HL Deb 05 February 1990 vol 515 cc526-79

3.17 p.m.

The Lord Chancellor

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee. —(The Lord Chancellor.)

On Question, Motion agreed to.

House in Committee accordingly.


Clause 44 [Conditional fee agreements]:

Lord Hacking moved Amendment No. 187: Page 35, line 12, leave out ("and").

The noble Lord said: If it is convenient to the Committee I should like also to address it on Amendments Nos. 188 and 191. In our deliberations on this Bill we have now reached the stage of considering the proposed conditional fee arrangements. Those are the proposals made by the noble and learned Lord which arise out of his Green Paper on contingency fees. In moving this amendment I seek neither to advocate nor speak against the new proposed conditional fee agreements.

My amendments are directed to two smaller but nonetheless important points. The first point is that, if there are to be conditional fee agreements, they should be set out in writing. Secondly, that the noble and learned Lord should identify the essential ingredients of that statement in writing to the client.

It is already good practice, when entering into an agreement to act for a client, to set out the terms of that agreement, especially the terms concerning the fee arrangements. Under the new proposed conditional fee agreements there are added more important reasons why that agreement should be set out in writing.

With regard to the essential information that the agreement in writing should contain, when a client is being invited to consider the conditional fee agreement, in my submission it is important that he should be fully aware of alternative means of funding the legal services that are being provided to him. The nature of the conditional fee agreements makes it most important that the client understands the full consequences of entering into such an agreement.

Without either advocating or speaking against these new proposed arrangements, for the reasons that I have put before the Committee, I beg to move the amendment standing in my name.

Lord Campbell of Alloway

As the Committee knows, I am committed to resist conditional fee agreements. However, if we are to have them —I hope that we shall not —surely we must support these amendments. We are considering a person providing advocacy or litigation services. There ought to be some unified regime under which this conditional service is rendered which would govern barristers, solicitors and the authorised bodies, albeit in consultation with all those bodies. There ought to be some unified system so that there is fair competition between all those providing the services.

On that basis I support the amendments, and in particular Amendments Nos. 188 and 191. However, I hope that the Committee will not accept conditional fee agreements.

Lord Hailsham of Saint Marylebone

I take the same view about the merits of Clause 44 as my noble friend. But it is surely not enough for the amendments that are proposed simply to be contained in a conditional fee amendment. Surely the other side should know what has been agreed between the client and his own adviser or advocate. The other side may have to pay in certain circumstances and therefore has an essential interest in such an agreement. The court should surely be told in writing what has been agreed before the proceedings are started, because in the end the court will have to tax the successful party's costs. The agreement may have been altered during the course of the proceedings to the disadvantage of the losing party.

Lord Hacking

Will the noble and learned Lord allow me to intervene? That point is covered in subsection (8). For the purpose of taxation, other parties in the litigation will not be required to make any additional payment over the standard costs in the case of a conditional fee arrangement.

Lord Hailsham of Saint Marylebone

All the same, one ought to know in advance exactly where one stands when one is dealing with contested litigation. It ought to be registered in some form so that people know the contents of the arrangement at the time when it is arrived at. Otherwise it is very much in the air.

The Lord Chancellor

On these amendments there is a good deal to be said for the views that the noble Lord, Lord Hacking, has put before the Committee. I have felt on balance that, since the risk of uncertainty would fall on the lawyer making the agreement, it would be highly likely that he would normally protect himself by reducing the agreement to writing. However, in view of the fact that the noble Lord has put the matter forward, I am very happy to consider it further. So far as I can see, there is little difficulty. If the noble Lord will allow me, therefore, I should like to consider the matter.

Lord Hacking

Unless other Members of the Committee wish to speak to my amendment, I beg leave to withdraw it.

Amendment, by leave, withdrawn.

[Amendment No. 188 not moved.]

Lord Allen of Abbeydale moved Amendment No. 189: Page 35, line 18, after ("by") insert (", or as the case may be, the calculation by reference to").

The noble Lord said: I should like to speak also to Amendments Nos. 190, 192, 193 and 194. I do not wish to pre-empt the discussion on clause stand part, but for the purpose of these amendments I am bound to make the point that, however generous legal aid may be, there will always be a gap between those who qualify for legal aid and those rich enough to enter into legal proceedings without a qualm. I think it most desirable, in order to help in a modest way towards filling that gap, that there should be on the statute book provisions which enable conditional fee arrangements to be made in a way that avoids the problems raised by the American arrangements. It is one way in which access to justice can be improved.

In these amendments, I am suggesting rather tentatively that, if powers are taken to introduce some form of contingency fees, the opportunity should be taken to widen those powers a little. The scheme can then be expanded if experience shows that that would be useful in order to take account of the possiblity of other methods of calculating the fees to be paid going beyond a percentage of the lawyer's fees.

If I dare say so, it might, for example, be thought desirable to provide that lawyers may be additionally remunerated by taking, in prescribed cases, a prescribed proportion of the sums recovered by way of damages. The noble and learned Lord the Lord Chancellor might perhaps appoint a committee of lawyers, laymen and representatives of consumer interests to advise on the permissible means of calculation.

I fully realise that the powers in the clause as it stands would be unlikely to be used on a great scale in the early days. I am not suggesting that there would be any question of using the additional powers for some time to come. However, it seems rather a pity that it would be necessary to come back for further legislation if experience showed the need for some development of the original concept.

I am certainly not wedded to the drafting of my amendments. I put them forward as a possible means of permitting flexibility and subscribing to what the noble and learned Lord described on an earlier occasion as "evolutionary change". I beg to move.

Lord Campbell of Alloway

Perhaps I may ask the noble Lord a simple question. Can these appropriate means of calculation in his concept bear any relationship to the damages recovered? Is so, that would indeed be a serious derogation for the concept of Clause 44 as it stands.

Lord Allen of Abbeydale

I thought I had explained that that is one possibility that could be envisaged in the future, not on the American model but only under strict prescription as to the proportion and type of case in which it might be possible.

Lord Campbell of Alloway

I thank the noble Lord. I hope that the Committee will not accept the amendment in any circumstances. It opens the door to an even greater objection than the objection that already arises to Clause 44 as it stands.

Lord Mishcon

I urge the Committee to exercise the caution that should undoubtedly be exercised when dealing with the question of lawyers' costs, conditional fees and contingency fees. I appear to have caused some merriment. I am talking about a very serious subject and one that affects the public very greatly.

There is not the slightest doubt that when legislation opens a door very slightly there is the danger of future legislation opening it still wider. If the Committee accepts the view that there can be conditional fees limited in the way that has been indicated in the Bill, I hope —and I am speaking personally —that the matter will end there. To walk into the possibility of the American model of contingency fees is asking for trouble for the public and the profession.

I should like to give the Committee an example of what could easily happen. Let us suppose that you have a personal injury case. You are covered in regard to your fees only if there is a recovery of damages in which you, the lawyer, participated. You are saved a great deal of trouble by the defendant insurance company offering a sum almost at the beginning of the case which, if you are thinking objectively and endeavouring to advise your client so, you believe may well be too small. However, as the lawyer —and here lies the conflict of interest —you face the possibility of a long trial with very much work at the end of which you may receive nothing. Yet here is a prospect of your walking away with a percentage of what has been offered by the insurance company as against having to do all that work and run all that risk. Is that what Members of the Committee would like the legal profession to be driven into?

I have one fear which I shall mention again later in Committee. I hope that even with the conditional fee there will be no question of a legal aid board saying to the client, "You will not receive legal aid because this is a case where you might find a solicitor who will do it on the conditional fee basis". Obviously, that would be a very wrong way in which to deal with legal aid.

Therefore, as I said when I commenced my remarks, the whole question of the regulation of lawyers' fees, within proper professional ambits and with a due regard to the way in which an honourable profession is supposed to behave, is a matter of serious concern to the Committee. I hope that, if we are to have the conditional fee, we shall not embark upon anything further; nor shall we give anyone the power to make recommendations or decisions which will further that conditional fee into areas which are extremely unhealthy.

3.30 p.m.

Lord Hailsham of Saint Marylebone

I too hold the gravest doubts about what I can describe only as an extension of the proposals in a clause which I regard as inherently immoral. Where are we going if it is not in the American direction? We know what the American direction is. In the Green Paper we were promised that we would not follow that path and now we are invited to follow it up to a point. I am not at all sure what the point is because I was not wholly able to understand the amendment when I saw it in print nor when I heard it advocated orally by the noble Lord, Lord Allen of Abbeydale.

I do not wish to compromise the debate which will surely follow on the desirability of the principle of Clause 44, and therefore at this stage I make only the following comment. Damages are intended to compensate the plaintiff who has been wronged. That is the principle which is followed. However, in America a successful litigant —whether plaintiff or defendant —virtually does not receive his costs. He does not receive what we would call his "costs".

In recent years —and such a case took place during my second term of Chancellorship —not only have we not gone down the American path but we have destroyed the old basis of party and party costs, which at best gave one about two-thirds of what one had spent, and have awarded costs which more approximately represent what one has actually spent. That was done on the common fund basis which has now become the standard basis. Beyond that, one has solicitor and own client, indemnity costs and so forth. We have gone down the opposite road in order to compensate the plaintiff for what he has suffered, if he has suffered any wrong, and also to say that the unsuccessful defendant should pay the costs of maintaining the case at the cost of the legal proceedings.

It is as well to look at the situation in America. It has the civil jury, which accentuates all the evils which the contingency fee system may or may not involve. The civil jury aims off for the contingency fee. Therefore, it awards against the unsuccessful defendant a sum approximately twice that to which he is entitled by way of compensation. Thus the American civil jury substitutes for our scientifically balanced system of costs an excessive award of damages. It may be that in some fields civil juries in this country do that but for different reasons. However, we shall not go into that matter today.

After two world wars, and stage by stage, we have gradually moved towards a judge-alone system. We have done so to great advantage, in my opinion, though against the natural conservatism of my profession. However, even if we retain that system —particularly in cases of personal injury —it is my experience that if you scratch a judge you find a civil jury underneath, though not quite to the same extent as a civil jury of 12. Perhaps when you scratch a judge you get one-twelfth of a civil jury. In other words, you are introducing the same evil because the judge too will aim off.

Baroness Phillips

I understand that the Committee will debate the Question, That the clause stand part. However, I hasten to intervene in order to remind Members that one of the reasons why I, among many clients, welcomed the Bill —the word "consumers" does not appear to be favoured —was because it would enable 80 per cent. of the population who neither qualify for legal aid nor are rich enough to contemplate action to enjoy the due processes of law.

I am touched by the vision of a profession which does not work for money. I am deeply touched by that. Nobody would suggest that its members would automatically force up costs in order to obtain more, so why should they be in a position where they are not properly rewarded? I believe that the whole issue has been confused. I originally understood that the clause was intended to enable more people to obtain the benefit of the operation of law which exists for them.

All Members of the Committee know many people who will not go to law when they have a good case simply because they are frightened of the final amount and that they may not gain anything. In other words, it is the old question; "Why throw good money after bad?".

The Lord Chancellor

I too am anxious not to pre-empt the main debate on clause stand part. However, in the light of the consultation which we held on this matter, I concluded that the correct principle was that the legal profession should be able to take on conditional fee arrangements—conditional on the success of the case but also conditional on the principle that the remuneration should be related to the work done.

That is what my proposal means; namely, that the only basis for remuneration will be the taxed costs awarded against the other side. In other words, it will make no difference as regards the other side whether, for example, the plaintiff is funded in that way or funded out of his own pocket. The actual price or payment which the other side must make if it loses is the sum of any damages awarded plus the taxed costs. It is those taxed costs plus, if necessary, a percentage uplift which would be permissible but nothing based on the award of damages.

The reason that I did not do that is that there is nothing at all necessarily connecting the size of the award of damages with the amount of work done. For example, there could be a huge award of damages to a paraplegic where liability was admitted and the amount of work done by the lawyer was very small indeed. That seems to me to be wrong in principle. As my noble and learned friend Lord Hailsham pointed out, we have a system available to us which is quite different from the American system because that does not have an award of costs, for example, to a successful plaintiff against a defendant. Therefore the sort of arrangement which I propose is not open there.

However, I do not believe that it would be wise to go for anything more than that which we have proposed. Therefore, although I understand what has motivated the noble Lord, Lord Allen of Abbeydale, to suggest this, I feel that the principle upon which I have stood is sound, subject to what we shall hear later, and that it would be wrong to go to anything which would allow professional remuneration to be related to the award of damages. It might be related underneath the percentage but not in the way suggested.

Lord Allen of Abbeydale

As I explained at the beginning, I put forward this proposal rather tentatively. It gave rise to an interesting discussion in which the lawyers who contributed to the debate ran very much according to form and said precisely what I expected them to say.

It looks rather different when one is a consumer and cannot get legal aid and I go along with the earlier comments of the noble Baroness. However, I take the explanation which the noble and learned Lord has given. I have an uncomfortable feeling that in a few years' time, when, as I hope, this clause will have survived and will have been put into operation, we may seek fresh legislation. However, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 191 to 194 not moved.]

3.45 p.m.

On Question, Whether Clause 44 shall stand part of the Bill?

Lord Rawlinson of Ewell

I rise to oppose the Question whether Clause 44 shall stand part of this Bill. This clause deals with the proposed conditional fee arrangement. I should have thought that even commentators who had been seduced by a belief that this Bill is one of reform to introduce cheaper and better access to justice would hesitate over this clause giving for the first time, as has already been indicated, advocates a direct financial interest in the result of a case.

I have no doubt that as the noble Lord, Lord Allen of Abbeydale, clearly indicated in his last comment, if this clause and practice are permitted cases will develop into speculative litigation, some of which can amount at times to blackmailing action. Eventually, our jurisdiction will join that of the jurisdiction referred to, of which this is its worst feature.

The old system, the present system, is that the advocate must have a fee marked on his brief. There is no financial consequence to him arising from the result of the case. He does not have his brief marked when he appears for the Crown because those fees are laid down on a specific scale. Traditionally in this country an advocate has always been regarded as an officer of the court, as is a solicitor. He has a duty to the court and must have and must give that detachment. The fact that he has no financial interest in what happens to the case and the amount of damages to be awarded gives him that strength of detachment to enable him the better to exercise his duty.

It may be said that this Bill permits those with reduced means to have access to the courts. Forty years ago, at the time of a Labour administration, it was decided —and it has been maintained ever since —that that problem should be resolved by the provision of legal aid. If you will the purpose, you must will the means. What has fallen badly away from the principle of those days and subsequent days is the proper funding of legal aid. That is the most serious of all the matters which face the consumer or customer at present. I fear that by this provision the Government give the impression of seeking some alternative —a demeaning alternative —to properly funding legal aid.

Perhaps I may indicate some of the mischief of which I had experience at the libel Bar and to which I referred on Second Reading. One held retainers for newspaper groups and one could see, even under the present system, that there were sufficient threats to bring actions for libel against newspapers which were of no merit whatever but which would cost the newspaper so much that it would do better to pay up and pay off the plaintiff in order to send him away.

Under the new system, if this clause is accepted, there will be a vast increase of that sort of mischief. We have seen the level of damages which juries have awarded. Was not £1.5 million awarded in damages to a noble Lord? If we develop into the American system some 40 to 50 per cent. of those damages will go into the lawyers' pockets —in the case I mentioned some three-quarters of a million pounds. That must encourage speculative action. The financial reserves of the newspapers had better be greatly increased if we start that process by introducing this clause.

That is the worst feature of the United States system, which has been referred to by my noble and learned friend Lord Hailsham. We have seen that. There is the ambulance chasing at the natural disaster or plane crash. We saw that that happened when there was that chemical leak in India. The American lawyers on the scene made offers to relatives of the injured saying that there would be no fee if there was no win. Those lawyers received 20, 30 or 40 per cent. of the damages. Members of the profession to which I am proud to belong acted like vultures. That all derives from the fact that if you give the lawyer a financial connection with the result or if you introduce this market philosophy into the administration of justice, not only is an economic principle being distorted with which many of us agree but the principle will be damaged if it is introduced into the field of justice.

I cannot recollect the statistic exactly, but about 80 to 85 per cent. of all actions in the civil courts are settled before they come near a court. What will happen in the circumstances of a conditional fee, with no fee no win? Will more actions be settled or fewer actions settled?

It is, therefore, something in which this Committee, which has looked so carefully at so many clauses of the Bill, must surely unite in saying to my noble and learned friend, "Increase legal aid if you want to give people more access, as you ought to do, but we beg you not to introduce this, the first step along a path which will lead to a very sad day for the administration of justice in the United Kingdom".

Lord Ackner

It was 11 years ago that the Royal Commission on Legal Services, under the distinguished chairmanship of my noble friend Lord Benson, considered and reported against contingency fees. It was seven years ago that the Government, in the White Paper devoted to dealing with the recommendations of that Royal Commission, accepted that recommendation. We are entitled to inquire: what has happened since to justify the proposed volte-face?

It will be said that the Civil Justice Review committee has sat and reported. I in no way criticise that review body. It was presided over by laymen. It had a majority of laymen on it and they very responsibly considered the pros and cons of this suggestion. It ended by saying that the review has not been able to make a full study of the matter and suggested its re-examination.

That was followed by a Green Paper devoted wholly and solely to this subject. That provoked the no doubt uncharitable view that the Government are attaching such importance to this subject that it will act as a smokescreen and produce the answer, when more legal aid is sought, "But you do not need to extend legal aid; go and ask the solicitor to take on a speculative action. If you have such a good case he will be delighted to do so".

The Green Paper drew attention to what occurs in Scotland, but it gave remarkably little detail. It did not give us a breakdown of the type of case; the nature of the risk run; the number of refusals that arose; the number of cases settled or the terms of settlement, or the type of advocate who took the case. I therefore took the great liberty when I had the privilege of meeting the then Dean of the Faculty of Advocates, Mr. David Hope, Q.C. —now the Lord President of Scotland —to ask him about his experience. He said that the figure of 1 per cent., to which reference has been made, was conjured out of the air because there were no statistics at all on this subject. It was merely an indication of how little use was made of the possibility.

I then asked in what circumstances, generally speaking, it was resorted to. He said that very occasionally a solicitor will go to a barrister whom he is used to briefing and say "I have a personal injury case. Time is running out to such an extent for the issue of proceedings that I will not be able to get the decision of the Legal Aid Advisory Committee before I must issue the writ and statement of claim. Will you be kind enough, therefore, to agree, without fee, to settling the writ and statement of claim and I will come back to you when I know what has happened with the Legal Aid Advisory Committee?" The barrister almost always agrees to do so. The solicitor returns and says "That is fine, we have legal aid", or he may say "No legal aid. They did not think it was a sufficiently strong case". The case is then either dropped or settled. In a great rarity of cases it may go on because the barrister and the solicitor do not share the view of the Legal Aid Advisory Committee. One might have expected the Committee to have been given a little of this detail, but not so far.

The other thing the Committee might have expected when the Civil Justice Review suggests a re-examination is that the Government would turn to the Law Commission, which is both wholly responsible and wholly independent, and ask for its views. There was plenty of time to do so. The Civil Justice Review committee reported about 18 months ago and there was time to get its views. They were not concerted. This stimulated the Law Commission, which thought the proposal a thoroughly bad one, to produce a report of about 33 pages, to some of which I shall refer.

That report was provided to the Government after the Green Paper but before the issue of the White Paper. One might perhaps have thought that it would be referred to in the White Paper; not a bit of it. All one finds in the White Paper regarding reactions —I read from page 47 —is this: There were over 500 responses on this topic. The majority of respondents (60 per cent.) were again solicitors. There was little support for a full contingency fee system. Many saw a more limited option as being ineffective unless the costs rules were changed. There was some support for legalising speculative actions, although it was again stressed that their use would be minimal". It is that, apparently, which has justified the Government proposing what has throughout the years been condemned. In my speech on the Second Reading I describe the paper by the Law Commission as treating the Government's approach to this worrying subject as "shallow" and "superficial". I will make that good by a number of references from the paper itself. The Green Paper states that in 1979 the Royal Commission on Legal Services considered the question whether contingency fees should be permitted. It was overwhelmingly against it. It consulted widely with the public and the professions. It received an overwhelming weight of evidence opposed to it. The Green Paper then suggests that the rule which prohibits a legal adviser from acting for his client on the basis that he will receive a fee if successful but none in the event of failure, is a restrictive practice which is "feudal" in origin and which may operate against the public interest.

The Law Commission holds the view that in truth the rule is one imposed by the law with two principal aims: (a) to prevent the exploitation of litigants, and (b) to promote the interests of justice.

The commission further states that to suggest that to legalise contingency fees would amount to no more than "deregulation" —that is a quotation from the Green Paper —seems to betray a misunderstanding of the origin, nature and purpose which have led the courts to impose the rule. Of course it is right that public policy should be reviewed in the light of changing social conditions. If it becomes clear that such conditions have altered the public interest, the reasons which support the rule should be weighed against the changes. However, the commission would suggest a more rational approach is required to the question of reform than one based on the assertion that because the rule is a restriction, the onus is on those who support the status quo.

I make one or two further references. The report is now dealing with the need for rules if you bring in this radical change. It says: Traditionally in the solicitor-client relationship it is the client's interests that dictate the actions of his solicitor whose duty it is to consult his client's wishes and take his instructions throughout the litigation. It is obvious upon reflection that a solicitor who is investing his own resources to support the client's litigation cannot be required to act on the client's instructions to the same unqualified extent. To take one simple example, after the solicitor has invested a substantial sum in the conduct of the case, it may become apparent that the chances of success are considerably less than they appeared when the client first instructed the solicitor. The solicitor may be unwilling because of his assessment of the chances of failure to invest greater resources. The client, on the other hand, may want to pursue the action. It will be necessary to develop new ethical rules to meet a situation such as this. The commission quotes from the observations of Professor Caughey in the University of Chicago Law Report 1987, where he says in regard to contingency fees: It is more accurate to describe the plaintiff's attorney as an independent entrepreneur than an agent for his client". The only other references I wish to make are these. The Law Commission points out that that will have the effect of increasing actions against professional persons. My noble and learned friend Lord Hailsham referred to the press as being the subject of blackmailing actions. I am far more concerned, because the press is capable of looking after itself —

Lord Hailsham of Saint Marylebone

More or less!

Lord Ackner

—with the individual professional man. The Law Commission says, that there will be an increase in medical malpractice cases. The official referees, in their submission to the Lord Chancellor on the Green Paper, make the point stronger. Members of the Committee will recall from previous debates that the official referees deal with building and construction dispute cases. They say: We think that architects, engineers and surveyors, also doctors and other professionals, could be particularly vulnerable to claims brought or threatened on a contingency basis. The damages recoverable in most construction cases would make receiving a proportion of them attractive, while for the professional even to report the claim to his insurers will probably result in an increase in his next premium. In consequence, however strong the professional's case, he might think it expedient to make a `nuisance payment' if the professional goes to his insurers and the action shows signs of being fully contested, with large costs involved, a speculative solicitor can always advise his client to discontinue.

4 p.m.

Lord Mishcon

I have waited until the noble and learned Lord finished an argument. I would not wish to be in any way confused, but so far he has spoken about contingency fees which many of us recognise as being an evil. Is not this clause directed to the conditional fees and not contingency fees?

Lord Ackner

We are talking about words. This clause is devoted to the solicitor obtaining his remuneration plus an uplift on the contingency that his client succeeds. That is a species of contingency fee; it was so described in the Green Paper and so dealt with by the Law Commission. I am fully aware of what the noble Lord has in mind, and that is a percentage of damages. I am not dealing with that.

Finally, I invite the attention of the Committee to what the Law Commission finally advised: The commission believes that greater research and more thought is necessary before it can be concluded that the introduction of a contingency fee would in fact significantly increase access to justice in this country especially since many of the cases which in the United States makes use of the contingency fee system are catered for by our own legal aid system. Secondly, Codes of practice and rules of conduct have not proved an adequate protection for litigants or apparently for the interests of justice in the United States. Thirdly, To require the litigant to pay any significant sum out of his damages does of course detract from the fundamental principle of English law that the courts strive to put a wronged person back into the position he would have been had he not been wronged. One writer has said: 'Any time a litigant has to pay representation expenses from his award justice is not done' ". It therefore concludes that far too little time, too little thought, and an excessively superficial approach have been allocated to this very difficult subject, and it is for that reason that I suggest that the Government should think again.

Lord Renton

When my noble and learned friend the Lord Chancellor has heard all the arguments in this debate, I hope that he will feel the wise course will be not to keep this clause in the Bill. I join with the noble Lord, Lord Mishcon, in making clear that we are not discussing the type of contingency fee which involves taking a share of the damages if one is acting for the successful party. We are discussing a matter which is not very far removed from it; namely, a conditional fee agreement under which, in accordance with the clause, the solicitor and barrister, or the solicitor and advocate, acting for the lay client, will only be paid if they win the case. I suppose, as a slight compensation for the risk, they will be paid a higher percentage of fees than normal for a case of that type and for the issue involved.

Let us consider the reality of the matter. If the lay client loses his case, he will still have to pay the costs awarded against him including the fees of his opponent's counsel and solicitor though he will not have to pay his own counsel and solicitor. That is the first and most obvious factor. If the lay client wins his case, and if his opponent does not possess the means to pay the costs awarded against him, the successful lay client, as a result of the conditional fee agreement, will have to pay his own counsel and solicitor more than if there had been no such agreement.

I make no apology for mentioning the matter again and adding some further factors. This measure is a poor substitute for improved legal aid. On this occasion it is a question of cost to the Treasury. Under the Bill there will have to be a good deal of public money spent on setting up various new bodies; namely, the advisory committee, the ombudsman for conveyancing services and the conveyancing appeal tribunal. But it goes without saying that, marginally to some extent, the Lord Chancellor's Department and the Director General of Fair Trading must have more officials. That will mean more cost. In the financial memorandum to the Bill it is pointed out that these new bodies will cost several million pounds. Altogether, between £5 million and £7 million will have to be spent in the first year, and more than that in later years when the system is underway. I suggest that the money would be much better spent on legal aid than on this poor substitute for it.

One difficulty has not so far been mentioned. When we discussed the cab rank rule last week my noble and learned friend said that he was in favour of it in principle. He had previously called it an important constitutional principle. I suggest that what is proposed in Clause 44 is inconsistent with that principle. I shall give two examples. The first is the barrister who says to his client, I am sorry, I won't enter into a conditional fee agreement because I consider that conditional fee agreements are wrong in principle". Most barristers already feel that that is so. He would then have to refuse the case, and it would be against the cab rank rule for him to do so.

My second example concerns the fairly young married solicitor or barrister with several growing children and no private means of his own. He decides to take one of these cases which lasts a long time. If a request is made to him to take another case with a conditional fee agreement which might also take a long time he would have to refuse. He could not afford to carry on taking difficult and longish cases without payment. That is another example of where he would have to disobey the cab rank rule.

This is a serious matter. Anxiety is felt in many quarters, and not only in the legal profession. I have heard other people say that they do not think it is right to try to solve the present difficulties of our system in this way. I most earnestly support those who say that Clause 44 should not stand part of the Bill.

4.15 p.m.

Lord Peyton of Yeovil

I lack the learning of other noble Lords who have taken part in the debate and so perhaps I may be forgiven if I ask a very simple and straightforward question. How many of us are really convinced that it would be right to make three distinct moves in the direction of the American system, and what gains would result from our doing so? First, it is proposed that we move towards the amalgamation of the two professions. Secondly, we are making substantial moves in the direction of setting up, in fact if not in name, a Department of Justice. Thirdly —this is the point with which we are here concerned —we are for the first time giving the advocate a pecuniary interest in the outcome of the case.

In those circumstances I feel that it is a measure of the very great esteem in which my noble and learned friend the Lord Chancellor is held that the Bill has had, relatively speaking, so smooth a passage. I speak with the utmost respect for my noble and learned friend when I say that in my anxieties I very much sought comfort from his words. Far from being allayed, my anxieties were however increased by words which he used. I hope the Committee will forgive me if I quote briefly from the Second Reading debate. My noble and learned friend said: I do not put myself forward as a prophet. I believe that if the proposals are rational and well based, and if we have set up a decent machinery for handling them, the results are likely to be beneficial. The machinery is capable of evolutionary change. I believe that we shall be able to proceed in an evolutionary way and to judge the results to some extent as we go along". —[Official Report, 19/12/89; col. 248.]. I derive no comfort from those words. My considerable anxieties about the three basic changes proposed in this legislation, far from being allayed, are sharper than they ever were. I very much hope that my noble and learned friend will have second thoughts about this clause as well as, perhaps, about some of the other matters that I have mentioned.

Lord Rippon of Hexham

I intervene briefly to refer more specifically to the clause itself. I appreciate that the purpose of the clause as it stands is restrictive. But apart from the reference of my noble friend Lord Peyton of Yeovil to the evolutionary process to which my noble and learned friend the Lord Chancellor referred at Second Reading, we have to consider the intervention this afternoon of the noble Lord, Lord Allen of Abbeydale. He quite clearly indicated that he hoped that this would be the thin end of the wedge leading to a form of future legislation which might be closer to the American system. The American system would at least have this disadvantage. It would be perfectly clear from the outset what the basis of the fee would be. If, for example, the lawyers appearing for The Sunday Times had agreed to accept 10 per cent. of the 60p damages, that might have been regarded as the best joke of all. As it is, it is not clear how the payments are to be made.

In Clause 44 everything really depends on orders to be made by the Lord Chancellor. Subsection (4) says: In this section "specified proceedings" means proceedings of a description specified by order made by the Lord Chancellor for the purposes of subsection (3)". Subsection (5) provides: The Lord Chancellor may by order prescribe such maximum permitted percentages for specified proceedings as he considers appropriate". Subsection (10) states: The proceedings mentioned in subsection (1)(a) are any criminal proceedings and any proceedings under". There is then a list of possible proceedings, and then of course it is said at the end in subsection (11): The Lord Chancellor may at any time by order amend subsection (10) by adding or removing descriptions of proceedings". So there is nothing certain in the clause.

Sir Harold Kent, who was first parliamentary counsel and then Treasury solicitor, says in his memoirs that when he was a young man he drafted a clause for which he was much praised by a senior civil servant —someone perhaps as senior as the noble Lord, Lord Allen of Abbeydale —who said, "Well done, my boy; nice and vague". And that is what this clause is.

Finally, I ask my noble and learned friend the Lord Chancellor whether he has yet studied the 39th annual report of the Law Society and the Lord Chancellor's Advisory Committee. It was only ordered to be printed by the other place on 1st February. It may be of interest to those who do not think that lawyers ever speak for anyone but themselves. The relevant paragraphs are 74 to 77. The committee says: This Committee has always opposed, on the grounds of conflict of interest, the introduction of contingency fees whereby a lawyer is paid only if the client's case is won, with payment fixed by reference to a percentage or share of the award that is made". I believe that most of us are opposed to that idea.

The committee continues: We are therefore pleased to note that the Government has rejected any type of fee involving a proportion of whatever damages are obtained. We remain somewhat apprehensive, however, regarding the proposal to allow conditional fees with a percentage addition to the normal costs". The committee asks that it should be ensured that any such uplift is unlikely to impair impartiality in the conduct of a case —a point made by the noble Lord, Lord Mishcon.

The report continues: Nonetheless, we believe that such conditional arrangements might occasionally prove helpful in cases where legal aid is not available … On the other hand, we doubt whether any such arrangements will have any major impact on financing litigation, first because lawyers will only be prepared to undertake cases on such a basis if they are reasonably certain of success, and secondly because of the disincentive effect of the costs rule". In other words, the Legal Aid Committee, which advises the Lord Chancellor, sees little merit in the proposal. It points to two considerations which it finds especially relevant. The first is to ensure that conditional fees are seen as a supplement to legal aid and not as an alternative; and, secondly, it says that it is also concerned to ensure that the availability of conditional fees is not perceived as a reason for not maintaining legal aid eligibility levels, and for not extending legal aid to those areas where it is presently unavailable. The committee concludes: We do not regard the arrangements for conditional fees as a realistic alternative to legal aid … We think that it is important that the Government should ensure that there will be no loss of service to the poorer client before any of the proposals are actually implemented". I suggest to those of the Committee who think that this is merely a legal argument that they bear in mind the views of the Legal Aid Committee, which clearly does not support the clause, and certainly not as at present drafted.

Lord Mishcon

Perhaps I may —

4.30 p.m.

Lord Hailsham of Saint Marylebone

I should willingly defer to the noble Lord, Lord Mishcon, but he has kindly deferred to me, which was wrong of him, if he will allow me to say so. I want to speak with as much studied moderation as I am capable of. I wish, however, to say that I seldom seek to talk in this place about morals; but I regard this as a straightforward moral issue. I believe a conditional fee of the type proposed, which is only one example of the contingency fee, although not the worst, to be inherently immoral. It undermines the whole ethic of advocacy, the whole ethic of the legal profession.

I have been for most of my life a barrister when I was not in office or in the army. I was the son of a barrister. I am the father of two barristers, one of whom is still in practice. This provision goes against everything that I was taught. It is against everything that I have practised. It is against everything that I have tried to teach my children. An advocate owes three distinct moral duties. His first, and I believe his overriding, moral duty is to the court. His second, and his next most important, is to his client. The third, and it is important, is to his opponent.

The conditional fee, whether in the form proposed or in any other form, undermines all three of those duties because it gives the advocate a direct financial interest in the result of his case. The only defence which the Government put forward in their Green Paper is that they trust the honour of the profession. I am sorry not to see any bishops in their place, but I am afraid that I take a theologically different view from that of my noble and learned friend. He apparently believes in justification by faith alone. He will remember of course that a namesake of mine, the "Ettrick Shepherd" James Hogg, wrote a book entitled Confessions of a Justified Sinner in which the man ended by killing his own brother. I believe that if there is one doctrine of the Christian church which can be proved by experience it is the doctrine of original sin. If we make it pay to be dishonest, people will become dishonest even if they start by being honest. That is what this proposal will do.

The duty to the court is never to deceive the court, never to misrepresent the evidence, and even to bring forward legal decisions on a point of law which are hostile to the case that one is seeking to argue. One's interest of course is to do all three if a conditional fee is allowed. One's duty to one's client is to promote his interests. Let us suppose that one receives an offer of a settlement —I wish to return to settlements because they may be important in this connection —but one can earn a little more money, if the defendant is going to pay out something, by asking for two or three more sets of particulars and so prolong the case a little longer and run up one's bill. One is then making more money. The client's interests may be totally different. As regards one's opponent, one's object is not even to take advantage of an inadvertent mistake. All those factors are contrary to the conditional fee.

In what I thought was a rather simplistic speech O sancta simplicitas at an earlier stage of our discussions on the clause, the noble Baroness, Lady Phillips, seemed to think that 80 per cent. of the country was debarred from receiving legal aid. I shall return to that point also, if I may. Contingency fees are no substitute for legal aid —none whatever. We have gone so far down that road of accessibility to the courts not to be prevented, so far as is reasonably possible, by absence of means.

We then start talking about consumers or, as my noble and learned friend prefers to call them, clients. But there is no one class of consumer at all in contested litigation. There is a plainfiff, a claimant, and a respondent, a defendant. Their interests are directly opposite to one another. The fact is that litigation is a necessary evil, but still an evil. The object of all good litigation ought to be to settle, and to settle favourably, on equitable principles to both parties. It is only if it cannot be settled that you fight the thing to the end. The interests of the parties are opposed.

In an earlier debate, I heard my noble and learned friend say that this was equally favourable to defendants. I am quite sure that it is not. Supposing you are having to advise a defendant in a personal injury case, whether or not he is supported by an insurance company, or a defendant in a libel case, whether or not it is a newspaper, or whether or not you are dealing with a defendant in a negligence case based upon professional negligence. A man without means comes and brings forward against you a vexatious, a frivolous or a frankly blackmailing case. You know that if he wins he cannot pay anything towards your costs. You are bound to advise the defendant to offer him something to go away.

But the contingency fee basis cannot meet that case. The courts will in fact be flooded with frivolous, vexatious and frankly blackmailing claims as they were in certain things before the war, which I well remember, where the first seven years of my practice at the Bar were spent and when there was no legal aid whatever. But you are bound to advise him to go away with a small sum of money, if you can. Of course, you will not have won the case. The contingency will be against you and the condition will not have been fulfilled. How can you make up your mind whether you have won or lost?

I invite your Lordships, if your Lordships think that I am just talking as a lawyer, to look at the subsection of this clause which excludes almost all family matters. Why do you supppose that they are excluded? They are excluded because it is impossible to say whether you have won or lost in a very large number of cases. There is no way in which you can define what constitutes winning or losing in a contested case, if your object is to come to an equitable settlement based on the principles of justice. And so obvious is it that that: is so, that in one whole area of the law—namely, family law —it is expressly excluded from the clause. I can only say that to me this is a stark and simple moral issue.

I say this to the noble Baroness, Lady Phillips, who seems to think in terms of plaintiffs and not of defendants, and who wants, as we all do, the maximum access to the courts when there is a good and reasonable claim. We are told that the Scottish system is a model for us all and the model indeed upon which this clause has been framed. The answer to that is that, at the most, we understand that 1 per cent. of the cases are contingency fee cases; and my noble and learned friend on the Cross-Benches, Lord Ackner, made a very good case for supposing that the figure of 1 per cent. is a gross exaggeration, that it is not anything like that. How does the noble Baroness, Lady Phillips, think that this is to be a substitute for legal aid access to the courts? My own view is that it is not and cannot be.

In 1979, the late Lord Elwyn-Jones introduced a set of rules under which about 70 per cent. of the population were covered by legal aid to a greater or lesser extent. I am sorry to say that they have been whittled away, though I did my best to maintain them during my period of office. But I am bound to say that there is more than a suspicion in my mind that what actuates the Cabinet in this case, though I would be the last to suggest that my noble and learned friend necessarily is actuated by the same motives, is to provide a substitute for legal aid in the form of a contingency fee. Even if that is not the object, I am perfectly sure that the Treasury will use it as an argument when the next set of regulations occur.

But it is not a substitute. The Scots have voted with their feet. They will not have anything to do with this evil thing. Less than 1 per cent. of the cases are fought on this basis. They cannot touch it with a barge pole and we are asked to imitate them. I hope that we do, if it goes through, which I hope it will not. This is an evil thing and it can only be described as evil and corrupting to an honourable profession.

Lord Mishcon

After that usual eloquent speech of the noble and learned Lord, Lord Hailsham, who mentioned as the main background of his argument the issue of morals, I wonder whether I might put a few thoughts to your Lordships. I do so with very great respect.

I ask your Lordships to realise what is the position today in regard to civil litigation, and what practitioners in the law, who seek to conform with their very honourable traditions, have to deal with? The noble and learned Lord, Lord Hailsham, was absolutely right. I know that it was one of the great prides of my late lamented and much respected friend Lord Elwyn-Jones, that he had brought to legal aid and its limits 70 per cent. of the population of this country. The noble and learned Lord, as one would expect of him, was absolutely accurate regarding that percentage. That percentage has dropped catastrophically and therefore, when one is dealing with the issue of morals, I will tell the Committee in all frankness the position that we on our Benches have to adopt.

It is literally true that 70 per cent. of our population, if faced with the necessity of dealing with civil proceedings either as plaintiff or defendant, if they were to be of any length or importance at all, would have to tell their lawyer. "I know that it is unjust, unjust to me and to my family, but I cannot afford to do it." If that is a moral issue, as I think it is, it is a very important moral issue and one with which we cannot deal with any equanimity at all at the present time.

The limits of legal aid are such —and I repeat it —that it would be literally true that without a grant of legal aid 70 per cent. of our population could not face a long civil case. What do you do about it? You do as I have tried to do, as others of my noble friends have tried to do, as those on the other Opposition Benches have tried to do and as some good folk on the Government Benches have tried to do. We plead with the Government, "Please, in the name of justice, in the name of morals, increase legal aid, unless you want to make a mockery of the famous ideal that our courts of justice are open to all for justice to be done, whether they be poor, whether they be of medium means or whether they be of wealth." Unfortunately the pleas have not met with success. I know, as Members of the Committee know, that if I had made this plea by way of amendment to the Bill —which would be technically impossible —I might say, "Let this clause go but put in its place a grant of legal aid", such as I believe was referred to by the noble Lord, Lord Renton. That would enable the people whom I have talked about, the people of medium means, to enter the courts of justice with confidence and without feeling that if they continue to do so they will be ruined and so will their families. We all know, as a matter of reality, that even if such an amendment could be put technically, the Government would not accept it. Nor would they accept an amendment to the amendment which gave us even half of that.

What does one do, faced with the moral issue of whether or not our courts of civil justice are open to all? Unfortunately what one has to do is to compromise. If Members of the Committee ask me personally whether I like the compromise of conditional fees, I have already frankly confessed that I do not. That is not the view of many in my profession; it is not even the view of the Law Society.

Baroness Seear

I am sorry to interrupt the noble Lord. Would be not agree that if we accept contingency fees, that would always be used as an argument against improving legal aid and weaken the case for more legal aid, which is what we on these Benches wish to see?

Lord Mishcon

The noble Baroness has anticipated the last part of my speech but she has put it very much more shortly. I am grateful to her, and I shall try to remember her words when I utter the last part of my remarks.

This cannot and must not be a substitute for legal aid. Even more than that, it is the very reason for Amendment No. 194A, to which I refer the Committee. The amendment says: where it appears to the Legal Aid Board that an agreement under section 44(1)"— that is the very agreement that we are talking about— could or ought to have been entered into, that circumstance shall not be taken into account by the Board when performing its functions under section 15(3) of the Legal Aid Act 1988". That means that if as a minimum —and this is why I am speaking on the Motion that Clause 44 stand part —the noble and learned Lord the Lord Chancellor is not able to say to the Committee that the amendment is accepted, I take it for granted that I must adopt the principle that legal aid will be affected by the grant of approval to this clause of the Bill. My noble friends and I shall have to vote with those who are trying to set this clause aside. If, on the other hand, the noble and learned Lord will give the undertaking that the amendment will be accepted, then I have to consider my position further when advising my noble friends.

4.45 p.m.

Lord Ackner

Before my noble friend sits down, will he be kind enough to indicate whether the compromise which he is reluctantly prepared to accept includes what I understand to be the position under Clause 44? It is that this contingency fee arrangement —and I use the word in the wide form —applies not only to the barrister and the solicitor but to the layman who, under the radical changes proposed by the Bill, will achieve both rights of audience and rights to involve himself in litigation services.

Lord Mishcon

I have considered that position as carefully as I can. I hope that I am not being over-optimistic when I say that I have taken it for granted that the grant of rights of audience to laymen coming from outside the professions of both solicitors and barristers will be so limited that I shall not have to be concerned with the matter. That is the view that most people have taken when they bear in mind the eminence of those who have to decide upon the rules relating to rights of audience.

Lord Campbell of Alloway

With the greatest respect to the noble Lord, Lord Mishcon, I have not had time to consider his proposals of compromise. As I understand them at the moment I find them wholly unacceptable.

Clause 44 contains two insuperable objections which cannot be met by any compromise. For the moment I leave aside the moral objection by my noble and learned friend Lord Hailsham with which I wholly agree. I leave aside any question of the application of the cab rank principle introduced by my noble friend Lord Renton and come straight to the clause. First, as a matter of principle, who has the say on a settlement under Clause 44? Is it the lay client or the solicitor? This is a crucial matter affecting the interests of the consumer which must be dealt with, spelt out and codified in primary legislation.

The second objection is the point taken by my noble friend Lord Rippon. The whole drafting is so wide and so unspecific that when the Motion is put that Clause 44 stand part, I for one cannot possibly vote other than it should not. The whole concept of the clause is so unspecific, so wide and prone to danger and so prone to induce the unjustices about which other Members of the Committee have spoken that as a matter of conscience I should find it impossible to vote that the clause stand part.

At Second Reading it was said assuredly by myself and the noble Lord, Lord Mishcon, that Clause 44 affords no substitute for the proper funding of legal aid. Other noble Lords joined us in that view. That is the problem with which we have to deal. The only way to deal with it is to bring forward another Bill and to vote that as a matter of principle Clause 44 does not meet requirements and should not stand part of the Bill.

Lord Hughes

I was interested in what the noble and learned Lord, Lord Hailsham, had to say about the change in legal aid. He mentioned that the 70 per cent. which the late Lord Elwyn-Jones achieved had been whittled away. My noble friend Lord Mishcon confirmed the 70 per cent. figure. He said that the figure had been drastically reduced. When we on the Scottish Royal Commission considered legal aid we found that the position then —it obviously has not improved in the interval —could be summed up in the phrase which was put to us, which was that only the very poor and the very rich could afford to litigate. Is the noble and learned Lord the Lord Chancellor prepared to allow legal aid to remain in that position?

Lord Donaldson of Lymington

The noble Baroness, Lady Phillips, suggested that this clause should be welcomed by the practising legal profession. For my part, I have some passing doubts as to whether she is right.

Baroness Phillips

If the noble and learned Lord looks at Hansard, I am sure he will find that I certainly did not use that phrase.

Lord Donaldson of Lymington

If I misunderstood the noble Baroness I apologise, but others may take that view. However, for my part I shall put that on one side as I regard it as a total irrelevance. What really matters, and what troubles me greatly, is whether this clause is in the interests of the client as a consumer and whether it is in the interests of the efficient and proper administration of justice. While I accept that there should be innovations in the administration of justice and in the way in which both branches of the legal profession are practised, I have regretfully come to the conclusion that this measure is not in the interests of the client as a consumer. Furthermore, it is wholly contrary to the interests of the proper and efficient administration of justice and therefore contravenes the general principle and the statutory objective which are set out in Clause 14.

First, I shall discuss the position of the client as a consumer. This clause seems to me to create an absolutely classic case of conflict of interest between the client and his lawyer. The basic proposition must be that the better the prospects of the client the less reason he has to agree to a conditional fee agreement. Conversely, the worse his prospects are the less the lawyer should agree to enter into any such agreement.

However, we must bear in mind that the scenario on the ground is of a client walking into a solicitor's office and saying that he has suffered a misfortune. That may be a running down action in which he proposes to be the plaintiff, or he may be in the position of a defendant. It is less usual for individuals of small means to be defendants, but that is not unknown. Either way the client enters the solicitor's office, tells his story and asks the solicitor what his chances of success are. At the moment he will receive an entirely dispassionate answer. However, under the terms of this clause the client then has to ask, if he has heard of conditional fee agreements, whether the solicitor is prepared to take his case on the basis of a conditional fee agreement.

That seems to me to put the lawyer in a wholly impossible position. Is the client to be told, as he would be told under any ordinary application of the present rules of the solicitor's profession, that he cannot be advised because there is a fundamental conflict of interest? He would be told that he must go to another solicitor who will advise him whether or not to enter into a conditional fee agreement with the solicitor he first approached. That practice would be strictly in accordance with the highest traditions of both branches of the profession. I am bound to say that I fear it would be met by the client saying, "They are at it again. Now they are trying to make fees for two solicitors." However, that would be quite untrue.

So, first of all, consideration would have to be given to whether there should be provision for the client to be independently advised. Furthermore, it is not just a question of whether or not one enters into the agreement. It is the terms of the agreement which are of vital importance. The noble and learned Lord, Lord Hailsham, treated this clause as if it were a no win, no fee clause. However, it is not. Clause 44(1)(b) states that a conditional fee agreement means an agreement which, provides for that person's fees and expenses, or any part of them, to be payable only in specified circumstances". I do not believe that those circumstances will be specified by subordinate legislation. They will be specified in the agreement.

Advising someone on what specified circumstances should be put into the agreement seems to me to be a highly skilled and difficult operation. Is one to say, "I shall waive my fees provided that you do not secure more than X pounds as damages"; or does one say, "I shall only waive my fees if you lose wholly and have to pay the costs"? I shall not weary the Committee with all the possible combinations, but they are almost infinite. Is the lawyer to advise his client as to what the terms should be? Is he to put all personal protection on one side and try to devise for his client the best possible agreement that the client can possibly obtain against him? That is unthinkable.

Curiously enough, although the clause is hailed as being a magnificent step forward for the client as a consumer I find it surprising that nowhere in the clause is there any suggestion that the client should have a provision which is now traditional in consumer legislation; namely, a cooling-off period. If seven days later he begins to think that the course he took was not the wisest one possible he is stuck with the agreement. I do not doubt that most if not all solicitors would say, if the client went back to them, that they understood and that they would start again. However, we are trying to legislate for the system and that should not depend entirely upon the good will of solicitors.

I fear that there may be a feeling that we are not involved with large sums of money in these cases. However, I regret to say that we are. It is not a matter of satisfaction to me that the costs of litigation are as high as they are. It has to be faced that in personal injuries litigation, to take a typical case, costs can quite easily run into thousands of pounds. Therefore, what the solicitor, and counsel if he joins in, have to consider is whether they are prepared to risk thousands.

Let us not forget that this is not just a question of time. When I was at the Bar I might have been prepared to give my time in the sense that if I did not get paid for it that was just one of those things. But from the solicitor's point of view what he is being asked to do under an agreement such as this is not only to give his time, potentially for nothing, but also to pay disbursements and to pay experts who may be extremely costly. He will of course have to pay all the copying charges, which one does not think of as amounting to very much but which solicitors tell me are a not inconsiderable burden in modern litigation.

Against that background there is no doubt that there is one piece of advice which a solicitor could give without any difficulty whatsoever; that is, to tell the client that before they discuss conditional fee agreements they should determine whether the client is eligible for legal aid because legal aid will, in 99 cases out of 100, be infinitely preferable from the client's point of view to a conditional fee agreement. I say that because his liability to pay his own lawyers will be strictly limited to his contribution, and, even more important, he will not normally be liable for his opponent's costs, save a small contribution which may be assessed against him. At the moment it customarily never exceeds the contribution which he has to pay to the Legal Aid Fund. So legal aid is enormously more attractive. However, I accept, and regret, that there is a large litigation poverty trap. If the client finds himself in that poverty trap he will have to look at the alternatives. Just as I have no doubt that legal aid is far preferable, I believe that the conditional fee agreement is not as attractive as it looks.

Clients —and perhaps one or two other Members of the Committee —will think of a conditional fee agreement as meaning that if the client loses he pays little or nothing and if he wins he recovers his costs from the other side. It is very much not so. If he loses he will remain liable for all the costs of the other side. If he wins he will have to pay the uplift of costs. I have no idea of the percentage figure of costs that anyone has in mind. If the basic costs are several thousand pounds, even a small percentage uplift will be a not inconsiderable figure. The client will also have to pay the difference between what are called standard costs which he will recover from his opponent and the costs which his solicitor is entitled to charge.

Standard costs have been fixed upon the basis—which to some extent is fictional —that it is possible to conduct a case for that sum and that every lawyer ought to be prepared to do so. I asked the chief taxing master the other day what in his experience was the difference between standard costs and what I used to call solicitor-known client costs. He said that that was an impossible question because it varied enormously. When I asked him to give me some idea he said that there are some cases which are dealt with on the basis of standard costs but they are relatively few. One could well be looking at a figure of 25 per cent. of the costs as the difference between standard costs and solicitor-known client costs. Therefore, in addition to the uplift, the client who has entered into a conditional fee agreement may be faced with a substantial part of the costs which he still cannot recover from the defendant.

That assumes that the defendant is good for the money. If the defendant is not good for the money, the client will be left to bear the whole of his own costs, including the uplift, for no benefit whatever. That would be the case unless he had had the prescience, or had been advised by his solicitor, to include a clause which provided that he did not have to pay his solicitor unless he could recover costs from the defendant. The solicitor is then faced with a further difficulty. How is the solicitor who enters into such a conditional fee agreement to find out what the chances are of his client being able to recover costs from the other side if he is successful?

I hope that the Committee will forgive me for exploring the matter at some length and in some detail. However, in a sense I am a worker at the judicial coalface and I see such cases from day to day in real life.

Perhaps I may turn now to the question of what happens when litigation begins. Conflicts will abound. What happens when the client fails to come up to proof? He may have gone to the solicitor and told him a coherent story, on which his claim is based. He goes into the witness box and tells the same story when examined by his own counsel. Cross-examination then supervenes and the position is found to be very different from what he said it was in examination in chief and from what his own solicitor thought that it was. What happens then?

I am not talking about the extreme cases of which all judges have some experience. I am not talking of the personal injury plaintiff whose action grinds to a startling halt —the plaintiff having claimed to have a broken leg and to be totally immobile —when the defendant produces a video recording showing him skipping around with his children. I am talking about the case in which the situation as revealed in court is totally different from that which the client had led the solicitor to expect. Is the solicitor to be able to get out of the agreement on the grounds of fraud, on grounds of misrepresentation or on grounds of non-disclosure? That aspect has to be looked at seriously.

The question may arise, perhaps at a later stage, whether a client should discontinue a claim. There are cases which are brought bona fide but which on preliminary investigation appear not to have the substance which the plaintiffs genuinely thought they had. In those circumstances anybody would advise the client to discontinue the claim. In such a case the lawyer is likely to say to his client, "It is perfectly true that I have a conditional fee agreement but I advise you to stop these proceedings". If the client turns round and says, "No, I don't agree with you. I am going ahead", what happens? Is the lawyer expected to throw unlimited good money after bad knowing that the case cannot possibly succeed?

If an offer of settlement is made should it be accepted? I am not talking about a lawyer who grabs a settlement in order to obtain his fee but about the lawyer who looks at the matter totally objectively, notwithstanding the existence of a conditional fee agreement. He may say to his client that he ought to accept the settlement. The client may say, "If I go on and lose I shall not have to pay you. It is true that an order for costs will be made against me but all my assets are in my wife's name, so I would rather go ahead". There may be variations that are more reasonable than that scenario. What happens? Is the client to have the right to go ahead and involve the lawyer in much further expense? That would have to be provided for in the conditional fee agreement. Who is to advise the client what provision should be included?

Suppose a conditional fee agreement includes a success condition —that the lawyer shall recover not less than £5,000 damages, and assuming costs of £2,000 —what happens if the defendant offers £6,000 as an all-in settlement? what is recovered? Is the lawyer recovering £6,000 and nothing in costs, which meets the success condition, or is he recovering £4,000 damages and £2,000 costs which does not meet the condition? That is another matter that will have to be looked at.

What about appeals? Suppose the client wins in the lower court and the condition in the conditional fee agreement is met and the lawyer is entitled to his fee? What happens when the other side shows signs of appealing? Is the lawyer bound to go on with the case? Does he duck out and say, "That is the end of the proceedings as far as I am concerned"? That again has to be looked at in the conditional fee agreement. There would be real problems if the conditional fee agreement said that one stopped at the end of the proceedings in the court of first instance. The client might be obliged to pay his lawyer the full costs, plus the uplift, and then lose everything in the Court of Appeal and have to pay the other side's costs both in the court below and in the Court of Appeal.

Those are some of the problems facing the consumer. Perhaps I may deal rather more briefly with the problems for the administration of justice, although I regard them as much more serious. As the Committee has already been reminded, lawyers owe a duty to the court which overrides the duty to the client. We are all brought up to that and we all accept it. It is not easy to balance one against the other. The scheme would add a new conflict. There is the lawyer's duty to the court which AS paramount, the lawyer's duty to the client which comes next and now the lawyer's duty to protect himself against undue liability under the conditional fee agreement.

The court relies upon the professional detachment of the lawyers who prepare the case and of those who appear before it and present the case. If the clause were to be passed and put into operation, every judge would want and need to know whether the lawyers appearing before him to argue the case or appearing before him as having prepared the case were also litigants in person because there would be no difference so far as concerns the fees between them and their clients. Both would have a strong interest in winning.

The very notification to the court that the lawyer was appearing on a conditional fee agreement would be objectionable in itself, although essential, because it would tell the judge, "I, the lawyer for the claimant, think this is a good claim, otherwise I would not have entered into the conditional fee agreement". In those circumstances, is the defendant's lawyer who is not on a conditional fee agreement able to stand up and say, "Well, I think my client has a good claim too"? We have never conducted cases on the basis that the judge wishes to know, or can ever be told, what the lawyer thinks of the case for the very good reason that cases should be tried on the evidence and not on the views of lawyers.

As I have said before, there is a problem here; namely, the problem of the litigation-poverty trap. However, the answer to that, once legal aid, expanded to the maximum extent that government resources permit, has been exhausted, is legal expenses insurance. That is growing rapidly. Or there might be —I do not put this beyond the ability of the market—special insurance to meet one's own costs if one loses. It would be a question of working out a premium on the facts of each case. So far as I know, no one has considered it for reasons which I do not pretend to understand; but it must in theory be possible.

It might also be well worth exploring, as the Law Commission suggested, a contingent legal aid fund as suggested by Justice. I do not put forward any of those ideas in preference to another. I merely say that any of those solutions are better than this clause which I believe to be wholly contrary to the interests of the client as consumer and to the interests of justice.

Lord Morris

Like my noble and learned friend Lord Hailsham, I regret the fact that there are no bishops here, but for very different reasons. I have always believed that it is they who have a problem seeing what makes the world go round.

I want to put a completely opposite point of view from that put at the other end of the Chamber and explain how the matter is perceived, rightly or wrongly, by the ordinary man in the street. The basis of the case put by noble and learned Lords at the other end of the Chamber, not least by my noble and learned friend Lord Rawlinson of Ewell, was that the fact that the lawyer had no direct financial interest in the case was a positive virtue. I suggest that 90 per cent. of the people in this country think that that is a positive evil. It puzzles them greatly. It is not just founded on ignorance. They see over and over again that, if the lawyer has no financial interest in the outcome of the case, he has little or no reason to concern himself too fully in the conduct of the case, litigation and advocacy.

I do not suggest in any way bad faith, but, if noble and learned Lords do not believe this, they should listen to what people say about the casual attitudes that they have encountered among people who conduct their cases and among people in the profession generally. They should speak to the people who work in the magistrates' courts and to those who work in the lawyers' courts. They strongly believe that, if a carefully geared financial interest were placed in the lawyers' hands, it would concentrate the minds of people conducting cases a great deal more.

If the ordinary man in the street had spent all his time with the buttress of clerks, and advocates had spent their time with the buttress of solicitors shielding them from the problem of fees and the terrible burdens that have been brought to bear on clients, we would have a much better system in this country. Rightly or wrongly, that is the view of a great number of people to whom I have spoken on this subject.

Lord Hutchinson of Lullington

Is the noble Lord suggesting that a lawyer in a magistrates' court should be paid more if he secures an acquittal? Is that the basis of what he says?

Lord Morris

I fail to understand how the noble Lord inferred that from what I said.

Lord Hutchinson of Lullington

What is the financial interest in a case in a magistrates' court? That is what I cannot understand.

5.15 p.m.

The Lord Chancellor

I believe in the doctrine of justification by faith alone and in the doctrine of original sin. I also believe that faith without works is dead, being alone, and, therefore, that the faith which is important is that which manifests itself in the way that people conduct themselves in their daily lives.

Perhaps I may begin by answering the noble Lord, Lord Mishcon. There is no question in my mind —I am perfectly prepared to make this as plain as I can, if necessary formally —that the clause is not a substitute for legal aid. It will be no part of the conditions required for an applicant for legal aid that he should first try for a conditional fee arrangement. There is no question of that.

However, for all the time that legal aid has been in existence, including the best possible time of the late Lord Elwyn-Jones—if I may put it like that for the purpose of argument —there has always been a top level of eligibility and therefore a position which is above the legal aid limit. A person may have a perfectly good case and no ready financial resources, and still not be able to take on a good case because he cannot finance it. Until now, it has been unlawful in this country for a solicitor, or a barrister for that matter, to take the case on the basis that he agrees in advance that he will be paid if he wins and not paid if he loses. I understand that to be the position.

A working party of the Bar considered the issue some time ago and drew attention to two matters which I wish to lay before noble Lords. It stated: We believe that some solicitors may already be prepared to take meritorious cases in certain circumstances even though their client's means may be such that the solicitors are aware that there is no realistic prospect of them receiving any remuneration for their services unless the client's claim succeeds. Moreover, most laywers will have had experience of cases where for one reason or another they have felt it right to waive their fees in whole or in part, after a case has been decided. Neither type of conduct has, so tar as we are aware, given rise to any real problem. Likewise, we see no real likelihood of difficulty if lawyers and their clients are allowed to achieve the same result by formal agreement made before the litigation is commenced". I shall not read the whole extract. There are many other points, but the one that I want to make concerns what happens at the present time.

Next, I want to say that my noble and learned friend Lord Donaldson drew attention to a number of matters which would need to be dealt with in relation to a conditional fee. When a person goes to his lawyer he makes arrangements with him about the work that he is to do and the terms on which it is to be done. He does not go to another lawyer for advice about that because in that case the other lawyer would need to have some view about the terms on which he was to work, and so on. So some arrangement with one's lawyer is a prerequisite for the lawyer to do any work at all.

The nature of the lawyer's authority is also something that has to be considered. The lawyer will act for the client and he must know what the client wants, the nature of the authority that is conferred and the terms on which the client will have his work carried out. So questions about the nature of the agreement with the lawyer are inherent in the present situation.

In this clause I do not seek to do more than make possible such conditional agreements. There is still full room for the professional bodies and the bodies which in any case regulate rights of audience or rights to conduct litigation to make detailed rules about precisely what is to happen. However, I firmly believe that it is not right to maintain a situation in which all types of conditional fee agreements are outlawed. This clause simply makes it lawful to have a conditional fee agreement which is related to the fees which would be earned apart from a conditional fee agreement, with an uplift (which I described in the White Paper as modest) to take account of the fact that, as my noble and learned friends and other noble Lords will know, the lawyer has to deal with outlays such as costs of photocopying, experts' reports and such matters.

A modest uplift to deal with that strikes me as perfectly reasonable. The detailed arrangements under which that is to take place can be laid down by the professional bodies. The three fundamental duties, which I accept my noble and learned friend Lord Hailsham described accurately, in my judgment are in no way inconsistent with the duty that would arise when a solicitor took on such an arrangement.

My noble and learned friends Lord Hailsham and Lord Ackner referred to the Scottish position; namely, that these arrangements —that is to say, speculative actions, as we call them, in which the lawyer takes on the client on the basis that he will be paid the taxed costs if he wins and not if he loses —have been lawful for many generations, although the percentage related to the amount of damages has not.

The question of the extent to which such an arrangement is taken up is a separate or different matter. The first question is: is it moral, or is there anything immoral about it? I cannot believe that the distinguished lawyers who have operated the Scottish system over many years regard it as in the slightest degree immoral. Of course precautions have to be taken. People have to be reasonably satisfied that a good case exists before it is taken on, but their natural instinct lies in that direction. Their interest in the whole matter is in the direction of not taking it on unless the case is a good one. I believe that that is fundamental.

With regard to settlements, there is said to be special difficulty. I find that quite hard to accept. I take it that it depends on the precise nature of the agreement. As I said, I seek only to take away the complete blanket of unenforceability and illegality which characterises such agreements at the moment. But let us take the simple case in which the lawyer agrees with the client that he will only receive his fees if the client obtains them from the other side. When an offer of settlement is made and a payment into court is offered, for example, the client takes the risk, as would also the lawyer, if he does not accept that offer that the costs will go against him.

I have always regarded that as one of the most difficult matters on which to advise. When faced with an offer which will have an effect on costs, what does one do? I have often taken the attitude when advising clients that this is an extremely difficult matter and I must put the full facts before them. It is the client who has to take the decision. Clients have often asked me, "What would you do if it were your own money that was at risk here?" I think that the client regards that question as a very good test.

I have not advised for a considerable time now but in the past I always did my best, judging the issues and risks as best I could, to put myself in the position that it was my own money that was at stake. I have to say that in nearly all the cases that I undertook—except for one notable instance which still stays very much in my memory —the client turned out to be on the right side of the matter. But it is impossible to forecast absolutely accurately.

However, all that is required here is for the lawyer to put himself in a position whereby his situation is affected by the advice in the same way as is the client's situation. It seems to me that from the moral point of view there is no objection whatsoever to a situation of the kind which I have sought to make legal.

I entirely agree that there are other possible matters to be considered but these are matters of detail which can be dealt with. I am simply concerned to remove the law which states that all such agreements, however meritorious they may be in particular circumstances, are not enforceable. The availability of such a right over and above legal aid strikes me as a valuable one for the client. I want to make it as clear as I can that I do not present this provision as a way to some greater type of case. I have founded it on a principle which altogether distinguishes this from the American type of case; namely, that the lawyer's return or remuneration that can be asked for in an agreement, which I am prepared to see as lawful if this clause goes forward, is to be related to the work done and not related to the amount of damages.

My noble friend Lord Peyton suggested various matters. I shall not deal with all three of them. The main point that he mentioned which particularly affects this clause——

Lord Renton

Perhaps my noble and learned friend will be so kind as to allow me to interrupt. I think that we should be quite clear about this matter. What he has just said about this not following the event —no pay, no win —does not seem to be consistent with what is in the White Paper. Paragraph 14.2, which refers back to the Green Paper, states: There was, however, little objection to the proposal that arrangements following the model of the Scottish speculative action (payment of normal fees only if successful) should be allowed in England and Wales". I think it quite natural that those who considered this matter in relation to this clause should have assumed that what my noble and learned friend was getting at was what he stated in the White Paper.

The Lord Chancellor

I hope that I have said nothing that suggests the contrary. That is precisely what I am getting at. An agreement under which the lawyer is paid if he succeeds is an agreement which may be lawful. The detailed rules about it would certainly be capable of being dealt with by professional bodies. There is nothing outlawing the nature of the rules that they can make.

I am concerned with the general law that makes such agreements unenforceable. That is exactly what I am talking about. I hope that I have said nothing that puts that into any doubt.

Lord Diamond

The noble and learned Lord referred to these arrangements being unenforceable. He has referred to them as being illegal. Are they illegal and therefore unenforceable; or are they only unenforceable?

5.30 p.m.

The Lord Chancellor

The accurate position is that they are unenforceable by reason of their quality. That is to say, the law does not regard them as allowable and therefore they are unenforceable agreements. That is my understanding of the position, on the basis that public policy is against them. It is quite difficult to have such a public policy —which is the policy of the legislature of the United Kingdom —which allows them in one jurisdiction but not in another.

In my submission therefore it is right that they should no longer be regarded as unenforceable provided that they conform to the conditions that I have specified, and any other conditions that may be laid down.

Lord Ackner

Will my noble and learned friend confirm whether the Scottish model is to be extended in Scotland to non-lawyers? As I understand the clause, it will cover not only barristers and solicitors but non-lawyers who have achieved the right of audience or the right to litigate.

The Lord Chancellor

The provision would apply to those who have been afforded rights of audience under the machinery that is set out in the earlier clauses, including the right to conduct litigation.

Lord Ackner

My inquiry was whether that will also apply to Scotland, or whether the Scottish situation is to remain as I understood that it was: limited to barristers and solicitors.

The Lord Chancellor

As I understand it, the Scottish situation is that an agreement such as has been described is not unlawful, and is enforceable in Scotland. Therefore I do not think that my noble and learned friend's question arises. It would not be unenforceable, whoever made it, because such an agreement as I have described is regarded as appropriate, not contrary to public policy.

The final point that I wished to make in answer to the noble Lord, Lord Peyton, was in relation to Americanisation, or something of that kind. In my submission, the provision is fundamentally distinguished in principle from the American system which relates to the payment of remuneration to the lawyer that is related to the amount of damages recovered and is not related to the work done. I believe that it is perfectly reasonable to relate payment to the work done. I distinguish that from a situation in which the payment has nothing whatever to do with the work that one has done but is related to the amount recovered.

I should have mentioned one other point. There have been so many; I hope that I have dealt with the principal ones. My noble and learned friend Lord Hailsham referred to an earlier point that I made about plaintiffs and defendants. I said then that such an arrangement applies to a defendant just as much as to a plaintiff. He made a point —if I remember rightly in the debate on the Green Paper when speaking in answer to the noble Lord, Lord Henderson of Brompton —that such an arrangement could not apply to defendants. My point is that the arrangement that I have suggested is permissible under the clause is available to plaintiffs and to defendants. I believe that there is very considerable security against any abuse of the system because, as has been pointed out, the award of costs against the plaintiff would still be available if the plaintiff does not succeed. These cases therefore are not likely to be taken unless the plaintiff has a good case.

The injustice that these arrangements address is this. At the present time if somebody is not eligible for legal aid —however high the legal aid limits were, there is a possibility of people being above them although they have a good case—unless he has the finance to undertake what might be quite an expensive litigation, he can do nothing. That makes such a method possible, subject to any detailed rules that the professional bodies in control of the citation might think it right to lay down.

Lord Hailsham of Saint Marylebone

If my noble and learned friend will forgive me, before he finally sits down, I wish to put on record that the point I was making was not that the arrangement under the clause was unavailable to defendants, but that it was virtually useless to defendants against a vexatious, frivolous or blackmailing plaintiff. The economics are against the defendant being able to enjoy that arrangement. My point was not that it was unlawful for such an agreement to be made in favour of the defendant.

The Lord Chancellor

That is a different point from that with which I was dealing when I spoke. My noble and learned friend now makes the point that such an arrangement could give rise to blackmail. I do not accept that. I believe that the arrangement would include the requirement, with regard to the professional rules, that the client had a reasonable case. It is well known that under the present arrangement somebody with a small amount of money can start a case. People settle cases on the basis that it is economical to settle them even if they think the client does not have a good case. That is particularly so in relation to legal aid. However, I do not believe for a minute that such consideration should tell against the lawfulness of the legal aid system.

People may think that they have a good answer. All that is required is a reasonable case on the merits for legal aid. That is not a reason why legal aid should not be allowed. In this case the defendant would be even more protected because, as the noble and learned Lord, Lord Donaldson, pointed out, at present under legal aid arrangements the defendant may not be able to recover his costs and may certainly not be able to recover them against the plaintiff. I hope that the Committee will feel that it is a proper arrangement to provide, while leaving it to the professional bodies to make the detailed rules, and on the understanding that such provision is not a substitute for legal aid but available over and above legal aid, whatever the legal limits were.

Lord Mishcon

Before the noble and learned Lord finally sits down, I have put to him —I hope in clear and fair terms —that I hoped he would accept Amendment No. 194A when it was moved. I understood him to say that he accepted the principle behind the amendment. If he could kindly give me his assurance that that amendment will be accepted when it is moved I shall know where I stand. If he does not, I do not know where I stand.

The Lord Chancellor

I certainly agree with the principle of the amendment. I am perfectly content with the amendment as it stands, subject to any later drafting which the draftsman may suggest. However, I am now prepared to accept it as it stands.

Lord Mishcon

I am obliged.

Lord Meston

I hesitate to interrupt but Members of the Committee should be aware that the amendment proposed by the noble Lord, Lord Mishcon, is as good as far as it goes but I do not believe that it goes far enough. Clause 44 will still have the potential to erode legal aid. Financial eligibility for legal aid is not determined by the Legal Aid Board but by the Treasury. Although the new clause proposed by the noble Lord, Lord Mishcon, will bind the Legal Aid Board, it will not bind the Treasury in determining eligibility for legal aid.

The Lord Chancellor

That is why I indicated that I am perfectly content with the principle that the availability of a conditional fee agreement in no way affects eligibility for legal aid. I hope that I made absolutely plain what I have in mind; that whatever the eligibility limits, the agreement would be available over and above eligibility for legal aid.

I cannot see the argument that availability of such an agreement would take the place of legal aid. They are quite different. As was said by my noble and learned friend Lord Donaldson of Lymington, the protection afforded by legal aid to the client is much greater, although in some matrimonial cases it is not as great as some people think.

Lord Rippon of Hexham

If the clause is accepted will not the Lord Chancellor be able to say to his right honourable friend the Chancellor of the Exchequer, "I am now in a much better position to resist any improvement at all in legal aid"?

The Lord Chancellor

Certainly not. The Legal Aid Act makes provision for those of poor or moderate means. I do not believe for one moment that this would be an appropriate answer to legal aid. This is an additional provision over and above legal aid. I believe that it is right to make possible that agreement under such conditions as thought appropriate by the bodies regulating rights of audience and rights to conduct litigation.

5.42 p.m.

On Question, Whether Clause 44 shall stand part of the Bill?

Their Lordships divided: Contents, 136; Not-Contents, 56.

Alexander of Tunis, E. Greenway, L.
Allen of Abbeydale, L. Griffiths, L.
Allerton, L. Halsbury, E.
Ardwick, L. Harmar-Nicholls, L.
Barnett, L. Hayter, L.
Beaverbrook, L. Henderson of Brompton, L.
Belhaven and Stenton, L. Henley, L.
Belstead, L. Hesketh, L.
Bessborough, E. Hives, L.
Bethell, L. Home of the Hirsel, L.
Blatch, B. Hooper, B.
Boyd-Carpenter, L. Howie of Troon, L.
Brabazon of Tara, L. Hughes, L.
Brightman, L. Irvine of Lairg, L.
Broadbridge, L. Jeger, B.
Brougham and Vaux, L. Jenkin of Roding, L.
Butterworth, L. Jenkins of Putney, L.
Campbell of Croy, L. John-Mackie, L.
Carmichael of Kelvingrove, Johnston of Rockport, L.
L. Joseph, L.
Carnegy of Lour, B. Kaberry of Adel, L.
Carnock, L. Kilbracken, L.
Cocks of Hartcliffe, L. Killearn, L.
Coleraine, L. Kirkhill, L.
Cottesloe, L. Lauderdale, L.
Craigavon, V. Layton, L.
David, B. Llewelyn-Davies of Hastoe,
Davidson, V. [Teller.] B.
Dean of Beswick, L. Long, V.
Denham, L. [Teller.] Lucas of Chilworth, L.
Derwent, L. Lyell, L.
Dilhorne, V. Lytton, E.
Dormand of Easington, L. Macaulay of Bragar, L.
Elibank, L. McIntosh of Haringey, L.
Ellenborough, L. Mackay of Clashfern, L.
Elliot of Harwood, B. Mackie of Benshie, L.
Faithfull, B. Macleod of Borve, B.
Fisher of Rednal, B. Malmesbury, E.
Fraser of Carmyllie, L. Mancroft, L.
Fraser of Kilmorack, L. Margadale, L.
Gallacher, L. Marshall of Leeds, L.
Galpern, L, Mason of Barnsley, L.
Goold, L. Merrivale, L.
Graham of Edmonton, L. Mersey, V.
Middleton, L. Selkirk, E.
Milverton, L. Serota, B.
Mishcon, L. Shaughnessy, L.
Montagu of Beaulieu, L. Shrewsbury, E.
Morris, L. Skelmersdale, L.
Mottistone, L. Strabolgi, L.
Mowbray and Stourton, L. Strange, B.
Munster, E. Strathclyde, L.
Napier and Ettrick, L. Strathcona and Mount
Nelson, E. Royal, L.
Nicol, B. Strathmore and Kinghorne,
Nugent of Guildford, L. E.
Orkney, E. Sudeley, L.
Orr-Ewing, L. Swansea, L.
Pender, L. Taylor of Blackburn, L.
Peston, L. Taylor of Gryfe, L.
Phillips, B. Terrington, L.
Pitt of Hampstead, L. Trumpington, B.
Prys-Davies, L. Ullswater, V.
Rankeillour, L. Underhill, L.
Rea, L. White, B.
Reay, L. Whitelaw, V.
Renwick, L. Windlesham, L.
Rodney, L. Wise, L.
Saltoun of Abernethy, Ly. Wyatt of Weeford, L.
Sanderson of Bowden, L. Young, B.
Ackner, L. Kennet, L.
Amherst, E. Kinloss, Ly.
Ampthill, L. Lloyd of Kilgerran, L.
Attlee, E. Melville, V.
Aylestone, L. Meston, L.
Benson, L. Moyne, L.
Bonham-Carter, L. Peyton of Yeovil, L.
Brandon of Oakbrook, L. Rawlinson of Ewell, L.
Byron, L. [Teller.]
Caccia, L. Renton, L. [Teller.]
Campbell of Alloway, L. Richardson, L.
Crook, L. Rippon of Hexham, L.
Diamond, L. Roskill, L.
Donaldson of Lymington, L. Sainsbury, L.
Elles, B. Seear, B.
Ennals, L. Shannon, E.
Falkland, V. Shepherd, L.
Gladwyn, L. Simon of Glaisdale, L.
Goff of Chieveley, L. Somers, L.
Grantchester, L. Stedman, B.
Grey, E. Templeman, L.
Hailsham of Saint Teynham, L.
Marylebone, L. Thomas of Gwydir, L.
Hampton, L. Tordoff, L.
Harris of Greenwich, L. Tryon, L.
Hutchinson of Lullington, L. Wigoder, L.
Hylton-Foster, B. Wilberforce, L.
Inglewood, L. Winchilsea and Nottingham,
Jenkins of Billhead, L. E.
Kearton, L.

On Question, Motion agreed to.

Resolved in the affirmative, and Clause 44 agreed to accordingly.

5.51 p.m.

Lord Mishcon moved Amendment No. 194A: After Clause 44, insert the following new clause:

("Protection of legal aid client in conditional fee agreements

.Where it appears to the Legal Aid Board that an agreement under section 44(1) could or ought to have been entered into, that circumstance shall not be taken into account by the Board when performing its functions under section 15(3) of the Legal Aid Act 1988.")

The noble Lord said: I do not believe that it is necessary to do other than move this amendment which I understand the noble and learned Lord is prepared to accept.

Lord Renton

Before my noble and learned friend replies, there is one matter which I find rather strange; that is, the words "or ought to have been". I did not believe that it was within the principles which my noble and learned friend expressed or in Clause 44 as it stands that there was to be any obligation to enter into a conditional fee agreement. The words "or ought to have been" suggest that there is such an obligation. Therefore, when further considering the drafting of this amendment I hope that my noble and learned friend will bear that in mind. I believe it is quite wrong to have those words in the amendment.

Lord Ackner

Before my noble and learned friend replies, it should be put on record that there is another acute difficulty which I do not believe has been faced up to. What is to happen when the lawyer for the plaintiff who has engaged himself on a contingency fee finds that the defendant is awarded legal aid to combat him?

Lord Mishcon

I refuse to use the words "contingency fee" because that is not the phrase which occurs in the Bill. It is not a phrase I shall use; it is not a phrase which I should have supported in the Division Lobby. The amendment is not to be deemed to be in substitution of legal aid. When an applicant for legal aid appears before the legal aid authority or his application is dealt with, the fact that this sort of arrangement may have been entered into should not be taken into account at all by the legal aid authority. That is all that the amendment says; that is all that it is meant to say. I have no doubt that the noble and learned Lord will consider the words "or ought to have been", although I cannot see any harm in them.

Lord Hailsham of Saint Marylebone

I hope that my noble and learned friend will pay some attention to the words "or ought to have been". I do not know what they can mean in those circumstances. By what criterion does the obligation come into an agreement of this kind? If legal aid is to be granted and it is a suitable case for legal aid, how could it possibly be right for such an agreement to be entered into?

Lord Mishcon

Perhaps I may give an example, I hope that the noble and learned Lord will find it fitting because we have spoken so much about personal injury cases. Let us take for granted that a plaintiff is knocked over by a car which has mounted the pavement and the driver is drunk. That person goes to a solicitor for help. The solicitor applies for legal aid. Without this amendment the board might conceivably say, "But you know this is just a case of the matter speaking for itself. It is re ipsa loquitur. It is impossible to lose this case. Why apply for legal aid? You should have talked to your solicitor or your solicitor should have talked to you about entering into one of those agreements. Have you discussed that with him? Why do you not want that?" I want to make it clear that there is no duty upon that person to say why he or she has not applied for it or on the solicitor to say why he has not discussed that with the client.

Lord Hailsham of Saint Marylebone

If legal aid is likely to be given —and of course it would be, means test apart, because the merits of the case are so obvious, as the noble Lord pointed out —then surely it is obvious that legal aid is the preferable alternative of the two.

Lord Mishcon

I hope that the noble and learned Lord will forgive me for saying that I am still in the position where I thought that my argument for the amendment was abundantly clear. It is not that the Legal Aid Board might say that legal aid is obviously preferential. It is to stop the legal aid authority saying to an applicant, "But do you realise that there is another course open to you? Have you discussed it with your solicitor or has your solicitor discussed it with you because that should be a matter for consideration and you should not trouble the Legal Aid Fund". In this amendment I am setting down a provision to stop any such question or discussion.

The Lord Chancellor

I said earlier that I accepted this amendment subject to any question which may be raised by the draftsman as regards the precise wording. I shall take into account what my noble friend Lord Renton said. I believe that that is the best way to proceed. I am sure that the noble Lord, Lord Mishcon, will be quite happy that we should seek to meet those difficulties so long as the principle is accepted.

I do not wish to create any impression that there is an obligation on anyone to enter into a conditional fee agreement. That is an option. I believe that the noble Lord, Lord Mishcon, had in mind when drafting this amendment that the Legal Aid Board might consider that there was an obligation. We want to negative that. Subject to the drafting of this amendment I accept it. I believe it is best that this amendment should now be written into the Bill reserving the right to come back on the detail of the drafting to try and meet those concerns because, as I said, I wish to meet them if I possibly can.

Lord Renton

In order that we can be constructive as well as critical, I suggest that the words "or ought to have been" could be replaced by the word "reasonably".

Lord Mishcon

The last thing in the world I want is the importation of the word "reasonably". I want that to be completely out of the discussion when the Legal Aid Board considers these applications, reasonably or unreasonably.

6 p.m.

Clause 45 [Regulation of right of Scottish and Northern Ireland lawyers to practise in England and Wales]:

Lord Rawlinson of Ewell moved Amendment No. 195: Page 36, line 11, after ("Lord Chancellor") insert ("with consent of the Lord Chief Justice").

The noble and learned Lord said: Perhaps I may speak to Amendments Nos. 195, 196 and 197, all of which deal with the right of Scottish and Northern Ireland lawyers to practise in England and Wales. I am qualified under this proposal because I am a member of the Northern Ireland Bar. The noble and learned Lord the Lord Chancellor will know all about the Scottish advocates.

All I suggest here, as I have suggested before, is that where it is a matter of permission being given to a practitioner qualified in Scotland or Northern Ireland and the Lord Chancellor is making the regulations, he should do that with the consent of the Lord Chief Justice. The Lord Chief Justice is the permanent head of the judiciary in this particular jurisdiction and it seems only right that in England we should have at least the head of the English judiciary as the person who will consent to regulations whereby persons from other jurisdictions come and practise in the courts of this country. That is the proposal in Amendment No. 195 which is followed by Amendments Nos. 196 and 197. I beg to move.

Lord Boyd-Carpenter

I hope my noble and learned friend will not accept this amendment. It seems to be quite wrong in principle that when a Minister of the Crown seeks to make regulations he should require the consent of somebody else. It puts him in the obvious difficulty that if consent is withheld, he cannot make the regulations which he feels he ought to make and which he may very properly be being pressed in either House of Parliament to make. Therefore to place a veto on the Lord Chancellor's regulation-making power in this way —even in favour of a deeply respected figure like the noble and learned Lord the Lord Chief Justice —is quite wrong in principle.

The Lord Chancellor

My noble and learned friend may take it that in contemplating regulations of this kind I should certainly wish to take the mind of the Lord Chief Justice as well as the other heads of division. The purpose of this clause, however, is to mirror as between the constituent law districts of the United Kingdom the rules made for the European jurisdiction. These are made under directives, as my noble and learned friend knows, and the Lord Chief Justice is not directly concerned in that procedure, though his views would necessarily be important.

I therefore think that, with the greatest respect, it is not appropriate that the noble and learned Lord the Lord Chief Justice should be mentioned particularly here. However, my noble and learned friend can be assured that in any regulation under this clause the Lord Chancellor would consult the heads of division.

Lord Rawlinson of Ewell

I thank my noble and learned friend the Lord Chancellor for those comments. They are very different from the authoritarian attitude of my noble friend Lord Boyd-Carpenter, who does not want to see on any basis, when we are introducing a Minister to matters of the legal profession, the introduction of the judiciary. As he ought to appreciate by now, we are starting on uncharted ground with a regulation affecting the independent legal profession.

Lord Boyd-Carpenter

Perhaps my noble and learned friend will allow me to intervene. If he is good enough to make a personal onslaught on me for being authoritarian, perhaps I may suggest that he is being authoritarian in as much as he is seeking to put part of a regulation-making power into the hands of a very distinguished judicial figure who is not responsible to Parliament. If anything is authoritarianism, cutting out Parliament in that way is precisely that.

Lord Rawlinson of Ewell

I am sorry that my noble friend is so sensitive about the word "authoritarian" which I boomed at him over his right ear. I received a copy of a letter which was addressed to the noble and learned Lord the Lord Chancellor, supporting the Lord Chancellor and complaining about the "crusty old men Lords Rawlinson, Hailsham and Boyd-Carpenter". Whether he likes it or not, he is aligned with us.

The view I have always expressed is that because this has a particular kind of ministerial interest —control over an independent legal profession —we should always have allied with it a member of the judiciary. I have consistently argued that throughout the course of the Bill. However, having regard to the way my noble and learned friend, with such grace as always but with such reasoning, has spoken in reply I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Hacking moved Amendment No. 195ZA: Page 36, line 13, leave out ("in such capacity as may be prescribed") and insert ("in that capacity").

The noble Lord said: In moving this amendment I speak also to Amendment No. 197A. Both of these amendments are probing amendments and, as I understand it, the object of Clause 45(1) is to enable the Lord Chancellor to make regulations to ensure that lawyers from other parts of the United Kingdom are able to exercise rights of audience or rights to conduct litigation in England and Wales which are not less than lawyers from other member states under the lawyers' services directive of 1977.

Under this directive lawyers from other member states of the European Community, have the right to provide such services in this country, or indeed in another member state, from an establishment in their own home state in their capacity as lawyers of their home state. The matching provisions within the United Kingdom should therefore follow the same lines. For example, any right of audience exercised in English courts by a Scots advocate should be exercised in his capacity as a Scots advocate and not in any other capacity. To say that he may do so in some other capacity will cause difficulty if not a little confusion. It requires a little clarification and perhaps the noble and learned Lord may be able to help. I beg to move.

The Lord Chancellor

I am sorry to say that I am not absolutely clear precisely what it is the noble Lord seeks to achieve by this amendment. The proposal is that a Scottish advocate will have rights of audience in England, for example, on the same basis as if he were a member of a profession in Germany that had rights of audience in the courts there.

That I think is what is sought by both of us. For example, a Scottish solicitor has very different rights of audience from an English solicitor so far as the different levels of court are concerned in Scotland. Some form of adaptation may be required if one crosses the boundary. I believe the regulations should have sufficient flexibility to enable us to do that. That is why we have the phrase, in such capacity as may be prescribed". It is in order to cope with that situation. It is to try to lay down what rights in England the person from Scotland might have when there is no absolute correspendence between the different categories of profession in the two jurisdictions.

The Earl of Selkirk

My noble and learned friend appears to be saying that when a Scots solicitor comes to England he will be allowed to appear in the equivalent of the sheriff court. Is that what my noble and learned friend is saying; or is he saying that as a solicitor he will be entitled to appear in the High Court?

The Lord Chancellor

That is one of the difficulties the clause has to deal with. I seek to mirror the arrangements that we have so far as the EC is concerned. To take the example of my noble friend, there might be difficulty in the idea that a Scottish solicitor should come to England and have a right of audience in a court here where no English solicitor had a right of audience. We are trying to cope with that situation by allowing us to have the capacity to prescribe rather than making it completely automatic. These directives are difficult to apply across the nations at the moment and we simply want to achieve a similar result, so that a Scots person should not be able to say that in England he has fewer rights than a Frenchman or German in similar situations. Conversely, an Englishman going to Scotland would have no fewer rights than a corresponding Frenchman or German would have in the same situation.

Lord Hacking

I am very grateful to the noble and learned Lord. It fortifies the mainstream argument that lawyers in Scotland, England and in Northern Ireland should have similar rights of audience as a result of which these problems would not arise. I am grateful to the noble and learned Lord for his exposition. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Coleraine moved Amendment No. 195A. Page 36, line 17, leave out from ("litigation") to end of line 19.

The noble Lord said: Paragraph 13.4 of the White Paper Legal Services: A Framework for the Future points out: that lawyers qualified only in one part of the UK already have, and will increasingly have, greater opportunities to practise in other EC member states than they do in other parts of the UK. This is clearly anomalous".

The purpose of Clause 45 as a whole is to give effect to paragraph 13.5 of the White Paper which states: The Government therefore proposes that the Lord Chancellor, the Secretary of State for Scotland, and the Secretary of State for Northern Ireland should be given power to make regulations which will ensure that UK lawyers have rights to practise in other parts of the kingdom at least equivalent to those available to lawyers from other EC countries".

The general objective of giving lawyers from one part of the United Kingdom at least as many rights regarding practice in other parts of the kingdom as lawyers from other EC countries is supported by the Law Society. It is at its request that I move this amendment. However, it is not appropriate or necessary for this purpose to enable lawyers from one part of the United Kingdom to provide conveyancing or probate services in other parts of the kingdom.

The EC lawyers' services directive 1977 enables lawyers from one member state to provide occasional services, including litigation and advocacy, in another member state subject to certain conditions. It expressly enables member states to reserve to prescribed categories of lawyers the preparation of formal documents for obtaining title to administer estates of deceased persons and the drafting of formal documents creating or transferring interests in land; namely, conveyancing and probate.

The Order in Council implementing the directive in the United Kindom accordingly excluded lawyers from other EC countries from the right to provide conveyancing or probate services in the United Kindom. In most other member states such services are generally provided by notaries who are not within the lawyers' services directive at all. In these circumstances it seems that references to conveyancing or probate services in Clause 45(1)(b) are inappropriate. This amendment proposes their omission. I beg to move.

The Lord Chancellor

I accept this amendment in principle. There is a slight problem concerning the consequent drafting. Perhaps my noble friend will allow me to make the corresponding alteration in terms that the draftsman would wish. I do not believe that this particular clause is inconsistent with the undertaking that I gave in the White Paper to make regulations which will ensure that United Kingdom lawyers have rights to practise in other parts of the kingdom at least equivalent to those available to lawyers from other EC countries. But the clause as drafted goes further in making provision for such cross-border practice than the service directive does with regard to inter-state practice. That was not my original intention, and for that reason I am prepared to accept this amendment in principle.

The amendment as drafted would leave the clause with a list at subsection (1) consisting of paragraph (a) and nothing more, and that is a matter I wish to deal with. I accept the amendment in principle and I undertake to bring forward at Report stage an amendment to the same effect as his.

Lord Coleraine

I am delighted to learn that the amendment is accepted in principle by my noble and learned friend. Therefore in order that he may see the drafting corrected, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 196 to 197A not moved.]

6.15 p.m.

On Question, Whether Clause 45 shall stand part of the Bill?

Lord Simon of Glaisdale

In the interests of constitutionality and economy of words in the statute book, I draw attention to two matters on this clause. The first is the relationship between subsections (2) and (3). This subject is an old favourite in that, The Lord Chancellor may by regulations", do such and such. Subsection (3) says that my noble and learned friend the Lord Chancellor "may, in particular" make regulations. Those are the particularities of subsection (2). When this matter arose before, there were about 15 lines similar to subsection (3). This time there are 13 lines. So the issue mounts up in size.

I said that the equivalent of subsection (3) was unnecessary. My noble and learned friend said that, strictly speaking, it was unnecessary. There was undoubtedly the implication that he thought that there were nevertheless reasons to put the subsection in. We can return to the matter and discuss it at Report stage when I shall table an amendment to leave out subsection (3). I thought that at this moment I would draw to the Committee's attention what I and I am sure other Members of the Committee regard —particularly the noble Lord, Lord Renton —as completely unnecessary verbiage. It is mounting considerably and soon we shall have a whole page of the statute book in the Bill.

The other matter is the regulation-making power in subsections (2) and (4). In both cases they are subject only to the negative resolution procedure in Clause 82. As regards subsection (4). there is yet another Henry VIII clause in which a Minister seeks power to amend the existing rule of law or practice. I do not take a categorical view against Henry VIII clauses. I am content with the line that is drawn by the Donoughmore Committee. In other words, each clause must be justified on its own merits, the onus being against the person putting forward a Henry VIII clause who must show that it is necessary and justify it to the hilt.

No attempt has been made to approach any of the Henry VIII clauses on that basis. There is a later amendment which, if the Government business managers have their way, will come on in the early hours of the morning. I fear that the hour is likely to be later than that. It is an amendment to make all the regulating powers under Clause 45 subject to affirmative resolution. I am simply indicating that at the moment they are subject only to the negative procedure. That situation is particularly blatant regarding subsection (4) which is a Henry VIII provision.

Lord Renton

The noble and learned Lord, Lord Simon of Glaisdale, has drawn attention to a clause which could have been expressed much more succinctly. Several of the subsections overlap. I should have thought that the draftsman would be well advised to consider a complete revision of the clause without altering its meaning or effect. It is one of the few clauses of the Bill which I favour.

The Lord Chancellor

I am grateful to know that my noble friend favours this clause. Perhaps as we go forward he will find others that he may favour. I understand the point made by my noble and learned friend Lord Simon of Glaisdale, and I have sought to explain before that I give this kind of detail in order to try and give notice of what is in mind. He is correct that at present the regulation-making power is subject to the negative resolution procedure. No doubt we can consider later whether that is appropriate. The idea is to give effect to the principle of directives. That was the reason for it. I hope that the Committee will approve the clause.

Clause 45 agreed to.

On Question, Whether Clause 46 shall stand part of the Bill?

Lord Hutchinson of Lullington

I should like the noble and learned Lord the Lord Chancellor to make clear the precise meaning and implication of the clause. Subsection (1) seems to say that barristers may be directly approached by members of the public and may enter into contracts for the provision of legal services. Does "a contract with his client" mean with his professional client and/or with his lay client? I presume that the implication of the clause is that from now on any advocate, be he barrister or solicitor, may be directly approached by any member of the public. Is that what the clause means? Under subsection (1) the Bar may make rules restricting that direct access if it so wishes. Does that mean that other advocates may not make such restrictions?

The question of direct access has not hitherto come up for discussion under the Bill. I should like to raise other matters, but I shall not waste the time of the Committee if the noble and learned Lord can explain straightaway whether I have understood the clause entirely wrongly or whether what I am saying is the implication of the clause.

Lord Renton

The noble Lord, Lord Hutchinson, is not wasting time. An extraordinary situation arises under the clause. I did not understand it until I read the Notes on Clauses. Under the heading "Policy Objectives", which follows the detailed explanation of the contents of the clause, its aim is set out: Subject to regulation by the profession, to facilitate direct access to barristers by persons other than solicitors and to help to ensure that the law does not unnecessarily restrict the ways in which barristers may offer their services". It goes on to say: It will enable barristers to sue for their fees and, subject to their immunity from suit in relation to advocacy work, to be sued". It adds: The General Council of the Bar is to remain free to make rules if it so wishes restricting barristers' rights to enter into contracts". I have two comments on what appears to be the purpose of the clause. As the noble Lord, Lord Hutchinson, pointed out, it is an indirect way of abolishing the rule that barristers can accept instructions only from solicitors. They cannot do so direct from lay people. Secondly, it will enable barristers for the first time to sue for their fees and to be sued. They can be sued at present for negligence in respect of non-advocacy work. Those two things are done in a rather indirect and hidden manner. What I find most extraordinary is that having said, and having enacted directly or indirectly, that any rule of law which prevents a barrister from entering into a contract with his client is abolished, it goes on to pass the buck to the General Council of the Bar to decide whether or not his new rule of law shall apply. I find that a rather strange method of legislating.

In the past these matters have been left, and left successfully, to the profession. Here we say in one subsection that it does not need the profession to make a rule, and then in the next subsection we say that the General Council of the Bar can restrict the barrister's right of entering into contracts. Perhaps my noble and learned friend the Lord Chancellor can explain the methods he has used in this clause.

The Lord Chancellor

There is a fairly strong view that a rule of law prevents a barrister as such from entering into a contract with his client for the provision of his services as a barrister. That prevents him from among other things suing for any fee that may have been arranged in advance. If there is such a rule I have sought in this clause to take it away but make it absolutely clear that the General Council of the Bar can regulate any matter in this connection. It is therefore entirely open to the General Council of the Bar to make any rules it wishes about it.

As the noble Lord, Lord Hutchinson, will know, part of the present arrangement at the Bar is that access can be had through other than solicitors. It is important that barristers should if they wish be able to make arrangements enforcible at law if that is to be allowed to happen as concerns advice services. I wanted therefore to give the maximum freedom to the Bar to make what rules it wishes. As barristers can be sued in certain contexts, it is right that they should no longer be obliged to accept a situation in which they cannot get money out of a client, even if he has money, just because the client refuses to pay. I think I am right in saying that at present direct access by professionals —for example, accountants and patent agents —is allowed. The possibility of having contractual relations will be helpful in that connection. This clause is in no way intended to deal with the Bar's rule restricting direct access by lay people. There is a nothing in the clause concerning the propriety of the rule. That matter is left entirely to the Bar to regulate. If the Bar were to take the view that in some cases direct access should be permitted, then it might think that a contract was appropriate. The whole idea is to give the Bar Council maximum freedom to make the arrangements, consistent with its professional standards, which it thinks best for the organisation of the profession.

6.30 p.m.

Lord Hutchinson of Lullington

I do not believe that the noble and learned Lord has appreciated the point that I am trying to discover. If the law allowed an advocate to enter into a contract with his client for the provision of his services that must mean that that client can have direct access to that lawyer; otherwise how can he enter into such a contract? It seems to me that once that is permitted the implication must be that the clause permits direct access by a member of the public to the advocate. That member of the public will say to the advocate, "Will you represent me in this case in the Crown Court next week?" The advocate then says, "Yes, I will, and we will have an agreement as to the terms upon which I represent you". If that is the implication of the clause, I should like to say a great deal more about it because the playing field envisaged in subsection (2) is ludicrously bumpy if a restriction on direct access applies only to members of the Bar and does not apply to other advocates.

The Lord Chancellor

The clause applies only to barristers and no one else. So far as I know, such a rule applies only to barristers. Therefore there is no bumpy or exceptional playing field. The General Council of the Bar is the professional body having full authority over every person covered by the clause. So there is nothing in the clause to oblige or enable a barrister to have direct access with a lay client in the Crown Court if the General Council of the Bar prohibits it.

It is not necessary to have direct access to have a contract. One could have a contract under which a solicitor, acting on behalf of his client, instructs a barrister and makes it clear that any instructions to the barrister from the client are to come through to the solicitor. One of the things that can happen under the present arrangements is that, the solicitor having instructed counsel on behalf of his client, the client may decide, for whatever reason, that he is not going to pay for the work that the barrister has done. If the solicitor decides that he does not want to do anything about it, there is nothing that the barrister can do at law to recover his just remuneration. That is no longer consistent with the present situation.

The clause gives the barrister the right, if he does not have it at the moment, to enter into a contract with his client in any way permissible by law, and leaves it to the General Council of the Bar, which rules every barrister, to make the rules necessary to deal with that matter. To take the example of direct access: the Bar's present rules, restricting direct access by lay clients to barristers, are in no way affected or reduced by the clause. I hope that the noble Lord sees what I have sought to achieve. My understanding is that the General Council of the Bar supports the clause —I hope that I am right about that —as being desirable in the interests of the Bar in the present situation.

Lord Donaldson of Lymington

Before my noble and learned friend sits down, in the interests of clarity will he consider making it clear on Report that "client" includes lay client as well as professional client? Some people may think that it is the solicitor only who is their client in this context. It is a point that may be worth making.

Perhaps I may also take the opportunity to welcome subsection (2). Without it, everyone would have been in real difficulties because it would be said that the will of Parliament is not only that the rule should be abrogated but that there should be a positive right to make a contract. The subsection makes it clear that the Bar Council is free to decide. I welcome the subsection.

The Lord Chancellor

I am grateful to my noble and learned friend. The whole idea of the clause is to preserve subsection (2). Subsection (1) merely gives the additional right to barristers, over and above what they have at present, if a rule of law such as the clause deals with exists. I shall consider whether we need to make the point plain. I had taken it that "client" would include the lay client. I shall take advice as to whether we can clarify the point.

Clause 46 agreed to.

Clause 47 [Immunity of advocates from actions in negligence and for breach of contract]:

Lord Allen of Abbeydale moved Amendment No. 198: Page 37, line 14, leave out ("barrister") and insert ("authorised advocate").

The noble Lord said: I should like to speak also to Amendments Nos. 199 and 200. I do so with rather greater enthusiasm than I managed to muster for the earlier amendment that I moved about conditional fees.

The effect of the amendments is to put an end to the immunity from liability for negligence which barristers enjoy in relation to advocacy in court. The clause, as at present drafted, extends that immunity to the new advocates provided for in the Bill. Solicitors are already covered. Incidentally, in doing so it defines the existing rule of law in rather wider terms than I had understood it to be. That, however, is a separate point not to be pursued in the present context.

The rule of law in question is one for which the judges were responsible, and this could well be the first time that that issue has been considered in the context of legislation before Parliament.

It would be possible to speak at great length about the amendment, but the main arguments can be summarised briefly. I am not a lawyer and perhaps I shall be forgiven if I get some of the technical terms wrong. If a barrister or solicitor appearing as an advocate in court on his client's behalf is guilty of negligence, there is nothing the client can do about it. He is entitled to no kind of redress or compensation no matter how dire the consequences are to him. If a barrister settles his client's case at the door of the court for a derisory sum in order that he can get rid of that case and free himself for something much more lucrative, he remains immune from any proceedings against him.

In a leading case in Canada, a plaintiff counsel failed to turn up at the trial and sent along an inexperienced replacement who failed to call vital evidence. The leading case here, which was settled in this place —Rondel v. Worsley —established that the rule was justified as a matter of public policy and not, as I had once thought, because there was no contract between barrister and client.

There seem to be two main arguments. The first is that the barrister needs to conduct his duties fearlessly and independently and that in doing so he must put his duty to the court —for instance, not to mislead —before his duty to his client, something we have already heard referred to on a number of occasions today. The client as a consequence may well feel aggrieved, but it seems to me unthinkable that if he brought an action any barrister could be found negligent for giving priority to his duty to the court.

The second argument is a point of more substance; that is, the risk of relitigation, having to go over the original dispute afresh in the courts. I can well see the force of this argument. But relitigation of a kind already takes place in the appeal system and, anyway, it seems to me that it is a lesser evil to make it possible for a grave injustice to be put right than for a client who has suffered an injustice to be left with no remedy. As Mr. Justice Krever concluded in the case in the Ontario High Court to which I referred just now, it seemed to him better that relitigation should occur than that the client should be left without recourse.

The disincentives to any aggreived client taking proceedings are quite considerable. He will be faced by a trained lawyer and the issues will be decided by the professional colleagues of that laywer. He would find it difficult to get legal aid unless it was thought his case was strong, and the welfare litigant who mounted a case which was found to be vexatious or frivolous could have it struck out.

The immunity of advocates is not universal. It does not exist in France, Germany or Belgium, without, so far as I know, any major difficulty having arisen; and in Ontario, to which I have already referred, there have been quite a number of cases establishing that it does not apply. To be fair, it applies in Australia following their understanding on a majority decision in a criminal case, and it applies in New Zealand, but I believe that it does not apply in the United States.

As your Lordships will be well aware, it applies to no other profession here. The surgeon, the anaesthetist, the constructional engineer and all the others are liable to claims for negligence. I have some sympathy with my noble and learned friend Lord Oliver of Aylmerton, who I am sorry is not here. When we were discussing the advisory committee earlier in the proceedings on this Bill, he asked why the legal profession in that context should be treated differently from all other professions. This amendment poses a similar question.

There are undoubtedly arguments both ways, but it certainly seems to me that on a balance of the arguments the case for putting an end to the immunity rule comes out much the stronger. It is not easy to reconcile its continued existence with the objective of this Bill of ensuring that there are no obstacles to access to justice. I beg to move.

6.45 p.m.

Lord Simon of Glaisdale

The immunity rule does not stand alone in respect of lawyers. The attitude of the law is consistent throughout only to give immunity so far as it is necessary in order that the person given the immunity should perform his duty to the public, and it is very narrowly drawn. For example, an ambassador at common law is immune from suit. It may be that certain people would find it difficult to bring suit against him, but the public interest demands that he should not be plagued by actions at law. But it is very narrowly drawn. The ambassador is only immune when he is in post and for a reasonable time thereafter.

So too with judges and so too with arbitrators. A judge is given immunity only in so far as he is performing judicial duties, because he could not perform them adequately if he was consistently worried about whether he was subject to suit. It is the same with an arbitrator. He is given immunity only in so far as he is carrying out his official duties. It is the same with an advocate. He has a supervening duty to the court. That may be very irritating to the lay client, as it was in Rondel v. Worsley. My noble friend said it was very unlikely that a suit could be maintained, but it was in Rondel v. Worsley and indeed it was fought up to the House of Lords.

So public interest demands that just as the judge and the arbitrator are protected, so the counsel, the advocate, is protected from suit altogether while he is performing duties where he has a supervening duty to a court; but no further than that. If he is negligent in writing an opinion in chambers, for example, he enjoys no immunity. The immunity as in the case of ambassadors, as in the case of judges and as in the case of arbitrators is very narrowly drawn, and those who read the judgment in Rondel v. Worsley and the cases which followed, such as Aronson, for example, will see how very narrowly it is drawn and how necessary within those limits it is on the grounds of public interest.

It is simply no good saying that a suit is likely to fail against a barrister, against a judge or against an arbitrator. Rondel v. Worsley showed that a discontented litigant is quite ready to have a go. So I hope that my noble and learned friend will not accept this amendment, which is an amendment to subsection (1).

Subsection (2) seems to me to follow directly from the fact that this Bill now creates a contractual relationship between an advocate and his client, and it is absolutely necessary, although I quite understand that my noble friend will wish it to go if he succeeds in saying that the immunity rule is hereby abolished.

Baroness Macleod of Borve

A few lay people have the opportunity of addressing noble Lords in this Committee stage of this very important Bill. Before starting I should like to pay a very deep tribute to all the people who have taken part in the proceedings on the Bill. I have learnt a great deal, but I listened with a great sense of not being as clever as I perhaps hoped I might have been when the noble Lords addressed us at all stages of this Bill, led by my noble and learned friend the Lord Chancellor. Their speeches have been impressively brilliant. However, in view of the essential qualities which the noble Lord, Lord Hutchinson of Lullington, described to us last week, it is obvious that advocates who are members of the Bar are exceptionally brilliant and talented men and women.

Clause 47 defines the existing rule of law by which advocates are immune from liability for negligence in relation to advocacy in court. Subsection (2) extends that rule in such a way that it provides immunity not only for lawyers acting as advocates but also for lay persons to be given new rights of audience under Clause 8. As we all know, there is to be a big and welcome change under Clause 8 in which only exceptional people of high quality will be able to obtain rights of audience and represent their clients in the higher courts.

In view of what I have said about the brilliance of the learned members of the Bar, perhaps it does not come amiss that it seems to me that because of their brilliance they have no need to claim immunity. It does not seem to me that one goes with the other. The Consumers' Association, with which I have been in touch, has had wide experience in the small claims court through the service known as the "Which Personal Service". The association is against all immunity for all advocates. As the noble Lord, Lord Allen, said, and as I am advised, this is the only profession which claims immunity. That seems quite extraordinary. I sincerely believe that the top people in this country should not avail themselves of the opportunity to hide, as some people might say, behind the skirts or trousers of immunity. They should have the courage of what they say, knowing that they are right. I follow the noble Lord, Lord Allen of Abbeydale, in asking the noble and learned Lord the Lord Chancellor to forgo the immunity for all advocates in our courts.

Lord Ackner

I respectfully agree with the noble Baroness that there is some cause for anxiety that the Rondel v. Worsley immunity is to be extended outside the field of the qualified lawyer. This is an old refrain because one of the most intolerable aspects of the whole Bill is the bringing into the courts, either as an advocate or later as a judge, a person who is not the lawyer obliged, by the discipline of his profession, to adhere to imposed and accepted rules.

Rondel v. Worsley runs to 104 pages. I have a photostat of the judgment here. I know that Members of the Committee hope shortly to adjourn so I shall make but a few references to it. I wish to refer in particular to the anomaly which the legal profession enjoys. It comes in the speech of Lord Pearson which is to be found at page 273: Great stress is laid on the argument that the immunity of the advocate is 'anomalous' to other professions. But the whole judicial process is anomalous to other professions. It is a thing on its own. It is a unique and important process of the community. The various ingredients of it — I shall refer to them in a moment — are immune in respect of the occasional hardships they may create by any failure on their part. And even the Press which is not part of it but which performs a service in respect of it shares this immunity. It can just as well be said that it would be an anomaly to make the advocate, alone among the other ingredients, liable for his failure in the judicial process. In truth, the facile use of the word 'anomalous' does not advance the matter". In the five ingredients, Lord Pearson was referring to the parties, the witness, the judge, the juror and he added the advocate. All those are Immune from a variety of other possibilities of claims: claims on the basis of perjury, incompetence, negligence and the like.

In many ways I am grateful to the noble Lord, Lord Allen of Abbeydale. I shall refer again to these judgments at the Report stage. Each and every one emphasises the importance of the cab rank principle and how vital it is to the administration of justice. I believe that in this Committee it has not yet been properly emphasised.

Lord Mishcon

I wish briefly to explain to the noble Baroness in simple language two reasons why a somewhat illogical-looking rule must apply for the public good. The first one is that if there were no such rule, in order to protect himself the advocate would have to quote every point that might have been made in a brief; and, worse still, every point that a client has asked him to put forward, even though the barrister knows perfectly well that to put forward some of those points might be inimical to the interests of the client. That is the first reason among many.

The second reason is that if one sues an advocate for negligence in the conduct of a case which he has lost, inevitably the case has to be retried. That is obviously undesirable and contrary to public policy. The case has to be retried in order to see whether there could or would have been a different result from that which the advocate achieved. My purpose in rising was only because I well understand how those who are not lawyers and who are Members of the Committee may think that this is a most unfair example of immunity and privilege which is given to advocates.

I rise for another reason. It may be that as a result of my ignorance—and if so the noble and learned Lord the Lord Chancellor will point it out to me in his usual gentle way —I had always thought that the immunity was limited to an advocate performing the duties of an advocate at a trial. Clause 47(2) contains the words, in relation to proceedings or contemplated proceedings". I thought that that might give rise to a great deal of misunderstanding as to whether or not the immunity rule is not as it was but is extended by the Bill. I cannot imagine that the noble and learned Lord intended in this clause to cover, for example, the opinion of counsel who —and I emphasise this—neglecting certain facts that were given in his instructions and also neglecting certain principles of law of which he ought to be aware, gave advice in contemplated proceedings that the plaintiff has no case. That might be an opinion which is absolutely negligent. Those would be contemplated prodeedings. Normally contemplated proceedings never get near a court for there to be any advocacy.

There might be the odd case of somebody intending proceedings and asking leave of the court to serve out of the jurisdiction or matters of that kind, or asking leave to issue a writ out of the jurisdiction. But these are cases which are obviously exceptional. Therefore I ask the noble and learned Lord whether these words, "or contemplated proceedings" come into the Bill inadvertently or are covered by some matter of which at the moment I am ignorant.

Lord Renton

We can again take refuge in the Notes on Clauses which are absolutely clear and succinct. They state that the intention of the clause is to extend the immunity to new classes of authorised advocate and authorised litigator and to those exercising rights of audience or the right to conduct litigation by virtue of directions made by the Lord Chancellor under Clause 8. I should remind the Committee that that clause is in Part I and it is the clause which deals which people who will be given the right to pursue small claims on the part of creditors. That is what the Notes on Clauses states.

7 p.m.

Lord Mishcon

I must not jump up and down. I promise the Committee that this is the last time I shall jump up. After this I shall sit down. However, I was dealing with the phrase "contemplated proceedings". Even if this measure now extends to a body of people whom we would not have contemplated but for the Bill, I was asking whether in any circumstances advocacy could or should cover from a practical point of view contemplated proceedings. That means proceedings which have not been started yet.

The Lord Chancellor

The purpose of this clause is to apply the existing rule of law only to advocates, whether they be barristers or solicitors or persons who act as advocates under Clause 8. It is the existing rule of law only that is being applied because we have defined the immunity rule as any rule of law which confers immunity from liability for negligence in respect of any act of omission. So in order to find out what the immunity is one has to go to the existing law which tells one what it is. There are cases in which the stage at which the immunity applies has been determined. I have no wish whatever to disturb those or enter into an attempt to define what they say. Therefore, I have used the expression "the immunity rule" as referring to the existing law. I hope that that is reasonably plain.

On the question of principle, however, the first point I have to make is that I believe that the principle reason for the immunity is in order that the integrity of public justice is maintained. The passage in the speech of the late Lord Diplock in a case called Saif Ali v. Sydney Mitchell & Co. puts these matters clearly. The noble Lord said: The retrial of the issue in the previous action if it depended on oral evidence would have to be undertaken de novo. This would involve calling anew after a lapse of time witnesses who had been called at the previous trial and eliciting their evidence before a different judge by questions in examination and cross-examination that were not the same as those put in the previous trial. The circumstances in which the barrister had made decisions as to the way in which he would conduct the previous trial and the material on which those decisions were based could not be reproduced in the retrial. The initial question in the action for negligence on whether it has been established that the decision adverse to the client reached by the court in the previous trial was wrong would become hopelessly entangled with the second question. It seems to me that to require a court of co-ordinate jurisdiction to try the question whether another court reached a wrong decision and if so to inquire into the causes of its doing so is calculated to bring the administration of justice into disrepute". That is the reason for the rule that I found my case on. However, as my noble and learned friend Lord Simon of Glaisdale said, there are other reasons as well.

This matter was also considered in the High Court of Australia in the case of Giannarelli v. Wraith, and Shulkes v. Wraithe on 13th October 1988. Much the same reason was given by the Chief Justice. It was a rather narrow decision at four to three but the decision of the court was in favour of maintaining the rule. The Chief Justice said: The second aspect of public policy that calls for attention is the impact on the administration of justice of allowing court decisions to become the subject of collateral attack by means of actions against counsel for in-court negligence. Exposure of counsel to liability for such negligence would unquestionably encourage litigation by unsuccessful litigants anxious to demonstrate that, but for the negligence of counsel, they would have obtained a more favourable outcome in the initial litigation. That would be the central issue for decision in secondary litigation of this kind. If the plaintiff were to succeed, the resolution of this issue by a different court and on materials which might well differ from those presented in the initial litigation, due to lapse of time or other reasons, would undermine the status of the initial decision. Yet an appeal against that decision might not succeed with the result that it would stand, though its status would be tarnished by the outcome of the collateral proceedings. The impact of a successful challenge to a criminal conviction resulting in a sentence of imprisonment would be all the greater. It would be destructive of public confidence in the administration of justice. And for this very reason there would be a strong incentive on the part of a disappointed litigant to sue counsel for negligence as an indirect means of calling in question the decision in the initial litigation". We raised this matter in the consultation and there was a difference of opinion in that the consumer bodies, as the noble Lord, Lord Allen of Abbeydale, and my noble friend Lady Macleod of Borve indicated, were in favour of doing away with the immunity. However, I think it is of particular importance that the Association of British Insurers which, assuming this immunity were to be taken away would have a new line of business, agreed that immunity from actions in negligence should in the future extend to all recognised advocates. Therefore that body believes that the rule has a proper place. I believe this rule is an appropriate one. We placed it in the forefront of consultation right from the start and I believe it is right that we should adhere to it.

Lord Mishcon

Will the noble and learned Lord clarify the point about contemplated proceedings, if only to put me in my place?

The Lord Chancellor

I believe I started with that point. I started by saying that the rule of law is the immunity rule which exists at the moment. The question of where the immunity starts in relation to a particular matter has already been decided. I do not wish to reopen that question. It is necessary to cover the matter of contemplated proceedings because the question may arise of how far along the road the matter has gone. That is why we use the phrase "contemplated proceedings". I am using it solely to make it clear that we are not making any change to the existing law and that that law continues as it was.

Lord Hacking

I am sorry to interrupt the Committee after the noble and learned Lord has spoken but I continue to have concern about the drafting of Clause 47(2). I heard exactly what the noble and learned Lord said about not intending to extend immunities. However, if one applies that practically against a member of my side of the profession, in the case of a failure to issue a writ within the limitation period or of conducting a litigation so slowly that it is struck out for want of prosecution, within the wording of Clause 47(2) both of those instances would seem to apply. That certainly extends the immunity.

The Lord Chancellor

The measure would not apply in those circumstances for the reason that they do not come within the immunity rule which is referred to in Clause 47(1). The immunity rule would not cover those matters and therefore nothing in any of the other clauses extends the immunity rule. It simply gives the subject matter to which the immunity rule may apply. However, as the immunity rule does not cover the matters the noble Lord referred to, nothing else brings it in.

Lord Mishcon

I rise for the last time and I do it only in order to extend what I have said and not to repeat what I have said. I know that the noble and learned Lord will consider, as he always does, the fact that these Acts of Parliament are read by lay people who ought to be able to understand them. No layman who read Clause 47(2), not knowing the abstruse ruling that was given in the cases to which the noble and learned Lord referred in regard to the immunity rule, would understand that contemplated proceedings came within the immunity rule which deals with advocates who are dealing with the matter at a trial. It may very well be that the immunity rule needs to be spelt out more clearly in the Bill or that some alteration has to be made to the wording. I merely ask the noble and learned Lord to consider the matter before Report stage.

The Lord Chancellor

I shall certainly consider the matter. I have sometimes found that non-lawyers in this Chamber find it easier to understand what I intend in the clauses than some of those who are not laymen. However, I shall take account of what the noble Lord has said.

Lord Coleraine

Having listened to what the noble Lords, Lord Mishcon and Lord Hacking, have said, I believe that there is one respect in which my noble and learned friend might consider the matter again, because it is misleading. Perhaps he would consider the possibility that Clause 47(1) might read: The provision by him of legal services by way of advocacy in relation to proceedings or contemplated proceedings".

The Lord Chancellor

I have considered carefully whether I should attempt to restate the immunity rule. Having studied the cases I have concluded that that would be rather unwise. Therefore, I thought it best to take the rule as it stands and allow the judges to develop it, not attempting to formulate or reformulate it in any way. However, I shall certainly consider whether anything can be done to eliminate the misunderstanding into which the noble Lord, Lord Mishcon, appears to have fallen.

Lord Allen of Abbeydale

In my opening remarks I said that I thought that the rule of law had been defined too widely. The noble Lord, Lord Mishcon, pursued that point. However, it appears not to arise in connection with my amendment in which I propose to delete the rule of law altogether. We seem to have strayed into a discussion on clause stand part.

Perhaps I could bring the discussion back to the amendment under consideration. I am a little disappointed in that I have heard no new arguments from the lawyers who have spoken to add anything to my previous knowledge, except possibly for a reference to judges and arbitrators by my noble and learned friend Lord Simon of Glaisdale, the relevance of which escaped me. I have read Rondel v. Worsley—page after page of it. It is beautifully phrased and carefully developed. I fear that I still find it unconvincing. I am comforted by the knowledge that a substantial minority in the Australian case to which the noble and learned Lord referred and a majority in some of the Canadian cases which I have looked at have also found it unconvincing.

I do not want to test the opinion of the Committee tonight. I should like to read carefully what has been said and consider it. I reserve the right to return to the matter at a later stage if need be. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 199 and 200 not moved.]

Clause 47 agreed to.

Viscount Ullswater

I believe that this would be a suitable time to break for dinner. I suggest that the Committee stage does not begin again before 8.30 p.m. I beg to move that the House do now resume.

Moved, That the House do now resume. —(Viscount Ullswater.)

Lord Simon of Glaisdale

Perhaps I may ask the noble Viscount how late it is proposed that the Committee should sit tonight, or tomorrow morning. When the Committee began today we had dealt with just over half the number of clauses in the Bill. It is fair to say, however, that the Committee had also dealt with some substantial schedules. However, there is one large schedule —Schedule 7 —to come. What is more, there is an amendment of considerable constitutional importance down for a very late clause, Clause 82. That amendment raises the question of the Henry VIII clauses and what should be proper parliamentary control.

As Members of the Committee know, a Henry VIII clause is a clause empowering the Executive to repeal, modify or amend a provision of an Act of Parliament. That represents an age-old struggle between Parliament and the Executive. In the famous words that have been used, that was the cause for which Hamden died in the field and Sidney on the scaffold. It is highly undesirable that this Chamber should have to deal with such a matter in the early hours of the morning, particularly when annexed to it is the question of whether the affirmative or negative resolution should be applicable to such provisions.

Moreover, I understand that the intervening business will take longer than an hour. The noble Lord the Lord Privy Seal is present. He said, very reasonably, that he would consider how the matter went. Inevitably we had a long debate on Clause 44, although there was considerable self-abnegation in discussion of that clause. We are now only at Clause 47 and there is a great deal to discuss. There is certainly two days' business ahead. I ask the noble Viscount or the noble Lord the Lord Privy Seal to say that an extra Committee day will be vouchsafed.

Lord Belstead

Perhaps I may reply to the noble and learned Lord, Lord Simon of Glaisdale. The noble and learned Lord was good enough to write to me today to warn me that he would raise the matter, probably at this hour.

There are two points that I should make. The first is that early on in the proceedings on the Bill some perfectly reasonably points were made about how the amount of time allocated to the Bill in Committee compared with other legislation considered previously by your Lordships' House. The Children Bill was mentioned. The moment has come for me to make it clear that we are now proceeding through a sixth day in Committee on the Bill. That is an additional day compared with the Children Bill in the last Session. As many Members of the Committee will remember to their cost, that was a Bill to which hundreds of amendments were proposed. As we have gone along we have agreed through the usual channels to allocate first a fifth day and then a sixth day.

Therefore, the second point I should like to make is that at the end of this sixth day we should reach the point agreed by the usual channels, namely, the end of the Marshalled List. If we do not do so Members of the Committee will be at a disadvantage, finding that they would have to continue with the Bill on a day which they had not catered for in their diaries.

To revert to my first point, as Leader of your Lordships' House I feel that we are being reasonable. We have an additional day compared to the enormously long proceedings on the Children Bill. I hope that that means that we shall not have to go too late tonight.

House resumed.