucrative NEW career as a Solar Panel (PV) Installer ... At present there is BIG DEMAND for skilled Solar Panel Installers in the UK, there is a great opportunity for you to re-train and have a rewarding new career".

Lord Broers: My Lords, I congratulate the Government on this outbreak of numeracy in their energy policy, but can the Minister reassure us that this might spread to offshore wind?

Lord Marland: I am not sure what I should be reassuring the noble Lord about-whether we should or should not carry on with offshore wind. However, we are committed to offshore wind, if that is the answer that he or anyone else wants. Our numeracy is still very much intact, and I am very grateful for his compliment.

Baroness Farrington of Ribbleton: My Lords, I missed the noble Lord explaining who had sent him the cheque and what reason they gave for sending it. I am sure it was not from redundancy money given to people who have been thrown out of work by the Government's policy.

Lord Marland: I think the noble Baroness is being a little trite. It comes from a firm called Solar Fusion. No one has yet been made redundant from the solar panel industry, which is alive and well. We have sought to reduce the amount that the consumer pays to help people in the solar industry. For a panel costing £4,000, you can still generate a £500 feed-in tariff benefit-which is more than 10 per cent and in the current market is very good-and a reduction of £190 on your bill. I do not think that there will be redundancies. I think that more of these things will be sold, and that that is good for jobs.

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Lord Cormack: My Lords, before my noble friend pursues this attractive alternative career, could he follow the advice of the noble Lord opposite when he is thinking of numeracy and have regard to onshore wind, which produces unpredictable amounts of energy at enormous cost and where the Government can save a very great deal of money?

Lord Marland: The noble Lord is right. We are considering the renewables obligation certificate that we are providing for onshore wind. We have finished our consultation and will announce and publish the results of our thinking on it on or before 9 February. I therefore ask the noble Lord to hold his breath until that date.

EU: Treaties


2.51 pm

Asked By Lord Liddle

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, I think we can all cool down now. It is the prerogative of any member state to suggest additions to the European Union treaties. Any addition, including the proposed intergovernmental treaty, would need to have the agreement of all 27 member states.

Lord Liddle: I thank the Minister for doing his best in that reply. However, with all his experience of European matters stretching over five decades in politics, would he please explain to the House how the Prime Minister can one month take Britain out of the room, claiming that the proposed treaty is a threat to our vital national interests, and then the next month appear to want to wave it through, declaring that he does not mind at all if the intergovernmental treaty, of which we will not be part, makes full use of the EU institutional machinery? Is it not true, and does the Minister not agree, that really the only way to protect Britain's vital national interests is always to be properly at the table in the room and not walk away, and that the only reason that the Prime Minister cannot do what is right for Britain is that his main concern is what he can get away with inside a divided coalition and a divided party?

Lord Howell of Guildford: I think that the noble Lord, in his enthusiasm for these matters, is getting a bit confused. This is an intergovernmental treaty; it is not going forward inside the European Union. The British Government are anxious that there should be orderly development of the eurozone and that obviously it should not collapse into chaos. Nevertheless, as I think the noble Lord himself has written, it has "design flaws" in it-I think those were his words-and therefore there has to be caution and care about the whole way

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in which it is carried forward. Certainly, the UK does not want to be involved in a treaty that supports a flawed system. We want to be supportive of a design for the future which is sustainable and which brings prosperity, not division, to Europe. That is the position. What is the role of the European Union institutions? We do not want to throw sand in the machine. If some of them can usefully be used in the aim of building a better euro system, we will support them, but we are reserving our position on exactly which institutions should be used and how they should be used. Our general attitude is supportive and constructive, and we are involved, as ever, in the machinery of building a prosperous and competitive Europe and a good single market. These remain our aims and we are taking a leading position on them.

Lord Taverne: My Lords, is the report in the Financial Times correct that the Government are giving a measure of support-it seems somewhat conditional-to the idea that those who signed the intergovernmental treaty can use the institutions of the community, including the Court of Justice? Does this have the support of the whole Cabinet, including the Secretary of State for Work and Pensions? Secondly, in his evidence before the House of Commons Select Committee on 11 January, the Chancellor said that the Government, in December, would have preferred to sign the proposed treaty had it included safeguards to protect the proper regulation of the City. Since the new treaty now includes safeguards that prevent it applying to the single market, what prevents the Government taking further steps towards re-engagement in Europe and signing the treaty?

Lord Howell of Guildford: There are two points there. As I said earlier, we have reserved our position as to which institutions of the EU as a whole should be usefully deployed in supporting the policing of this intergovernmental treaty. We have reserved our position on that. The report in the Times sounded a bit further forward than that and is not correct.

As to the Chancellor's views, he has made it clear all along that a treaty that was going to reinforce a eurozone that was sustainable and which met a whole range of conditions, including full implementation of the October agreements, solving the Greek debt problem, recapitalisation of the banks and a proper liquidity structure throughout Europe, was the kind of thing that we would have supported, but that is not on the table at the moment. We will have to see how the intergovernmental treaty works, which of the existing 26 agree to it-not all of them may-and, as it proceeds, we will be supportive. But we do not want to sign up to the eurozone as it is because, as the noble Lord opposite said, and as all observers now recognise, despite their views to the contrary many years ago, the system is design-flawed.

Lord Hannay of Chiswick: My Lords, will the Minister say what provisions, if any, of the intergovernmental agreement on the table in Brussels today are objectionable to the British Government? Will he confirm that even were we to sign that agreement and it became an amendment to the Lisbon treaty, none of its provisions

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would impose obligations of a legally binding kind on the United Kingdom unless and until we join the eurozone?

Lord Howell of Guildford: The noble Lord's last words are the key to the matter. The treaty on the table is designed for the 17, although others may go along with it. It will be debated in the various Parliaments. It is designed for the 17 and involves degrees of surveillance and control that are not congenial from the British point of view; we believe that we can best proceed not by being within and making constant objections and delaying the whole process of the 17 that want to go ahead, but by being supportive from outside. That is the position, which seems perfectly sensible and constructive.

Lord Pearson of Rannoch: My Lords, do the Government agree with their own lawyers who have advised that it is illegal to allow the ECJ to police something that is not in the treaties-in this case, the proposed fiscal compact's debt brake rule? Would it not be wiser to insist that the eurozone follows its own law in the hope that that brings an orderly end to the euro, with a return to national currencies at agreed initial exchange and interest rates? Is that not the only sensible way forward?

Lord Howell of Guildford: The noble Lord is letting his vivid imagination roam into the future. We have not reached the situation that he describes; perhaps we never will. I have made it clear that we reserve our position on how and which institutions should be used and how they may usefully be used to police the new intergovernmental treaty. These matters are yet to be decided; the position, I repeat, is reserved.



2.59 pm

Asked By Lord Ahmed

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, between 11 and 13 January my and noble friend Lady Warsi visited Pakistan, where she called on Prime Minister Gilani and Foreign Minister Rabbani Khar. She expressed the UK view that a strong, stable, constitutional democracy was in the interests of Pakistan. We are following the political situation in Pakistan closely. We want Pakistan to enjoy credible elections that respect the constitution and help ensure stability.

Lord Ahmed: I thank the Minister for his reply. Does he agree that it is important for any democratically elected Government to show respect for law, the courts and public opinion, and to reject corruption, nepotism

30 Jan 2012 : Column 1329

and bribery? Therefore, does he also agree that it is better to work with national institutions such as the civil service and the army to modernise and reform them rather than criticising them in public? Finally, will he help the Government of Pakistan try to negotiate some sort of peace deal with the Taliban in Pakistan?

Lord Howell of Guildford: From the British point of view, the sentiments about how democratic Governments should develop are admirable. There are certain matters inside Pakistan that it is not our business to be concerned with or to solve; they lie with the people of Pakistan. However, the general principles that the noble Lord, Lord Ahmed, outlined are the right ones. Dealings with the Taliban, too, are a matter for the Pakistan Government. There are delicate and important areas where contact with the Taliban appears to be developing internationally. This may be part of the progress and help needed to see Afghanistan get on a better path.

Lord Hussain: My Lords, since Pakistan has been ruled by military dictators for a long time, and the present Government are the first in 35 years to complete four years in office, the lack of democratic continuity has weakened the state institutions. How can the Minister's Government help create an environment in which the democratic process will continue uninterrupted in Pakistan?

Lord Howell of Guildford: The best way is the way which we are using: namely, playing a very forward part in assisting social, educational and institutional development in Pakistan. Pakistan is the largest recipient of United Kingdom aid: it will work out at about £446 million over the next three years to 2015. We have a huge programme of bringing more children into school-another 4 million out of the 17 million in Pakistan who still do not go to school. We are also playing a major role in other, very valuable social developments. Those are the conditions in which the better democracy that my noble friend rightly wants-and we all want-is most likely to grow.

The Lord Bishop of Norwich: My Lords, as we approach the first anniversary of the assassination of Shahbaz Bhatti, the Christian Minorities Minister, in Pakistan, does the Minister detect any signs of hope that Christians and other minorities will be able to play their fullest and most active part in the democratic process there?

Lord Howell of Guildford: The right reverend Prelate rightly reminds us of a particularly horrific thing; and there have been other horrific murders as well. None of them is welcome. He asks whether I am optimistic and can offer reassurance that things will improve. We will do our best to support the development of a more peaceful, balanced and democratic Pakistan in every possible way; a Pakistan that tolerates faiths and removes the stain of attacks on minorities, including horrific attacks on the Christian community such as the ones that occurred. However, it would be misleading

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if I stood at the Dispatch Box and sounded optimistic notes about the future, which is still very precarious for all these faiths.

Lord Foulkes of Cumnock: My Lords, I commend the Minister for dealing with three out of four of today's Questions in such detail. Will he confirm that he will still receive only his basic salary and not a performance bonus? Is that not an example to others?

Lord Howell of Guildford: I cannot confirm that because I do not receive a salary.

Lord Brooke of Sutton Mandeville: My Lords, does my noble friend welcome the recovery in Pakistan cricket? Does he further think that it would be a happy conclusion to the present series if we won the last test?

Lord Howell of Guildford: In seeking a positive side of developments in Pakistan, I certainly had in my notes that its cricket was coming along quite well, but like my noble friend I rather hope that in the next round we do a little better.

Legal Aid, Sentencing and Punishment of Offenders Bill

Bill Main page
21st Report from the Constitution Committee
22nd Report from the Joint Committee on Human Rights
21st Repors from the Delegated Powers Committee
22nd Report from the Delegated Powers Committee

Committee (6th Day)

3.05 pm

Clause 43 : Conditional fee agreements: success fees

Amendment 118

Moved by Lord Thomas of Gresford

118: Clause 43, page 30, leave out lines 4 to 6 and insert-

"(b) the maximum limit must be expressed as comprising either or both of the following-

(i) a percentage of the descriptions of damages awarded in the proceedings that are specified in the agreement; or

(ii) a percentage of the amount of fees which would be payable to the person providing legal services including advocacy if they were not acting under a conditional fee agreement,"

Lord Thomas of Gresford:My Lords, I have to apologise for the length of my opening remarks, but as your Lordships will have seen, this is a very large group of amendments and it covers some three discrete topics.

Clause 43 deals with the conditional fee agreement-a CFA or no-win no-fee agreement-under which the successful claimant wins from the defendant both damages and costs to pay his lawyer's fees. The fees under a CFA include a success fee, an uplift of the basic fees by an agreed percentage. The rationale behind the success fee is that it is not the lawyer's prize

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for winning his case but his insurance; an uplift on his fees when this client wins covers the value of his time and effort when another client loses and he receives no fees at all. If the claimant loses, he does not have to pay his own lawyer's fees, because it is no-win no-fee, but he is liable for the money paid out on his behalf for court fees, expert and medical reports, and witnesses' expenses.

The Government's purpose in Clause 43 is to amend the current position under the Courts and Legal Services Act 1990 to provide that the success fee payable to the successful claimant should no longer be payable by the unsuccessful defendant but should be paid instead by the successful claimant out of the damages he receives. All the losing defendant will pay by way of costs is the claimant's lawyer's base fees and his own costs.

When the 1990 Act, led on in this House by the noble and learned Lord, Lord Mackay, was originally enacted by the Conservative Government to provide relief for the MINELAs-middle income not eligible for legal aid-it was expressly provided by Section 58 that the costs payable by a losing defendant to a successful claimant should not include the success fee payable under a CFA. At the beginning, no success fee was paid by defendants, but in 1999 the Act was amended by Labour so that the success fee was recoverable from the losing defendant, along with the claimant's base costs. Labour's policy at that time was to abolish the grant of legal aid to all-the impoverished as well as the MINELAs-in all personal injury cases save clinical negligence. The carrot was that defendant insurance companies would pay the success fee instead of the claimant. The proposals in this Bill seek to return to the original concept of the noble and learned Lord, Lord Mackay, in 1990.

The 1990 Act did not change the general rule that the losing party pays the winning party's costs; costs follow the event. Therefore, if a claimant lost his case, he did not have to pay his own lawyer's fees-no-win no-fee-but under the principle of costs following the event, he was liable to pay the successful defendant's costs, which could be a very considerable sum. To cover this possible liability, an insurance market quickly grew up whereby the claimant would insure himself against the risk of losing; that is, "after the event" insurance, or ATE. The original 1990 Act said nothing about the cost of the insurance premium for such cover and accordingly a claimant was responsible for the premium.

Section 29 of the Access to Justice Act 1999 expressly provided that the premium paid by a successful claimant who had insured himself against the risks of losing was recoverable as well as the success fee. The policy was that an injured claimant would recover his damages in full without any deduction, so the losing defendant-usually an insurance company or a company so large that it was self-insured-paid four times over: the damages to the claimant, the base costs of the claimant's solicitors, the success fee, and the ATE insurance. As it happens, I raised the issue of the extension of CFAs and its impact on insurance in a dinner-time debate some 14 years ago, on 9 March 1998, before the 1999 Bill was introduced. I was very much against the

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abolition of legal aid in personal injury cases and at that time was promoting the CLAF scheme that is so successful to this day in Hong Kong and fully supported by the Bar Council. Two particular matters stand out from that debate. My late noble friend Lord Kingsland-and I do mean friend-then the leader of the Conservative Benches in this area, said he applauded the long, hard look the noble and learned Lord, Lord Irvine, was taking at legal aid. He said:

"In his overall review of legal aid, the Opposition applaud particularly his desire to extend legal aid into areas such as the provision of social welfare, immigration and other areas where preventive legal advice will save so much money by avoiding ensuing litigation. All that is to be greatly applauded".-[Official Report, 9/3/98; col. 93.]

In that debate, the noble and learned Lord, Lord Irvine, said:

"Premiums for personal injury proceedings, in which conditional fee agreements have been allowed since 1995, are typically £100 to £150. For many of those who will gain access to justice, which they are denied now, that is not an excessive sum".-[Official Report, 9/3/98; col. 96.]

The legislation was passed in the context that the noble and learned Lord, Lord Irvine, believed that insurance premiums for ATE insurance were £100 to £150. The past 11 years have witnessed the unintended consequences of the 1999 Act and the urgent need for reform.

It was emphasised in the Jackson report that the maxim "once size fits all" is certainly not the way to go. In personal injury cases, the defendant who caused the injury will have acted negligently, not deliberately. In defamation or breach of privacy cases, the harm is quite deliberate, usually with the motive of selling newspapers. Personally, I am intensely relaxed about the newspaper that libels an individual or breaches their privacy having to pay the lot-the injured party's success fee and ATE premium-although I am afraid that neither the Mirror nor the European Court of Human Rights would agree with me. The defendant does not, in a libel case, have to pay for future care or future loss of earnings, and the damages award is usually small. Therefore, different concerns apply in different categories of cases.

3.15 pm

The 1999 changes in the recoverability of the success fee have been highly lucrative for solicitors. The Jackson report points out that if 30 per cent of a solicitor's fees represent profit and 70 per cent are administration costs, then a 100 per cent success fee, which is not untypical, doubles his fees and gives him a profit of 130 per cent. Since the claimant never has to pay any part of the success fee under the present provisions, he is totally indifferent as to whether the success fee is 10 per cent or 100 per cent. In Road Traffic Act cases, where the success rate is over 90 per cent, the ramping up of success fees became so blindingly obvious that the success fee was limited by regulation to 12.5 per cent. Other cases may be riskier, where the success fee remains at large. Solicitors say, "We have a merits test to ensure that only meritorious claims go forward". Such a test can easily degenerate into cherry picking, so that risky cases may be dumped and only sure-fire winners taken on. If a lawyer picks only the obvious

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winners and discards risky cases, why should he have a success fee to insure himself against cases which, by definition, he will never lose?

In today's climate, I support the Government's decision to transfer the burden of the success fee to the successful claimant. That will immediately introduce competition for clients. Some lawyers, in easy, run-of-the-mill litigation, may even advertise that they will charge no success fee at all. Others, who take on the riskier cases, will have to calculate how low they can push their success fee percentages to attract clients, in order to cover their losses on those cases they might lose. The proposal that the claimant pays the success fee introduces competition in this area, which will push down the percentages that solicitors ask for.

That brings me to Amendments 118 to 120 and 162. The Government propose to limit the success fee in personal injury cases to 25 per cent of the damages for pain, suffering and loss of amenity in special damages to the date of the award, but to exclude from that calculation any damages attributable to future loss, whether loss of earnings, medical fees, care costs or the like. I should point out that the maximum limit or cap that was envisaged in the original 1990 Act was a percentage of the whole of the award of damages, not a part, as is now proposed. A maximum limit, specified as a percentage of damages, is inappropriate where the action is one merely for injunctive relief or in an area where damages are, by convention, low, such as actions in defamation or privacy cases. Consequently, Amendment 118 provides for the success fee to be calculated not just as a percentage of damages, but also, as an alternative, as a percentage of the fees which would normally be charged. Amendments 119 and 120 are consequential amendments.

Amendment 162 deals with Clause 53, which provides for an additional sum to be paid by a defendant to a claimant if judgment in the claimant's favour is more advantageous than an offer he made earlier to the defendant which the defendant rejected. The sanctions against a defendant for failing to accept a claimant's offer to settle generally amount to considerably less than the sanctions against a claimant for failing to beat the defendant's offer to settle. Consequently, there is less incentive for a defendant to accept a reasonable offer from the claimant than for a claimant to accept a reasonable offer by the defendant. Amendment 162 clarifies that the court must evaluate the non-monetary benefit of injunctive or declaratory relief or the vindication of a claimant's character in defamation proceedings.

Amendment 137D allows the House to consider one-way costs shifting. This is the second topic with which this group of amendments is concerned. It would mean that a defendant, even if successful, pays his own costs and does not seek them against the losing claimant; namely, one-way costs shifting. It follows that if such a regime were in force, a claimant could bring his action without fear of having to pay the defence costs if he loses. To an ordinary individual, having to pay defence costs takes all his savings and perhaps his home, which would be a significant deterrent to most people from bringing even a gold-plated claim let alone a risky one if he is facing that financial liability.

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One-way costs shifting is not a new concept. It has been the rule in legal aid cases since I started practice. An unsuccessful legal aid plaintiff may have an order for costs made against him not to be proceeded with without the leave of the court. I have never known any attempt made by an insurer following such an order to obtain costs or to seek to obtain costs against an unsuccessful claimant. Jackson, in his report, calls it the "legal aid shield". One-way costs shifting exists in legal aid.

In formulating his proposals, Lord Justice Jackson was assisted by calculations made by the Medical Protection Society, which over an 18-month period calculated that it had paid out £2.8 million in ATE insurance premiums which had been recovered by successful claimants as part of their costs. The Medical Protection Society had itself paid more than £9 million of defence costs of which it had recovered only £380,000 in costs orders against unsuccessful defendants. It had recovered only £380,000 but had had to pay £2.8 million in ATE insurance premiums to successful claimants. It follows that it would be far better financially for it not to seek costs at all when it wins if it could avoid paying the claimant's ATE premium when it loses. Lord Justice Jackson concluded:

"On the basis of the material provided during the Costs Review, it seems to me inevitable that, provided the costs rules are drafted so as (a) to deter frivolous or fraudulent claims22 and (b) to encourage acceptance of reasonable offers, the introduction of one way costs shifting will materially reduce the costs of personal injuries litigation. One layer of activity, namely ATE insurance against adverse costs liability, will have been removed from the personal injuries process".

Jackson recommended the introduction of qualified one-way costs shifting. The Government intend to introduce, through the civil procedure rules, such a regime. In my view, it is essential that the principles to be applied in formulating these civil procedure rules for one-way costs shifting should be on the face of this Bill. If the Bill provides on its face that the premiums for ATE insurance should fall upon the claimant, as it does in Clause 45, so should the provisions of one-way costs shifting, the other side of the coin, also appear in the Bill and be properly debated.

At the moment, I understand from discussions with the Government that no precise formulation of the alterations proposed to the CP rules has yet taken place. These rules are made by the Civil Procedure Rule Committee, which is an advisory non-departmental public body sponsored by the Ministry of Justice, headed by the Master of the Rolls and comprising five High Court judge members, one circuit judge member, two district judge members, three barristers, three solicitors and two consumer affairs lay members. I think that Parliament should give the rule committee its parameters and that it should not be left to the Executive, or for the committee simply to follow the recommendations of the Jackson report as it sees fit.

The qualifications in this Bill follow the precedent of Section 11 of the Access to Justice Act 1999 in respect of legal aid; namely, that in making a costs order against a legally aided person, the judge may take into account his financial circumstances and the

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reasonableness of his conduct. In the course of discussions with representatives of the insurance industry, I have found that they are not concerned about the financial circumstances of the losing claimant. It is so rare that such a claimant can meet the defendant's costs personally that it is simply not worth the while of the industry to formulate the mechanisms that would be required to assess every claimant's means. In other words, we do not want means testing, and neither does the insurance industry. Further, Jackson was concerned to say that the claimant must be at risk of some adverse costs in order to deter frivolous claims and applications in the course of otherwise reasonable litigation. He suggested a formula for the proposed alteration to the Civil Procedure Rules at page 190 of his final report:

Amendment 137D refers, first, to the one-way costs shifting applying to a claimant "regardless of" his means. The insurance companies do not want it and neither should the Government. It refers to actions which are brought against defendants who are insured or self-insured. We are not dealing with one-way costing where the action is brought against an individual. The amendment also proposes the extent of one-way costs shifting and seeks to add clarity in defining unreasonable conduct. Provision is also made for Part 36 offers. The amendment seems to deal with the objections that might be made to Lord Justice Jackson's original formulation, which the Government have accepted, and puts forward significant amendments.

As I previously outlined, the expectation of the noble and learned Lord, Lord Irvine, in 1998 was that the premiums for ATE insurance would be in the region of £100 to £150 when he took the decision in 1999 to switch the responsibility for those premiums from the claimant to the losing defendant. But there were unintended consequences. Market forces took over. The claimant was happy to agree to any size of premium which he himself was never going to have to pay, win or lose. If he lost the case, the insurance company customarily waived the premium, in effect it self-insured itself against loss in such circumstances. In the case of Rogers v Merthyr Tydfil County Borough Council, Lady Justice Smith pointed out that cases were being advanced by claimants protected by ATE insurance when no private litigant would dare to take the risk. This judge, who is very experienced in personal injury claims-as I know to my cost-said:

"At present, the insured claimant can notionally pay the high premium which reflects his poor chances of success, secure in the knowledge that, if he wins, the premium will be recovered and, if he loses, he can walk away unscathed. I find it hard to believe that Parliament intended that claimants should be in so much better a position than the private litigant".

This change has meant that the claimant does not have to worry because he is not going to pay the premium, whatever happens.

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3.30 pm

Costs judges who were asked to assess a successful claimant's costs found it impossible to challenge the size of the premium. In that same Rogers case, Lord Justice Brooke said:

"District judges and costs judges do not ... have the expertise to judge the reasonableness of a premium except in very broad brush terms, and the viability of the ATE market will be imperilled if they regard themselves (without the assistance of expert evidence) as better qualified than the underwriter to rate the financial risk the insurer faces".

So the judges who are supposed to tax costs found that they could not enter into any discussion or sensible judgment as to what a premium should be. The claimant does not care about how much the premium is because he will never have to pay, and the taxing masters-the judges who deal with costs-will not enter that area at all, so that insurance companies can charge whatever premiums they like.

Lord Justice Jackson cited one of the illustrative cases provided to him by the Commercial Litigation Association, where the claimant's profit costs in a particular case were £425,000, disbursements were £561,000, but the ATE insurance premium was £976,000. In other words, the ATE insurance premium in that case was more than all the other aspects, costs and disbursements put together. I am familiar with premiums in the region of £80,000. Evidence produced to Jackson showed that when these premiums are charged by ATE insurers, 65 per cent of premium is attributable to risk, 15 to 20 per cent is attributable to brokerage fees and 15 to 20 per cent to administration and profit. ATE insurers under this system have been charging whatever premium they can get away with, because it is not challenged by anybody, and only 65 per cent of those premiums are attributable to the risk that they are undertaking.

Jackson advanced two solutions. His first, and preferred, solution is that the premium should be paid by the winning claimant out of his damages to reverse the present situation. His second solution, alternatively, is that the cost of the premium be shared between the claimant and the losing defendant. Under either alternative, the claimant then has an interest in the size of the premium. If he is going to pay it himself, he is worried about how big it is; if he is going to pay a share of it, he is concerned about the size of the premium. Absent some cartel, competition ought in practice to keep the premium at a level which is a true reflection of risk.

The Government have opted in this Bill for the first solution, subject to an exception in clinical negligence cases whereby part of the ATE premium which covers disbursements in the way of expert and medical reports will be recoverable from the losing defendant. That part of the premium, which covers the risk of paying the defendant's costs, will be paid by the winning claimant out of his damages even in these extreme cases.

If one-way costs shifting applies, as I have previously argued, the defendant pays his own costs whatever the result, the losing claimant does not pay his own lawyers-no-win no-fee-nor under such a regime the defendant's

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lawyers, so it is obvious how crucial it is to introduce such a regime as a vital part of the reform of the system.

A claimant, even if successful, will remain liable for court fees and expenses paid out on his behalf for experts' reports and so on. In a typical case, those expenses would amount to between £2,000 and £5,000, which is enough to deter a genuine claimant from advancing his claim.

ATE insurers, faced with the destruction of a very large market by reason of one-way cost shifting, say that they are not interested in covering merely the costs of disbursements of such small sums. But obviously if the amount of money at risk is £2,000 to £5,000, the premiums will be back in the realms envisaged by the noble and learned Lord, Lord Irvine, in 1998. So although I have conceded ground on the claimant paying the success fee out of his damages, I retain enough of my purity of principle from 1998 to prefer the second option advanced by Jackson, with some changes, and hence the amendments under discussion.

Amendment 144A would extend Clause 45 to all personal injury litigation and not just to that for criminal negligence. Amendment 144B makes the important point that the provisions apply only in favour of those who take out ATE insurance at the beginning of the claim. Jackson found instances of ATE insurance being taken out after liability had been admitted, when there was no possibility of an adverse costs order against the claimant, and the full premium being then claimed against the defendant as part of the costs order. If claimants take out ATE insurance at a later stage of the proceedings, when the wind appears to be rather less fair than they thought, the market might be too small for the risk to be properly spread.

Amendments 144C to 144E are for clarification. Amendment 147A makes the important point that the amount required to be paid in respect of the premium must not exceed a prescribed maximum amount, which is,

Amendment 148A introduces the concept of sharing the cost of the premium but also incentivises the defendant to settle the case at an appropriate time. It provides that if the case is settled within the pre-action protocol period, or its equivalent, the premium remains payable by the claimant, but at each stage of the proceedings the premium is shared. If the claimant is successful and obtains judgment, he will still have to pay 20 per cent of the premium. I would argue that sharing the premium for ATE insurance, reduced as it would be, because it would refer only to disbursements and not to defendants' costs, would be a far more satisfactory way in which to vary the cost, much reduced by one-way cost shifting from the huge premiums currently demanded.

Amendment 149A is consequential. Amendment 156AB makes the obvious point that one-way cost shifting and this reform go together, and the regulations on each aspect should come into force in the same day.

I started by apologising to the House for the length of time that I would take in presenting these amendments. I repeat the apology and I beg to move.

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Lord Beecham: My Lords, I speak rather earlier than I might have expected. I congratulate the noble Lord, Lord Thomas of Gresford, on the lucid way in which he has presented a very complex argument on very complex issues. I do not entirely agree with everything that he said, but the Opposition and I have considerable sympathy for a good deal of it.

This House is familiar with Henry VIII clauses, but in the year of the World Shakespeare Festival this Bill could perhaps best be described as a Henry VI Bill, since it is in three parts. This is Part 2-and in Part 2 of "Henry VI", there is the famous phrase:

"The first thing we do, let's kill all the lawyers".

I cannot recall whether that was part of the coalition agreement or the extent to which it would in any event receive approval from a majority of your Lordships.

However, it is necessary for me to give an opposition view of the generality of the case and then speak more particularly about the amendments tabled in my name and the name of my noble friend Lord Bach. I want to be clear that the Opposition agree that costs in litigation are an issue and have to be dealt with. Equally, we dislike the claims management industry and the commercial referral fees charged by companies seeking to promote litigation. We would go a long way with the Government in restricting the scope of conditional fee agreements, success fees and the like in relation to road traffic accident cases, most of which are settled and with relatively modest damages. I would extend that to slip and trip cases as well, which are much the same category. We agree with the noble Lord and indeed with Lord Justice Jackson in promoting qualified one-way cost shifting for all cases and not just for personal injury claims, as the Bill proposes. However, there is a concern about "after the event" insurance, particularly if QOCS were to be limited.

In passing, the noble Lord, Lord Thomas, referred to positions where there is no incentive on claimants to settle, but of course insurers like to have it both ways. They charge, it appears inflated, premiums for "after the event" insurance but then seem to want to shift the cost on to claimants. In exactly the same way, they complain about whiplash injury claims but sell details of possible claimants to claims management or claims referral companies, so one's sympathy with the insurance industry is tempered by the experience of what it actually does.

There are, however, principles that need to be borne in mind. The overriding principle should be that successful claimants should not see the compensation on their loss eroded by meeting the costs of the insurance, or indeed the success fee in the event of a successful claim. The noble Lord did not deal with the myth of the compensation culture-perhaps he does not have to-but it is a myth, as the noble Lord, Lord Young, made clear in his own recent report to the Government. The fact is that there has been something like a 14 per cent reduction in civil claims cases in the past year and a four-year downward trend in the number of claims brought, but the principle must surely be to maintain access to justice for people of modest means. That was the whole theory behind the changes made under the Access to Justice Act and the introduction of conditional fee agreements.

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The Access to Justice Action Group surveyed 69,000 cases in the light of the Government's proposals and concluded that around a third of those would not be brought if the legislation were to go forward in its present form. Given that we are seeing savage reductions in legal aid, so that the very poorest in any case would be in great difficulties, we are perhaps now seeing a returned-to category of what might be called the legally squeezed middle. Interestingly the same survey showed that around 50 per cent of those who would in effect be expected to bear success fees, and if necessary the cost of "after the event" insurance, would be around the higher rate tax threshold of £40,000-odd a year-not an inordinately affluent group of people.

3.45 pm

That conflicts with the original concept. As it happens, I remember discussing the proposals to take personal injury cases out of legal aid with the noble and learned Lord, Lord Woolf, a professional colleague, after he had spoken at a meeting in Newcastle, his home town. He was full of assurances that all would be well in the volume of work that would be promoted for solicitors and that the system would work very effectively. We are seeing that that is perhaps no longer the case.

There are other consequences, which have yet to be measured fully, that are adverse to the public purse. If good cases are not brought that would have resulted in a recovery of damages, at least two parts of government in the context of personal injuries claims could lose out: the National Health Service for the non-recovery of the costs of treatment-there is an estimate of around £93 million a year for that-and the compensation recovery unit of the Department for Work and Pensions, which, under the current benefits system, reclaims from defendants benefits that have been paid where a claimant has been entitled to those benefits as a result of injuries. Those factors need to be borne in mind.

As the noble and learned Lord has pointed out, the Bill makes success fees irrecoverable from defendants, and in personal injury cases limits the success fee to 25 per cent of general damages, to be uplifted in theory to compensate for that potential deduction by some 10 per cent. Amendments have been tabled that deal with this aspect, but it is perhaps as well to make it clear now that a 10 per cent increase would be an increase on a level of damages that in any case involving personal injuries is regarded as too low. As long ago as 1999, a report indicated that general damages for personal injuries ought to be increased by some 50 per cent. Action was not taken by either the courts or indeed the then Government to secure that change.

We are facing a perverse effect of these changes. Successful claimants lose because they will not cover the cost of "after the event" insurance and the success fee will be taken out of their damages. The principle of English law has hitherto been that the person should be put in the condition that he would have been but for the negligence, in the case of personal injury claims-or other failures, in the context of other types of claim-of another party. That rather disappears under this proposal. In fact, it does disappear. Equally, successful defendants lose because they will not be covered by "after the

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event" insurance from claimants. Alternatively, they will be faced with qualified one-way cost shifting and so cannot recover costs either.

The people who gain-paradoxically, it might be thought-are the unsuccessful defendants: people who lose their cases. Unsuccessful defendants do not have to pay a success fee or, obviously, the cost of insurance. Unsuccessful plaintiffs gain under the qualified one-way costs system. In my submission, it is a perverse outcome of the cases that those who fail are protected while those who succeed see a substantial cost falling on them.

We argue that costs would be better controlled through better case management and the proper assessment of costs, including a determination of the relevant level of the success fee. It might be possible to prescribe the levels applying to cases in regulations, but in all events the courts should be robust in assessing what is a legitimate success fee. The noble Lord rather dismissed the notion of pooling risk, which would allow for the swings and roundabouts of lawyers undertaking cases with less than 100 per cent probability of success-perhaps substantially less than that. It is the basis of the whole of the Woolf reforms that that risk should be accepted.

There will undoubtedly be cases involving very little risk. I repeat that you can take RTA and trip and slip cases out of the equation, which leaves you with a core of inevitably rather more difficult cases where certainty is by no means apparent. However, I suggest that it is for the courts to make the appropriate adjustment when looking at the success fees. There is a danger that we will see the "after the event" market decline, and unless there is a substantial move to one-way cost shifting across the board there is a real risk people gaining access to justice. That is the basis on which the Opposition approach these matters. I will now-I hope to the relief of the Committee-speak briefly to the amendments.

I agree with many of the noble Lord's amendments, particularly the amendment to Clause 53 and Amendment 137D, although we would like to see that measure extended to all types of claims, not just to those that he listed, although they are significant. Equally, we agree that clinical negligence should be left out of Clause 45, as proposed in Amendment 144A. We agree with Amendment 144B but not with Amendment 144C. Amendment 148A concerns splitting the "after the event" premium. If that is to be retained either under the Bill or in practice-there are doubts about whether it would survive in practice-that might be a fallback position to explore.

Had the noble Lord, Lord Martin, been here, I would certainly have supported his Amendment 127, which would make it clear that success fees would not include the payment by one party of a success fee payable by another party under a conditional fee agreement. I think that is designed to protect, for example, trade unions supporting their members.

I come briefly to the amendments in my name and that of my noble friend. Amendment 131 deals with the position where a defendant has been unreasonable and where the success fee would be permitted in that event-a success fee to be payable by the defendant

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would be provided for. That seems to be perfectly straightforward. Amendment 133 would allow success fees for appealed cases. By definition these are not straightforward matters. If an appeal goes forward, there are surely issues to be determined, and there must be a risk in such appeals.

Clause 43 looks at the up-rating of general damages, particularly in personal injury cases. This needs a moment of explanation, and perhaps I can exemplify what the position would be if an award of general damages of £10,000 were to be made. The uplift at 10 per cent would increase the total award to £11,000, but a success fee of 25 per cent in a personal injury case would reduce the amount payable to the claimant to £7,750. The first amendment is, in effect, the Government's position. To be frank, I am not quite sure why we have tabled it. However, Amendment 137C would restore the £10,000 damages, because it would increase the general damage figure to £13,330, and a 25 per cent fee would reduce the general damage figure back to £10,000. Hence the uplift in respect of general damages only-not special damages-with a net loss to date, would at least shelter the successful claimant from a large reduction in his recovered costs.

Our amendments to Clause 45 raise the issue of the recoverability of costs in clinical negligence cases. They would allow the recoverability of premiums for ATE insurance in such cases, even after QOCS was introduced. The problem with clinical negligence cases is the cost of the experts' reports; hence these amendments seek to cover those.

In our amendments to Clause 53, under the heading "Offers to settle", we seek a mandatory uplift, which would encourage parties, particularly defendants, to settle. Very often, the delay in cases is the result of defendants unnecessarily prolonging matters. I have to say that that is often a feature of clinical negligence claims. Hospital authorities and others can take a long time to come to terms.

Amendments 190 and 192 put the emphasis on qualified one-way cost shifting, because they deal with the fact that there is no scheme at the moment. The Government are still considering one, and it would be interesting to know from one or other of the noble Lords opposite-I take it that the noble and learned Lord, Lord Wallace of Tankerness, will reply-how far those discussions have got, where they are heading and what kind of scheme we may be facing. If we are going to agree on a scheme that we can support, we need to know what it would actually involve before any of these changes, which will be critically dependent on a robust scheme, are made.

Equally, Amendment 193 would delay commencement until the general damages uplift and an effective system of disbursements for unsuccessful claims are dealt with by the Government or the courts.

We have set out the three issues that need to be determined: an increase of 25 per cent in personal injury damages, an effective system of qualified one-way cost shifting, and an effective system to meet the disbursements. These are procedural matters. Subsequent groups of opposition amendments will deal with the following: injury cases in group 2, non-injury cases in group 3, and judicial review and public authority liability in group 4.

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4 pm

Lord Phillips of Sudbury: I support my noble friend. My name is on most of the amendments in his name, although not Amendment 137D. I commend him on the clarity with which he spoke to what is an extremely complex set of issues. I wonder whether putting 30 technical amendments in a single group is really an efficacious way of legislating. I am bound to say that the background to these intensely complex practical and theoretical issues does not seem to have been adequately prepared. I endeavoured on day five of Committee to move an amendment calling for a review of clinical negligence cases, which are in a special class of sophistication of their own, and I hope to move it again on Report. I hope that the Minister will not mind my saying that I believe that there has been insufficient preparation for our debates on those matters.

I add only a couple of facts to the underlay to the group spoken to by my noble friend Lord Thomas of Gresford. The position in respect of claims and litigation generally is a mess, let us make no bones about it. It is in a fiendish mess. I speak as one who has always been deeply concerned about the whole concept of conditional fees, which seem to me to be in permanent danger of undermining the professionalism of lawyers, because they have a deep conflict of interest when acting on a conditional fee basis vis-à-vis both their clients and their professional obligations. That is where we are, and perhaps one day we will consider how other countries deal with the problem of how to fund bringing cases to law. Perhaps Germany would be a good example, where the whole field of costs insurance is infinitely further developed than it is here and seems to provide their citizens with a rough equality of access to justice that we no longer have with the progressive dismantling of the legal aid scheme.

To undermine the points made by my noble friend Lord Thomas, one fact struck me forcefully. According to a general insurer from whom the Ministry of Justice has obtained statistics in preparation for the Bill, costs as a proportion of the damages have risen from one half in 1999-whatever the client got by way of damages, the costs were roughly one half-to being roughly equivalent by 2004 and costs now exceed damages by 50 per cent. In the space of just over 10 years, that huge swing in the division of spoils between the lawyers and the insurers on the one hand and a client on the other has taken place. That must give rise to intense concern on the part of anyone and everyone. As I said, I think that the amendments in the group in the name of my noble friend Lord Thomas to which my name is attached improve things a bit, but we should not deceive ourselves that we will end up with fair access to justice.

Baroness Turner of Camden: I am not a lawyer, and this is a very complicated set of amendments in a single group. My concern arises because for many years I was a trade union official with responsibility for the legal cases service that we provide to our members. My concern, and that of the TUC, is that the Bill changes the balance away from people who are poor who have had an accident at work and want to seek compensation for their injuries. It has destroyed

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the balance, as they see it, between the wrongdoer and the injury victim, denying claimants access to the courts and with the money taken from them simply serving as a windfall for negligence defendants and sometimes for their insurers. Even if representation can be obtained, many on a low or middle income may not claim because they are unable to fund disbursements upfront or because of a general feeling regarding the costs, or the risk of the costs, involved. Trade unions collectively assist up to 150,000 personal injury claimants a year. There is a concern that their ability to look after their members will be impacted by the Bill, and in particular by Clauses 43 and 45, which we are currently discussing with this group of amendments.

As has already been explained, back in 1999 mechanisms were put in place to ensure that all reasonable legal costs could be claimed by a successful claimant from the negligent party to protect access to justice, particularly for those on a low or modest income, and to protect claimants' entitlement to their compensation in full. Such costs include success fees and "after the event", or ATE, legal insurance. In our opinion, Clauses 43 and 45 would probably reverse that position, destroying injured claimants' rights.

Clause 43 stops recoverable success fees. Currently, claimants can find lawyers to take on their cases on a no-win no-fee basis using a conditional fee arrangement because the lawyer is paid a success fee. This is an additional cost paid in successful cases to cover the risk of running a whole basket of claims, some of which will be lost. It is the recoverability of this success fee from the insurer that the clause will ban. Instead, the claimant might have to pay up to 25 per cent of their damages to their lawyer as a success fee-if they can find a lawyer to take the case. As Jackson knows-we have been talking about the Jackson report because it is on his recommendations that a lot of this legislation is based-this will harm claimants, and he proposed an increase in damages for the injury alone of 10 per cent to compensate. However, this will not work. Those pursuing employer liability claims will lose out, and this uplift may prove largely unnecessary if the Bill relates only to RTA claims. We are concerned not about that but about accidents at work in this particular briefing.

So far as concerns accidents at work and industrial injury, there is a further concern that if this legislation takes effect there will be a reduction in the number of compensation cases that can be pursued, and that that in turn will have an effect on safety at work, health and safety legislation and so on. That is another impact that this legislation will have on compensation for injuries that workers may sustain in their employment.

Clause 45, at the stroke of a pen, stops a claimant recovering the cost of ATE insurance to cover the risk of paying a defendant's costs or disbursement. Without ATE, many claimants will not be able to take the risk other than in very straightforward cases.

For those reasons, those of us who are concerned with trade union cases and with work injuries and so on are worried about the impact that this legislation, if not amended, will have on the possibility of people injured at work being able successfully to pursue

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compensation cases. The Government sometimes seem determined to prevent individuals who feel that they need compensation pursuing their cases. I sometimes think that they have been taken in by all the publicity in recent years about our becoming a compensation culture. I do not think that that is true at all. It is obviously true that many people feel that, if they are injured at work or through somebody else's negligence, they have a right to claim compensation for their injury and they therefore looks for means to secure that compensation. Sometimes they go to a union if they belong to one, or they may go to other organisations that provide advice and support to individuals. Those individuals will not feel able to do so if there is a risk that they will not get their case taken, or will be landed with fees that they have to pay themselves because they will not get full recovery, having had to pay the compensation success fee to the lawyer involved.

That is terribly unfair, and I hope that during the passage of this Bill we will be able to table amendments that will deal with some of those concerns. Some of the amendments in this group will deal with the concerns that I have voiced this afternoon. They were expressed previously when we had Second Reading and I do not want to repeat everything that was said then, but I want to emphasise that I am talking about people who have very little money. When they are injured at work, often the compensation is no more than £3,000, which may not appear to be a very large sum of money, but to somebody working as a cleaner, it is an enormous sum. Certainly, it is not a trivial amount. People with small claims, who feel that they have been injured and are entitled to compensation for their injuries, may have doubts about whether they can proceed, and they will not find people willing to take up their case. That would be a great pity; it would block people's access to justice. I thought that in any reform, we should be concerned with improving access to justice. The Bill, especially in these clauses, does not do that. I hope that we can amend them during our discussions.

The Advocate-General for Scotland (Lord Wallace of Tankerness): My Lords, I join the noble Lord, Lord Beecham, and my noble friend Lord Phillips, in thanking my noble friend Lord Thomas of Gresford for introducing this compendious set of amendments. It is useful to do that because it brings together all the different strands of this package. As the noble Lord, Lord Beecham, said, my noble friend Lord Thomas introduced the issue and spoke to the amendments with great clarity. In doing so, he raised a number of important issues to which I hope to respond. I shall, obviously, deal with the amendments, but if accepted, they would completely undermine the reforms that we are trying to make to civil litigation costs.

I shall try to take the amendments together in some of the natural groupings: Amendments 118 to 120 and Amendments 127, 131 and 133 all relate to Clause 43; Amendments 138, 143 to 146, 147A and 148A all relate to Clause 45; Amendments 158, 159, 160 to 162 and 190 to 193 all relate to Clause 53; and Amendments 137B and 137C would insert a new clause.

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To respond to the general comments that have been made, both by my noble friend Lord Thomas and the noble Lord, Lord Beecham, perhaps it is worth emphasising the importance of Part 2 of the Bill, even though I shall not go down the Shakespearean historical paths of the noble Lord, Lord Beecham. Part 2 includes provision to implement fundamental changes to the current no-win no-fee conditional fee arrangements regime. As my noble friend Lord Thomas has indicated, it is taking us back to the regime introduced by my noble and learned friend Lord Mackay of Clashfern when he was Lord Chancellor in the 1990s. We believe that the Bill will restore a fair balance to civil justice. It is worth reminding ourselves that conditional fee agreements were used successfully then without the substantial additional costs that have followed the changes introduced by the previous Government in the Access to Justice Act 1999. Under our changes in this Bill, meritorious claims will be resolved but at a more proportionate cost, while unnecessary or avoidable claims will be deterred from progressing to court. We believe that these changes can help businesses and other defendants who have to spend too much time and money in dealing with avoidable litigation-actual or threatened. It is worth reminding ourselves that if a defendant feels pushed into a position where they feel they have to settle a claim that they think does not have any merit at all because of the potential costs that they might incur if they proceeded to defend the action, it is not justice. It is not justice if unmeritorious claims are allowed to succeed.

4.15 pm

The noble Lord, Lord Beecham, claimed that there would be additional costs across government as a consequence of the measures. We believe that that will not be the case. Taking the Bill as a whole, it is estimated that the changes will lead to savings of up to £50 million per annum, for example, for the National Health Service.

The noble Lord, Lord Beecham, and the noble Baroness, Lady Turner, mentioned road traffic cases. The noble Baroness also mentioned cases arising from employers' liability. For completion of the picture, it is worth reminding the Committee that the existing road traffic claims process, which was negotiated under the previous Government, came into effect in April 2010. It covers claims of up to £10,000 where liability has been admitted. There is a general consensus that it has worked well. Following a recommendation of the 2010 report Common Sense, Common Safety from the noble Lord, Lord Young, the Prime Minister announced that we would extend the scheme upwards in value to £25,000, and to other types of personal injury cases, including employers' liability and public liability. The Government intend in due course to set out a way forward on extending the scheme, and we look forward to working with stakeholders on the detail.

Clause 43 seeks to abolish the recoverability of a success fee under a conditional fee agreement from the losing party in any proceedings. This will require claimants pursuing claims under CFAs to take an interest in keeping down their costs and will reduce the disproportionate impact of their costs on those who face the claims. At the moment, a claimant has no

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interest at all in tackling mounting levels of costs. The costs that losing parties must pay can comprise their own legal costs and the winning party's basic legal costs. That much is reasonable and applies generally in civil litigation. However, under CFAs the losing party also has to pay the winning lawyer's success fee of up to 100 per cent of the base costs, as well as the "after the event" insurance premium that can be very substantial, as we heard from my noble friend Lord Thomas. That is why a losing defendant in a CFA case can expect to pay more than double the legal costs of a defendant in a non-CFA funded case. This in turn can put CFA-funded parties at a significant disadvantage over those whose cases are funded by other means.

Lord Martin of Springburn: I apologise for being late for the Committee; I was travelling from Scotland. I am sure that the noble and learned Lord will acknowledge that cases that involve 100 per cent recovery are those that go to court. There are stages where settlements can be made. The defendant can make an offer that can be accepted. If it is done at an early stage there will not be the 100 per cent costs that we were talking about.

Lord Wallace of Tankerness: My plane from Edinburgh, too, was delayed today; I understand the noble Lord's difficulties. He mentioned the arrangement for making offers. Part 36 arrangements were spoken to by my noble friend Lord Thomas when he moved the amendment. I will come to the matter in responding to the debate.

As I indicated, very often these cumulative costs can lead defendants to feel under pressure to settle a claim when they have no legal reason to do so, through fear of incurring payment of excessive costs as the case proceeds.

Without Clauses 43 and 45, high and disproportionate costs in civil litigation will continue. Access to justice will not become more meaningful for all parties, as we intend. If all the amendments to Clause 43 were agreed, the fundamental elements of the Government's reform package would be lost, and defendants would continue to be liable for significant additional costs across a range of cases. It is useful to put the level of costs in some context. My noble friend Lord Phillips pointed out that one general liability insurer indicated that, in 1999, claimants' solicitor's costs were equivalent to just over half the damages paid; by 2004, average claimants' costs were roughly the same as the damages; and, by 2010, average claimants' costs represented one and a half times the damages received by the injured victims, and indicated that while average damages paid have increased by one-third since 1999, average claimants' costs have increased by two and a third times over that period. These figures reflect Sir Rupert Jackson's findings that claimants' costs are substantially higher than defendants' costs, and that claimants' costs in CFA cases are substantially higher than in non-CFA cases.

Lord Beecham: If damages had increased, as recommended in 1999, and kept pace with inflation, that ratio would not be quite as wide, would it?

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Lord Wallace of Tankerness: We will come to increased damages. Damages are totally to one side in this. The point I was making was about the difference between claimants' costs and defendants' costs. For example, in clinical negligence cases in the period 2005 to 2010, claimants' costs paid increased by 45 per cent while the NHS Litigation Authority's legal costs declined by about 30 per cent. That reflects Sir Rupert Jackson's findings that claimants' costs are substantially higher than defendants' costs. That is one of the things that we seek to address.

It might be helpful if I indicate at this stage our current timetable for the implementation of Lord Justice Jackson's proposals in Part 2-subject, of course, to parliamentary approval. We believe that these are important measures and we want to implement them as soon as possible in order to control the costs of civil litigation. However, I will reflect on some of the specific issues that were raised by my noble friend Lord Thomas. These proposals will require the making of new regulations and changes to the Civil Procedure Rules. We wish to make sure that we get the details of these regulations and rules right, and that will inevitably take some time.

We are also conscious that stakeholders will need appropriate notice of when the changes will be implemented and how the details will affect them. We have already announced that the legal aid provisions in Part 1 will be implemented in April 2013, subject to parliamentary approval. For these reasons, I can inform the Committee that, subject to parliamentary approval, the Government intend to implement the Jackson provisions in Part 2 in April 2013 as well.

As I have outlined, Amendment 127, tabled in the name of the noble Lord, Lord Martin, if allowed to stand, would allow continuation of the current regime of recoverable success fees-which, for the reasons I have indicated, we are determined to tackle. Therefore, we will resist that amendment.

I turn to Amendments 118 to 120. The Government have said that in personal injury cases there will be a cap on the amount of damages that may be taken as a success fee. It is important to remind ourselves that the cap of 25 per cent in personal injury cases is a maximum in order to protect claimants' damages. Lawyers do not have to charge a success fee of 25 per cent of damages. Indeed, in many personal injury cases where there is little risk of difficult legal issues arising, it may well properly be the case that a zero success fee, or a much smaller success fee, would be appropriate. Indeed, there is no need to claim a success fee at all. As my noble friend Lord Thomas said, an element of competition will start to emerge, and no doubt some firms of solicitors will get a reputation for taking on cases with very modest or no success fees, whereas other firms prepared to take on more risky litigation would have higher success fees. The cap will be set at 25 per cent, but that is intended in personal injury cases only and is to protect claimants' damages. In particular, it will not apply to damages for future care and loss, which can be very substantial. I do not accept that the amendments tabled by my noble friend are necessary, because he mentioned some non-personal injury cases where that 25 per cent cap will not apply,

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albeit that the fee under the Bill would refer to a percentage of damages. Obviously, in non-personal injury cases, the 25 per cent rule would not apply. Amendment 118 would allow lawyers to increase the notional fee and overall costs, whereas the policy intention is to reduce these costs. Therefore, we do not believe that Amendments 118 to 120 are necessary or appropriate.

Amendments 131 and 133 seek to exempt certain types of claim from our package of reforms to the existing CFA regime. We cannot accept these amendments as they undermine the Government's reform of civil litigation funding and costs. Under our reforms, people will still be able to bring cases on CFAs in areas where they are currently used. We are also making improvements that will help claimants wishing to fund claims on a CFA that were not available previously, and we are protecting claimants' damages. I just referred to the 25 per cent cap; as has also been recognised, there will be a 10 per cent increase in non-pecuniary general damages such as those for pain, suffering and loss of amenity. This change is being taken forward by the senior judiciary.

Amendment 131 proposes that the success fee should be recoverable where,

This relates to the recoverability of success fees from the defendant, which we do not believe should be the case. To allow for recoverability where the defendant is alleged to have been unreasonable, at least to some extent, is a recipe for satellite litigation and even more costs being generated. It will introduce uncertainty and the opportunity to allege unreasonable behaviour in every case-one can see the certain incentive to do so-which would not be acceptable.

I will return later to the point made by the noble Lord, Lord Martin, but we are introducing changes that will require defendants to behave properly in relation to offers. The changes to Part 36 of the Civil Procedure Rules-Offers to Settle-are touched on in Clause 53 and the amendments that have been moved in relation to that. The changes will incentivise defendants to make earlier and better offers; otherwise, they will suffer increased financial penalties. With regard to Amendment 133 and the question of funding of appeals, the same general arguments apply as for unreasonable behaviour by the defendants. The Government are not persuaded that any special provisions need to be made in respect of appeals, and appeals can be funded on the same basis as cases in the first instance.

As has been acknowledged in this debate, in personal injury cases we are introducing a system of qualified one-way cost-shifting-QOCS-which will protect losing claimants from having to pay the defendant's costs. Although these measures are being taken forward outside of the Bill, including through the Civil Procedure Rules, they are an important feature of the overall package. To maintain a level playing field, these changes should apply equally and to all categories of cases. Otherwise, in cases covered by these amendments, the losing party will still be liable to pay not just the winning party's ordinary costs but all the additional costs associated with CFAs, without any justification.

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The effect of Amendments 137B and 137C is almost identical, the difference lying only in the amounts they suggest. I have spoken about the changes we are making to CFAs. As part of his package of reforms, Lord Justice Jackson recommended that the level of general damages in tort cases such as for pain, suffering and loss of amenity should be increased by 10 per cent. The Government have accepted this recommendation, and the increase will apply to all cases, however they are funded.

However, Amendment 137B seeks to make this increase part of primary legislation by incorporating it into the Bill. Amendment 137C specifies that the increase should be 33 per cent. I believe that an increase of 33 per cent would be an overcompensation. As well as exceeding the level of the proposed cap on success fees, it would be a substantial windfall for claimants not on CFAs, who would not be liable for any success fee. It would also increase the burden on defendants, which goes against the grain of these reforms.

I understand that noble Lords wish to see a commitment to a 10 per cent increase in the Bill. However, we have given the matter much thought and we do not believe that to do so is either necessary or practical. The level of general damages has historically been for the judiciary to decide. This was so in the Court of Appeal case of Heil v Rankin, which increased the level of such damages. Again, we believe it would be appropriate for the senior judiciary to take this increase forward, as indeed it is.

4.30 pm

It may also be helpful at this stage if I deal with a question raised with me by my noble friend Lord Faulks at Oral Questions on 20 December. He asked whether bereavement damages awards would also be increased. This award is payable to certain close relatives of a deceased person in the event of a fatal accident caused through another person's negligence. The level of the award is set by the Lord Chancellor under the terms of the Fatal Accidents Act 1976. I am happy to confirm to the Committee that the Lord Chancellor has agreed that the bereavement damages award should be increased by 10 per cent, in line with the increase in general damages for non-pecuniary loss. This increase will be made in due course by order under the negative resolution procedure, so that the increase can come into effect at the same time as these other measures.

I will now turn to Amendment 137D, which seeks to insert a new clause in Part 2 of the Bill, with the intended effect of extending the scope of one-way costs shifting in other areas of civil proceedings. The burden of costs would remain solely with the defendants and the culture of risk-free litigation by claimants would continue. We believe that this is neither acceptable nor conducive to a package of reforms to no-win no-fee conditional fee arrangements.

Amendment 138 would limit the effect of Clause 45 to areas of law where qualified one-way costs shifting operates. As the Government indicated in response to their consultation, this will initially apply in personal injury cases only. If Amendment 138 was accepted, the recovery of ATE insurance would continue in all

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areas of civil litigation except personal injury. My noble friend Lord Thomas raised an important issue, namely whether QOCS should be included in the Bill. We have obviously considered this. We believe, however, that it should be implemented by means of an amendment to the Civil Procedure Rules once we have finalised the policy details on how the rules should be drafted. The Civil Procedure Rules are made under the Civil Procedure Act 1997 and have the overriding objective of enabling the court to deal with cases justly. They set out the rules which govern how civil cases should be conducted, including, for example, the costs sanctions that should apply in certain circumstances. They are made by the Civil Procedure Rule Committee and agreed by the Master of the Rolls and the Lord Chancellor, coming into effect by way of statutory instrument.

We will, however, continue to work with stakeholders on the detail of a QOCS regime for personal injury cases. We acknowledge and are grateful for the expert stakeholder contributions that have been received. That work will resume in earnest once the details of this Bill are finalised. However, there are some difficult issues which we are addressing, and which need to be got right for the hundreds of thousands of personal injury cases dealt with each year: what does "unreasonable behaviour" mean? How can we balance certainty for the claimant with the need for the claimant to face at least some litigation risk, the absence of which is a major flaw in the current regime? How can we ensure fairness to all sides, and reduce the scope for satellite litigation? We all recognise that these are important, but nuanced, issues and we believe that they are best resolved by the Civil Procedure Rules. We cannot, as I have indicated, finalise a policy on the rules until we know, for example, the primary legislation as set out in this Bill, but I can say that there does appear to be broad agreement that it should not be a primarily financial threshold in personal injury cases, although that would not necessarily apply were, at some future date, QOCS to be extended to other categories.

Lord Thomas of Gresford: Before my noble and learned friend leaves this issue, he knows that my concern is that this amounts to a dialogue between Government and the Civil Procedure Rule Committee, with no input from Parliament whatever, and no guidance to the Civil Procedure Rule Committee on how it should proceed and what the parameters are. What I was seeking to do, in broad terms, with my amendment was to introduce certain specific things-for example, that the word "unreasonable" should not be used in these procedure rules, but we should revert to familiar territory, such as "frivolous", "vexatious", "abusive of process" and "fraudulent claim", actually spelling out where a judge should have a discretion and where he should not. "Unreasonable" has such a broad meaning that it would put any litigant off if he were to be told by his solicitor, "We will take this case forward, but you have got to appreciate that, at the end, the judge may look at it and say that your conduct is unreasonable". What does that mean?

As I endeavoured to show in my remarks, in explaining that concept in the report Lord Justice Jackson used the term "fraudulent, frivolous", although he did not use "vexatious". I am seeking clarity. The Civil Procedure

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Rules will come out of the air from somewhere and will not have any proper parliamentary scrutiny. They will have been drawn up as a result of discussion between the Executive and the Civil Procedure Rule Committee, which is entirely made up of judges and lawyers. I would have thought that there would be a constitutional position. It is more serious than anything else in the Bill.

The Civil Procedure Rule Committee should have guidance, as elsewhere in this Bill it does. Over and over again in the Bill, we come across regulations being made by the Lord Chancellor. There is specificity about that. But this position is highly unsatisfactory. If the Minister cannot put something in the Bill in the way in which he has described, what assurances will Parliament have that the Civil Procedure Rule Committee will act in accordance with certain principles?

Lord Beecham: I absolutely agree with everything that the noble Lord has just said. This is a fundamental change in the way in which litigation is to be conducted. It should not just be referred to a wholly unaccountable, although no doubt extremely worthy, group of people on the rules committee. Obviously, they are very eminent but they are not accountable, in the sense that the normal framework would be, to approve changes of this significance. Perhaps, as he develops his reply, he would deal with the point of restricting this significant change to personal injury cases when Lord Justice Jackson advocated it across the piece. Perhaps he would care also to reflect on a point made when colleagues and I met the Association of British Insurers no less, which, for example, said that it did not support means testing for qualified costs shifting at all. But, as I understand it, that is to be part of the scheme-if that is what presumably the rules committee, since it will not be part of the Bill, will say.

The noble Lord is absolutely right to raise these issues and I hope that the Minister will take this back and think again about how matters are to be progressed given the significance of the change.

Baroness Butler-Sloss: Perhaps the Minister will not mind if I add a very few words. I had not intended to intervene but, as a former chairman of a rules committee, I have to say that I have considerable faith in the good sense of the way in which it does its work. But the points that have been made are extremely relevant. It is not really the business of a rules committee to change something so dramatic. As the noble Lord, Lord Thomas of Gresford, has said, I would add that "unreasonable" is extremely difficult. The words used by the noble Lord are the standard words that have been used from time immemorial, as the lawyers say. "Unreasonable" is nothing like as serious as the other term but is liable to cause considerable difficulties of interpretation.

Lord Wallace of Tankerness: My Lords, it is very evident from the three interventions that this matter is clearly exercising the Committee. I certainly note from the experience of the noble and learned Baroness, Lady Butler-Sloss, having chaired a rules committee

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that perhaps we are going into territory which we may not have been in before. As to what my noble friend has said, I sometimes hesitate to put things on the face of the Bill because, as we all know, once there, they limit what a rules committee might be able to do if faced with an obvious set of circumstances where it does not believe there should be one-way costs shifting, and it can inhibit that. However, I take the point that unreasonableness could be going too far towards the other extreme in terms of its lack of clarity.

My noble friend asked: if it is not possible to put something in the Bill, what assurances could be given? That is something we shall certainly want to reflect on when considering these contributions. I am sure that we shall have an opportunity to address this again at the next stage of the Bill, and if there are assurances that can be given, I would hope that we would be able to do so. Perhaps I may leave it at that for the moment. We recognise the importance of the points that have been made.

I should restate that there already appears to be broad agreement that there should not be a primary financial threshold in personal injury cases for QOCS, although that would not necessarily apply were QOCS to be extended at some later date to other categories of personal injury. I hope that reassures my noble friend on that particular point.

Amendments 143 and 144 seek to replace the Lord Chancellor's discretionary power under Clause 45(2) with a duty to make regulations in respect of the recovery of "after the event" insurance premiums relating to expert reports in clinical negligence cases. I can give the Committee the assurance that we intend to allow for this recoverability so that poor people can get expert reports in clinical negligence cases without having to pay for them upfront. However, we have deliberately kept a degree of flexibility around the drafting of the regulations.

The effect of Amendments 144A to 144D is to extend the recoverability of ATE insurance premiums to all civil cases. Unlike the current exception for clinical negligence, the proposed exception is intended to apply to ATE insurance which covers the risk of paying opponents' costs as well as funding expert reports.

Lord Thomas of Gresford: My Lords, with great respect, I advanced the amendments in the context that one-way cost shifting will go through, as the Government say it will, in which case the defendant's costs are immaterial. The only ATE insurance that will be required will be for the disbursements of the claimant himself, which would not otherwise be covered. That is the area to which I am referring in those amendments.

Lord Wallace of Tankerness: My Lords, we believe that the package of proposals seek to end ATE insurance premiums being charged to the defendant with the specific exception of clinical negligence cases. To start unpicking it in such an important respect would not retain integrity of the proposals as a whole. I hope that I am not misinterpreting what he said, but my noble friend has suggested that it might be possible to split or share the recoverability of success fees or ATE

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insurance premiums. Indeed, I think that the Bar Council has suggested that some success fees or ATE insurance premiums should be payable by the losing side with the remainder payable by the claimant. Lord Justice Jackson made alternative recommendations on partial recoverability of success fees and ATE insurance premiums in the event that his principal recommendations were not accepted. But the Government had a full public consultation on both the primary recommendations and the alternatives and gave careful consideration to the responses. We decided to take forward the primary recommendations-abolishing the recoverability of success fees and ATE insurance premiums-as the best way of restoring proportion and fairness to the CFA regime.

It has been suggested, as referred to in Amendment 146, that the market may not provide for or adjust itself sufficiently to take account of these. The amendment requires the Lord Chancellor to,

in making regulations under Clause 45(2). I accept that the changes the Government are seeking to implement are fundamental, but we expect the insurance market to respond positively to them. It is easy to say ahead of an event that all sorts of appalling things will happen, but after 1999 the market certainly adjusted to the opportunities with ATE premiums, and it is not surprising that those who wish to maintain the status quo are making substantial representations to that effect.

4.45 pm

Ministry of Justice Ministers and officials have met a substantial number of different insurers as the proposals have been developed since Lord Justice Jackson's recommendations were published. Although some providers have said publicly that they will pull out of the ATE market if the changes go ahead, others have indicated that they will look positively at developing products which meet market needs as the details of the proposals are finalised.

Amendment 145 seeks to ensure that the costs of disbursement and any additional insurance taken out against adverse costs after the introduction of QOCS can be recovered from the losing side. The amendment goes against the objectives behind Clause 45, which is to reduce costs associated with ATE insurance.

Amendments 147A and 148A would have almost the same effect in that they would allow the ATE insurance premium to remain recoverable by way of a costs order, which may potentially be set at a much higher level than what is being proposed in the Bill. An inflated cost burden will remain with the losing side, which cannot be right in the circumstances.

My noble friend Lord Thomas and the noble Lord, Lord Martin, referred to offers to settle, which are dealt with under Amendments 158 to 162. Again, the Government do not feel able to accept the amendments, which are either unnecessary or inappropriate.

It might help if I say something about part 36 of the Civil Procedure Rules, dealing with offers to settle. The current rules permit the court to impose what are, in the main, costs sanctions against a party that refuses an offer made by the other party but then does not beat that offer at trial. The sanctions are designed to

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encourage early offers and early settlement of cases, as the noble Lord, Lord Martin, indicated, so that both parties are spared substantial costs in both time and money. Lord Justice Jackson argued that these costs sanctions need redressing in favour of claimants. As we set out in our consultation response, we intend to amend the rules in order to encourage claimants to make offers and defendants to accept them. Clause 53 enables rules of court to be made to permit a court to order an additional amount to be paid to claimants by defendants who do not accept a claimant's offer to settle which is not subsequently beaten at trial.

As I have said, the intention is to set the additional amount payable at 10 per cent, but there are issues to be resolved as to whether 10 per cent is appropriate in every case, in particular in higher-value claims. We will continue to work with stakeholders on what the details of the rules should be, but I hope the Committee will agree that these are matters best left to the rules. For example, the amendment would apply the increase in all cases, whatever the value of the claim, whereas we are discussing with stakeholders whether there should be some cut-off or tapering in higher-value claims.

Amendment 162 seeks to include in the value of non-monetary benefit any,

The amendment is unnecessary. It is the Government's intention that such matters would be included in the definition of non-monetary benefit awarded to the claimant in any event should the additional penalty be calculated in that way. Clause 53 gives some flexibility to make sure that the rules are appropriate across all categories of law, and it is our intention that they should be.

Amendment 161 seeks to establish a procedure to review every three years the level of the additional amount payable by the defendant. This is not necessary, particularly if the flexibility currently afforded by Clause 53 is maintained. The Lord Chancellor will have the power to review the level of sanctions and can be called to account for that if necessary. The Government are committed, as has already been indicated to the Committee in previous debates, to a post-legislative review of their reforms between three and five years after the Act is passed, which could include the level of the additional amount.

Finally, Amendments 190, 192 and 193 seek to prevent the implementation of the reforms until certain requirements have been met. The Government have given a commitment to implement the measures, which we have outlined outside of this Bill. I hope that the detail of that has given the necessary reassurance.

I am grateful for the indulgence of the Committee in answering a considerable number of amendments. However, I think that it has been useful to consider this-as it were-omnibus set of amendments, which have raised all the different elements of the package. I urge noble Lords not to press their amendments.

Lord Martin of Springburn: On the incentive to settle early-I am trying to put this in layman's terms-is the noble and learned Lord saying that a claimant can, through his solicitor, put it to the defendant that it

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would be a reasonable settlement, for example, to pay X amount or to print something in a particular magazine that would help the defendant to get his reputation back? Is the noble and learned Lord saying that, if such an offer is refused by the defendant, that would be taken into consideration by the court?

Lord Wallace of Tankerness: I think I understand what the noble Lord is saying and I think I gave an indication on that point. Let me just try to find that-

Lord Thomas of Gresford: May I help by saying that my Amendment 162 goes directly to that point?

Lord Wallace of Tankerness: As I said in response to my noble friend Lord Thomas, we do not believe that that is necessary because it is the Government's intention that such matters would be included in the definition of non-monetary benefit awarded to the claimant in any event should the additional penalty be calculated in that way. Clause 53 gives us the flexibility to do that so that the rules can be made across all categories of law. It is our intention that they should be. However, perhaps I may put that in writing, in a letter to the noble Lord that I will circulate to other Members of the Committee, to explain the matter in more detail.

Lord Thomas of Gresford: My Lords, I am most grateful to all noble Lords who have spoken in this debate and, in particular, to the noble and learned Baroness, Lady Butler-Sloss, for her support on the issue-which I regard as having constitutional significance-about whether the Civil Procedure Rules should be formulated without Parliament having any input into them at all. It seems to me that it is for us to decide, one way or the other, what the particular parameters should be.

Let me just pick up on two points. First, should the means of the claimant come into it at all? The insurance industry does not want that, but the proposal in the Bill is that the claimant's means should be taken into consideration. What about the meaning of "unreasonable"? The meaning is so broad that it should really be narrowed down. On that issue, I want to hear further from my noble and learned friend and I shall be talking to him about it between now and Report. I will take the issue further if necessary.

Secondly, on the question of splitting the burden of the insurance premium, it seems to me that that is a sensible way to go forward. The corks from the champagne bottles will be popping down in the City when people read my noble and learned friend's response that the premium will fall entirely upon the claimant. Why should it not be split? There would be advantages both ways in splitting the premium: first, there would be an incentive for the claimant to ensure that premiums are not too high and are not, as at the moment, left completely in the air; on the other hand, if you split the premium in the staged way that my amendment proposes, there would be a great incentive on the defendants to settle. The course that I have suggested includes advantages beyond the mere way in which the liability falls. I would like to hear a little bit more

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about why the Government prefer Lord Justice Jackson's first proposal, as opposed to his alternative proposal, which I am not persuaded is the better one. I shall certainly return to that matter again.

I remind my noble and learned friend that, on this side, I have accepted that the success fee should be paid by the claimant from his damages, subject of course to a limitation of up to 25 per cent. I agree with him-in fact I made the point earlier-that the probability is that solicitors involved in non-risk litigation will advertise, "No success fee payable here". Those bigger firms that get involved in the riskier litigation will do a very determined assessment of what risks they are prepared to carry in advertising their own services subject to a success fee. I see that there is an advantage in that. I shall read and study what the Minister has said and, I hope, discuss the matter further with him and come back on specific issues at Report. At the moment, I beg leave to withdraw my amendment.

Amendment 118 withdrawn.

Amendments 119 and 120 not moved.

Amendment 121

Moved by Lord Beecham

121: Clause 43, page 30, line 12, at end insert-

"( ) The amendments made by subsections (2) and (4) do not apply in relation to proceedings that include a claim for damages for-

(a) death; or

(b) physical or psychological injury,

resulting from any breach of duty trespass to the person."

Lord Beecham: I will not detain the House long on this group of amendments, which sets out a menu-perhaps almost an à la carte menu-of cases in which it might be appropriate to depart from the general principle that the Bill advances. In other words, it would extend the success fee exemption into personal injury cases more generally.

Amendment 121 is of a general nature and perfectly straightforward. It is my understanding that, at the time when the changes were introduced to legal aid for personal injuries and the initial scheme established under the Administration of Justice Act and Access to Justice Act 1999, reservations were expressed by the then Opposition-both parts of it-which I personally shared at the time and still share. I have already outlined the problems that we have with the nature of the uplift and deduction that is contained in the Government's proposals. I shall not expatiate on those any longer.

Amendment 122 looks to complete exemption for employment liability personal injury cases. These are usually intrinsically more difficult than, for example, the RTA case, which all of us agree should not carry the position in relation to success fees and the like that currently apply. Certainly, as a practitioner who spent a lot of time on those cases, I would have thought that there was a strong case for taking those out of the arrangements proposed by the Bill, and that success fees and ATE insurance should rest where they currently do on defendants.

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Amendment 129 looks at a different category of case-cases of maximum severity on which the Judicial Studies Board guidelines lay down parameters. These cases are necessarily more complicated, certainly in relation to disbursements and the like, and generally heavier to promote than the conventional claim. It may be that in those cases a different regime should apply.

Amendment 130 deals with the case of occupier's liability. There are not all that many personal injury cases arising out of occupier's liability claims. I am advised that there was a watering down of protections under the Occupiers' Liability Act 1984, although I have to confess that I do not recall quite how much watering down took place at that time. Nevertheless, these are cases in which, again, there are rather more involved in pursuing them than in a straightforward claim and this is also a possible case for modifying the general approach of the Bill.

5 pm

On Amendment 134, the noble and learned Lord has referred to a welcome provision for increasing the damages for bereavement, which are generally thought to have been too low in any event. That increase will also assist in these cases, but the proposal in this amendment is to deal with success fees and to provide that they might also be levied in these cases, which are often somewhat more difficult to pursue for the very reason that the unfortunate deceased cannot give an account of what happened. It is not always the case that that is what makes it more difficult to pursue but it very often will be, and in those circumstances the success fee argument about that falling on the defendant becomes correspondingly stronger.

Amendment 136A also refers to an area of law which I think we come on to later. The noble Lord, Lord Alton of Liverpool, has an amendment on asbestosis, which is a terrible disease-I have some professional experience of it-but not the only disease that has caused great pain and suffering for many people. There is a whole raft of cases, such as pneumoconiosis cases, while others such as repetitive strain injuries are somewhat different. They are troublesome but by no means as serious, yet nevertheless quite complicated, and some of them have given rise to compensation schemes negotiated nationally. There is of course still the issue of pleural plaques, which has been adequately dealt with in the noble and learned Lord's jurisdiction although not in the constituency, as it were, of his noble colleague the Minister. England has not taken the same view about pleural plaques as Scotland, which is unfortunate, but again that underlines both the complexity of the system and therefore, in our view, the need not to restrict the successful claimant's damages by reducing them to paying for success fees and "after the event" insurance.

Amendment 136B makes the point that in personal injury cases where a public authority is liable it seems reasonable that such an authority, representing as it does the whole community, should participate in pooling the risk which the scheme was originally designed to promote rather than the cost of it being met by

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successful plaintiffs. In this context, the whole community should be involved since it is authorities acting on its behalf who will have been deemed liable, whereas in other cases it is sectional interests represented by separate insurance companies-for which we would still argue, but this is a different case.

Those amendments refer to the success fees and the following amendments deal with costs orders. Again, there is a general application of the principle to all personal injury cases, unless of course we have QOCS fully implemented in a way which goes somewhat further than the Government currently propose, with the limitations that we have already discussed. Again, Amendment 152 would make ATE costs recoverable in the case of employers' liability cases, while Amendment 156AA makes the same argument in relation to disease cases and Amendment 156C preserves cost liabilities by agreement for industrial illness liability cases.

It would be welcome if the Government were to welcome all these. I anticipate that that will not be the Minister's response, but it may be that, on further consideration, some of these categories of case would evoke more sympathy, and possibly a modification in the Government's stance, than others. For that reason, I invite the Minister, if not today then later, to peruse the menu with particular care and maybe select some, if he cannot select all, of these improvements, as we would regard them, to the scheme that the Bill lays out.

Lord Newton of Braintree: My Lords, I wonder whether I might come in briefly, not least because of the reference to the later amendment of the noble Lords, Lord Alton and Lord Wigley, and others that is acknowledged to be related to asbestosis, which in effect is raised by one of the amendments in this group. I hope that the noble Lord, Lord Alton, will understand. I had indicated that I might speak in support of his amendment but I hope that he will take this as a speech in support; I do not expect to be here if this drags on as it looks like doing. Am I allowed to say that kind of thing?

The main thought that occurred to me was-I say this before coming more positively to the noble Lord's amendment-that this and the two subsequent amendments look to me like a pretty scattergun approach. By the time I had read through them over the weekend, there appeared to be almost nothing that noble Lords on the Front Bench opposite were not seeking to exempt, and on a very wide front. I would like to know, for example, what Amendment 121 means by "physical or psychological injury". We can all understand what is meant by death, but "physical or psychological injury", which I think is referred to in that amendment-I hope I have got this right-appears to be of a breadth that could cover anything from a cut finger to hurt feelings when someone was nasty to you, and I am not aware of a definition of "physical or psychological injury" that would narrow it. If I am wrong about that, no doubt the noble Lord, Lord Beecham, will tell me. Some of his other amendments are more closely defined and relate, for example, to definitions in the criminal injuries compensation scheme. If he wishes to intervene, by all means he may, but I thought that this was a blunderbuss approach.

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Lord Beecham: Well, I am sometimes guilty of blundering, but a good example of psychological injury would be post-traumatic stress disorder, which is not at all uncommon in the case of severe accidents. That is the sort of territory. This is a fairly conventional term in personal injury litigation.

Lord Newton of Braintree: As a non-lawyer trespassing with great trepidation into this lawyers' paradise territory I am prepared to accept that, but to a layman "physical or psychological injury" as a definition of any serious kind would cover pretty well anything. If I am told I am wrong then I will accept that, but at the moment I think it is in doubt.

Having made that point, which will indicate that were there to be any question of pressing some of these amendments to a vote-I understand that there is not-then my noble friend on the Front Bench will be thrilled to hear that I would not be minded to support them, I turn to the more positive point about Amendment 156A and the amendment later on of the noble Lord, Lord Alton, relating to asbestosis. I have some experience of claims relating to that disease-or rather to mesothelioma, the form of cancer to which it often gives rise-in my capacity as both Minister for Disabled People and Minister for the industrial injuries compensation scheme, and latterly as chairman of a hospital sometimes concerned with these respiratory diseases. I think there is a real case for wondering whether we should not maintain assistance to that group of people.

There are two reasons for that. One is that this condition is what you might call very slow burn. Exposure to asbestos that occurred very many years ago may give rise much later to mesothelioma, one of the nastiest forms of cancer. In consequence, there could be significant difficulties in proving the causation. Therefore, there is a case for making sure that legal aid is available in such cases. The nature of this disease and the problems associated with it also make a strong case in ordinary human terms for ensuring that people who have contracted it through no fault of their own as a result of something that happened during their employment should be helped to establish whether their employer could be held liable for that, or, indeed, whether they should get compensation in any other way. Therefore, I hope my noble friends on the Front Bench will not consider that this amendment would have a scattergun effect but that it is well targeted and deserves careful consideration. I hope that the noble Lord, Lord Alton, will make his case alongside mine in an hour or two or whenever we reach the relevant amendment.

Lord Alton of Liverpool: My Lords, I wish to intervene briefly to support the terms of the amendment spoken to by the noble Lord, Lord Bach, specifically on industrial-related injury such as mesothelioma-the issue to which the noble Lord, Lord Newton, has just alluded. We will debate that whole question later but it is worth reinforcing the point that 30,000 people have died of mesothelioma over the past 30 to 40 years and that 60,000 more people are predicted to die of this terrible disease in due course. From the time of prognosis to death, the period which elapses is usually about

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nine months. Whatever else, it is obvious that this is not a group of people who can bring in vexatious or frivolous cases. If the Government are minded to look for some exceptions-the rifle-shot approach that the noble Lord, Lord Newton of Braintree, has just advocated, not the blunderbuss approach-clearly this is one of those groups which I hope they will look to exempt. The measure does not even ask for legal aid; it simply asks for the status quo, which is that success fees can be paid in such cases.

Baroness Butler-Sloss: My Lords, the noble Lord, Lord Walton of Detchant, would have wanted to speak at this moment or, indeed, on the amendment of the noble Lord, Lord Alton. He reminded me of the appalling stories of the miners and the solicitors who eventually took virtually all their money. Whatever else is done, it is of enormous importance that one should be very strict about how much can be taken from the damages that may be received. However, more important than that is this special class of asbestos sufferers. They are not large in number, although the noble Lord, Lord Alton, gave extremely worrying figures that I did not know about. The life expectancy of these people is dependent on whether they are suffering from blue asbestos or white asbestos. They are a very special case. One entirely understands what lies behind the Government's need to introduce this measure. However, whatever else they do, one hopes that they will recognise this particularly special case.

5.15 pm

Lord Newton of Braintree: My Lords, given that this is Committee, perhaps I may intervene again. I forgot to say, because I stood up in some haste, that the numbers point is interesting, as a consequence of what I call the slow burn, where a lot of cases that are appearing now relate to injury caused many years ago. My understanding is that cancer is one of the few whose incidence is, if anything, increasing rather than decreasing, because of the delay from the time of causation in such cases coming through. I think I have got that right, but whether I have or not I am delighted that the noble and learned Baroness, Lady Butler-Sloss, joined us in support of this point.

Lord Wallace of Tankerness: My Lords, perhaps I may deal with Amendments 121, 122, 129, 130, 134, 136A, 136B, 151, 152, 156AA, 156AB and 156C together. All seek to exempt certain types of cases from the Government's reforms of no-win no-fee conditional fee agreements-CFAs. My noble friend Lord Newton described some of these amendments as being parts of a blunderbuss approach. I think that the noble Lord, Lord Beecham, described it as a bit of a shopping list. I shall come on to the issue relating to mesothelioma sufferers.

The amendments clearly stem from concerns that individuals may be unable to afford to bring certain personal injury cases. My noble friend Lord Newton of Braintree anticipated later amendments in the group beginning with Amendment 137A, which will be moved by the noble Lord, Lord Alton. I recognise that other issues arise such as the difficulty in trying to track

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down previous employers. I know that my noble friend Lord McNally will respond to that group of amendments and bear in mind what my noble friend Lord Newton said. When I was a Justice Minister in Scotland, I remember the plight of many mesothelioma sufferers, who were trying to get the process expedited so that their cases could be brought to court because many of them had a very short life expectancy. I certainly recognise the importance of those cases and I am sure that there will be a fuller debate on the back of the amendments to be moved and spoken to by the noble Lord, Lord Alton.

The difficulty with the other amendments in this group, as my noble friend Lord Newton said, is that when taken together they do not leave very much of the original intention of the Bill. With regard to recoverable or non-recoverable success fees being shifted to the defendants, it was pointed out in the previous debate that such fees have led to an escalation of costs. A plaintiff does not have the same interest, or may have no interest, in seeking to contain costs in those circumstances. One amendment relates to situations in which the defendants are public authorities. Some people have to pay the price of these additional costs. In motor insurance cases, we pay them through increased premiums. Council tax payers will no doubt bear some cost when escalating costs are picked up by public authorities.

The changes that we are bringing about will lead to costs becoming more proportionate. Equally, claimants will still be able to bring necessary and meritorious claims, and receive damages when they are due. However, as with privately paying clients, claimants on CFAs may have to pay some of their legal costs out of damages recovered. However, as I have indicated, we are introducing a number of measures that will help claimants to pay their solicitors' success fees. The point was well made by my noble friend Lord Thomas of Gresford, in response to the previous debate, that in many cases no success fee is charged and some solicitors may have a selling point: "We will litigate for you, and no success fee will be charged". That is more than likely to happen.

We must also remember that there will be a 10 per cent increase in general damages for non-pecuniary loss such as pain, suffering and loss of amenity. There will be a cap on the success fee at 25 per cent of damages awarded but, significantly, that will not apply to damages for future care and loss in personal injury cases. That will help to protect a claimant's damages.

We have already discussed qualified one-way cost shifting. That will mean that losing claimants in personal injury cases who act reasonably will not have to pay a winning defendant's costs, which in turn will reduce the need to have expensive ATE insurance products. Amendment 156AB is intended to ensure that the changes to the ATE insurance arrangements under Clause 45 do not come into force until the QOCS regime has come into force. I assure the Committee that we intend the package of reform to come into force at the same time.

On Amendment 156C, Clause 46 prohibits membership organisations from claiming the costs incurred by self-insuring against risk. That point was made by the

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noble Baroness, Lady Turner, in our previous debate. As I understand it, under the Access to Justice (Membership Organisation) Regulations 2005, bodies are listed by the certification officer. Trade unions represent an important number of those bodies, but a number of others have also been listed under Section 30 of the Access to Justice Act 1999.

As has been said on many occasions, the Government have decided to abolish the recoverability of ATE insurance premiums, and believe that this change should apply equally to arrangements for membership organisations. Retaining the recoverability of ATE insurance premiums for membership organisations would create an unfair advantage and mean that defendants in claims brought by members of such organisations would continue to be liable for significant additional costs in such cases and be placed at a disadvantage.

Lord Justice Jackson made no formal recommendations in reference to member organisations. In such a compendious report, one may wonder why not. Nevertheless, in his response to the consultation, he supported the Government's proposal that changes to the recoverability of ATE insurance premiums ought to apply equally to the arrangements for membership organisations in order to remove any unfair advantage. That view was shared by 63 per cent of respondents to the consultation, who thought that retaining recoverability of the self-insurance element for membership organisations would create an unfair advantage. It is to ensure that that unfair advantage does not occur that we resist the amendment, and I invite the noble Lord to withdraw it.

Lord Beecham: My Lords, I reassure the noble Lord, Lord Newton, that this is a group of probing amendments to see which, if any, the Government might feel on reflection ought to be accepted and the scope of the current scheme in effect retained. Clearly, the answer has not been one to encourage optimism on this side of the House, but there are cases, particularly the last one to which the noble and learned Lord referred, where the Government are trying, as so often, to have it both ways.

In previous debates we have heard trade unions invoked as a source of advice and support for their members once legal aid goes. This is an area in which trade unions have for a long time been active in promoting the interests of their members. They will now lose that benefit. In my view, there is a strong case for the Government to look again at the position. I accept that they want organisations such as trade unions to support their members in the field of legal advice, but if so, they ought to endeavour to facilitate that, not at the Government's expense but by retaining success fees and the self-insurance element that the noble and learned Lord proposes to remove.

Asbestosis is probably the most acute of the diseases involved, and when we will come to a debate on it I will strongly support the noble Lord, Lord Alton. It is sometimes forgotten that it is not just direct exposure to asbestos that causes problems and has resulted in litigation but indirect exposure. There have been cases in which wives dealing with laundry and clothes that have been contaminated with asbestos fibres have themselves suffered injury. They have eventually succeeded

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in obtaining compensation, but that is an illustration of the kind of difficulty and complexity that can arise. There may well be other cases. Every few years, a new condition reaches the courts. Asbestosis was one; miners' lung disease, pneumoconiosis, was another; and there are others. Although it is certainly true that, as the noble and learned Baroness, Lady Butler-Sloss, pointed out, some lawyers rather exploited the position in some of those cases involving minters, on the other hand many lawyers took these cases on over a very long period at considerable risk to themselves before obtaining settlements. That eventually led to the sensible outcome of a national scheme that determined a scale of damages and, for that matter, the scale of costs. There will be other cases. One imagines that cases may arise over time in the nuclear industry. There have already been some in which radiation has caused damage. I hope that at the very least the Government will look at those cases sympathetically.

The noble and learned Lord referred again to the number of cases that are being pursued. However, I remind him of the figures that I quoted in the first debate: the very detailed analysis of 69,000 cases showed that a third would simply not have been brought under the proposals presently in the Bill. A significant proportion of cases would therefore be pursued, many of them no doubt successfully although others not.

If we are still in the business of trying to promote access to justice by spreading the risk so that it is not always against lawyers' interests to run cases with a lesser probability of success, that is something that the system should encourage. The fear is certainly that cases with less than a 75 per cent chance of success will just not reach the courts. A very respected firm, Thompsons, which acts for a number of trade unions, indicates that at the moment it takes cases with a risk level as low as 50 per cent, and it cannot see how it could conceivably do that in the future. Yet some of the very cases that we have been talking about involving asbestosis, pneumoconiosis and so on started off with a probable success rate of 50 per cent at best and arguably even worse. If we are not to close the door on emerging cases of that kind or on cases with perhaps a two-thirds chance of success, we have to have a balance to which success fees can contribute. The Opposition's case is that that ought not to be simply a matter for successful defendants; it ought to be a collective insurance risk. That is the position that we seek to get to.

Lord Lester of Herne Hill: I am very grateful to the noble Lord; I had not intended to intervene. Does he agree that in the public interest we ought to be concerned not only with securing a fair balance between claimants and defendants but with being quite clear that there must be adequate safeguards against abuse by members of the legal profession in relation to conditional fee agreements and success fees? I have encountered abuses, for example in the equal pay area, where claimants' lawyers have insisted that in cases against public authorities the women concerned should enter into binding agreements to ensure that a cut from the damages for equal pay for these poorly paid women goes to the lawyers and that no individual settlements are made

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without the consent of the lawyers. Should we not be very concerned about those kinds of things and about driving up the level of unnecessary litigation?

Lord Beecham: I entirely agree with that and I think that there ought to be a regime for the determination of the size of the success fee in any event. If a case is brought, that matter should be capable of being decided by the court. The noble Lord's point is one which unfortunately will see damages being taken willy-nilly precisely from claimants in that category. They will not have the opportunity of getting the success fee paid by the other side. In a sense the noble Lord is supporting the case I am making. I entirely agree that members at both ends of the legal profession need to be monitored and that the courts ought to be taking a more positive role both in case management, as I indicated in the first debate, and in the assessment of what is an appropriate success fee. I beg leave to withdraw the amendment.

Amendment 121 withdrawn.

Amendment 122 not moved.

Amendment 123

Moved by Lord Bach

123: Clause 43, page 30, line 12, at end insert-

"( ) The amendments made by subsections (2) and (4) do not apply in relation to proceedings that include a claim for damages for loss resulting from any breach of duty to exercise professional care or skill."

Lord Bach: My Lords, in opening this group of amendments, I shall do my best to be as brief as I can. The Committee is obviously in very tolerant mood this afternoon, as was shown to the noble Lord, Lord Thomas of Gresford, who made an excellent speech in favour of his amendments in the first group. His speech was almost as impressive as the report of Lord Justice Jackson in its completeness and, I was going to say, in its size. Both pieces of work are very much to be commended.

Before I discuss Amendment 123, I shall also speak to Amendments 124, 126, 132, 153, 154 and 156 in the group. It is worth pointing out to the Committee that for shorthand purposes we talk about the Government, as it were, accepting Lord Justice Jackson's report. They have accepted part of it and rejected other parts. It is important to remember that at all times. Lord Justice Jackson himself, as all people in his position do, when putting forward his report before the previous general election, made it clear that it was to be seen as a package or not at all. Of course, the Government have decided to pick and mix-maybe all Governments, to be fair, would have decided to pick and mix, but this Government have certainly done that. What we meet in Part 2 of the Bill is not pure Jackson; it is very much a part of Jackson that the Government like but not the part that they do not like. In particular, that relates to legal aid and to clinical negligence. Other matters in Part 2 are not just not pure Jackson; they are anti-Jackson.

I shall set the scene for Amendment 123. An elderly pensioner places her life savings of, say, £40,000 with an investment adviser. That adviser assures her that he

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will keep it ticking over so she has some moderate income but will not be exposed to risk. Instead, the adviser, who has not his client's but his own interests at heart, places the money in a high-risk instrument for which he gets a hefty broker fee. This otherwise impecunious pensioner loses all her money in the first year. Today, if she sued that investment adviser for professional negligence and won her case, he would have to give her back the £40,000-her own £40,000-pay her lawyers' costs and a success fee which can range up to, as we have heard, 100 per cent of basic costs if he denies liability for as long as possible, and the insurance premium that the pensioner takes out to cover herself should she lose the case.

Under the proposed legislation, should it go through unamended, things would change dramatically. The pensioner would get her money back but then her lawyer's success fee and the cost of insuring against losing would be deducted from her original capital. In short, the £40,000 might become £20,000, or even less. Surely the Committee would agree that that is an inequitable outcome, and not one that many in Parliament or outside could welcome. It is simply a by-product of legislation that purports to deal with tens of thousands of road traffic personal injury cases-largely whiplash-that drive up the cost of motor insurance, rather than the few hundred professional negligence cases which is what this amendment is about, that are heard each year.

It is only common sense that we should not seek to legislate for a system of litigation that allows professional people to prey on their impecunious and weak clients. The Committee today is full of professional people of one sort or another and the House is even more full of them when it is sitting. As we all know, being in a profession is a privilege. When a professional takes on contractual fiduciary and moral duties to do their best to help their clients, they take on an important responsibility. We have professions in our society because we need experts who specialise, whether it is expertise in finance, in my example, the law, engineering or medicine. They should know that society takes seriously if and when they act negligently, with malice, or breach their duty of care. Should we make it so difficult for the individual to take action and claim back their damages in full? Would that not have a corrosive impact on trust in the professions and their regulation, which is something that professions and the professionals themselves should not and do not welcome. We think that the answer to this dilemma is to listen to what Lord Justice Jackson said and extend one-way costs shifting to all litigation, not just keep it to personal injury. That in one fell swoop would deal with the problem that the Government talk about with regard to losing defendants' paying the insurance premiums of winning claimants, which we are told simply inflate costs without adding a huge amount of value.

Secondly, perhaps we could limit the non-recoverability of success fees to 80 per cent of the litigation market-the side of the market that has more nuisance and abuses- which is low-value road traffic cases and public liability personal injury cases. Should we fail to do this, and leave the Bill unamended, the perpetrators of the PPI mis-selling scandal-the mortgage mis-selling scandal

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of the 1980s and 1990s which noble Lords will remember-and thousands of other instances when rogue professionals have abused their position of trust, will go unpunished and unheard. Their victims will multiply in a system where those who have been wronged are dissuaded from taking action against rogues, knowing that Parliament will have legislated to substantially limit their rights to redress. It would be something of a rogues' charter.

I end what I have to say about this amendment by citing the views of the president of the Professional Negligence Lawyers Association who said that many litigants face the dilemma of having had their trust betrayed by one professional adviser and that their only redress by way of litigation is to risk remaining assets and perhaps insolvency by trusting another-meaning another professional adviser-to win their case. That is not a satisfactory position and we ask the Government to think again.

The subject of Amendment 124 is privacy and defamation. Both matters are-as always, but particularly at the moment-the subject of intense discussion. We are still living through a scandal that was as devastating to the reputation of the media industry as the expenses scandal was to the political world. Every Member of this Committee believes in both the freedom and the viability of the press; clearly that is something that unites us. At the moment we have the potential of major reform of the law of defamation being pursued through Parliament. The Minister who will respond to this group of amendments has responsibilities in that area. I commend what he has done up to now and I am delighted that the noble Lord, Lord Lester, is in his place, because he is in many ways the author of the reform of defamation that I hope we will see before long.

We welcome discussion and reform, which are important. The balance is wrong between the freedom of the press and the rights of the individual to be free of tortious defamation; we should look at that. However, the impact on the law of the legislation that we are discussing will be too grave for us to stand by while it passes. The impact of Part 2 of the Bill will be to make defamation and privacy proceedings in the main completely inaccessible to the average citizen. It is not just the Official Opposition who see this problem. The Liberal Democrats tabled amendments on Report in another place to exempt these cases from the reforms. The Joint Committee on the Draft Defamation Bill stated:

"Nonetheless we are sufficiently concerned about",

the Government's proposals,

I come to the Dowler case. As the Committee will know, Bob and Sally Dowler lost their daughter Milly. They wrote to the Prime Minister, asking for the reforms that we are debating to be withdrawn. They wrote:

"What we wanted to make clear to you is that we could not have done this without a "no win no fee" agreement ... What helped was the fact that we would be insured if we lost a case and a premium for the insurance would be taken from the other side if

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we won. Without that we would not have been able to start a case or even threaten it ... We are sure that you do not want to go down in history as the Prime Minister who took rights away from ordinary people so that large companies could print whatever they like and break the law without being able to challenge them".

That is perhaps the best example I can give the Committee this afternoon. It shows what is at stake here.

Let us imagine that, in the wake of a scandal as extraordinary as the hacking scandal-the hacking of the phones of hundreds of innocent people-our response in Parliament was to make it more difficult, or even impossible, for the victims to take action and expose further scandals. Without the powers of the court to compel disclosure as part of litigation, we would not have seen the mountain of evidence that we now know exists. There would have been no information, no investigation and no justice.

Why are privacy and defamation cases so problematic in this legislation? It comes down to the fact that in general the courts here do not award huge damages to victims of defamation or invasion of privacy. Damages are very low-an average of some £4,000. According to research analysis by Mr David Howarth, a Cambridge law professor better known to us as the shadow Justice Secretary in the previous Parliament and MP for Cambridge, average costs are around £11,000. According to Lord Justice Jackson, insurance fees are around £65 for cover of £100, and I am afraid that defendants sometimes rack up costs in denying liability for as long as they can. So the costs of the claimant and defendant dwarf the damages that are sometimes involved.

5.45 pm

Should I successfully sue a newspaper now for defaming me, I will receive small damages and the satisfaction of redress. My lawyer's fees will be paid by the paper, as is normal, as will their success fee and the premium for my insurance. Under the new system, I would receive a small uplift of 10 per cent in damages, taking the figure in my example to £4,400. My lawyer would receive his costs from the wrongdoer-the defendant-as is normal. However, the success fee would come from my damages. If the paper had stretched out the litigation, the success fee might be as high as 100 per cent of base costs: £11,000. In this example, I now have a net loss of £6,600 from winning my case.

However, we argue that it might get worse. My insurance premium will also be taken from me as a winning claimant. The defendant has stretched this out and built up costs. My insurance premium, which of course reflects the potential cost liability, is perhaps £10,000. We should remember that the Government have no plans for one-way cost shifting in this type of case, even though the case for it has been well argued by the noble Lord, Lord Thomas of Gresford, and by my noble friend Lord Beecham, among others. There is no succour for me to be had there. Suddenly, despite winning my case, in my example I am left with a bill of £16,600. Who on earth would take action to defend their good reputation if they faced being left with an enormous bill?

According to Lord Justice Jackson, we are talking about between 200 and 250 cases a year. It does not

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appear to be a great crisis in a compensation culture. Without doubt the result of the Bill would be that the ability to take action would be very much restricted for ordinary people and would allow media companies, if they were so inclined, to print whatever they liked without challenge.

I have no problem with fixing the law around defamation if we find it to be broken-and I think that changes need to be made. However, making it unenforceable would be something quite different. I hope that the Government will think about cases of this kind and will deal with this credibly, instead of carrying on with their approach so far: namely, the blanket dismissal of a compelling argument advocated by this side of the House, by the Liberal Democrats in another place, and by a Joint Committee of both Houses.

I will now be very quick. Amendment 126 is about small businesses. We are trying to deal with small businesses suing large ones for breach of contract. Like professional negligence cases, these cases do not involve general damages per se but concern past loss. It is hard enough now for small businesses, even without being in that situation. If they sue for breach of contract, they do not get all their losses back. It is difficult for them to find a lawyer to take their case. I fear that this may be a serious miscalculation. There is no award of general damages that will increase by 10 per cent in these cases. There is no capping of how much lawyers can take, either. We know of the general sympathy that there is for small businesses around the Committee and in both Houses of Parliament. If the Bill is not amended, they will be prey to the worst kind of economic uncertainties at a time when they are struggling.

Finally, I come to Amendment 132. I hope the Government will think about this as well. Cases of public importance are highly risky, and we want to encourage lawyers to take them on because they set precedents and help make our law by evolving the common law, which is crucial, as the Committee will agree. If those cases are restricted to just the wealthy, then the cases in which the rights of the impecunious are in question will just not come before the courts. They are difficult and tough cases. We want to make sure that they get a fair hearing. It is something we want the Government to consider amending before the Bill goes through.

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