§ Order for Second Reading read.
§ 3.22 p.m.
§ The Attorney-General (Sir John Hobson)
I beg to move, That the Bill be now read a Second time.
We have a rather limited amount of time for the Bill this afternoon, but I assure the House that it is the intention that the Bill shall be taken in a Committee of the whole House. Therefore, if hon. Members were to feel that the principle of the Bill was right, although it could be improved in any direction, they would have the opportunity of attempting to improve it in a Committee on the Floor of the House. But it is entirely a matter for the House whether, when the hour approaches four o'clock, it decides to give the Bill a Second Reading. I desire to hear the views that may be expressed, and I shall, therefore, try as quickly as possible to say what the Bill is about and to give such opportunities as I can to other Members to speak.
The Bill authorises the payment out of the appropriate Legal Aid Fund, that is English or Scottish as the case may be, of the costs incurred by an unassisted litigant who is successful in proceedings in which his opponent received legal aid. Quite simply, the problem with which the Bill seeks to deal is this: if an unassisted litigant is sued by a legally aided litigant, and the unassisted person wins, as a general rule he cannot recover the costs he has incurred. But if, on the other hand, the assisted person wins, the unassisted litigant usually has to pay his opponent's costs.
This has been described as "Heads I win, tails you lose". Thus the unassisted person may have to bear out of his own pocket his own costs even though he has won the action brought against him by an adversary who was financially assisted by the State, and who might never have brought the action had he not been assisted. This may cause financial hardship and be an injustice to the unassisted person. The Bill is designed to alleviate the hardship and minimise the injustice. The House will doubtless recall that a Bill with a similar aim and in almost the same terms was introduced in the other place last Session. The 1592 Bill is based on precisely the same principles, and is in substantially the same form.
Legal aid is a notable social service, introduced with the support of both parties in 1949 to enable the impoverished to seek justice which they might not otherwise obtain, and to enable the not-so-well-off to litigate with a reasonable prospect of limited liability and on easy credit terms. There is no doubt that this has conferred widespread benefits, and has promoted the rule of law within our society. I hope that hon. Members will agree that it has not yet turned us into a nation of litigants, and I trust that it never will.
Nevertheless, the introduction of the Legal Aid Scheme created problems of its own. These have been steadily solved, but the outstanding problem, which has always troubled those concerned with these matters, has been that of the unassisted litigant who won an action and then found himself left to pay his own costs.
That situation is not a new one and was not the creation of the introduction of the Legal Aid Scheme. In this country there has always been a risk of becoming the opponent of an impecunious litigant with no chance of recovering one's costs although one is successful. There was and is nothing whatever unlawful in assisting the impecunious to litigate, provided either that there is some mutual interest or concern, or that help is given out of charitable motives.
Thus, many impecunious plaintiffs were helped to litigate by other persons before legal aid was introduced, by reason of which the successful defendant has been left to pay his own costs because he could not recover them from the person who had received assistance. What the Bill endeavours to do is not to put every citizen in a better position by guaranteeing his costs if successful where the Legal Aid Fund is giving help, but to bring help where the fact of State assistance to one citizen has caused severe hardship to another, and where it would be just and equitable for that help to be given.
I now turn to the provisions of the Bill. Clause 1(1) gives the court which finally decides proceedings in favour of an unassisted party the power—subject 1593 to the further provisions of the Clause—to order the payment to him out of the Legal Aid Fund of the whole or any part of the costs which he has incurred in the proceedings. The Legal Aid Fund for this purpose is the English and Scottish Fund respectively, whichever is appropriate.
Subsection (2) imposes two conditions which must be fulfilled before any court, in respect of costs incurred either at first instance or on appeal, can make an order for such a payment. First, the court must be satisfied that it isjust and equitable in all the circumstancesthat the unassisted party should be paid his costs out of the fund and secondly, the court must considerwhat order should be made for costs against the party receiving legal aid.This second provision is to ensure that the court do not forget that the assisted litigant can be ordered to pay costs, and that this is the first remedy which the successful unassisted litigant ought to have. Hon Members will remember that the court has power to order the assisted litigant to pay such costs as,having regard to all the circumstances, including the means of all the parties and their conduct in connection with the disputeis reasonable. The court must consider whether an assisted party should pay anything, and then deal with the balance of the costs, whether it should come out of the fund or not, and for that purpose consider whether it is just and equitable in all the circumstances. Those are the two limitations in respect of costs incurred either at first instance or on appeal, and whichever party incurs them.
Subsection (3) imposes a further limitation on the power to order the payment of costs out of the Fund by providing that no order shall be made for the payment of an unassisted party's costs incurred at first instance only, unless that party was the defendant, and secondly, unless the court is satisfied that the unassisted party would suffer severe financial hardship if no order were made.
By this provision, an unassisted person who institutes the proceedings—in other words, who is the plaintiff—cannot at first instance recover his costs incurred in that court. If he is defendant, he can only be awarded his costs out of the fund if the court is 1594 of the opinion that he would otherwise suffer "severe financial hardship" unless the order is made.
There is, I suggest, good reason for differentiating between the plaintiff and the defendant in this respect. When the unassisted plaintiff institutes proceedings he does so with the knowledge that he might not be able to recover his costs, even though successful. He is in a position to decide whether or not to litigate, with the consequent risk of being out of pocket as to his costs.
An unassisted defendant, on the other hand, is in a different position. He has not started the litigation; he has no choice. It is, therefore, right that he should be protected in this respect, if he is likely to suffer severe financial hardship. But to provide the same protection for an unassisted plaintiff would place him in a stronger position than he would have been in if the defendant had not been legally aided, and that cannot be justified.
Nor would it be right for the State to subsidise both sides of litigation in cases instituted by an unassisted person who can afford to bring an action just because the defendant happens to be granted legal aid. It is for these reasons that the Bill distinguishes between plaintiffs and defendants at first instance.
The House will note that the limitations imposed by subsection (3) do not apply in relation to costs incurred by an unassisted party in an appellate court. He may be awarded his costs in the appellate court out of the Legal Aid Fund whether or not he instituted the proceedings at first instance and whether he is appellant or respondent in the appellate court. Of course, as far as the appeal costs are concerned, he is not confined to getting them only if severe hardship is caused to him. Therefore, it is entirely a matter of whether it is just and equitable that he should be granted the costs of an appeal.
Equally, the court is not required to apply the "severe financial hardship" tests in deciding whether to order costs incurred on the appeal to be paid out of the Legal Aid Fund. It may be suggested that payment to the successful unassisted litigant from the Legal Aid Fund of his costs at first instance should be authorised in all cases and 1595 that it is wrong to confine the right only to those cases where severe financial hardship can be shown. This would cast a heavy burden on the taxpayer—possibly in the region of £340,000 a year—for the benefit of a small number of persons, and, ex hypothesi, for persons who would not be suffering any financial hardship and, in many instances, persons who would be covered by insurance companies and would expect to take risk, such as motorists and factory owners.
Furthermore, it would mean that the person sued by an assisted litigant would enjoy an advantage he would not have if sued by someone unassisted, fn the latter case, if he won it is true he might get an order for costs, but he would not be certain of having those costs paid. In the former case if he won he would be certain to get his costs paid.
Quite apart from the expense involved, I feel that it would be wrong in principle to do this; for the unassisted successful litigant should surely not be put in a better position than he would be if his adversary has an unassisted litigant possibly of moderate or small means.
I do not claim that the Bill, if passed, will remove all hardship and all injustice, for that would be claiming too much. But I do claim that it goes a long way to remove the worst hardship and injustice and provides a solution to an extremely difficult problem which is fair not only to litigants, but also to the taxpayers, out of whose pockets the costs of implementing these proposals must come. It would, in my view, be quite wrong to improve the position of litigants so as to guarantee payment to them in all cases even though they had suffered no substantial hardship of any sort.
Subsection (4) of Clause 1 restricts the power to award costs by providing that no order shall be made where, apart from the Legal Aid Scheme, a party would not recover his costs. This applies particularly to divorce proceedings where respondent husbands who are successful do not recover their costs under the ordinary law. They will equally, of course, not be able to get an order for the payment of such costs out of the fund, if they would not have 1596 got an order for costs in the ordinary event. Subsection (5) of the Clause deals with the question of appeals which are to be on points of law only. I think that that is right and I hope that the House will accept it.
Subsections (1) and (2) of Clause 2 give the Lord Chancellor power to make regulations for the purposes of the Bill. These are principally of a machinery or procedural nature, but I ought to make special reference to Clause 2 (1,6), which allows the Lord Chancellor to modify the application of the "severe financial hardship" limitation with regard to an unassisted litigant who appears as such and is involved in a fiduciary, representative or official capacity.
This is intended to deal with trustees, executors, officials and others who are only appearing in the litigation in a representative capacity and who may not themselves suffer any hardships at all by payment of their costs. Beneficiaries, or those interested in the fund, may, nevertheless, be affected very adversely indeed by the decision.
The circumstances in which such problems may arise are so diverse and various that it has been thought better not to attempt to deal with each and all of them by legislation, but to allow them to be dealt with by regulation and to see, as the situation develops and the problems arise, what ought to be done to convey the benefits of the Bill to those who are really financially affected, although not in all cases actual parties to the litigation.
Subsection (5) ensures that if an assisted person is assisted for part of the proceedings only, which happens quite frequently, an order under the Bill in favour of the unassisted party will be limited to that part of the proceedings in which assistance was given.
The expense of these proposals will depend on a number of uncertain factors, such as the numbers of successful unassisted parties, the ways that the courts exercise the discretion that they have and the amounts that are ordered to be paid. It is impossible to make an accurate forecast, but, doing the best that one possibly can with a rather cloudy crystal ball, it has been estimated that approximately £55,000 will be the additional cost that will fall upon public funds. The House will, I am sure, 1597 appreciate that this estimate could be upset by an exceptionally heavy case such as Auten v. Rayner and if one got a case of that magnitude in any year the estimate would be very greatly altered indeed.
I ought to remind the House of the rising cost of legal aid, because it is against this background that one has to look at these proposals and their possible cost. In 1959–60, the total cost in England and Wales to the Exchequer of maintaining the Legal Aid Fund was £1.3 million. In 1960–61, it was £1.8 million; in 1961–62 it was £2.5 million, in 1962–63 it was £3.5 million and in the current year it is expected that the figure will rise further.
The result is that in four years the total cost to the Exchequer has trebled. We know that the reasons for this are that legal aid is more widely available, there are more divorces, legal aid is available to criminal cases in the magistrates court and particularly it is available in the magistrates' court to domestic proceedings. But, furthermore, the financial limits have been extended and made more liberal and all this has added to the cost, and also the additional amount of legal aid has added to the administrative costs of the Law Society in running the scheme.
It is the essence of the scheme that a person who wishes to litigate, and has reasonable grounds for so doing, should not be deprived of his opportunity by reason of his lack of financial means. I think that everyone is agreed that there must be no derogation from that principle. But it is clearly imperative that the cost to the taxpayer should be kept within bounds by constant examination of the administrative machinery and by ensuring, so far as is possible, that legal aid is granted only in proper cases. The whole question of the cost of legal aid is one which I know that my noble Friend the Lord Chancellor has had under review. It is a matter which we must bear in mind in our considerations of the proposals made in the Bill, since the additional cost of making payments to the unassisted party will also fall upon the fund and thereby upon the Exchequer.
I hope that what I have said will be of some assistance to hon. Members in appreciating the general principles of the Bill and that it will be acceptable to 1598 them, whatever details they may feel require dealing with in Committee. I commend the Bill to the House.
§ 3.40 p.m.
§ Sir Frank Soskice (Newport)
It is now twenty minutes to four and I know that a number of right hon. and hon. Members wish to contribute to this debate. Therefore, I have the choice either of being extremely short, in the hope that we may all be able to make our speeches, or speaking as I would normally, which I hope is not with undue prolixity. I will try to follow the middle course and begin by saying that, speaking for myself, I should have thought that the purpose of this Bill is one which we ought to accept.
I have this question to put to the right hon. and learned Gentleman. Some hon. Members may wish to enlarge the scope of the relief which is provided. For example, they might wish to change the words, "severe financial hardship" which appear in Clause 1(3) in page 2, line 6, of the Bill. I wish to know from the Attorney-General whether the Financial Resolution to provide for the extra expense occasioned by this Bill is so framed as to prevent any Amendments being put down when this matter reaches the Committee stage—if the House gives it a Second Reading—and prevent such amendment as would enlarge the cost that this Bill will occasion to the Exchequer. I should be grateful for some information on this because, if that is so, it might well be that the House would wish to discuss the terms of that Resolution.
That being said, I wish to put one or two questions rather than propositions to the right hon. and learned Gentleman. It seems to me that in our legislation we are apt sometimes to put too much on to judges. We are apt to say, "We will not decide what is reasonable, let us leave it to the court". We ask judges to do that without giving any guidance about the sort of things which they are to take into account in making up their minds whether a particular situation is reasonable or not. I ask the right hon. and learned Gentleman whether this is not one of those cases. Here we are saying—I am looking at Clause 1(2)—that no order is to be made unless:the court is satisfied that it is just and equitable in all the circumstances …"That is a very comforting phrase for hon. Members of this House to use. But 1599 looking at the matter as a judge would look at it, the judge would expect some guidance from this House about the sort of things to be taken into account. Do they include the conduct of the parties? Do they include their respective means? What do they include? We are asking a question of the courts when using that phraseology, although I am conscious that this is not the first time this House has used that kind of phrase. But we add to it a further provision that no order is to be made unless the court is satisfied that the unassisted party will not suffer severe financial hardship. I should have thought that we ought to add to the proposition presented to the courts for a solution.
Different minds may answer differently the question whether an individual, in given circumstances, suffers severe financial hardship. Some may say that he does if his opponent is assisted and he is not—without more. Others may say that we have to take into account the respective means and resources available to the unassisted person in order to enable him to pay the costs. I should have thought that, whatever line we think is the right one, we ought to lay it down in terms of the Bill and to say in the terms of the Bill which we are asked to approve what sort of things the court is to take into account.
I gathered from the speech of the right hon. and learned Gentleman—speaking for myself I would be disposed to agree with him—that when a phrase such as "severe financial hardship" is used it is intended to connote that the means of the unassisted person are to be a relevant factor. If we mean that I think we should say so. We should apply the same touchstone to the other phrase about whether it is just and equitable to make an order. We should say whether that takes account of the behaviour of both parties. Presumably that is intended, but I do not know and I hope the Attorney-General will be able to tell us about it.
Time is going on, but I must put one or two short questions. The Attorney-General drew a distinction between the costs of proceedings at first instance and costs in an appellate court. I was not clear about the distinction. Clause 1(3) 1600 seems to put them on the same footing but I am not certain when I look at the terms of the Bill when the assisted person is to be able to hope that he will obtain costs. A case might go on for three years because it goes to the House of Lords. Is such a person to be out of his money, even though he eventually succeeds, or should there be an interim payment which in given circumstances he must pay back? The provision in the Bill does not seem to show how such a course would work.
What is to happen if a person who is sued puts in a counter-claim on which he is successful? I do not know whether he can recover the costs of the counterclaim which he is unable to recover from the assisted person. I think Clause 1(2) does not alter the existing law in regard to making orders against assisted persons that they should pay all or some of the costs of proceedings which they bring. I think that is put in for the purpose of clarity enjoining on the court not to forget—which is extremely unlikely—the duty of issuing an order where an assisted person should pay part of the costs.
It looks to me as if the provisions in regard to actions brought against persons in a fiduciary capacity should be more closely worked out. It is hardly satisfactory to leave that to regulations. What is to happen if a trustee is sued when he holds money in trust for beneficiaries, some of whom are poor and some are rich? How is one to judge whether there is financial hardship or not? Speaking for myself, I should have thought it was hardly satisfactory to leave that to subordinate legislation. If this Bill goes to a Committee of the whole House, I hope we shall explore that aspect in much greater detail.
§ 3.49 p.m.
§ Sir Lionel Heald (Chertsey)
I am sure that everyone in this House is in favour of the principle of the Bill and no one would want to delay its coming into operation, but it is now about ten minutes to four. I speak as as humble back bencher on one side of the House and we may have a speech from the back bencher opposite and then there is to be a Government reply.
Several matters have already been raised and it would appear that there should be no speeches from the back 1601 benches, but that, I feel, would be an unfortunate thing. I certainly feel a great embarrassment because I am anxious to draw the attention of the Government to the fact that there is a widespread feeling that the provision which is being made here for the unassisted person is quite inadequate. The Law Journal, a well-known periodical, which speaks for people who have great experience in these matters describes it as "a remarkably ungenerous Measure". This does need to be gone into.
With the greatest respect to those concerned, surely it is desirable that these matters should be explained on Second Reading so that the Government could have the opportunity to consider amendments before we go to Committee, otherwise one has the uncomfortable feeling that we may be faced then with being told that the matter has already been decided and that the Government will not consider any amendment.
I feel that this is a very difficult and embarrassing position. I find difficulty in compressing my own remarks, which were not intended to be long in any case. There are reasoned arguments which could be put on this proposal, but I can only indicate in a moment what I would desire to say had I time and opportunity.
In another place, the Lord Chancellor said that this was intended to give the courts a fairly wide discretion in this matter, But I do not myself believe that the words "severe financial hardship" will necessarily give such a wide discretion at all. I can imagine a court saying, "There are three words here".
It is true that in the Gracious Speech some of us were rather misled into Slinking that there was to be some amendment and that the intention was… to alleviate hardship resulting from litigation".Now, these two other words have been added and all of us who are lawyers can easily imagine a judgment in which we shall be told "it is not only hardship that is involved but severe financial hardship". This provision is clearly intended to extend interpretation to much more than the word "hardship".
I hope that hon. Members on both sides will support what I have said about the seriousness of this matter. I find it very revealing that we are told 1602 that the total cost of this scheme will be £50,000 whereas if everyone got it would be £350,000, which appears to mean that only one person in seven will get anything at all.
That may be right, but surely it is the kind of matter which should be very carefully considered. In addition, there are also other points which need to be taken into account, including, for instance, those relating to investments by trustees. I hope that it will be appreciated that these points of view ought to be expressed before the matter is dealt with. I certainly will not "hog" the debate any more, and I shall merely sit down with the request that the matter should not be disposed of today.
§ 3.52 p.m.
§ Mr. Niall MacDermot (Derby, North)
I echo the embarrassment felt by the right hon. and learned Member for Chertsey (Sir L. Heald) in having to seek to make a Second Reading speech in the very short time available. I will try to avoid making what can properly be Committee points, but there are some matters which one can raise on the Second Reading of a Bill which are not in order at a later stage. [Hon. Members: "Talk it out."]I hear hon. Members around me suggesting—and it appears to be general consent—that this debate should be continued beyond today. Be that as it may, I will still endeavour to be brief.
I think that we all join in welcoming the Bill. I think that the whole House, agrees that great benefits have derived from the Legal Aid and Advice Scheme. Also, everyone familiar with its operation knows that it has on occasions—although they are relatively rare, I believe—inflicted a hardship on successful, unassisted defendants in cases where they would not have suffered that hardship had it not been for the scheme.
As the Attorney-General pointed out, it is not every successful unassisted defendant who would not have suffered some loss if there had been no Legal Aid and Advice Scheme. The problem is not a new one. It existed before but it has been, I think, inflated by the scheme.
In the scope of the Bill, the main provision is subsection (3) of Clause 1, 1603 and I wish to say something about paragraphs (a) and (b) of the subsection. I question the wisdom, under (a), of having the absolute provision that the unassisted person must be defendant to the action. I can imagine the situation where an unassisted person has started a perfectly good and valid claim, on which he succeeds. The defendant obtains legal aid to prosecute a counterclaim, a counterclaim on which perhaps he will not even defend the main claim, and all the litigation and all the costs will really be incurred on the counterclaim. It would be an expensive piece of litigation on which he would not have embarked if he had not received legal aid. In these circumstances, it occurs to me that it might be extremely unjust to the unassisted claimant if he were not able to get an order for costs against the fund.
I am aware that there is a provision in Clause 2 which enables regulations to be made to determinethe proceedings which are or are not to be treated as separate proceedings for the purposes of this Act, or as having been instituted by the party receiving legal aid for the purposes of section l(3)(a) of this Act.This seems to be a curious form of legislation whereby the definition of words in the Bill, which affect the meaning of the Bill and will govern the whole scope of it, is to be left to regulations to be promulgated later. The Government should decide at this stage what is to be the scope of the Bill and define what is in the Bill and not leave it to regulations. In other words, we are, in effect, signing a blank cheque.
I am not sure that I follow the right hon. and learned Member for Chertsey in finding the words "severe financial hardship" in Clause 1(3,6) too restrictive. I rather gathered from the tenor of the right hon. and learned Gentleman's remarks that he would wish "severe" and "financial" to be omitted, so that the provision would read—the court is satisfied that the unassisted party will suffer hardship unless the order is made.Any unassisted person who gets an order for costs which cannot be satisfied will suffer hardship. The judge would be placed in an even more difficult situation if the provision read in the way 1604 suggested by the right hon. and learned Gentleman.
§ Sir L. Heald
I am sure that the hon. and learned Gentleman realises that I did not have time to expand that. I merely said that as the words stand they are too narrow.
§ Mr. MacDermot
I follow. It is agreed that there will need to be some qualification of the word "hardship", but it may not be as severe as the words that are there now.
The other point I wanted to raise, which is perhaps truly a Second Reading point, is to invite the Attorney-General to consider another form of hardship which can arise under the operation of the Act at the moment, one of which I have had personal experience. There is occasionally a case where a legally aided plaintiff comes to court and whereas his advisers had previously thought that he had a good claim, they take the view as the case develops in court that he has a very doubtful claim indeed.
In such circumstances, sometimes counsel for the defendant, who perhaps is briefed by an insurance company, realising that if the case goes on the defendant may himself incur a lot of costs which he is unlikely to recover, may think that the businesslike and sensible way to dispose of the matter is to make a small offer to the plaintiff. In such circumstances, the plaintiff's counsel would usually strongly advise him to accept the offer, and everyone would be satisfied.
The difficulty at the moment is that the Legal Aid Fund automatically has a charge upon any such offer for the costs of the plaintiff. The effect is that the plaintiff, if the offer is accepted, would get nothing. The action therefore goes on, a great deal more costs are incurred, and no one has any discretion to waive the charge which the fund has upon any damages which may be awarded. I invite the Attorney-General to look into this and see whether he can enlarge the scope of the Bill to enable a discretion to be placed on the legal aid authorities to waive their charge.
I had other points to raise, but they are all matters which can be raised in Committee. For my part, I would leave the matter to the Committee stage.
§ 3.59 p.m.
§ Mr. R. J. Maxwell-Hyslop (Tiverton)
The points which have been raised already are of very great substance. I will be brief. It seems to me that if the court, decides that it is just and equitable—
§ It being Four o'clock, the debate stood adjourned.
§ Debate to be resumed upon Monday next.