CONDITIONAL FEE AGREEMENTS

HC Deb 22 June 1999 vol 333 cc1043-51

Mr. Vaz

I beg to move amendment No. 23, in page 18, line 14, after 'but', insert (subject to subsection (5))'.

Mr. Deputy Speaker

With this, it will be convenient to discuss the following: Government amendments Nos. 24 to 32.

Mr. Vaz

This group of amendments consists largely of technical amendments, either to ensure that new sections contained in clause 27 have the effect intended, or to make consequential drafting changes to amendments made earlier in the Bill's passage through Parliament.

I shall deal first with amendments Nos. 23 and 26. Part of the purpose of the changes that we have made to definitions of what constitutes a conditional fee agreement is to bring into statute two decisions of the courts from last year. The two cases in question are Thai Trading Co. v Taylor and Bevan Ashford v. Yeandle. The full implications of the two judgments have been set out earlier in the Bill's passage and are described in the explanatory notes, so I will not recite them again at this hour. However, the present draft of the proposed section 58 in clause 27 goes further than simply taking those judgments into statute. It would have the effect of making unlawful agreements that are otherwise sanctioned by statute, known as non-contentious business agreements.

This type of fee agreement is intended to provide a way that lawyers can offer to work for clients who have business that will not come, or is unlikely to come, before the courts. There are very many services that lawyers undertake other than litigation in the courts, and the way in which they choose to offer their services—particularly the way in which their fees are calculated—was never intended to be encompassed by the provision in clause 27.

In moving the amendment, I recognise that there is great disquiet that non-contentious business agreements are used to allow solicitors to offer to undertake cases before the employment tribunals on the basis of a contingency fee. Contingency fees are payable only if the client is successful and are calculated solely by reference to the amount of the award made by the tribunal. They allow the lawyer to share in the proceeds of the action. This kind of fee would be unlawful and unenforceable if it were used to fund a case before the courts. My noble and learned Friend the Lord Chancellor has clearly set out his views: he does not believe that that kind of a fee should be used in employment tribunals. It is a quirk of the law that the work of this tribunal falls within the definition of non-contentious work.

The Government will be considering further whether such fees should be lawful in the employment tribunal as part of a review of the practices, rules and procedures of all tribunals that is designed to ensure that they meet the requirements of European Union law and comply with European convention rights. As regards the employment tribunal, it will inevitably require consideration of the present provisions that do not allow the award of legal costs—except in exceptional circumstances—to successful parties.

I think that I can deal fairly quickly with amendments Nos. 24, 25, 27, 29 and 31, which are to the same effect as those urged on the Government in Committee by the hon. and learned Member for Harborough (Mr. Garnier)— I am sorry that he is not in the Chamber to hear me lavish praise upon him. He sought a change in the proposed sections 58 and 58A of the Courts and Legal Services Act 1990 in clause 27 of the Bill. He asked—in a most eloquent manner—that, in place of the term "enhanced fees", we use the term most usually adopted to describe the additional payment due under a conditional fee agreement in the event of success: namely, a "success fee".

In committee, my hon. Friend the Member for Ashfield (Mr. Hoon) said that he had considerable sympathy with the hon. and learned Gentleman and agreed to seek parliamentary counsel's views. It was 11 May, and clearly a good day for the hon. and learned Member for Harborough because we accepted two of his proposals. As far as parliamentary counsel can see, it is possible to replace the term "enhanced fee" with "success fee". The change does not alter the substance, only the terminology.

Amendment No. 28 is little more than a drafting amendment, and follows on from changes made earlier in the Bill's passage to the new section 58 of the Courts and Legal Services Act 1990 contained in clause 27.

In response to concerns about the definition of the parties to a conditional fee agreement, which largely drew on the present definition in section 58(1), the proposed section 58(2)(a) was amended in another place. This subsection as currently drafted defines conditional fees solely in terms of the provider of services under the agreement, not the consumer. The subsection therefore encompasses the kind of collective agreements that membership organisations are likely to use when securing legal services on behalf of members. Amendment No. 28 to new section 58A(6) will ensure consistency with the revised section 58(2)(a).

Finally, amendments Nos. 30 and 32 are technical amendments to bring the language of the two clauses into line with the changes in name brought about by the introduction of the civil procedural rules on 26 April 1999.

I commend the amendments to the House.

Mr. Hawkins

In the temporary absence of my hon. and learned Friend the Member for Harborough (Mr. Garnier), it would be churlish if I did not acknowledge the praise lavished on him by the Minister. We spoke on another occasion about the fact that the term "garnishee order" is familiar to all lawyers. I know that the Minister referred to this as the Garnier amendment.

I am delighted that the Government have accepted the suggestions of my hon. and learned Friend the Member for Harborough. The Bill has undoubtedly been improved, as the term "success fee" will be more readily understood than the phrase "enhanced fee", which was open to possible misinterpretation.

On thanking the Minister earlier for his congratulations and welcome to me, I omitted to welcome him to his new post, as so many other hon. Members have done. May I remedy that omission by welcoming him warmly? I know that we shall have many amenable exchanges, even though we may disagree on some points of substance.

Mr. Burnett

I have made my views on conditional fee agreements known on many occasions during the passage of the Bill. Such agreements are riven with conflicts of interest. Does the Minister believe that it should be incumbent on any solicitor acting in a conditional fee agreement to disclose that to the solicitor to the other side—not just the existence of the conditional fee agreement, but the amount or the extent of the uplift in such an agreement?

Mr. Vaz

If the solicitor wishes to do so, I do not see why he or she should not.

Mr. Burnett

I am grateful to the Minister. Does he agree that it should be compulsory to make such a disclosure?

Mr. Vaz

The detail of whether or not that should be incumbent on a solicitor will, I hope, be one of the issues considered in the consultation process during the summer months. I am sure that the hon. Gentleman's remarks will be taken into consideration. I am glad to see that the hon. Gentleman is back to his usual statesmanlike approach.

Mr. Peter Bottomley (Worthing, West)

I shall intervene briefly, as this is the only part of the discussion that is directly linked to conditional and success fees. I declare an interest. It is recorded in the Register of Members' Interests that I gave expert depositions in some civil liability cases in the United States, where I have seen the most appalling misuse of the courts process by lawyers.

I must be a little careful, as one case is still running. It has been said by others that there has been appalling misuse of the legal process by people who have enormous sums to gain. I do not think that that will happen to the same extent in this country.

I have a brother-in-law who is one of the pro bono solicitors who have been willing to take on cases that most others would not because their lawyer firms have a tradition of doing such work. The idea that we will find sufficient solicitors able to take on conditional fee work in such a way that will replace present legal aid is wrong. I have a current case in my constituency of an elderly woman, who is not the kind who wants to go money grubbing after an accident, who is finding it difficult to find a solicitor to take on her case.

I am not saying that all that would be solved by the amendment and I understand the sincerity of what the Minister has put forward, but many debates on amendments on Report are not just about what is going into present law but are about putting down markers for the next change.

What we are being asked to approve in terms of change to legal aid and the further opening up of success fees and conditional fees will have some benefit. In some ways it will help to restrict the unrestricted growth of legal aid. But it will also have many penalties and consequences which I hope that the Government will monitor. If they do that in association with the professional bodies, there will be much more to gain the next time the House returns to the subject. At the moment, few people would argue that consideration is fully satisfactory.

Mr. Vaz

I thank the hon. Member for Worthing, West (Mr. Bottomley) for his thoughtful and valuable contribution which was sincerely felt. He may have misunderstood the system in America. It has an advanced case of contingency fees, as opposed to conditional fees, which is what Britain has. I, too, have similar reservations to contingency fees being used, but not to conditional fees. These arrangements have proved successful and they can focus the client and the solicitor on issues in a much more productive way. I can assure the hon. Gentleman that the Lord Chancellor and I would not be proposing the changes if we were not satisfied that the agreements do work and will work. However, I shall certainly take on board the thoughts that the hon. Gentleman has expressed today.

Amendment agreed to.

Amendments made: No. 24, in page 18, line 22, leave out 'enhanced fees' and insert 'a success fee'.

No. 25, in page 18, line 37, leave out 'enhanced fees' and insert 'a success fee'.

No. 26, in page 18, line 47, at end insert— '(5) If a conditional fee agreement is an agreement to which section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies, subsection (1) shall not make it unenforceable.'. [Mr. Hill.]

Mr. Hawkins

I beg to move amendment No. 98, in page 19, line 3, after 'proceedings', insert 'save those brought under Section 82 of the Environmental Protection Act 1990'. This is an important amendment. I hope that the House will bear with me if I take a little time to explain why not only we, but the Law Society and the crucial campaigning charitable organisation, Shelter, think so too. We hope to persuade the Minister and the Government that, even if they cannot accept the amendment today, they can, nevertheless, reflect on it further.

The Law Society strongly supports the amendment. It is intended to ensure that the decision of the Court of Appeal in Thai Trading Co. v. Taylor, reported in The Times on 6 March 1998, to which the Minister referred briefly when dealing with the previous group of amendments, is incorporated in full. The Court of Appeal's decision in that case overruled a previous decision of the divisional court in British Waterways Board v. Norman. It thus permits legal representatives to act in housing disrepair cases in magistrates courts for tenants of low means.

All hon. Members will be well aware of the crucial importance of housing disrepair cases involving tenants of low means. Many of us have acted in such cases during our own legal practice and, even more so, non-lawyers will have had such cases referred to them in their constituency surgeries.

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Legal aid is not available to such tenants because proceedings under the Environmental Protection Act 1990 are technically criminal proceedings; they therefore rely on lawyers who are prepared to work on their behalf on a speculative basis. The exclusion of all criminal proceedings from Thai Trading-type conditional fees thus bars those speculative arrangements. That is why we, as well as Shelter and the Law Society, think that the present position is unwise and unhelpful. The amendment would ensure that the rights given by Parliament in the 1990 Act, which was introduced by the previous Conservative Government, are not effectively removed by the Bill.

The Law Society points out—this is bound to be of concern to Members on both sides of the House, but perhaps to Government Back Benchers in particular—that, without that change being made, it will be not at all clear whether the Minister can properly confirm, as he and the Lord Chancellor have sought to do, that the Bill will comply with our obligations under the European convention on human rights. That is also our view.

The Government have incorporated the European convention on human rights into British law and they have to certify that every Act of Parliament will comply with it. That includes the Bill, but we respectfully agree with the Law Society that the Lord Chancellor and the Minister may have grave difficulty in certifying that, unless the amendment is accepted. A similar amendment moved by Lord Goodhart in the other place was withdrawn only after the Government said that they would consider the issue further and, if appropriate, table their own amendment. We therefore find it somewhat surprising that they are not prepared to accept our amendment, or table one very similar, today.

I was a member of the Standing Committee, which debated amendment No. 49 on the afternoon of 4 May. The Minister's predecessor—the Minister of State, Foreign and Commonwealth Office, the hon. Member for Ashfield (Mr. Hoon)—said that he could not accept an amendment that would make public funds available for representation for summary complaints, which are technically criminal proceedings because they require a complaint to a magistrates court to be issued. He argued that the risk of costs not being paid by a defendant was slight and went on to say: I believe that other methods of funding such as no-win, no-fee agreements of the type that we constantly discuss can be used and the non-availability of legal aid does not prevent a complainant from taking a reasonable case to court."—[Official Report, Standing Committee E, 4 May 1999; c. 160.] It was, therefore, with considerable surprise that members of the Law Society heard the then Minister say in Committee: We believe that it would be imprudent, and possibly unjust, to make a single exception of that kind without fuller consideration of all the issues of the principle and practice raised by doing so."—[Official Report, Standing Committee E, 11 May 1999; c. 256.] The Law Society says that it is not clear why the Government so changed their approach in the week between 4 May and 11 May, and assumes that some lobbying or some departmental interventions might have taken place. Who can say? Perhaps the Minister will enlighten us. However, the consequence is that, unless the amendment is accepted, Parliament will give people a right to take action in respect of housing disrepair and certain other nuisances even though it intends to deny those affected the means to enforce their rights.

Sadly, tenants of houses in disrepair are, by definition, likely to be of limited means. As the Minister must know from his constituency case work, it is extremely rare for such tenants to have the means to fund the legal cost of taking enforcement action. Magistrates court proceedings are an effective means of securing a remedy in such cases. The Law Society rightly says that tenants usually rely on solicitors being willing to take a case in the knowledge that, if unsuccessful, the tenant will be unable to pay their costs.

Many such cases are taken by law centres, and the Government are rightly at pains to say how much they support them. As the Minister knows, law centres are not allowed to charge their clients. Legal aid has never been available for such proceedings. Many may be entitled to free legal advice under the green form scheme, but as the Minister well knows, that cannot cover representation in court proceedings.

The Government propose to clear up any doubt about whether solicitors can act on such a basis by giving statutory force to the Court of Appeal's decision in respect of Thai Trading. That is very welcome. However, the bar on such agreements in criminal proceedings rules out their availability, and the Act will make them unenforceable unless it is changed.

As the issue raises considerable implications relating to the European convention on human rights—Parliament is expressly prohibiting the only kind of arrangement whereby such actions could be funded—the rights given to tenants under section 82 of the Environmental Protection Act 1990 by the last Government would become meaningless. The Bill is called the Access to Justice Bill, but, as the Law Society rightly says, there will be no access to justice for such tenants if it is left unamended. Certainly the Government would be very unwise if, in a Bill that they have entitled the Access to Justice Bill, they denied access to justice in a way that has previously applied.

In Thai Trading Co v. Taylor, the Court of Appeal expressly overruled the decision of the divisional court in British Waterways v. Norman, which was itself a housing disrepair case. In that case it was held that, in effect, solicitors could not recover costs in successful cases when they had acted speculatively. We want the Government to think again.

I found it particularly moving that a fax briefing that I received from Shelter on this matter drew attention—it was blocked in black—to the fact that Shelter's president had been the late great Cardinal Hume, to whom Members on both sides of the House have paid tribute, and who will be sadly missed in this country. I hope very much that, in tribute to Cardinal Hume if for no other reason, the Government will pay careful attention to what the organisation of which he was president for many years has said about clause 27.

Shelter is absolutely committed to supporting our amendment. It points out that it provides a range of legal services for people with housing problems", and that its advisers provide legal advice and assistance on housing matters through our nationwide network on housing aid centres. It has a legal team with a wealth of experience of taking housing cases through the legal system. It considers the amendment to be vital. It points out that its clients are often disadvantaged citizens in urgent housing need, and says: It is vital that such people have access to justice and that their cases are dealt with speedily by the courts. As Shelter says, Section 82 prosecutions provide", currently, a vital remedy for many of our clients, particularly in the social housing sector"— I am sure that that is important in the constituencies of the vast majority of hon. Members— who otherwise have no effective means of combating conditions that may jeopardise the health of their families. Shelter's housing aid centres deal with numerous cases of that kind every year, helping clients to bring prosecutions when, for example, unscrupulous landlords fail to deal with condensation, dampness or unsafe electrical circuitry. Shelter says: Without legal aid or conditional fee agreements to fund these cases, many of them would not be brought. Shelter says that it hoped that the Government would return to its original thinking on this issue by restoring the position to that following the Court of Appeal's judgment in Thai Trading Co v Taylor by making a suitable amendment to the Courts and Legal Services Act during the passage of the Access to Justice Bill. That, it says, was its understanding—as well as the Law Society's understanding—of the statement made by the Minister's predecessor, the hon. Member for Ashfield, in Committee on 11 May.

Shelter does not accept the Government's argument—nor do I, and nor do my hon. Friends—that an exception should not be made to the general principle that conditional fee agreements are not appropriate in criminal proceedings. It says: By neither making legal aid available nor allowing conditional fees to fund these cases, many of our clients will be denied access to justice and essential works to improve their living conditions will not be carried out. This is an important matter, and I strenuously urge the Minister to think again. If he cannot do so tonight, it is still not too late for the Government to indicate firmly that they intend to correct the position. It is not too late for them to accept our amendment—or a very similar proposal—to ensure that people have the opportunity to bring vital cases, and that the rights that they have enjoyed since the Conservative Government's 1990 Act will continue.

Mr. Vaz

I thank the hon. Member for Surrey Heath (Mr. Hawkins) for his kind comments, although we should now draw a line under all the congratulations from both sides of the House—or, in 100 years, people reading today's Hansard might think that there was something of a love-in going on. His congratulations, for which I thank him, must be the end of it. I thank him also for moving amendment No. 98 in the way that he has—although I had to pinch myself, as I never thought that I would see the day when a Conservative Front-Bench spokesman quoted Shelter in defence of his case.

As the hon. Member for Surrey Heath said, the amendment would allow conditional fee agreements to be used in bringing criminal prosecutions under section 82 of the Environmental Protection Act 1990.

A similar amendment was tabled in Committee. As my predecessor said then, section 82 of the Environmental Protection Act 1990 provides for summary criminal proceedings by someone complaining of a statutory nuisance. Proceedings under section 82 are criminal proceedings. As such, in principle, they would be excluded under the general exception in section 58(10) of the Courts and Legal Services Act 1990 of criminal proceedings from proceedings in which conditional fees may be used.

I accept that part of the effect of the decision of the Court of Appeal in the case of Thai Trading Co. v. Taylor—a case decided last year, in which the Court of Appeal ruled that lawyers may agree with their clients that they will charge less than their normal fees, or no fee at all, if they are unsuccessful on behalf of their client—was to approve the use of conditional fee agreements in cases under section 82.

As the House will know, the decision in Thai Trading overturned an earlier decision, in the case of British Waterways Board v. Norman. In the latter case, an agreement between the solicitor and the client that, if the prosecution under section 82 were unsuccessful, the solicitor would not seek to recover costs against the client was held to be unlawful and unenforceable.

The question, therefore, is whether, in bringing the effect of the decision in Thai Trading into statute, we should reflect that decision in its entirety or make it subject to the general principle that conditional fees, with or without enhanced fees, may not be used in criminal proceedings.

There had been some concern, in Committee and elsewhere, about the need to restrict the scope of conditional fee agreements. For that reason, having given the matter very careful thought—and I mean very careful thought; I am sympathetic to what the hon. Member for Surrey Heath said—we have concluded that it would not be right to breach the general principle that conditional fees are not appropriate in criminal proceedings.

Amendment No. 98 proposes a single exception for criminal cases under section 82 of the EPA. There is nothing unique about that provision. There may well be provisions elsewhere in the criminal law with similar effect so that conditional fees might be a possibility. If we are to consider breaching the general principle, it is important that that is undertaken on a logical basis and is not piecemeal. Moreover, such a breach can be undertaken only after very careful thought about the impact of conditional fees—regardless of whether enhanced fees are being sought—in the criminal justice process.

The Government do not believe that such a careful consideration of the issues is possible in the time that the Bill will be considered by the House. We believe that it would be most inappropriate, and possibly unjust, to make a single exception of that type.

The hon. Member for Surrey Heath should not look so sad, because the Government are not unsympathetic to the concerns that lie behind the amendment or to concerns that tenants should be able to ensure that statutory nuisances are dealt with. However, we have to balance those concerns with the potential effect of allowing conditional fees in criminal cases.

Mr. Gareth Thomas (Clwyd, West)

I understand the argument that my hon. Friend the Minister is making, but perhaps I could press him on one matter. How does he anticipate that those rather important cases brought under the Environmental Protection Act 1990 will be financed in future?

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Mr. Vaz

In the way in which they are financed at present. Several agencies, including law centres, could help people in that position. My hon. Friend does not have to press me too much, because we are sympathetic, but we do not feel that it is appropriate to breach the general principle now.

I do not accept that the Bill would result in people ceasing to have access to the remedy afforded by section 82. Those with a strong case will continue to be able to prosecute successfully the person or body causing the statutory nuisance and to obtain a costs order in their favour, perhaps using the agencies that I have mentioned. There may be other remedies in the civil courts that they could pursue, for which conditional fees would be available. The procedures put in place by all local authorities that allow their tenants to have defects to their property put right remain.

The issue is raised in my constituency case bag and I am sure that other hon. Members have the same experience. I have set out the Government's view. We are not unsympathetic to the points that have been made, but we are concerned that if we breach the general principle, we shall find ourselves in all kinds of difficulty. In view of the sympathetic comments that I have made, I invite the hon. Member for Surrey Heath to withdraw the amendment.

Mr. Hawkins

I thank the Minister for expressing sympathy with the principles of the points that I have made and with the comments of the hon. Member for Clwyd, West (Mr. Thomas), who is also concerned about the matter. The Minister has promised to continue to look at the issue carefully, and has said that the Government may find another legislative opportunity soon to deal with that and other aspects of the criminal law to allay the concerns of the Law Society and organisations such as Shelter. In view of that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 27, in page 19, line 25, leave out 'enhanced fees' and insert 'a success fee'.

No. 28, in page 19, line 38, leave out from beginning to 'any' in line 42 and insert 'A costs order made in any proceedings may, subject in the case of court proceedings to rules of court, include provision requiring the payment of'. No. 29, in page 19, line 43, leave out 'the payment of enhanced fees' and insert 'a success fee'.

No. 30, in page 19, line 45, leave out 'taxing' and insert 'assessment'.

No. 31, in page 19, line 47, leave out 'the payment of enhanced fees' and insert 'a success fee'.—[Mr. Vaz.]