Litigation: Conditional Fee Scheme (Hansard, 18 July 1994)

§ The Lord Chancellor (Lord Mackay of Clashfern)
My Lords, the conditional fee scheme outlined in the draft order and regulations will provide a valuable means of access to justice for many people who might otherwise be unable to afford to proceed with their cases. There has been extensive consultation on the draft order and regulations and, in the light of the responses I have received, I believe that the safeguards provided in the order and regulations are generally sufficient and satisfactory. I do, however, remain open to specific suggestions for improving the terms of the order and regulations, although I would now like to make early progress towards bringing the scheme into effect.

§ Lord Ackner
My Lords, while thanking my noble and learned friend for his detailed Answer perhaps I may, before putting any further question, in two sentences refer to the context. Conditional fee agreements are a species of contingency fee which permit lawyers to take cases on a no win, no pay basis with a charge—an uplift or a mark up—on top of their normal fees in the event of success. Initially it was to be 20 per cent. It has now been put at a maximum of 100 per cent. The second point is that before the Courts 4 and Legal Services Act 1990 made such speculative agreements lawful, they were unenforceable being contrary to public policy.
My questions are these: first, does my noble and learned friend agree with the advice of his own advisory committee mat unless his regulations prohibit the uplift exceeding a set proportion, it could absorb the greater proportion or even the whole of the sums recovered thereby equalling, if not exceeding, the greater excesses of the American system which have been so often condemned? Secondly, does he not further agree with his own advisory committee that his regulations should prohibit lawyers bringing wholly unmeritorious actions in the hope that defendants will settle them to avoid the trouble and expense of going to court?

§ The Lord Chancellor
My Lords, I propose to address myself to the two questions. First, I agree with the advice of the advisory committee that it is possible, under the draft regulations, for a lawyer to make an arrangement of the kind to which my noble and learned friend has referred. But the purpose of these regulations is to provide a maximum uplift, the principle behind it being that the uplift is related to the work done and not to the amount of damages. I can well see that, depending on the circumstances, it may well be right for the parties to make an arrangement to limit the uplift by reference to the amount of damages.
On the second point, obviously the system is one which is quite different from the system that prevails in the United States in mat it is related to the work done rather than to the amount of damages recovered. Secondly, in this country there exists a very different regime for costs from that which prevails in the United States because in this country the loser will be liable for costs. Therefore in the kind of action to which my noble and learned friend referred in his second question, there will be a liability of costs on the plaintiff which the lawyer will be bound to tell him about and which should be an important safeguard against the kind of difficulty to which my noble and learned friend referred in the second branch of his question.

§ Baroness Mallalieu
My Lords, the Lord Chancellor's advisory committee was anxious that a client should have the safeguard of being told in advance what his case was likely to cost him under this scheme. I wonder whether the noble and learned Lord could help us. Although the regulations provide that the client will be told in advance what he will have to pay if his claim is partially unsuccessful, or what he has to pay in any event, or if the agreement is terminated, the regulations as presently drafted seem to be silent on a requirement to tell him what he is likely to have to pay up if he wins, and how it is to be calculated. I ask the noble and learned Lord why that is so and whether it can be rectified in redrafting.

§ The Lord Chancellor
My Lords, the intention is that the matter to which the noble Baroness referred is the central part of the agreement. The other matters that are specifically referred to are supplementary. I do, however, see that it is wise for the lawyer and client to discuss at the outset the likely proceeds from the enterprise. In view of that, having had discussions with 5 the president of the Law Society just last week, I think it may be possible to meet the point by putting in some requirement about the situation that should obtain with regard to the net amount that the client could expect to recover as a measure of success in terms of the agreement.

§ Lord Hailsham of Saint Marylebone
My Lords, quite apart from the danger to plaintiffs outlined in the original Question, what protection have meritorious defendants against unmeritorious claims brought against them in the knowledge that the plaintiffs will not be able to pay if they lose?

§ The Lord Chancellor
My Lords, as my noble and learned friend knows, the law affects the lawyers concerned in those circumstances. The most important safeguard is the one to which I referred; namely, that in taking action along these lines plaintiffs who have assets will have a serious concern with regard to the risk to those assets.
I should also say that I understand that the Law Society is in the final stages of organising a form of insurance policy to protect clients against a costs order under a conditional fee agreement. That will be a valuable supplement to the conditional fee scheme. If that is implemented it will be a complete answer to the anxiety to which my noble and learned friend has just referred.

§ Lord Lester of Herne Hill
My Lords, is the noble and learned Lord the Lord Chancellor able to assure the House that lawyers will not be able to take a disproportionate share of damages in cases which they win? Can he also give an assurance that there are speedy, accessible and effective remedies for members of the public complaining about too large a share of the success being taken by the lawyers?

§ The Lord Chancellor
My Lords, the weapon that Parliament gave to me was to determine the maximum uplift that could be taken in any case. I have been persuaded by the representations that have been made to me that that maximum ought to take account of the most unlikely case that can properly be taken, which would be one in which there was something like a 50 per cent. chance of success. Obviously the client and the solicitor or other lawyer will require to agree on these matters. The Law Society proposes a draft form of agreement. I believe that that information is the best protection that a client who wishes to proceed in this way can reasonably have.

§ Lord Allen of Abbeydale
My Lords, as a non-lawyer I was among those who welcomed the provision relating to conditional fees when the 1990 Courts and Legal Services Bill was going through Parliament as a means of improving access to justice. As I recall, I suggested, without success, an amendment extending the relevant clause. Is it not disappointing that four years later we are still arguing about the implementation of the powers conferred by the 1990 Act, notwithstanding that, as I understand it, a comparable arrangement has been operative in Scotland 6 for some considerable time? Can the noble and learned Lord say a little more about when he hopes to be able to introduce the new scheme?

§ The Lord Chancellor
My Lords, I believe that many of your Lordships are persuaded that evolution rather than revolution is the way to progress when making changes to the legal system. Care has been taken to try to take account of all the various anxieties that have been expressed and in relation to how far the scheme should extend at its first implementation.
I hope that having been through the process for some time we are close to the position where I can invite this House and the other place to approve the regulations. I certainly hope to be able to do so before the end of the year, all being well.

§ Lord Renton
My Lords, is not the difficulty that the conditional fee scheme, even at its best, will drive litigation further into the realm of speculation? Will my noble and learned friend therefore take careful note of the cautious advice already given to him by his advisory committee?

§ The Lord Chancellor
My Lords, everyone who embarks on litigation knows that the outcome is not certain. It is important that the risks should lie with those who take them. That is one of the advantages of this particular type of proposal. I agree that it is wise to proceed cautiously. The four-year period to which the noble Lord, Lord Allen of Abbeydale, referred is an indication of the time that I have taken. However, it is not wise to wait too long.

§ Lord Peyton of Yeovil
My Lords, my noble and learned friend suggested that there should be discussion as to the likely proceeds from the enterprise. Does he not think, on reflection, that that conjures up a rather alarming picture and that many clients would not stand much of a chance?

§ The Lord Chancellor
My Lords, it is important that the client and the lawyer should be aware of what: is likely to be the outcome and the range of outcomes which has to be considered. That is what I had in mind. The client is embarking on an important transaction and it is very important that the client should be informed of the range of outcomes which the lawyer thinks possible.