LEGAL AID BILL (Hansard, 13 February 1964)

§ THE LORD CHANCELLOR

My Lords, I do not think that your Lordships will expect me to speak for very long on this Bill, for in its main features it is similar to one to which your Lordships gave attention in March of last year. I then explained it pretty fully, and it is not very easy to make a different speech proposing for a second time that the same Bill should be read a second time. But if perchance some of your Lordships have looked at Hansard and seen what I said then, I hope they will forgive me and not accuse me of tedious repetition if I say much the same to-day.

When the Legal Aid Scheme was being devised by the Rushcliffe Committee, and the Legal Aid and Advice Act was considered in Parliament—and, indeed, since then—there has been much discussion in Parliament, in the Press and in legal circles about the problems which this Bill seeks to tackle. It has, indeed, been an intractable problem. Many suggestions for its solution have been considered, and this Bill contains what we believe to be the best way of dealing with it. As your Lordships know, in the ordinary way the successful party in litigation obtains an order for costs against his unsuccessful opponent. If a man is sued by an impecunious person whose claim fails, it may not be possible to obtain from him the costs which he has been ordered to pay. That is one of the chances of litigation.

I think it is generally agreed that the provision of legal aid to help those considered to have cases worthy of litigation (maybe to recover damages for personal injuries, maybe to establish some right or other) is a very desirable and beneficial social service of which we may well be proud. But if, as a result of obtaining legal aid, a man embarks on litigation and loses his case, and is then ordered to pay the costs incurred by his successful assisted opponent, the result may be to ruin him or drive him to bankruptcy. That is why Section 2, subsection (2)(e), of the 1949 Act pro- 650 vides that the assisted litigant's liability to pay his opponent's costs is not to exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including the means of all the parties and their conduct in connection with the dispute". I am sure your Lordships will agree that this is a proper provision so far as the assisted litigant is concerned. But it must be recognised that it operates unjustly in relation to the successful unassisted litigant. He is unlikely to get an order for the payment of all his costs made against the assisted litigant. He may not get any order at all for the payment of any of his costs. So it can be said, as my noble and learned friend Lord Reid has in fact said, that, so far as the assisted litigant is concerned, this is an example of "Heads I win, tails you lose". The injustice is even greater if the assisted litigant appeals and loses again, for then the unassisted litigant, though successful, may find himself having to pay two sets of costs: and if the assisted litigant appeals to your Lordship's House and loses, three sets of costs. It is in an endeavour to remedy that situation in some degree that I bring this Bill before your Lordships.

There are, I know, some who hold the view that if the State aids a litigant who loses, then if that litigant cannot pay the successful litigant's costs, the State should do so. That would indeed cast a heavy burden—and an unacceptable one—on the Treasury and the taxpayer, and it is open to the serious objection that to adopt that solution would put the successful unassisted litigant sued by an assisted person in a far better position than the successful litigant sued by an unassisted person of limited means. In the former case, the successful litigant would be certain to get all his costs paid: in the latter case, he would be unlikely to do so. The provision made in this Bill is designed to secure that a person sued by an assisted person is not put in such a preferential position.

Clause 1 gives the court power to order the payment out of the Legal Aid Fund of costs to the unassisted party. It provides in subsection (2) that before such an order can be made the court has to be satisfied that it is just and equitable in all the circumstances that provision for those costs should be made out of public funds … 651 and, further, that the court is under a duty to consider what orders should be made for costs against the party receiving legal aid and for determining his liability in respect of such costs". The purpose of this is to ensure that the court keeps in mind the fact that the assisted litigant can be ordered to pay costs, and to ensure that the court considers whether he should be ordered to do so. These two matters must be considered by every court, whether appellate or of first instance, before any order is made for payment out of the Legal Aid Fund.

My Lords, there is one further limitation imposed by subsection (3) on the power to order payment of costs out of the Fund. That subsection provides that no order shall be made for the payment of the unassisted party's costs if these were incurred at first instance only unless that party was the defendant and the court is satisfied that he would suffer severe financial hardship if no order were made. There are two points I should draw to your Lordships' attention in connection with this. First, in courts of first instance such orders for the payment of costs out of the Fund can be made only in favour of unassisted defendants. The reason for this is that, if a man chooses to sue then there seems to be little justification for the State's being required to pay his costs if he succeeds against an assisted litigant. Secondly, the order can be made in favour of a successful unassisted defendant only if the court is satisfied that he would suffer severe financial hardship if no order were made. It was this provision that gave rise to some discussion and criticism in another place.

I have carefully considered the views expressed, and have given much thought to the suggestion that this particular provision should be dropped. I have come to the conclusion myself that this provision must be retained in the Bill. If it is omitted, the result will be that the Fund will become liable to pay all the costs of every successful unassisted litigant when the litigant could not show that the failure to pay him out of the Fund led to his suffering severe financial hardship. Big corporations and insurance companies, who are of course frequent litigants, might 652 thus get their costs, and this would place a very substantial burden on the Fund, and so on the taxpayer. It is not possible to calculate with any certainty how great it would be; but to do this would indeed be to place the successful defendant sued by an assisted plaintiff in a better position than one sued by an unassisted plaintiff, from whom he would not be certain of getting his costs.

Clause 2, subsection (1), is new, and it is my intention to make regulations for the purposes contemplated by the three sub-paragraphs of that clause. It is necessary, and I think appropriate, to prescribe by regulations what are to be treated as separate proceedings, and also what are to be treated as instituted by the party receiving legal aid—for instance, proceedings by way of counterclaim and cross-petition. I am at present considering the manner in which this Bill should be applied where the unassisted party is acting in a fiduciary, representative or official capacity. It will be necessary to adapt the "severe financial hardship" requirements for unassisted parties such as trustees, executors and administrators. It is not by any means easy to devise a fair scheme for the application of the Bill to such persons, but I am confident that it will be possible to devise a satisfactory method in relation to their costs. The regulations will of course be laid before your Lordships in due course.

Clause 3 makes the necessary provision for adaptation to Scotland. Clause 4 makes it clear that if the Northern Ireland Parliament decides to legislate on the lines of this Bill it can do so in relation to Northern Irish appeals to the House of Lords or in references to the Judicial Committee of the Privy Council.

My Lords, I do not think you will expect me to say much more about this Bill. I commend it to your Lordships, It is, I think, a useful reform and will at least go some way to remedy an injustice which has been apparent ever since the Legal Aid Scheme was devised, an injustice to which much thought has been given over many years in an endeavour to find a satisfactory way of dealing with it and I commend this Bill to your Lordships as one that gives the courts considerable powers to alleviate the hardship suffered by successful opponents of 653 assisted litigants. I beg to move that this Bill be now read a second time.