§ 3.13 p.m.
§ The Lord Chancellor rose to move, That the draft order laid before the House on 20th April be approved [17th Report from the Joint Committee].
§ The noble and learned Lord said: My Lords, I beg to move, that the draft Conditional Fee Agreements Order 1995 which was laid before this House on 20th April be approved. At the same time, I shall speak to the second Motion standing in my name relating to the Conditional Fee Agreements Regulations 1995 and hope to move that Motion formally later.
§ Section 58 of the Courts and Legal Services Act 1990 empowers me to prescribe the types of proceedings in which conditional fee agreements should be available, the maximum percentage uplift which solicitors can charge on their fees when they take a case on that basis, and any other requirements of an agreement. It is those matters which are set out in the draft order and regulations which are before your Lordships. These drafts have now been approved in their current form in another place without a Division.
§ The consultation exercise which has given rise to the order and regulations has been a lengthy and extensive one. I am required by Section 58 to consult the Lord Chief Justice, the Master of the Rolls, the President of the Family Division and the Vice-Chancellor, and also the Law Society and General Council of the Bar. In addition to the statutory consultees, I approached consumer bodies and other organisations with an interest, including my Advisory Committee on Legal Education and Conduct. Drafts of the order and regulations were circulated to numerous members of the profession and to members of the public.1544
§ In developing the conditional fee scheme as it now stands, I have given a great deal of consideration to the advice which I have received from all sources. My purpose has always been to develop a scheme which will increase access to the courts and consumer choice. That cannot be achieved by stifling the scheme with over regulation. Clients and solicitors must be given the freedom to reach an agreement which reflects their mutual interests according to individual circumstances. Of course that must take place within a framework which provides protection for the client, who is naturally in the weaker position at the negotiation stage because he or she is unlikely to have much knowledge of the law and procedure. It is that balance which I have sought to achieve within the order and regulations.
§ I propose that conditional fee agreements should be allowable in personal injury cases, insolvency actions and cases before the European Commission of Human Rights and the European Court of Human Rights. A limited scheme of that kind should enable us to observe how conditional fees work in practice, with a view to extending the scheme to cover other cases if it appears sensible to do so. I also propose that the maximum permitted percentage uplift which a lawyer may charge on his fees should be set at 100 per cent. That figure is exactly what has been allowed since August 1992 under the Scottish speculative fee scheme, and that percentage was decided by the Scottish courts not the Government. It is this proposal which has perhaps provided most discussion and is at the root of many of the misgivings which have been expressed. I therefore wish to take this opportunity to explain the reasoning which led me to the conclusion that 100 per cent. was the right figure at which to set the maximum uplift.
§ First of all, I must again emphasise that the whole purpose of conditional fees is to extend access to justice. The fact that lawyers can charge an uplift of up to 100 per cent, will encourage them to accept cases with a 50:50 chance of success, which, if the uplift were lower, it would not be appropriate for them to take. With a low uplift of, say, 10 per cent.—which was the first proposal—the range of cases which would be taken would be very much more restricted.
§ In approaching this matter one has to assume that the ordinary fees that lawyers charge are based on the view that they will be paid those fees for the work done with a reasonable level of profit as part of the practice of their profession. Therefore, their fees do not include any element for the risk of litigation so far as concerns the outcome for the client. That is the right way of doing it.
§ It is obvious that if one is to take a case which involves a degree of risk, the correct balance is to allow the proper percentage of risk to be taken into account in fixing the fee. For example, if one takes a case where the chance of success if 50:50, the correct uplift for that—unless one is going to charge other clients for that case—is 100 per cent. Of course, if one has a case in which the risk is much less then it is appropriate that the uplift should also be much less. Under Section 58 I am entitled to fix a maximum uplift that may be charged. That is what I have done and that is why, in response to the consultation, I took the view that that was the right figure.1545
§ Those who oppose the 100 per cent. uplift must recognise that as an inevitable consequence the range of risk which can appropriately be taken is thereby reduced. I can see no good reason why those clients who have a viable case, but for whom the prospects of success are of the order of 50:50, should not be able to take advantage of the scheme if they wish to do so.
§ It follows that if the lawyer is successful he or she will receive an uplift in fees of 100 per cent. That is seen as conferring a great benefit on the lawyer but the other side is that there is a 50:50 chance that for all the work done the lawyer will receive nothing.
§ I would add that I do not anticipate the figure of 100 per cent. becoming the normal uplift for all conditional fee cases. There has been a suggestion in some papers that that will happen, but I do not accept that. I must determine the maximum percentage uplift. Nor can I see why it should be assumed that that will happen in practice. My intention has always been to provide sufficient scope for the conditional fee scheme actually to work. We will not be serving the interests of the consumers of legal services by stipulating a low maximum uplift and effectively limiting the kind of actions which solicitors would be prepared to take on a conditional fee basis to those of low risk.
§ In relation to the concern which has been expressed about the 100 per cent. uplift, there have been calls for the regulations to impose a statutory cap to ensure that only a certain percentage of any damages recovered can be taken by way of the uplift. I do not believe that I have the power to do that under Section 58 of the Courts and Legal Services Act 1990. The power given to me is to prescribe the maximum percentage increase on the lawyer's normal fee. However, it seems to me that there would be other difficulties with imposing such a cap even if I had the power. How would a cap, imposed by regultaion, operate in cases in which there is a structured settlement whereby the plaintiff may receive a lump sum and then a regular payment during his or her lifetime? A statutory cap may also have the same effect, as I have mentioned with regard to lower uplift, in discouraging lawyers from accepting cases with a high risk. The relationship between cost and the amount in claim varies a great deal, in practice, with the amount that is claimed.
§ It may well be that a cap such as the Law Society recommends in its model agreement will prove a useful tool. It certainly helps to focus attention on this aspect of the matter in discussions between the lawyer and the client. However, it is important for the client to be aware of the implications of the uplift and it is for this reason that I have included within the regulations a requirement for the agreement to state whether or not there is to be a cap on the amount of damages to be taken by way of the uplift. This will ensure that the matter is addressed in all cases if the agreement is to be a conditional fee agreement obtaining the protection of the law and therefore enforceability.
§ I ought to emphasise another aspect of the matter. An additional safeguard against excessive costs will be provided by taxation, which will be available to clients under a conditional fee agreement in respect of all the fees in question. The proposed taxation amendments have 1546 been circulated for consultation among taxing experts and I expect them to come into force within the next few months. That is on the assumption that your Lordships approve the draft order.
§ It may also be helpful if I direct your Lordships' attention to the other requirements in the regulations which will provide protection to the client. The regulations require a conditional fee agreement to state, first, to which proceedings or parts of them it relates. It is possible to have a conditional fee agreement relating only to part of what would otherwise be a composite proceeding.
§ Secondly, it should state the circumstances in which the legal representative's fees and expenses, or part of them, are payable. That is to define what is to be success for the purpose of the agreement. It is most important that client and solicitor should have their minds focused on that matter, which may vary according to the circumstances of the case.
§ Thirdly, it should state what payment is due upon partial failure of the specified circumstances, irrespective of the specified circumstances occurring and upon termination of the agreement for any reason. In other words, the agreement must state what happens if for any reason it is to be terminated or what happens if the result or outcome is only a partial not a full success within the meaning that the parties have agreed upon for success.
§ Fourthly, it should state the actual amount payable in the event of success or, if that is not specified, the method to be used to calculate it. However, the client and solicitor must direct their attention at the outset to the question of how fees are to be calculated if the amount of the fee in question is not specified.
§ Fifthly, it should state whether the amount payable is to be limited by reference to the amount of any damages which may be recovered on behalf of the client. In other words, the lawyer and the client are to discuss and agree the question of whether there is to be a cap on the amount of the fee which can be taken under the agreement by reference to the amount of damages in question. Of course, that can vary and it is a matter for the parties to agree upon.
§ In addition, the agreement must state that before it was entered into the legal representative drew the client's attention to the availability of legal aid and taxation and the liability of the client for the costs of his legal representative and for the costs of any other party to the proceedings. These requirements, supported by the guidance and recommended forms of agreement, which I know the Law Society is to distribute to solicitors, will, I believe, provide an appropriate degree of protection to the client.
I believe that the conditional fee scheme will provide greater access to justice and will increase choice for the consumer; and I thank the Consumers' Association for its view that,
conditional fees offer a means of support for those who would otherwise be deterred from pursuing their legal rights by the fear of legal costs".
The scheme that I propose combines consumer protection with sufficient flexibility to encourage take-up of the scheme and the adjustment of protection to the particular circumstances of the client and the proceedings in question.
§ Lord Ackner
My Lords, before the noble and learned Lord sits down, perhaps he can help me with regard to the suggestion that he has no power to cap the amount which can be taken out of the damages. Has the noble and learned Lord had the opportunity to reconsider an amendment that he moved on Report on 22nd February 1990 to the Courts and Legal Services Bill? The amendment proposed that the conditional fee agreement,complies with such requirements (if any) as may be prescribed by the Lord Chancellor".Perhaps I may remind your Lordships that the matter arose in this way. In discussing the amendment the noble and learned Lord said:Your Lordships will see that the second of the two amendments provides for the prescribing of requirements rather than information. While the former includes the latter, it also seemed wise on reflection to include the possibility of prescribing, for example, how conditional fee agreements should define success in the client's action".The noble Lord, Lord Mishcon, made this short intervention:None of us quite knows how it is going to work"—that is, conditional fees—I should have thought that when one has something which is highly controversial, when one needs to see how it works out and how it ought to be regulated—indeed, how it may be stopped—the requirement is for flexibility, to give this power to make regulations from time to time to condition the fee, to limit rights or to extend them in some way",—[Official Report, 22/2/90; cols. 490–1.]
In moving the amendment, the noble and learned Lord said that the fact that the matter is somewhat controversial is a very good reason for giving the Lord Chancellor power to make additional requirements if that seems to be necessary. In saying that there is no power, has the noble and learned Lord overlooked the fact that it appears that that power was taken specifically by the amendment moved on Report?
§ The Lord Chancellor
My Lords, your Lordships have heard what was said about that matter. It will be seen that there is no reference whatever to any suggestion of a modification of the idea that control should be by reference only to the percentage uplift.
The amendment to which my noble and learned friend Lord Ackner has referred sought to make it clear that I would have power to make requirements not only in relation to the substance of the agreement but also as to information which would be laid before the client preparatory to that agreement. I was of the view at the time, and I remain so, that it was wise to make it clear that those powers included the power to require information to be laid before the client as well as to require the agreement to take a particular form. I am absolutely satisfied that I never intended to add any power to prescribe a cap for the very good reason that I sought to devise a scheme which would answer the criticism made by my noble and learned friend Lord Hailsham of Saint Marylebone that the contingency fee system, which we were not accepting, had the disadvantage that it applied only to plaintiffs. I was devising a scheme to apply equally to plaintiffs and 1548 defendants. Therefore, it was not in my mind at any stage that a power of the kind to which my noble and learned friend has drawn attention should be added. I certainly did not have that in mind when I was moving the amendment to which he referred.
§ Moved, That the draft order laid before the House on 20th April be approved [17th Report from the Joint Committed]—(The Lord Chancellor.)
§ 3.33 p.m.
§ Lord Ackner rose to move, as an amendment to the above Motion, to leave out from ("That") to end and insert, ("this House calls on Her Majesty's Government to withdraw the draft Conditional Fee Agreements Order 1995 and re-lay it in a form which gives effect to the following recommendation of the Lord Chancellor's Advisory Committee on Legal Education and Conduct that either:
§ (1) the maximum permitted percentage by which fees may be increased in respect of each description of proceedings specified in article 2 of the order is 20 per cent.; or
§ (2) the maximum amount payable expressed in percentage terms in relation to the amount of any sums which may be recovered shall not exceed a specified figure.").
§ The noble and learned Lord said: My Lords, in moving the amending Motion standing in my name on the Order Paper, I should like to stress at the outset four quite distinct points. First, my Motion recognises fully that, as Parliament nearly five years ago approved the principle of conditional fee agreements, full effect must be given to that decision so as to enable such agreements to work effectively and fairly. As is apparent from the terms of my amendment, it is in no way a wrecking amendment; quite the contrary.
§ Secondly, the purpose of my Motion is to protect the client from, in the words of the Lord Chancellor's Advisory Committee on Legal Education and Conduct, "the glaring injustices" which could arise if the proposals of my noble and learned friend the Lord Chancellor were accepted.
§ The uplift of 20 per cent. which I propose, instead of 100 per cent., is not a figure which I have conjured out of the air. In fact, it was proposed originally by the noble and learned Lord the Lord Chancellor and represents double his initial suggestion.
§ Fourthly, my amendment, which would reduce the uplift from 100 per cent. to 20 per cent., or alternatively cap—that is, prescribe the maximum amount expressed in percentage terms; I would suggest 25 per cent.—the amount which the successful lawyer may take out of any damages or other sums which may be recovered from the litigation, represents the recommendations consistently, vigorously and forcibly put forward by the Lord Chancellor's Advisory Committee which was presided over by my noble and learned friend Lord Steyn.
In case it should be suggested that those recommendations are in any way impractical or out of touch, I should point out that among the 17 members of that committee are a recent past president of the Law Society, the head of the litigation department of one of the City of London's most respected firms of solicitors and a recent past
president of the Institute of Chartered Accountants. The majority of the committee, who are laymen, were appointed by the Lord Chancellor to ensure, so we were informed, that:
the views and interests of the users of legal services are properly and fully represented".
§ Perhaps I may now explain why we should be especially concerned to protect the client and why we should proceed with particular caution in this new field. Conditional fees are a species of contingency fees and were so described in the Government's 1989 Green Paper. In undertaking a case on the basis of no-win, no-pay, a lawyer is clearly involved in speculative litigation. By allowing the lawyer to have a personal financial interest or stake in the outcome of a case, it has hitherto been accepted generally that that might affect his objectivity, distort the advice that he gives and, further, might lead to improper practices, thereby undermining the integrity of the administration of justice. Of course, the greater the stake, the greater the danger. Those were the essential reasons why, since the Statute of Westminster in 1275, contingency fees were considered to be contrary to public policy and therefore unenforceable; hence Section 78 of the Courts and Legal Services Act 1990 which for the first time made an agreement to enter into that species of speculative legislation enforceable.
§ Of course, it is water under the bridge that the section was enacted in the teeth of opposition from seven Law Lords, the Master of the Rolls, a former Lord Chancellor, my noble and learned friend Lord Hailsham, a former Attorney-General, the noble and learned Lord, Lord Rawlinson of Ewell—who I am delighted to see in his place—and the Law Commission. But the history that I have recounted and the opposition to which I have just referred surely make it incontrovertible that in this new field one should proceed gradually and with caution. Indeed, the approaching five-year period since the enactment of that section without, as yet, the approval of the necessary order and regulations is clear confirmation of the validity of that proposition. Why else has there been that delay?
§ I turn now to what has been happening during the past five years since Section 58 was enacted. The prospectus under which your Lordships were invited to accept the clause which became Section 58 was fundamentally different from that which provides the basis of the current invitation made by my noble and learned friend the Lord Chancellor to approve his draft order and regulations. In 1990 the proposal was to limit the uplift to a "small" or "modest" percentage of the solicitor's proper costs. Indeed, in Committee the noble and learned the Lord Chancellor gave an example using a 5 per cent. uplift. In 1991, a year later, he issued a consultative paper in which it was proposed to set the maximum uplift at 10 per cent. The Lord Chancellor's Advisory Committee agreed that that maximum uplift appeared to be about right.
§ However, two years on the noble and learned Lord the Lord Chancellor proposed to double the figure to 20 per cent. But apparently that did not satisfy those solicitors who might be interested in this new field of work. In August 1993, the Lord Chancellor announced—I stress this—without further consultation with his own advisory 1550 committee, that he intended to set the maximum permitted uplift at 100 per cent; that is, 10 times the initial figure which he had proposed in his consultative paper.
The Lord Chancellor's Advisory Committee was so concerned that the practical implications of the decision should be understood by my noble and learned friend the Lord Chancellor that it issued a press notice in November 1993 stating in terms that the Committee was not persuaded that,
the startling implications of the 100 per cent. permitted uplift have been fully appreciated".
§ The committee pointed out that in personal injury litigation, which will form the bulk of the litigation affected by the new proposals, the plaintiffs were often vulnerable people of limited means, the typical victim being relatively unsophisticated in both his knowledge of legal matters and his capacity to bargain over legal fees. Moreover, the rate of success in those claims is exceptionally high, most of the litigation being straightforward, with little risk of a lawyer not being paid his fee. In fact, the noble Lord, Lord Hacking, gave two examples when we debated the matter last November of victims in two railway disasters whom his firm were proceeding to act for without any fees to be paid until the matter was concluded.
§ If your Lordships need further confirmation, it is to be found in the remarkably low premium—less than £100—payable by a plaintiff for a policy of insurance recently negotiated by the Law Society against his liability to pay the defendant's costs and his own disbursements in the event that his action failed. As the Lord Chancellor's Advisory Committee pointed out in its press notice, it is common for a plaintiffs costs to reach an amount equal to half or even more of the damages recovered. Accordingly, if the 100 per cent. permitted uplift comes into force, the successful plaintiff may have to pay his solicitors an additional sum equal to the whole of the damages awarded to him.
Of course, if there is a finding of contributory negligence, those damages are reduced accordingly and the risk of losing everything to his advising lawyer is that much greater. Indeed, in correspondence passing between my noble and learned friend the Lord Chancellor and my noble and learned friend Lord Simon of Glaisdale (of which I was sent copies), the Lord Chancellor accepted that there may well be cases where the damages could be swallowed up even with an uplift lower than a 100 per cent. He gave examples of such a situation. It was for that reason that in its press notice the Lord Chancellor's Advisory Committee pointed out that,
one way of eliminating some of the most glaring injustices would be to restrict the uplift to a limited part of the damages";
in other words, to cap the proportion of damages which the successful plaintiff has to sacrifice to his lawyer. Indeed, I have already referred to the 25 per cent., as has my noble and learned friend the Lord Chancellor, being the figure which the Law Society will put in a model agreement.
§ Following the debate that I initiated on 1st November last year, my noble and learned friend the Lord Chancellor revised the drafts of the Conditional Fee Agreements Order and supporting regulations and sent the final drafts to my noble and learned friend Lord Steyn on 13th March.1551
§ My noble and learned friend the Lord Chancellor was not prepared to restrict the uplift to a limited part of the damages. All he was, and is, prepared to do is to provide in Regulation 3 that a conditional fee agreement should state whether or not the amount payable to the lawyer is to be limited with reference to the amount of damages recovered.
While, of course, that will ensure that the question must be addressed in every case, it imposes no cap on the proportion of the damages which can be swallowed up by costs. I respectfully submit that the provision does not provide adequate protection for the client. That was the view expressed by my noble and learned friend Lord Steyn in a letter dated 24th March this year to the Lord Chancellor (of which I was sent a copy), following a meeting to discuss his current proposals. In his letter my noble and learned friend Lord Steyn said:
The chief difficulty remains your proposal to permit a maximum uplift of 100 per cent. of the legal adviser's fee. The Committee is still concerned that such a high percentage will create far too great a risk that any damages recovered will be swallowed up in legal fees … I have to say that none of the arguments against this view appears convincing to the Committee. As you know, the Committee much preferred your original proposal of a maximum of 10 per cent. increase. However, subject to safeguards, the committee was prepared to accept that 20 per cent. maximum would be reasonable. But, for the reasons repeated above, I must leave you in no doubt that the Committee remain wholly opposed to the current proposal to permit a maximum increase of 100 per cent. The primary position of the Committee is that the maximum uplift should be no more than 20 per cent".
On the assumption that you might wish, despite the Committee's view, to permit an increase of 100 per cent., the Committee took the view, as set out in my letter to you of 26th May of last year, that an essential safeguard would be for the Regulation to set a limit on the proportion of damages payable towards legal fees. On this matter, too, I have to say that the Committee is not convinced by the argument that it has heard against the implementation of that safeguard".
Your Lordships may remember that in the debate on 1st November my noble and learned friend the Lord Chancellor took the point that he is taking today; namely, that he has no power to make the provision to cap. I respectfully submitted that I and a number of my judicial colleagues with whom I informally discussed the matter did not accept that view. I drew attention inter alia to his wide regulation-making power in Section 120(3) of the Act which provides:
Any such regulations … may contain such incidental, supplemental … provisions or savings as the person making the regulations… considers expedient".
In his letter of 24th March of this year, my noble and learned friend Lord Steyn informed the Lord Chancellor that the committee did not agree that he had no power to impose such a limit or that to do so would be to attempt to modify his power to set a maximum increase in fees. My noble and learned friend gave his reasons in detail. They were as follows:
The committee finds that in the Act no express or implied restriction on that power such as to prevent its exercise in order to limit the proportion of damages payable to the legal advisers. The Committee recalls your substitution of the words 'requirements' for 'information' in an earlier draft of the provision at the Committee stage in the House of Lords. You then explained that 'requirements' included, and went further than 'information' so as to include, for example, the power to prescribe how conditional fee agreements should define success in the action. The Committee does not agree that a limit on the proportion of damages would modify your power to set
a maximum uplift. Permission to increase a fee is logically distinct from any limit on the proportion of a particular source from which that increase may be satisfied. Moreover, the argument has no reasonable limit; it could presumably be said to apply even to your own example of a prescription of the way success in the action is to be defined. Such a definition would undoubtedly affect the amount of fees the legal adviser could recover".
§ As I pointed out in the debate on 1st November, if the Lord Chancellor does not have the requisite power then he should obtain it. After all, nearly five years have gone by since the Act was passed and a little extra delay in ensuring that the very real concern expressed by his own advisory committee is met would be time well spent.
If the Lord Chancellor does not have the power, as the noble Lord, Lord Hooson, said in the debate of 1st November,
for heaven's sake, he should seek it".
I do not believe that there would be any impediment either in this House or the other place in obtaining the power".—[Official Report, 1/11/94; col. 802.]
Perhaps I may end by again emphasising that I am in no way seeking to prevent effect being given to Section 58 of the Act; on the contrary, both I and the Lord Chancellor's own Advisory Committee are concerned to ensure that the client receives proper protection from—again I quote from that committee—
the glaring injustices which could arise",
as a result of the implementation of the draft order and regulations. Surely this is an area in which one should proceed with great caution. Why not start with a 20 per cent. uplift and see how it works? It can always be increased. If you start with a 100 per cent. uplift, the prospects of it ever being reduced are exceedingly remote.
§ These are the essential reasons for tabling my amendment. My noble and learned friend Lord Donaldson of Lymington, who is currently abroad, has written to me supporting my Motion. I beg to move.
§ 3.50 p.m.
§ Lord Irvine of Lairg
My Lords, the noble and learned Lord, Lord Ackner, has made his arguments so fully that I can be brief. I oppose the proposal of the noble and learned Lord the Lord Chancellor that the draft order and regulations be approved and support the amendments of the noble and learned Lord, Lord Ackner. I do so not on the basis of opposition to conditional fees in principle, but in the interests of protecting consumers of legal services. I start therefore from an acceptance that Parliament has sanctioned conditional fee agreements which comply with such requirements as the noble and learned Lord the Lord Chancellor may prescribe for them. The issue therefore is what the requirements should be and what minimum floor of protection should be prescribed as mandatory terms of conditional fee agreements.
Conditional fee agreements may, in an age in which the eligibility limits for legal aid have been cut most harshly provide an alternative means of access to justice. But that must not be achieved at the expense of what might reasonably be thought to be the exploitation of litigants for the benefit of lawyers. I would add that the noble and learned Lord should use his powers under the 1990 Act to 1553 legislate for consumer protection in a way that is both clear and certain and not in a way that is dependent for its effectiveness on the good will of the legal profession.
First, "no win, no fee" does not mean exactly what it seems to say. Even under a "no win, no fee" agreement the client who does not win still has to pay the costs of the successful party and the expenses, the disbursements, which his solicitor has incurred; for example, barristers' fees. Secondly, I accept that conditional fees are not contingency fees in the full or traditional sense. A contingency fee arrangement means that the lawyers are entitled to a percentage "slice of the action"—that is, of the damages recovered—whereas under a conditional fee agreement the solicitor will be entitled if the case is won—admittedly, that is a contingency—to an agreed uplift on the amount of the fees for the work he has done above the level they would otherwise have been. So the basic question seems to be this: how much uplift is necessary, in the category of cases to which these arrangements will primarily apply, to compensate solicitors for the cases they lose where they will recover no fees for themselves?
The principle surely should be that the maximum permitted uplift in cases that win should not be disproportionate to the risk of losing. The Law Society has said that the current proposals,will enable conditional fees to be widely used in personal injury cases whilst also providing appropriate measures to ensure proper consumer protection".I agree with the first part, but not the second. Personal injury cases, as the noble and learned Lord has rightly observed, are a low risk area of litigation from the standpoint of plaintiffs. In the vast majority the plaintiff succeeds in whole or part. In fact I understand that around 95 per cent. settle, to the advantage of plaintiffs, without any court order. In my view the first thoughts of the noble and learned Lord on the Woolsack on this subject were correct. A 10 per cent. or at most 20 per cent. uplift was sufficient incentive. He should have adhered to that.
I endorse also a point made by the noble and learned Lord, Lord Ackner. The fact that insurance cover against the risk of losing can be purchased through the Law Society's accident line scheme for less than £100, demonstrates that in the class of case, personal injuries, to which conditional fee agreements will primarily apply in practice, the risk of loss is very low. I therefore think that a 20 per cent. uplift for succeeding is proportionate to the low risk of losing.
It is argued—we have heard the noble and learned Lord on the Woolsack argue in this way—that a maximum success fee of 100 per cent. is necessary for lawyers to undertake on a "no win, no fee" basis cases with only a 50:50 chance of success. I could at least see that argument if 100 per cent. success fees were confined to 50:50 cases. But they are not. In any event I think that solicitors practising in the personal injuries field would be compensated for their unremunerated time in cases they lose by their 20 per cent. uplifts in the vast majority of cases where they win. I would predict that unless a 20 per cent. maximum is fixed we will be returning in future years to figures that will show that uplifts close on 100 per cent. will have been applied in a disturbingly high proportion of cases.
1554 The next question is whether the noble and learned Lord, if he is insistent on retaining a maximum of 100 per cent., should be imposing a statutory cap on the uplift of, say, 20 to 25 per cent. of the damages recovered. I regard such a cap as an essential protection for the consumer of legal services. Particularly in cases where the damages are low and the fees high, it would be possible to win but to have to pay out literally all the damages recovered in legal costs plus success fees. That would be litigation which would in practice have been conducted—this is how the public would see it—for the benefit of the lawyers alone. The Law Society itself sees the merit of such a cap because it will be recommending to its members a cap of 25 per cent. of the damages recovered. The noble and learned Lord should himself be imposing a 25 per cent. cap as the only sure means of protecting the consumer.
The noble and learned Lord maintains that he lacks the power to impose such a cap. I am not entirely clear what his position is. Is the noble and learned Lord saying that he would impose such a cap if he had the power to do so, or is he simply maintaining that he lacks the power to impose a cap which he would not wish to impose in any event?
§ The Lord Chancellor
My Lords, I am sorry if I did not make my position clear. My position is this. I wish to devise a scheme which is applicable both to plaintiffs and defendants and therefore I do not intend to impose a cap of this kind as part of a regulatory mechanism. I thought I had made that clear; I am sorry if I have not done so.
§ Lord Irvine of Lairg
My Lords, I am much obliged. I, however, for my part, do not agree that Section 58 of the Act does no more than permit the noble and learned Lord the Lord Chancellor to prescribe the level of uplift and so does not permit, or impliedly precludes, a cap being imposed on the amount of the uplift. There is no bar, in my view, on his prescribing such a cap. The issue is whether he should do so.
I believe that both prongs of the argument of the noble and learned Lord, Lord Ackner, are well founded. The issue is the protection of the consumer. Why not, I ask, in the interests of the consumer, introduce the scheme on one or other of the bases proposed by the noble and learned Lord, Lord Ackner? My preference is for a 20 per cent. uplift and then to monitor the use of conditional fee agreements in practice to see whether they turn out to be widely used in practice and have succeeded in their objective, with the consumer subject to no more than a 20 per cent. uplift.
I predict that to begin with a maximum possible uplift of 100 per cent. will be seen in future years to have sold the consumer short. Even at this late stage I urge the noble and learned Lord on the Woolsack to revert to his earlier judgment of what the maximum uplift should be.
§ Lord Hacking
My Lords, before the noble Lord sits down I shall be grateful if he will assist me and the House by explaining how he proposes that capping should work when the assistance is provided to the defendant rather than to the plaintiff.
§ Lord Irvine of Lairg
My Lords, I confess that I was addressing the situation of a plaintiff who gains a recovery and not of a defendant. However, I have made plain that my strong preference is for a 20 per cent. uplift, full stop.
§ 4 p.m.
§ Lord Rawlinson of Ewell
My Lords, I felt so strongly about many provisions in the 1990 Act that, for the first time in 40 years in one House or the other, I was driven to vote against the party of which I have been a member all my life. I oppose this particular order because I cannot bring myself to accept any scheme which seeks to identify the reward of the lawyer with the result of the litigation. Parliament may have passed the 1990 Act, but that does not reconcile me to the principle. Any step which changes the English concept of the role of the lawyer is a very serious matter and one greatly to be deplored.
Many jokes are made about lawyers, but throughout the history of this country and the history of the common law the conduct of lawyers, standing for justice and principle, is something of which the country can and should be proud. Anything which alters that great tradition of the lawyer's role and his relationship with the client and the court is very serious. This is another step on the road to Americanising the English practice of the law, which is being accomplished step by step. It was commenced by a former government under a former Prime Minister who was bewitched by all things American, and whose voice is being heard again in the land engaged in the modern tradition of retired Conservative Prime Ministers of rubbishing the policies of the governments of their successors.
When I talk about the Americanising of the English law, I make it plain that I am a member of the American Bar Association. For nearly a quarter of a century I have been a Fellow of the American College of Trial Lawyers. I have great ties of family and blood with America. However, I do not admire the manner in which the Americans practise law, not only in the criminal law.
Noble Lords may have some experience of the practice of American criminal law, having seen it on their television sets recently. In the great debates five years ago about whether we should amalgamate the two professions it was said that there would be three lawyers—a QC, a junior and a solicitor—defending people. In the O.J. Simpson case I have seen six different advocates presenting the prosecution, under a prosecutor who has no command of the laws of evidence and is wholly unable to examine without asking leading questions. The conduct of the defence lawyers, the television coverage, the absence of any principles of contempt of court and the lack of authority of the judge, which is the most important aspect of all, present an idea of how the United States system can end up. That is a criminal case, but it illustrates the different attitude to the practice of law, which is founded on identification between the client and the advocate, the intimate association between the two, the planning done together, the interviewing of witnesses, the coaching of witnesses, the scheming, the PR activities and, above all, the reward identified with the result in civil cases.
1556 Compare that with the English system. The English advocate is not even allowed to interview witnesses, let alone coach or rehearse them. In the proper tradition (of course it is abused) of the English Bar and the English solicitor, counsel and solicitor are officers of justice with a duty to the court as well as to the client. The identification of the lawyer with the success of the suit by giving him a contingency interest at once alters the concept of independence and of integrity, and in this order "conditional" is the same as "contingency".
It will be said, "This is just a minor alteration. Why are you making such a great fuss? This is pursuant to what Parliament has approved. The effect will be to cut the legal aid bill", as I have no doubt the Treasury masters have told my noble and learned friend the Lord Chancellor he must. It is said that it concerns only certain cases and the civil field. Who believes that it will stop there?
If one is going to provide legal assistance and representation to people of little or no means there has always been a choice. One is the road of legal aid—publicly paid representation. It is an expensive road, but one which this country decided upon. It is a rather noble road. There has always been the other road—giving the lawyers a cut of the cake to persuade them to take on cases. That is the difference. An order of this kind, which is the first of many which will come before your Lordships' House, alters the whole concept of the practice of the law. We shall not be able to stop it now. It will progress step by step. It will be said that it saves the great legal aid bill.
There is the comical attitude of editors who say that the proposal is opposed by lawyers and that it is a very good scheme. Those editors are briefed by the legal equivalent of the "teenage scribblers" of the memorable phrase of my noble friend Lord Lawson. However, they are blind to what will ultimately happen. Inevitably there will come a time when there is the new tort of privacy and conditional fees will be available in cases of libel. Then there will be some squealing by the press as opposed to the Bar.
I shall not go into the detail, which has been dealt with by my noble and learned friend Lord Ackner. What does the uplift fee really mean? Of course it is linked to the amount of damages. First my noble and learned friend the Lord Chancellor decided on 10 per cent. Why did he do that? He had the advice and backing of his department. However, he has been driven to a 20 per cent. uplift, and then to a 100 per cent. uplift which, as The Times put it, is high enough to tempt lawyers to take on cases. What a noble prospect!
All that this order does is gingerly, gradually and piecemeal destroy the English concept of the practice of law and replace it with the system from across the Atlantic.
This is a matter of principle. It may be said that the principle has already been decided by Parliament, but in my 40 years in Parliament I have seen it change its mind sometimes. For that reason I oppose this order and shall support the amendment. That is the least that can be done to prevent a step which I feel takes the English law along a very dirty, ugly road.
§ 4.10 p.m.
§ Lord Nicholls of Birkenhead
My Lords, I apprehend that the only issue before your Lordships' House concerns the terms of the draft order and the draft regulations. There are those, including Members of your Lordships' House, who have been and still are much troubled about the whole concept of conditional fees. They are concerned that whatever the care with which it is watched, this new plant—it is not indigenous to England and Wales and has not previously been grown here—will inevitably become out of control rather like rhododendrons on the Welsh hillsides. That issue is not before your Lordships, the principle having been approved by Parliament.
As I understand it, the chief concern of those who are critical of the draft order is the possibility of abuse by lawyers. They are worried that high street solicitors acting for plaintiffs in personal injury cases will charge excessive uplifts in fees not justified by the comparatively modest risks involved in acting on a conditional fee basis in such work. They are concerned that there is an unequal bargaining position between lawyer and client.
Some risk of abuse must be inherent in any new scheme such as this. However, I suggest that one should not underestimate the extent today of real competition for work among high street solicitors. House sellers and buyers shop around. That has had a marked effect on the fees which solicitors can charge for conveyancing in the domestic field; likewise, charges for making wills. I can see no good reason why high street solicitors should not find themselves competing for this new type of work. That will serve a useful purpose in curbing any tendency to charge excessive uplifts in fees and take excessive profit margins.
When solicitors were first given rights of audience in the higher courts, there were those who feared that the established legal order would be shaken to its very foundations—likewise, some 20 years ago, when solicitors' scale fees for conveyancing were abolished, and, much later, when licensed conveyancers were introduced. But what has happened? The Royal Courts of Justice building stands as sturdily as ever. The Land Registry has not been struck by lightning.
There are real risks involved in the scheme, but I suggest that they are worth taking in pursuit of increasing access to justice. In the nature of things it is not a scheme which can be introduced experimentally on a piecemeal basis for a few months in one or two selected locations like a new form of credit card. As I understand it—I shall be corrected if I am wrong—the noble and learned Lord the Lord Chancellor has indicated, or will indicate, that he intends to monitor the progress of the scheme. On that footing I am content. I suggest that the scheme is worth trying, and that we should get on with it without further delay.
§ 4.15 p.m.
§ Lord Mishcon
My Lords, perhaps I may copy the beginning of the extremely lucid speech of the noble and learned Lord, Lord Ackner, by stating the points I wish to make and the reasons why I make them. The points raised by the noble and learned Lord numbered three. I apologise for enlarging upon that number; mine number four.
1558 First, it is my duty, out of sheer courtesy, to say to the noble and learned Lord the Lord Chancellor that so far as I know and have heard the legal profession much appreciates the fact that he indulged in extensive consultation before coming forward with the order. I wish to acknowledge that factor, especially in view of other remarks I shall make.
The second matter I wish to acknowledge is the disturbing gap in our system of adjudication of the law and of rights as between subjects. The poor man is covered by legal aid; the wealthy man has his bank balance and bank manager. All of us who stand in between find that our legal system is so expensive in practice that we cannot enter the gates of the courts let alone the doorways of the Savoy Hotel.
The conclusion must be that there is something wrong with our system. The answer to that must be one of the main considerations of the noble and learned Lord, Lord Woolf, at this moment. The answer might lie in more conciliation than arbitration and alternative processes. We ought to be looking closely at the way in which these heavy bills arise. I belong to a profession which is responsible for such heavy bills; I admit it at once. But that does not necessarily mean that we have to embark on a course which is contrary to a tradition which goes back over the centuries, as has been said.
Thirdly, the noble and learned Lord, Lord Nicholls, was absolutely right. I refer to a phrase used, I believe, by the noble and learned Lord, Lord Ackner. The question of whether we go ahead with the scheme is water under the bridge with regard to the principle.
However, my fourth point arises out of something the noble and learned Lord the Lord Chancellor said, at which I trembled a little. If I remember correctly, and I took a note, he used the words "with a view to extending". I find those words very ominous. They are my excuse for going a little into the rights and wrongs and results of such a scheme. I plead with the noble and learned Lord. Let this scheme not be extended beyond personal injuries and liquidation matters without a great deal of thought and much experience. It is strange—is it not?—that an issue that was contrary to public policy yesterday seems to be at least partially in accordance with public policy today. There is every reason for considering whether that transformation has taken place.
I am a lawyer. I act for a client who asks my advice as to whether he has a case. He makes clear that he has not much money. When trying to assess his chances of success in the opinion that I give, I hope that I would be honest without having at the back of my mind that in a moment I am to discuss with him an agreement in which the question of the chances of success will regulate the surplus fee I intend to charge and discuss with him. I ask this rhetorical question: can one get a better example of conflict of interest at the commencement of my interviewing the client?
What happens in the middle of a case? I have forecast to that client that I believe he has a bad case and, therefore, please, my uplift is 100 per cent. If we embark on further litigation, apart from personal injuries, I reach the stage of discovery. I find that the other side has disclosed a document which sends the chances of my winning the case rocketing. That often happens. I am unfortunate 1559 enough on discovery to find documents that make my case worse, but that is a personal experience. Some of my professional colleagues are more fortunate. What is my duty then? Is it to summon the client and say, "No, the uplift we had in our original agreement was X per cent., but I can now tell you that the chances are greater. I ought therefore to alter it"? However, subsequently I receive a devastating blow. I interview a witness who, I have been told, is lucid and clear in favour of my client. I take a statement from him and find that he is a lamentable witness. I wonder whether I dare call him. Do I then summon my client back again and say, "Well, I told you we were in a far better position after discovery. I must now tell you, having interviewed this witness whom you told me about, that I am afraid that our chances have plunged. In those circumstances, shall we take out this agreement and come to another percentage?"
This proposal is supposed to be for the protection of the client. However, it is just not practical to say, "If you believe that I have unjustly charged you too high a percentage because of your chances in the case you have the right to go before the taxing master. He will adjudicate whether I have wrongly forecast your chances of success." I have a veneration for taxing masters, but they know nothing about judging the chances of success in litigation. I doubt whether some of the taxing masters, bless them, have ever conducted a piece of litigation in all their lives.
§ Lord Mishcon
It is pleasing to have the support of the noble Lord, Lord Hacking. Apart from the point about the taxing masters, ought I not to advise the client, "You had better go to another solicitor to argue the case before the taxing master as to whether I have charged correctly because I have an interest in it and there would be a conflict. You must go elsewhere". Will the solicitor who now takes on the case of arguing that I far too pessimistically and wrongly forecast the case be subject to a success rule? If the other solicitor manages to bargain me down and the percentage is lower, does that solicitor collect?
Unfortunately, it is something that one witnesses year after year. The legislation is turning the professions in our country into something different; it is eroding the dignity of the professions and their traditions. Only last Friday The Times carried a headline in regard to the medical profession:What have we done to our nice old doctors? By treating them like plumbers we are making them behave like tradesmen".I do not want that to happen to my profession. I do not want to be turned into a bookie.
§ 4.25 p.m.
§ Lord Taylor of Gosforth
My Lords, I wish to associate myself with all that has been said by the noble and learned Lord, Lord Ackner, and those who agree with him. I am sorry that it causes me to disagree with my noble and learned friend on the Woolsack, with whom I would much rather agree, as I usually do. However, as a matter of principle I am wholly in sympathy with the words that fell from the noble and learned Lord, Lord Rawlinson. It seems to me that the contingency fee is an alien creature 1560 in our justice system. I would much rather that it had never made its appearance. I believe that it will lead to speculative litigation and that, as has been graphically illustrated by an experienced solicitor a few minutes ago, there is a danger of a conflict of interest and possibly a lowering of standards.
It has been said more than once, and I accept it, that the issue of principle is now to be regarded as water under the bridge. The most important point at issue is that we should ensure that the alien creature is not allowed to run amok. The object of having the alien creature is, so we are told, to improve access to justice. We must ensure that it grants impoverished litigants better access to justice, not simply lawyers better access to fees.
I do not understand how the noble and learned Lord the Lord Chancellor reached the figure of 100 per cent. He began with 10 per cent. and when he was put under pressure he doubled it to 20 per cent. We have all had experience in the law of trying to settle cases and I never went from 10 per cent., to 20 per cent., to 100 per cent. in all the cases I ever sought to negotiate. How the noble and learned Lord reached 100 per cent. is quite mysterious. He told us that 100 per cent. has been the situation in Scotland. There are two points about Scotland. First, in so far as there have been conditional fee agreements there, they have been used minimally and have made hardly any impact on access to justice. If the noble and learned Lord knows that that is the level in Scotland, why did he start with l0 per cent. if the was going to end with 100 per cent.?
In my personal experience, the noble and learned Lord the Lord Chancellor has always shown a canny caution when it comes to money matters. It would be most unfair and improper for anyone to suggest that his caution with regard to money is confined to occasions when money comes from the Treasury, but not to occasions when it is to come from impecunious litigants. That would be unfair. However, it will undoubtedly be from the impecunious litigant that the 100 per cent. would come. I consider that it is outrageous to reach that percentage in what must be the nursery slopes of such a scheme. As has been said, one can increase by starting low. If we start with 20 per cent. or even 30 per cent. or 40 per cent., it would always be possible to increase the amount if solicitors found that it was simply not economic for them to take on that form of work. But we cannot go down from 100 per cent. My guess is that it would be easy for the solicitor in the stronger position with regard to his client to negotiate higher percentages—perhaps not 100 per cent. but higher than would be justified by the risks that have to be taken.
I wish to adopt all the arguments that were so well presented by the noble and learned Lord, Lord Ackner, and the noble Lord, Lord Irving of Lairg. I suggest that the Lord Chancellor should go back and reconsider this matter. He made a virtue of having taken the opinion of the Heads of Division and of having consulted his own advisory committee. But despite the views of both those bodies, he has gone ahead with this figure although they all advised against it. They did so not because of any desire to stifle the scheme, but simply because they are truly anxious about whether the percentage that he has in mind can really be regarded as reasonable. I ask the House to support this amendment not to defeat the whole 1561 exercise, but to ask the Lord Chancellor to go back and reconsider what would be the appropriate level at which to pitch the uplift.
§ 4.30 p.m.
§ Lord Peyton of Yeovil
My Lords, if I had come here today absolutely convinced that the proposals put forward by the noble and learned Lord the Lord Chancellor were correct, I am bound to say that over the past hour or so I should have been severely shaken. I cannot conceive of the possibility, having heard the arguments advanced, of my views not being very much shifted. As things are, I did not enter the Chamber in that state of mind. I am opposed to this proposal. The mere fact that Parliament has approved it does not entirely stifle me in the wish I have to express my objection to it. We are still free to do that.
I apologise for intruding for the first time in this debate an element, if not of total unlearning, at least of very small learning. I am perhaps prompted to do so by the fact that I learned such law as I have in a prison camp in Germany, where notions of the common law did not prevail. I had the good fortune to sit at the feet of a very remarkable academic lawyer, the late Professor Hamson. I know of no one who had a greater regard for the structure of the common law than he. He taught it brilliantly. Perhaps I may say to my noble and learned friend on the Woolsack that he accompanied the instruction with a very clear rider that it was more than possible that those eminent and very learned men who sat on the Woolsack could get things very badly wrong. Today, I find myself rather daringly echoing that view.
The noble Lord, Lord Mishcon, is exceedingly persuasive. But I do not think I have ever heard him express himself quite so strongly as he did this afternoon when, in concluding his speech, he said:I do not want to be turned into a bookie".Those words will stay with me for a very long time.
There is very little that I can contribute by way of experience to what has been said this afternoon. Therefore, I have just two questions. First, I am puzzled by the lack of reference to the position of the defendant. What will he know of the position of the plaintiff? I am not clear about that. It seems to me that he may well be faced with a man of straw who is engaged in a speculative case with the aid of a very bright lawyer, and the defendant will know nothing of that and will have the immense handicap of not knowing that, if he loses, he will face a very heavy bill for his own costs. My second question is a very simple one, but I am not quite sure that there is a very easy answer to it. What is the purpose of an advisory committee? The noble and learned Lord has one. He has the benefit of the advice of men of immense experience and learning, so far as I know. I have a copy here of the letter (which has been widely circulated) that my noble and learned friend wrote on this subject to the chairman of the committee on 19th April. He states:I understand the Committee's views on the percentage uplift, but I do not agree with them".That is the first rejection. He continues:I remain persuaded that it is right to fix the maximum figure for the percentage uplift at 100%".1562 That is the second rejection. He goes on:Similarly, I remain of the view that I do not have the power to impose a limit on the proportion of damages that can be taken by the uplift".The advisory committee takes a very flat-footed view to the contrary.
On taxation, my noble and learned friend states:I agree that conditional fees will be a new and unusual challenge to the taxation system, but I believe that taxation does have a role to play".That is the third rejection. He adds:I do not believe that there is any need to hold up the Order and Regulations … on this account".There again, the advisory committee had suggested some delay, echoing the point made previously by the noble Lord, Lord Mishcon; namely, none of us knows what the result of all this will be, and therefore let us proceed with caution.
There were other points on which the noble and learned Lord was unable to go along with the advice that he had received. So far as the professional rules are concerned, my noble and learned friend did not agree with the committee as to whether the regulation was ultra vires. He simply states the fact that he does not agree with the analysis and is satisfied that the regulation is intra vires. My noble and learned friend goes on to say that he agrees that monitoring is important, but then appears to have very little enthusiasm for it, being prepared even at this very uncertain stage to rely entirely on sampling.
I am not sure that I know how to express myself. There is a very grave danger that with the system we have—despite what has been said by a very impressive col lection of speakers—it is quite possible that when the bells go the opinions expressed will not be reflected in the Division Lobby. I therefore make this plea, very much as a layman, to my noble and learned friend. I do hope that, bearing in mind what he has heard this afternoon, he will be broadminded and have the courage to have second thoughts.
§ 4.40 p.m.
§ Lord Lowry
My Lords, like some noble Lords I must begin by declaring a bias. I have great misgivings about the whole idea of conditional fees and the rather skeleton scheme which at present we can see for bringing them into effect. But I recognise the need to try to fill the gap between the very poor who, so far at least, are able to resort to legal aid and the seriously rich who may be supposed not to require it. However, I shall put aside my prejudices for today at least and try to concentrate on the matter in hand. I have two anxieties: first, the 100 per cent. uplift which, in ordinary language, might be called the power to charge double what one's services are worth in the event of winning the case; and, secondly, the marked difference which seems to exist between my noble and learned friend on the Woolsack and his advisory committee.
The purpose of the uplift must be to induce lawyers to undertake these cases and reward them suitably overall, if excessively on the individual occasion. I dislike the idea of any uplift. A client should not have to pay and the lawyer should not receive more than the lawyer's services are worth. There again, for the sake of argument, I shall leave that point on one side.
1563 The proposal started tentatively at 5 per cent. It went to 10 per cent. on paper; then to 20 per cent.; and it is now 100 per cent. I shall try not to repeat what my noble and learned friend the Lord Chief Justice said. Like him, I have tried to settle a few cases but not on the basis described. If we were at an auction and the bidding went from 5 to 10, to 20 and then to 100, that would indeed be a brisk rise in the bidding. The committee was happy with 10 per cent., yet accepted 20 per cent.; but it still strongly disagrees with 100 per cent. I hope I am not being impertinent when I say that if 100 per cent. is the logical and proper figure, why should such a grave miscalculation have crept in at the beginning of these calculations?
The reason for the uplift is the risk of failure. Let us consider the facts for a moment. Most of the cases, as far as I can see, will be plaintiffs cases in personal injury litigation. To those with experience of that kind of litigation it ranks among the most easily predictable in a somewhat unpredictable field. That is especially true if the case is to be tried by a judge without a jury, or so it is thought. Predictability accounts for a high proportion of settlements in this field because both the plaintiffs and the defendant's advisers have a pretty good idea of the value of the case and there are a lot of settlements in this field.
I speak of personal injury cases because that field of litigation offers the best prospect of recovering money out of the damages. As we have already heard—I paraphrase what the noble and learned Lord the Lord Chancellor said on a previous occasion—there is a duty in Scotland and will be a duty here to satisfy oneself that a good case exists before it is taken on. That is a serious duty owed to the client, to the court system and to the opposite party if the lawyer is a conscientious person, as most of them are. One does not want to be starting a bad case for one's client and it is quite wrong to start a bad case against another party—the less acceptable name for that is blackmail.
We have heard that there is a modest premium to insure against having to pay the defendant's costs. That is another indication of the likely outcome of many of these cases. The statistics on which those premiums are based—no doubt that is the way in which the premiums are arrived at—support, not surprisingly, what has been said. What is the real effect of that? It is that the money is taken out of the damages of successful plaintiffs to pay for the mistakes and misfortunes of solicitors who take on bad cases. In other words, legal aid above the statutory legal aid limit is provided by the legal profession which is in turn to be reimbursed by successful litigants out of the damages which they ought to have received. That may be tolerable if the tax on success is 10 per cent. of the costs or even 20 per cent., but not, I venture to say, if it is 100 per cent.
The 100 per cent. uplift assumes a likely failure rate of 50 per cent. It is not a true comparison to say that a 50:50 case deserves to be heard and therefore the 100 per cent. uplift is needed. First, there is something like taking the good with the bad in this field; secondly, one should have regard to the overall likelihood of a practice being successfully conducted and remember that when dealing with personal injury cases the solicitor should 1564 not—and certainly does not have to—look at cases which are less than 50:50. The majority of cases he will see will have a very much better chance than 50:50. It is hard, if this is a question of a variable scale with a maximum of 100 per cent., for the solicitor to say—however honestly he is behaving and however experienced he is—just what the right tariff is.
The noble Lord, Lord Mishcon, has allowed me to shorten my speech, your Lordships will be pleased to learn, with his good examples of those chances. I shall not go into further detail in that regard therefore except to speculate whether, when he is at odds with his client in front of the taxing master and sends him to another solicitor, that other solicitor will feel that he had better have a 100 per cent. uplift.
We are told, quite correctly, that what is being said is that 100 per cent. will be the maximum and not the norm. But I share the misgivings voiced by the noble Baroness, Lady Mallalieu—who I am pleased to see in her place and from whom I hope we shall hear—and mentioned also by the noble Lord, Lord Irving of Lairg, that there is a great danger that the maximum will become the normal.
What is the machinery of control? We are told that there is no machinery of control except that the 100 per cent. is the maximum. We are also told that at present there is no means of introducing control—something I cannot quite understand. I have read what purport to be the relevant provisions. But I am not going to quibble. My experience of legislation and rule making is that one ought to decide what one wants first and then draft the primary and secondary legislation which will achieve one's object.
If there is no control, imagine the unequal position of the client, worried, ignorant and in a strange environment, and the solicitor who says, "There is no other way to success but to authorise me to take on your case and charge 100 per cent. uplift if you win". That would not arise if we were dealing with taxed fees or if we were dealing with a modest 10 per cent. or even 20 per cent. standard uplift. There would be no bargaining and no question of oppression or deception. As the chances in the case changed from hour to hour, there would be no recrimination, no feeling that this case is now a sitter or that that case could never be won. This is a very serious matter to consider—the question of the maximum figure with everything else left in the air.
Another possibility is to relate the fees to the award of damages. That is a most unattractive alternative but at least it would be clear. We must remember that costs against the defendant are awarded here in the ordinary way whereas that is not true in America, which has been responsible for the entirely different approach of the speculative lawyer in that jurisdiction. They are not necessarily alternatives. What is wrong with combining two limits: a limit on the uplift and a limit on the proportion of the damages which can be resorted to in order to satisfy fees.
So far I have tried to address the practicalities, but I do go a little further. I submit that, in any circumstances, for a professional person to take from the client a fee amounting to twice what those services rendered are worth is not only unacceptable but quite scandalous. I 1565 have long been aware that hyperbole in an advocate does not assist his case. But I can think of no adjective less emphatic to describe my view of a step like that.
I can be very brief about my second point. There are a great number of loose ends here in what is by any standard of judgment a new and controversial scheme. The advisory committee, comprising a majority of lay people and headed by a most experienced and distinguished chairman, has given clear and strong advice of which, I respectfully suggest, very great account should be taken.
§ 4.53 p.m.
§ Lord Campbell of Alloway
My Lords, it is a privilege to follow the noble and learned Lord. I agree with everything that he said and in particular with the three points that he made with such total clarity. The 100 per cent. uplift—"unacceptable" and "scandalous". How could it better be put? Disagreement with the advisory committee or the loose ends—again, how could it better be put? How can one go further with this miasma of dissatisfaction and doubt, such as we have heard in this Chamber today? There is then the question of control.
I do not conceal my prejudice in this matter. I am proud to assert it. It was so wonderfully asserted by my noble and learned friend Lord Rawlinson, and even, if I may say so, by the noble and learned Lord the Lord Chief Justice, my noble friend Lord Peyton and the noble Lord—I was about to say my noble friend—Lord Mishcon, in one of the most remarkable speeches that I have ever heard the noble Lord make in your Lordships' House.
§ Lord Campbell of Alloway
And that is saying something. But your Lordships will appreciate that I have not had the privilege of hearing all of them.
I accept that one's prejudice, of which I am proud and which I shall always retain, must not cloud one's judgment. All other noble Lords who have spoken are quite used to the position of having to put aside one's own prejudice and approach the problem totally objectively. I listened with attention to everything said by your Lordships today. I listened to the argument of my noble and learned friend the Lord Chancellor, supported by the noble and learned Lord, Lord Nicholls, to which I shall come in a moment, and to every other speech in your Lordships' House. I agree with all that has been said by all noble Lords save for my noble and learned friend the Lord Chancellor and the noble and learned Lord, Lord Nicholls.
One question puzzles me, but obviously I must have got it wrong somewhere. Somehow this question of vires was introduced. But what on earth that has to do with this debate I am totally unable to understand. If my noble and learned friend the Lord Chancellor had the vires he would not use it anyway, so what is the object of arguing whether or not he has it? Perhaps I missed the main point but, at least for the moment, I am rather foxed about its relevance.
1566 With regard to the way in which the noble and learned Lord, Lord Nicholls, dealt with the matter, I accept that one has to approach the matter as to how to implement Section 58, which is established in primary legislation. The question is whether the way proposed by my noble and learned friend the Lord Chancellor or the way proposed by the very advisory committee he set up is the better way of doing it. Limiting it to PI, insolvency and the European Commission of Human Rights and the European Court of Human Rights is one thing, but to use it as a fulcrum to develop this without the question of control, which was referred to by the noble and learned Lord, Lord Lowry, is objectionable.
In any event, when the noble and learned Lord, Lord Nicholls, says, as he did, that competition between the high street solicitors will resolve the question of the 100 per cent., I ask, "Will it, my Lords?" Does the noble and learned Lord know a number of solicitors in the high street who will not take legal aid at the moment because they do not get enough out of it? Competition on this basis on the high street solicitors is so much pie in the practical sky. There is no question about that. And we are not concerned in this area with the examples of wills or conveyancing, to which the noble and learned Lord referred.
There is really nothing more that I wish to add to the merits of the argument. But it seems that the amendments to these Motions to approve the draft order and regulations are entirely well-founded. These drafts as they stand should be withdrawn and relaid in a form which reflects the recommendations of the advisory committee. These amendments moved by the noble and learned Lord, Lord Ackner, although in form amendments to the Motion, are in substance a reasoned rejection of the draft order and regulations laid. If that is so, then so be it and let them be rejected, if we have to divide on the matter.
The distinction between an amendment to a Motion and a reasoned rejection is too fine to be drawn by your Lordships. This is no exercise in confrontation and brinkmanship. We are only concerned with what is the better way of implementing Section 58 of the Act. It is entirely appropriate that if such be our opinion we should reject the method proposed by my noble and learned friend the Lord Chancellor in favour of the proposal by his own independent advisory committee. In this situation parliamentary prudence plays no part and party political affiliations do not have any direct bearing. As my noble friend Lord Peyton urged, this is a matter where, if it is the opinion of your Lordships, how can we do otherwise in this unusual situation than to reject the order and the regulations as laid? It is unusual because there is disagreement. It does not happen as a rule when subsidiary legislation comes before your Lordships, but there is disagreement between the noble and learned Lord the Lord Chancellor and his advisory committee.
The negotiations are bogged down in stalemate. If this amendment to the Motion is carried on a Division, no doubt that logjam or stalemate can be re-opened and resolved by some acceptable compromise. After all, it is ordained by statute, as some kind of parliamentary safeguard, that we either accept or reject the Motion as 1567 it stands. If in our honest opinion, having considered all that has been said, we feel today that it should be rejected, then reject it we should. In any such situation I shall support the amendment proposed by the noble and learned Lord, Lord Ackner.
§ 5.3 p.m.
§ Lord Cocks of Hartcliffe
My Lords, when I saw the list of speakers for this debate I felt that I had to check once again with the Clerks of the House as to whether it was in order for a layman to speak. Fortunately, I have had that reassurance so I shall add a few words. The noble and learned Lord, Lord Nicholls, spoke about bringing competition into the profession. I am happy to be able to tell him that I have already told the House about my appointment card for Chelsea and Westminster Hospital, which has on the back an advertisement by a solicitor seeking custom in personal injury cases. He may or may not think that this is appropriate.
Throughout this debate and in the literature, which I have tried to read conscientiously, there has been a great argument about uplift and whether it should be 10 per cent., 20 per cent., 50 per cent. or 100 per cent. Nowhere have I seen any mention at all about the amount which is; being uplifted. The question of fees being charged by some members of the legal profession I have mentioned before. I am astonished that a debate of this nature can take place with no reference to it whatsoever.
I shall not weary the House at length on this. I have mentioned before the Written Answer I had from the noble and learned Lord, the Lord Chancellor, on 10th October 1994 about Dr. Jawad Hashim. The answer states that Mr. Colin Ross-Munro had already drawn £671,111 and Mr. Hugo Page, £438,523. It concludes,Final costs will not be known until final bills have been submitted and the bills have been taxed".—[Official Report, 10/10/94; col. WA 94.]
The noble Lord, Lord Mishcon, made some rather censorious remarks about taxing masters and suggested that they might never have conducted proceedings in court. But, in my very limited experience, taxing masters have been vindicated. I refer to the appeal proceedings on 1st December 1993, when the noble and learned Lord, Lord Templeman, speaking about the challenge to a taxing master's decision, said to the appellants,The amount of fees you and your leader were claiming for a four day case would have hired three very competent headmasters for a year".He went on to say—
§ Lord Mishcon
My Lords, I wonder whether, with his usual courtesy, the noble Lord will give way. I want to make it clear that I said that I venerated taxing masters. Quite apart from that, I said that, if they were being asked to adjudicate as to the chances of success of an action, I felt that that was a field in which they had had little or no experience.
§ Lord Cocks of Hartcliffe
My Lords, I am very much obliged to the noble Lord. But, inexperienced though this particular taxing master was, the noble and 1568 learned Lords, Lord Templeman, Lord Keith of Kinkel and Lord Goff, all found in his favour. The noble and learned Lord, Lord Templeman, said,These fees would have been unheard of even three or four years ago. The whole thing has come across from America and it has just gone up and up and up".I believe that a noble and learned Lord made that point earlier on.
Such reticence on the part of the legal profession about their own money does not extend to other people's money. Only yesterday we were told by the Sunday Times that Mr. Mears was calling in his presidential manifesto for a £100 levy to make up the cost of the appeals and the damages compensation fund which they run. He goes so far as to suggest that £100 should be added to conveyancing bills. Clearly, the electorate to which he was appealing was not that of the usual house purchaser.
In the Mail on Sunday there was a report about lawyers' calls for cash for victims, saying that the Bar Council was,against the proposals in the Criminal Injuries Compensation Bill".There is a quotation from Mr. Robert Latham, who sits on several victim support committees. He said,We urge you to show two fingers to this new scheme".This is where a layman is at a disadvantage because the phrase "two fingers" is clearly some sort of legal technical phrase with which I am not familiar.
The serious point is that it seems to me, with the greatest respect, that these debates are conducted in a vacuum. There are some unfortunate children who suffer from what is called SCID, which is severe, combined immune deficiency. It means that they must be kept free of any possible source of infection. Their early life is lived in a bubble where their victuals are passed into them. It seems to me that some of the debates about legal matters held in this House and in another place are conducted without any relationship to the world outside.
I shall try briefly to make a little clearer what I mean. The scheme we are talking about today extends to personal injuries. There appeared in The Times an extremely interesting article by Michael Baum, who is an eminent cancer specialist at the Royal Marsden Hospital. The article was called, "Does Screening Really Work?". He pointed out,Something like 80 per cent. of men dying of other unrelated diseases in their eighties will be found to have prostate cancer at post mortem".The tenor of his remarks was that there are many cancers which are never discovered unless there is a post mortem because they do not develop to a stage where they can be diagnosed. He said that it is possible that testing can be overdone.
That was reinforced in The Times on Saturday 10th June in an article by the health correspondent, Jeremy Laurance, who wrote that fear of litigation makes smear-test staff over-cautious. Dr. Angela Raffle claimed:Staff live in fear of being blamed for failing to prevent cases of invasive cancer. The desire to avoid over-diagnosis, which in the past kept the detection rates low, has now been outweighed by the need to avoid any possibility of being held responsible for missing1569 The report goes on to state that 5,500 women were referred for further investigation and treatment,for a disease that would never have troubled them and are being left with problems that include lasting worries about cancer, difficulties in obtaining life insurance and worries concerning the effect of their treatment on their subsequent reproductive ability".
I shall not weary the House with more details of that, but we are talking about people in the caring professions now who are becoming worried about the increasing tide of litigation. We have to think forward to people who are contemplating what to do with their life. If the situation deteriorates very much further, people will be reluctant to enter the caring professions. I believe that such considerations should have equal prominence when we are discussing these other matters.
§ 5.11 p.m.
§ Lord Coleraine
My Lords, I spoke in the debate on 1st November which was initiated by the noble and learned Lord, Lord Ackner, and I have come here today to renew the support that I offered then to my noble and learned friend on the Woolsack. I do not propose to go over old ground again, except to the extent that it is made necessary by the amendments in the name of the noble and learned Lord, Lord Ackner, which raise again two issues about which he spoke in November. I suggest that neither amendment should command our support.
First, the noble and learned Lord asks the House to agree that the maximum costs uplift should be 20 per cent., not 100 per cent. As my noble and learned friend on the Woolsack suggested—it seems a long time ago now—fixing that low figure would deprive the injured plaintiff, with only about a 50:50 chance of success, of the opportunity to proceed with the benefit of a conditional fee agreement. Those 50:50 cases are cases where there is a good chance of success but at the same time a real possibility of failure. Those are cases which deserve support.
Judge Michael Cook, in an article in The Times of 6th June which I expect many of your Lordships read, makes particularly hard-hitting points about the amount of uplift. He writes:The Lord Chancellor originally proposed a maximum uplift of 10 per cent., but the Law Society argued that this would require solicitors to win ten out of 11 cases merely to break even".The judge is a serious commentator, but he is wrong. As I understand the position, the actual objection to the 10 per cent. uplift was simply that the cases to which it might apply were cases in which there was almost no chance of the plaintiff losing—in other words, the scheme (if so limited) would simply not reach many of those plaintiffs who need conditional fee agreements.
The article goes on:When an increase to 20 per cent.—reducing the odds for breaking even to five wins out of six—still did not satisfy the Law Society, the Lord Chancellor weighed in with a massive 100 per cent. uplift. The Law Society welcomed the proposal and revealed that 92 per cent. of personal injury claims, to which conditional fees are to apply, succeed. A 100 per cent. uplift had been secured for an eight per cent. risk".
That tendentious argument is, with all respect to the judge, more than a little misleading. The regulations cannot reasonably be read as permitting the maximum 1570 uplift for open and shut cases, but that is what the passage is implying and what the noble Lord, Lord Irvine of Lairg, seems to think when he says that the maximum uplift will not be confined to 50:50 cases, and it is what the noble and learned Lord, Lord Lowry, also thinks. However, the maximum uplift will and should be applied in only those cases where there is a good chance of success but also a real chance of failure—the 50:50 cases. All that Judge Cook's meagre statistic shows is that 50:50 cases may be relatively few in number, but nothing can be made of that in relation to the amendments tabled by the noble and learned Lord, Lord Ackner, or in relation to the comments of the noble and learned Lord, Lord Taylor of Gosforth, about the low take-up in Scotland. It may be that there are not all that many people who require such assistance in 50:50 cases, but that is not a reason why they should not have it.
As to the amendment requiring that there should be a cap on fees, I would consider the compulsory imposition of a cap at best unnecessary but at worst in some respects operating against the interests of litigants. Indeed, I do not find myself in entire agreement with the Law Society, whose brief advises me that the Law Society will recommend to practitioners that,A cap should normally be included in agreements".There are obviously cases where a solicitor would recognise that the offer of a cap was appropriate to his client's financial and other circumstances. The noble and learned Lord, Lord Ackner, referred in November and today to the example of the damages in an otherwise successful claim being so reduced by a finding of contributory negligence that the uplift left the plaintiff out of pocket. It is on that sort of basis that he recommends the compulsory cap. But under the draft regulations, any solicitor offering a cap would be able also to offer an agreement without a cap, and it stands to reason that the uplift without the cap would probably be smaller than the uplift with the cap. The noble and learned Lord would remove from the plaintiff the element of choice, and leave him only the cap and the higher uplift. I consider that the imposition of a compulsory cap would be a retrograde step to take in this matter, and so I oppose it. It is inherent in litigation that even a successful plaintiff may be out of pocket at the end of the day. I have not heard either side of the profession—barristers or solicitors—recommend that when that happens the lawyers should forgo their fees in an effort to make things right for their plaintiff client. What is important is that there should be choice, and informed choice, and that honest proposals should be put by the lawyer to the client.
That leads me finally to say a word in relation to the amendments about a point which John Mark Taylor, the Parliamentary Secretary, brought out in the Commons in the debate on 15th May. It is a most important point which it is easy to overlook. There will be an undenied and binding legal duty imposed on a solicitor, in preparing and advising on a conditional fee agreement, to give the right and proper advice to his client; otherwise the agreement will be struck down at the end of the day as an agreement entered into by the client 1571 under the undue influence of the solicitor. In the last resort, that is what is going to make the regulations and the order work.
We should be looking to the future now. I am sorry that the noble and learned Lord, Lord Ackner, is still fighting the battles of 1990. I remind the House that the order and the regulations have been passed by another place. I commend to the House the Motions in the name of my noble and learned friend the Lord Chancellor and I hope—
§ Lord Boardman
My Lords, I am most grateful to my noble friend for giving way, but as he is well versed in the Law Society's figures, I wonder whether he can say how it managed to secure insurance cover against the other party's costs for less than £100 if the risks of losing were so substantial.
§ Lord Coleraine
My Lords, I am not in the cognisance of the Law Society on that matter. I consider that the question of insurance is a complete irrelevance. Whether or not they get insurance is entirely up to the clients. The only effect of the insurance is, if it is correct, to make it possible for litigants to litigate without risk. I am not sure that that is a good idea. I do not know the answer to my noble friend's question, but 1 hope that the House will reject the amendments and support my noble and learned friend on the Woolsack.
§ Lord Campbell of Alloway
My Lords, before my noble friend sits down, does he also consider irrelevant the difficulties explained in some detail by the noble Lord, Lord Mishcon, as regards the assessment of risk, which is fundamental to the scheme? Does my noble friend consider that irrelevant?
§ Lord Coleraine
My Lords, no, indeed I do not. I recognise that there will be cases where it is difficult to find an acceptable conditional fee agreement. On the other hand, there will be many cases where it is possible to do so. I am asking the House to let this proposal go forward. As it works out, we shall discover where it is necessary to amend it and what type of agreements are practical and what are not.
§ 5.20 p.m.
§ Lord Allen of Abbeydale
My Lords, I am not a lawyer and like the other two lay Members who ventured to intrude into this lawyers' paradise, I can claim no expert knowledge of the subject. So it is with some diffidence that at this late stage of the debate I make a modest contribution. I derive some comfort from the fact that it is, after all, the non-expert, the non-lawyer, the ordinary person, who is intended to be the beneficiary of the proposals put before us by the noble and learned Lord on the Woolsack.
It could not be denied that most of today's critics intensely dislike the whole concept of conditional fees. That has been made abundantly clear. It is true that it has always been followed by the disclaimer that one has to accept the will of Parliament, but the melody, as it were, lingers on.
It is perhaps not surprising that the detailed implementation of a policy of which those critics profoundly disapprove turns out not to be to their taste. 1572 It looks rather different if one is just an ordinary person who is not poor enough to qualify for legal aid and not rich enough to embark upon litigation with equanimity. To people like that—to people like me—it seems that at last there is some prospect of access to justice becoming more open.
I looked back at the debates on the Bill leading to the 1990 Act, and I see that not only did I welcome the relevant clause but also that I incurred the grave displeasure of some of my legal friends by rather rashly moving, without success, an amendment which would have given the Lord Chancellor even greater powers. I therefore greatly welcome the order and regulations laid before us today, with only the regret that we have had to wait so long and possibly also with the feeling that they might have covered rather more types of case.
As it is, almost the whole argument has centred on just one category—namely, personal injury cases—and that, too, from the point of view of the plaintiff only. The arguments which have been put forward with considerable forensic skill—that if there is to be a mark-up, 20 per cent. would be better than 100 per cent.—have lamentably failed to convince me at all; 100 per cent., just on the arithmetic, strikes me as being unobjectionable in a 50:50 case. There is some weakness in the argument that that is too much because in the vast majority of cases personal injury claims are straightforward and almost always succeed, since it seems to me that the argument disguises the fact that a number of cases which are not so clear and which might indeed be 50:50 are never brought under the present circumstances, and that is one of the points at which the proposals are aimed.
It has been suggested that 100 per cent., or something near it, might become the norm. I do not believe that that will be possible. With all deference to the noble Lord, Lord Campbell of Alloway, I believe that there is something in the argument that the citizen would be able to shop around. We know that when there is competition, as in conveyancing, even legal fees can come down quite a bit.
One can hardly expect the noble and learned Lord the Lord Chancellor to welcome the other part of the suggestion made by the noble and learned Lord, Lord Ackner, for a specific cap on the proportion of damages which can be taken by way of fees, when he takes the view that the statute gives him no power to do that. In a long life in public affairs, I have found that on the whole it pays to take advantage of the legal views reached by the Lord Chancellor.
A good deal of the problem is met by the provision in the regulations that the amount payable to the lawyer is to be limited with reference to the amount of damages recovered, or that there is power for that to be provided in the agreement, which at any rate will ensure that the matter is discussed between the lawyer and the client. Although some scorn has been poured on the taxation arrangements, the fact remains that they provide some safeguard. The arguments, very skilfully put, as one would expect, by the noble Lord, Lord Mishcon, would apply, it seems to me, to any form of uplift and are not conclusive on the question of whether one would go for 20 per cent. or 100 per cent., which is the main issue 1573 raised in the amendment tabled by the noble and learned Lord, Lord Ackner. There will be cases too where the client will be as much interested in clearing his name as in obtaining some money.
There is one crucial difference between this scheme and the American scheme which is not to be overlooked and which has only just been touched upon. That is that the American contingency fee system works only if there is a prospect of damages from which the lawyer's fee can be deducted, whereas the Lord Chancellor's scheme works on both sides of the litigation. So the citizen who finds himself as a defendant in a personal injury claim will be able to make use of it. Indeed, I would not be all that surprised if the insurers for their part got round to seeing considerable merit in the scheme.
I recognise that the question of costs, which has been touched on from time to time, presents a problem which does not arise in the United States. The possibilities again will have been discussed between lawyer and client before the agreement is signed, and, although it is not a complete answer, the insurance scheme worked out by the Law Society, which I do regard as relevant, can go some way towards coping with that problem. It will apply only when the solicitor's firm is a member of the Law Society's accident line scheme and is an approved participant in the insurance arrangements. That incidentally should ensure that the client is helped by lawyers who know their way around. It will not cover some types of case, including medical negligence and pharmaceutical drug and tobacco-related actions, but where it is applicable cover will be provided for a pretty modest premium.
There is just one other point. I noticed that on previous occasions—I believe on one occasion this evening also—reference has been made which suggests that the speculative fee arrangement in Scotland, which hears a family resemblance to what is now proposed, has fallen into complete disuse. I have made some inquiries, and my understanding is that those reports of the scheme's demise are considerably exaggerated and that it is not the case that it has been found to be generally unacceptable.
As a conscientious Cross-Bencher, I naturally support the Government when the Government are right. It is not my fault that so often they prove to be wrong. However, tonight I believe that the Government's proposals are right. Much as it grieves me to differ from my fellow Cross-Bencher, the noble and learned Lord, Lord Ackner, I hope that the House will reject his Motions and approve the order and regulations.
§ 5.30 p.m.
§ Lord Hacking
My Lords, almost every participant in the debate has acknowledged that Section 58 is in the Courts and Legal Services Act and that Parliament has decreed the introduction of conditional fees. However, it is clear from most speakers today that there is deep opposition to conditional fees and that if they are to be introduced they should have minimal effect. That will be the consequence of the House agreeing the amendments 1574 tabled by the noble and learned Lord, Lord Ackner. As was rightly said by my noble friend Lord Coleraine, the scheme would reach almost no one whom it is designed to help.
We would then be left with, as was described by the noble Lord, Lord Mishcon, the disturbing gap—I would describe it as the ever-increasing disturbing gap— between the poor man covered by legal aid and the rich man supported by his bank balance. When your Lordships debated the matter in November I quoted certain figures as regards the fall in eligibility for legal aid. I told your Lordships that at the beginning of the 1980s about 70 per cent. of families within the jurisdiction of England and Wales were eligible for legal aid. By the end of the 1980s, that figure had fallen to about 50 per cent. and has been falling ever since.
The Consumers' Association in a survey dated June 1993 ascertained that one-third of people in this country who considered taking legal action did not do so and that a significant factor in that was concern about the cost of legal proceedings. Therefore, the question is: what is to be done? Alas, the answer cannot come with a revival of the legal aid scheme as I remember it as a young member of the Bar in the early 1960s.
We therefore have before us the proposals of the noble and learned Lord the Lord Chancellor. Your Lordships may not like the proposals but I say firmly that many outside the House support the scheme; members of the Consumers' Association, members of the Law Society and others who come face to face with clients and the issue of costs.
Being also a member of the Bar of the State of New York, I am tempted to address your Lordships on the contingency fees system and perhaps that alien creature to which the noble and learned Lord made reference. However, I shall turn to what I believe to be the vital issue before your Lordships; it is the curious situation which we now face in this debate. The consumers clearly support the proposals. The opposition comes almost entirely from the lawyers—from some sections of the legal profession and the judiciary—on the grounds, I emphasise, that lawyers will abuse the system by dishonest practices because of financial interest in the outcome—
§ Lord Ackner
My Lords, the noble Lord has overlooked the fact that the main criticism as articulated has come from the advisory committee of the noble and learned Lord the Lord Chancellor. At the noble and learned Lord's insistence under the Courts and Legal Services Act, the majority of the committee are laymen. Therefore, to lay the blame for the criticism on the lawyers is hardly consistent with that situation.
§ Lord Hacking
My Lords, I am of course aware of the composition of the advisory committee. However, any of your Lordships who have listened to the debate and heard comments outside the Chamber will know that there is substantial opposition from the lawyers on the ground that the lawyers will abuse the system by dishonest practices because of their financial interest in the outcome of cases and by manipulating the uplift percentages so that costs will swallow the damages.
1575 I have greater faith. There has always been an incentive to win cases. The noble and learned Lord, Lord Ackner, was a prominent and successful member of the Bar. Although he may be too modest to remember, I am sure that clients went to him and said words to the effect, "You have a great reputation for winning cases. I would like you to take on my case and do your best to win it". If clients went to the noble and learned Lord with those words, they were well judged, because my recollection from my early days at the Bar is that the noble and learned Lord was, indeed, very good at winning cases—
§ Lord Hacking
My Lords, there has always been an interest in winning cases. Secondly, lawyers have always had some financial interest in the outcome of a case. I ask former and present members of the Bar to recall the many occasions on which they have had to advise a client whether to settle. Of course a lawyer has a financial interest in the continuing of a case; that is especially so for a member of the Bar who has cleared his diary for three to six months with no other court work booked.
The simple answer is that when faced with such issues there is only one judgment to make—what is in the best interests of the client. I suggest that that is the judgment which the noble and learned Lord, Lord Ackner, used when he was at the Bar and I suggest that it is the judgment that any self-respecting barrister or solicitor makes—
§ Lord Hacking
My Lords, I shall not give way now. I am moving on to the next point, which is costs swallowing up damages. That is already a problem. I am cautious about citing cases in which I have been involved because the noble and learned Lord, Lord Ackner, will proceed to recite them back to me in our next debate. However, I was recently involved in a case in which I was conducting a personal injuries claim on behalf of a client and in which considerable costs were involved because of a substantial and complicated loss-of-future-earnings claim. At a late stage the plaintiff received and accepted most generous redundancy retirement proposals. As a result, the loss-of-earnings claim went out of the window. My client was therefore left with a small personal injuries claim; so small that under taxation the uncovered costs would have exceeded the remaining damages.
I saw my client and told him that the good news was that he had won the case and that he had achieved damages of some £15,000. But I did not tell him that, in view of the uncovered costs, the bad news was that he would not benefit at all. I could have composed a letter which would have run something along the lines, "Dear Client, I am glad that I represented you in that case and it was a great pleasure to win it for you. However, that pleasure will result in you paying me because all the damages have been swallowed up and there are still costs owing".
1576 No self-respecting lawyer would behave in that way. If he did so it would be highly damaging in the relationship between client and lawyer. It would quite likely visit upon him serious professional discipline. I remind your Lordships that under the Law Society code it is wrong and a breach of the Law Society rules to take advantage of a client or to overcharge for work done. Under those rules, it is also a requirement to give impartial and frank advice to clients. In any event, there is power in taxation to reduce or remove the uplift altogether. More fundamentally, the regulations and the Law Society model agreement will require these matters to be properly considered between the solicitor and the client as set out in writing.
When we last debated the issue the Opposition supped with a long spoon. I had hoped that today they would shorten that spoon by recognising the need for the scheme and by having greater faith in the professional behaviour of our fellow lawyers and in our professional bodies in exercising discipline. It was therefore with alarm that I heard the noble Lord, Lord Irvine of Lairg, say that we should not—I hope that I repeat his words accurately—rely on the good will of the legal profession for the scheme is for the exploitation of litigants for the benefit of lawyers. Is that the way we should he behaving?
§ Lord Campbell of Alloway
My Lords, I apologise for interrupting the noble Lord in the middle of his reading his autobiography. But I wish to ask him whether he thinks it is quite fair to criticise members of the Bar, of whom he was once one, by saying, "Well, if you do not have any work, you have to fight the case, hut of course, if you are very busy, you settle because it is much better to settle and get on with the next case". That is just not a fair criticism of the profession of which he was once a member.
§ Lord Hacking
My Lords, my noble friend misjudges the comment that I made. As regards his reference to reading from my autobiography, one of the most important contributions that we can make in your Lordships' House is to give the benefit of our experience, and I willingly do that.
§ 5.40 p.m.
§ Lord Renton
My Lords, I did not put down my name to speak and did not intend to do so. I venture to intervene now only because one important matter occurs to me which I feel obliged to raise and which has so far not been mentioned.
The order before us relates to proceedings before the European Commission of Human Rights and the European Court of Human Rights and says that they should be specified proceedings for which conditional fee arrangements may be made with, if necessary, a 100 per cent. uplift. Section 58 of the 1990 Act does not mention any proceedings before an international court. Therefore, it seems to me that it may be that a question of ultra vires arises in relation to making this order put forward by my noble and learned friend the Lord Chancellor.
1577 Quite apart from the narrow scope of Section 58, it seems to me that we have no power in our Parliament to make an order governing the rules of conduct, fee arrangements made, and so on, before an international court unless there has been at least consultation with the judges of that international court, just as there has been consultation with the Heads of Divisions in our country. I ask my noble and learned friend the Lord Chancellor whether there has been any such consultation and if so, what was the outcome of it.
But beyond that, we should think further. The question arises whether we have power to make such arrangements for conditional fees before an international court unless the other courts and parliaments which established that court by treaty, duly ratified, have been consulted, have agreed that we should do so, and, indeed, agreed that they would do so. Perhaps my noble and learned friend would be so kind as to comment on that.
Of course, if this order is in part ultra vires for either of the two reasons which I have given, it would seem to me that the whole order is ultra vires unless we amend it in addition to the way suggested by the noble and learned Lord, Lord Ackner. Perhaps I may say in passing that I fully agree with him.
There is only one other point which I wish to mention with regard to the proceedings before the European Court of Human Rights, and so on. "Specified proceedings" in the order in relation to our own courts are actions for damages for death or personal injury and winding up in liquidation proceedings. I believe that it is just possible to get an action going in the European Court of Human Rights for damages in some things but it is never heard of that that court has considered liquidation for winding up proceedings. Therefore, in the order we must turn to paragraph 2(1) (f), the last point, which refers to:proceedings before the European Commission of Human Rights and the European Court of Human Rights established",as described. It seems to me that all the proceedings before such a court can be made subject to a conditional fee order. I have not had the experience of appearing before international courts in the way that some noble and learned Lords, and others, have, but it seems to me a very strange situation, bearing in mind the very wide jurisdiction which the European Court of Human Rights has—almost going into moral matters—that we should have those conditional fee arrangements in operation, with the possibility of a 100 per cent. uplift.
Therefore, we must be very careful and I should be grateful if my noble and learned friend would let me have the answers to those important questions.
§ 5.47 p.m.
§ Baroness Mallalieu
My Lords, I wish to speak very briefly from the Back Benches and, therefore, I speak before the noble Baroness, Lady Hamwee, and with her consent.
I wish to speak in favour of the amendments tabled by the noble and learned Lord, Lord Ackner. Some of us share the intrinsic dislike expressed by the noble and 1578 learned Lord, Lord Rawlinson of Ewell, for the idea of conditional fees. But, as the noble Lord, Lord Coleraine, said, this is not the time to revisit the battle of 1990.
Surely it must now be for Parliament and in particular for your Lordships' House, which has a wealth of both legal experience and expertise, to fight a battle in 1995 to try to ensure that this order and the regulations which go with it provide the best possible scheme for the public.
The time has passed when legal aid was available to virtually all those who needed it, and it will not come again in the foreseeable future. Other methods must be found to fill the gap which, as many other noble Lords have already said, is denying access to our system of law for those who are deemed to be too rich to qualify for legal aid but who are too poor to pay for it.
The noble and learned Lord the Lord Chancellor has been somewhat beleaguered this evening. In fairness to him, he has had to perform a difficult balancing act in trying to determine the correct level of the uplift by which fees may be increased. If he makes the uplift too low, solicitors will not bother to offer the scheme to the public. If he makes it too high—I use another technical expression like the one used by the noble Lord, Lord Cocks—the public will find that the scheme is a con.
To put it frankly, "no win no fee" sounds mightily attractive, but if the result is to win and no damages or virtually no damages are received because the lawyer has pocketed the lot, dissatisfaction with both the lawyers and the legal system will rightly increase.
As others have said, the noble and learned Lord, Lord Mackay, proposed initially a 10 per cent. maximum uplift which he then raised to 20 per cent. In this order, he raises it to 100 per cent.; in other words, adopting double or quits. He maintains, as he did at the outset in introducing the order and regulations, that he has no reason to suppose that 100 per cent. will be the norm. He says that he has no power to impose a cap and if he did have power, he would not do so. He says that it is open to the parties to discuss the matter and reach their own agreement. But a lay litigant who is desperate for help is not in a strong position to bargain with a lawyer who he is anxious should pursue his case with energy and enthusiasm. If there is no cap and the uplift maximum is 100 per cent., there is no safeguard that that maximum will not become the norm and there is no safeguard that the whole of the damages will not be taken in costs and legal fees.
We were reminded by the noble and learned Lord, Lord Ackner, that the Lord Chancellor's Advisory Committee (which is independent of Parliament and of the legal profession with a majority of non-lawyers) says that 20 per cent. is the correct level to attract solicitors and to protect the public. These agreements must benefit the public and not the lawyers. It is because I am afraid that, as presently drafted, the order and the regulations do not do so that I must oppose the proposals of the noble and learned Lord the Lord Chancellor and support the amendment moved by the noble Lord, Lord Ackner.
§ 5.50 p.m.
§ Baroness Hamwee
My Lords, I should first declare an interest as a practising solicitor and a partner in a firm of solicitors. I do so because I believe that the 1579 protection of the client is to the benefit of the reputation of my profession. The noble Lord, Lord Cocks, reminded me very vividly this evening that the reputation of lawyers is almost as bad as that of politicians. Therefore, some of us tonight will not win.
When the matter was debated on 1st November last, my noble friend Lord Hooson said that the basic problem which faced the House was put to him by a "solicitor colleague" who said:This is more a consumers' than a lawyers' issue. At present, lawyers often cannot be afforded … I believe that if people like me can't afford people like me, then the system needs changing".—[Official Report, 1/11/94; col. 800.]I was the solicitor colleague, but my noble friend put the matter even more cogently than I could. I believe that legal costs are too high. I share the concerns expressed, among others, by the noble Lord, Lord Mishcon, that one must look at all possible measures to reduce them. I hope that the noble and learned Lord, Lord Woolf, will find alternative processes that will help to do so.
It is because I want the conditional fee scheme to succeed that I support the noble and learned Lord, Lord Ackner, this evening. My concern arises partly from my own experience. I accept that anecdotal evidence is often poor evidence, but it is only human to rely upon it to some extent. In negotiating the settlement of a dispute with an American lawyer I had the experience to find that the dispute was settled in a manner which I thought was very much to the disadvantage of his client. The lawyer—and he more or less told me this—wanted to settle the case because he wanted to get his fee. Although I accept that there is no intention to transfer the American system lock, stock and barrel here in this country, one must at least recognise the fact that some lawyers will be affected by matters of cash flow, if not matters of amount, when forming a view and giving advice to their clients.
My other recent experience took place while I was negotiating, on behalf of an English client, a conditional fee agreement with another American lawyer. I should point out that it is such an agreement, although it has some elements of contingency. It has taken weeks to negotiate the agreement, necessitating pages of documents. It is so complicated that I believe it well shows the absurdity of the need for another lawyer to negotiate on behalf of a client with his overseas lawyer.
In mentioning the question of the agreement, I see from the monitoring arrangements proposed that it is anticipated that the agreement can be varied during the course of the proceedings. Indeed, there is a reference to that in the arrangements. However, I wonder about the effect of the possibility of renegotiating an agreement during the proceedings. Most of all I share the concern expressed about the maximum uplift and the possibility that it may quickly become the norm. We have talked about 100 per cent. and perhaps it would be appropriate to remind ourselves that the 100 per cent. is not a matter of doubling profit. I say that because the base fee, which may be doubled, contains in itself an element of profit. I would not like to mislead myself in that respect. I am sure that your Lordships will have taken the point, but I have tended to forget that it is in fact more than a question of an extra 100 per cent. profit.
1580 As I said, I agree with the approach of trying 20 per cent. to see how it works and then, if necessary, looking at an increase. I agree with the noble and learned Lord, Lord Nicholls, about the effect of the market, although I am not convinced that shopping around to the extent practised by some clients is in fact to their benefit. My noble friend Lord Wigoder commented to me that there is perhaps an analogy with doctors in Harley Street: they do not seem to have reduced their fees even though there is quite a market in the area.
We have talked about taxation and its role in ensuring that fees are appropriate and proportionate. However, with taxation being assessed after the event I cannot help feeling that hindsight will be too tempting on some occasions to ignore. As regards the question of the cap, I am not convinced that it should be ruled out because it is more difficult, perhaps impossible, to apply in the case of a defendant. An attempt should perhaps be made to apply it where it can be applied for a plaintiff to see how it works.
There is also the question of insurance. I share the scepticism about insurance that has been voiced by some speakers. I would add to that the dangers that many of us will have experienced of an insurer finding a way to get out of paying what one thought was a certain sum of money from a policy that one thought would provide protection. There has been much experience recently in another field; namely, that of mortgage protection. House owners have tested their insurance arrangements only to find them wanting because the small print tends to protect the insurer more than it does the person who has taken out the policy.
I should be most unhappy if your Lordships were to think that I was suggesting that my firm would take advantage of clients. However, I shall report a conversation that I had this morning with a litigation colleague. I asked him what his view was about the proposals. After expressing concern about the unequal bargaining power between client and lawyer, he said, "If the system had been in operation for a while, I would have retired by now". In these days of charters, I hope that we shall see the best possible charter for the client and not what the public might regard as another charter for lawyers.
§ 5.57 p.m.
§ The Lord Chancellor
My Lords, I believe that your Lordships would be surprised if I were deliberately to introduce a system under which lawyers could properly exploit clients to the clients' disadvantage. In introducing the scheme it is not my purpose to do so. It has been said that the Advisory Committee that I appointed and whose services I greatly value—although not all of your Lordships who spoke today valued the committee in advance—has required me to examine closely the problems that it has raised. That I have done. It is one of the reasons why I have taken some time in arriving before your Lordships with the proposals, which, as I said, passed through the other place without a Division.
My noble and learned friend the Lord Chief Justice reminded your Lordships that I started off at 10 per cent., then went to 20 per cent. and finally went to 100 1581 per cent. He said that that would not be a way to settle an action. Well, of course, I was not settling an action; indeed, I certainly have not settled this particular action. What I was doing was responding to the consultation which Parliament enjoined me to have with the Law Society, with the designated judges and with the Bar Council. I also consulted the advisory committee.
I saw—and my noble and learned friend Lord Lowry addressed the point—that there was a great danger that, if one did not approach this as a matter of principle, the uplift would be regarded as a tax. That is the way that my noble and learned friend approached it—that successful litigants would be taxed at some rate, 20 per cent. for example, in favour of the unsuccessful. That is not what this scheme is about. This scheme is about fixing an uplift for the particular case which is appropriate to that case.
The first point of my noble and learned friend Lord Ackner, seeking to reduce the uplift to 20 per cent., is not a device that will protect clients. It is a device that will limit the application of the scheme to cases in which the chances of success are of the order that would justify 20 per cent. I can see no justification for doing that at all. I learnt that as a result of the consultation, and I have heard no answer in principle to that this afternoon.
Obviously if I wanted a quiet life, which I must say I am as keen on as anyone else, I would have gone along with this. But surely I have to approach this as a matter of principle, and the principle is that the uplift should be related to the chance of success.
The noble Lord, Lord Mishcon, with his characteristic flair for advocacy, does not want to be a bookie. I can understand why. But the courts have had to evaluate the chances of success in actions. If a solicitor by chance forgets to raise an action in time, the amount of the damages will have as one of the factors the chances of success in the action as well as the amount of damages that the action would have incurred if it had succeeded. Therefore this idea that one has to evaluate the chances of success in an action is nothing new in the law. The noble Lord, Lord Mishcon, says it is new for taxing masters. If it was as easy as the question of my noble friend Lord Boardman would suggest, it would not be very difficult for a taxing master to see that, if one could get insurance for £100 against costs of £100,000, the chances of success must be pretty good.
This brings me to another fact. It has been said that the insurance covers all personal injuries. The insurance is a matter for the Law Society's negotiators who negotiated with an insurance company. But my understanding is that it does not cover all actions of personal injuries. It would be surprising if it did. It covers only some. Obviously, as the noble Lord, Lord Irvine of Lairg, said, a lot of personal injury actions are successful, which is why I was talking about a minimum originally. But there are other actions for personal injuries where the chances of success are doubtful. What is the correct measure of the limit to which one should go in allowing doubtful actions under this scheme? Surely it is that of 50:50.
1582 Recently the Bar Council has given guidance to the profession about how it evaluates claims for the purposes of legal aid, because one of the fundamentals in legal aid is to find out what the chances of success are. The Bar Council put it in this way in its recent guidelines:A barrister should estimate the prospect of a successful outcome by reference to one of the following categories, namely, very good, 80 per cent.; good, 60 to 80 per cent.; reasonable, 50 to 60 per cent.".My submission to your Lordships is that it is absolutely proper for a lawyer to take an action in which the prospects of success are reasonable. If he does so and judges that the prospects are 50:50, he should charge that client what his services are worth. My noble and learned friend Lord Lowry said it should not be twice what they are worth. I say no because one has to take account of the risk which the lawyer is carrying, and therefore the services have to take account of that risk because if the risk turns out against the lawyer and the client, then the answer will be that the lawyer gets paid nothing based upon the chances of success in that particular case.
In my submission, as a matter of principle the maximum uplift that should be allowed, in the light of all the consultation, is 100 per cent. I have heard nothing that justifies reducing that. Of course I understand perfectly that, if someone charges a 100 per cent. uplift when it is a sure-fire case in which one can get insurance for £100, that is highly undesirable. I entirely agree with that. It is equally undesirable that he should charge a 20 per cent. uplift if that is the situation. There is nothing in a 20 per cent. uplift—it makes it a little smaller perhaps—that justifies charging 20 per cent. if it is a sure-fire case. The argument of my noble and learned friend is obscuring this principle. The principle has to be that the actual uplift is measured by the chances of success in that particular case. Anything that obscures that and tries to spread it over the whole range of personal injuries, as if it were a statistic, is just nonsense. All of us who know anything about statistics know that statistics do not apply to the individual case. It is only if one has a large number of cases that the statistics apply.
The noble Lord, Lord Mishcon, for whose views, as he knows, I have great respect, gave us a most interesting argument, which of course is equally applicable to any form of the scheme. Your Lordships may recollect the argument, which was interesting and fascinating at the time but applies to any form of the scheme because I, and I think he, have the ultimate control of the taxing masters as regards any form of the scheme. As I said, the advisory committee took this view. I have of course discussed it with the committee. But the matter is one of principle and I am seeking to explain to your Lordships today what that principle is.
I hope that your Lordships will go along with the principle because, if you in any way fudge the principle, you will be teaching the legal profession that, instead of looking at the risks of the particular case, they should take the view that this is in the nature of a reasonable tax and a reasonable tax should be about 20 per cent. I am all in favour of reducing taxation, as your Lordships 1583 know, but this is not a tax. It is the reasonable charge which the client should suffer who has this particular type of case where these are the odds.
The idea that the lawyer becomes a bookie if he gives odds seems to sit badly with the advice that the Bar Council has given to the banisters' profession that I read out to your Lordships. It is essential to be able to give a view about what the chances of success are. It is utterly wrong to suggest that insurance is available in cases where the outlook is of a 50:50 success rate.
My noble and learned friend the Lord Chief Justice asked: if the arrangement in Scotland is 100 per cent., why did I not start with that? I thought I had explained that, perhaps before my noble and learned friend was able to be in his place. I pointed out that the decision of the court in Scotland came in August 1992. I did not have sufficient vision to know exactly what it would decide under its powers. However, I was convinced by the argument and I thought that one of the aims of consultation was that, if a good argument was put to me, I was supposed to listen to it and give effect to it. That is what I have done. I went along with a principle and I would strongly ask your Lordships to be good enough to support me in that.
I understand all this about fudging. It is unfortunate that a lawyer should profit at 100 per cent. But if that is the lawyer's fair right, he should get it. I do not for a moment condone people taking more than they are entitled to. I think my record of trying to make changes in your Lordships' House to the legal aid system would bear that out. I am in favour of the client, but I am in favour of the client being able to take a case at 50:50 if the client wants to do that and is properly informed about the risks. I see no reason in the world why my scheme should exclude such clients, which is what in effect the scheme of my noble and learned friend Lord Ackner does. Of course it is always possible for a lawyer to take a 20 per cent. uplift in a 100 per cent. case. But then, if he is going to remain in business financially, he will have to recover that money from other people. That is the unfairness that I see in the fundamentals of what is proposed against me. It is utterly unfair to the clients who have a sound case to have to pay in this way.
The arguments that I have heard against me this evening—and I have discussed the arguments with the committee—are all based on that assumption. In my submission to your Lordships, it is a wrong assumption. It is a mistake in principle and it is damaging to fairness to the individual client in the cases to which the scheme will apply.
On the subject of the cap, I have taken the view that it is extremely difficult to apply a cap generally by regulation. I instance the case of the structured settlement. Your Lordships will know that a structured settlement is one in which a capital sum is payable immediately, with income payments made over a period. As an illustration, it would be difficult to apply a cap of 25 per cent. of the damages unless one gave the lawyer a pension. That would be an unworkable arrangement.
It may be that a cap is right in a particular case, but the merit of what I propose—which recognises the concerns of my advisory committee—is that the client 1584 and the solicitor will have to sit down and examine that matter before agreement is reached. The lawyer may say at the beginning, "Are you willing that the uplift I take may use up all your damages?" The client may say, "No, I am not. I would like it to be not more than half." On the other hand, there may be a matter on which the client feels that his honour is at stake. For example, relating to an accident at work he says one thing and another employee says the opposite and the question is which is truthful. The honour of the plaintiff is at stake. Your Lordships will have experience of that happening. For the sake of being vindicated, the client may be willing to go a fair distance in that matter. Why should I prevent him?
Those are the points of principle that I want to put before your Lordships. As my noble and learned friend Lord Hailsham of Saint Marylebone said in earlier debates, I believe that fairness requires that the system I propose should apply equally to plaintiffs and defendants. All the skill of the noble Lord, Lord Irvine of Lairg, was not able to show how the cap could apply in respect of defendants, unless it applied to costs alone. That would not be a fair arrangement if the plaintiff could incur costs up to damages plus costs and the defendant only costs. That would be utterly unfair.
Therefore, as a matter of principle, I have approached this as a matter of fairness. The 100 per cent. figure in Scotland was fixed by our judicial colleagues there. It is my understanding that the Scottish speculative system, with 100 per cent. uplift, is used to a considerable extent. The amount varies, but on Friday three leading firms in Edinburgh had between them 30 or 40 actions on this basis. The great thing about the scheme is that I have never known of a complaint.
That brings me to the last point that I want to make. The agreement is made at the beginning of the litigation. It is capable of being altered by agreement. It cannot be altered unilaterally once it has been made, but it can be altered by agreement. The kind of case to which the noble Lord, Lord Mishcon, referred would certainly be one which might arise for renegotiation. That already applies in relation to legal aid. A solicitor who suddenly discovers a cast-iron statement against him is supposed to advise the legal aid authorities so that they may reconsider whether legal aid should be granted. Noble Lords will know how often that happens.
Renegotiation is possible, but ultimately the only time the person has to pay out any money and anything is done to the detriment of the client is after the case has been successful. Therefore, the client has succeeded before that arises. In that connection, I want to remind your Lordships of a fundamental point; namely, this is an agreement between solicitor and client. If there is anything in it which is disadvantageous to the client, since the solicitor is always regarded as having influence over the client, unless the solicitor can prove that the agreement was a fair and proper one he cannot succeed in enforcing it on the ground of undue influence. Therefore, at the stage at which that arises, the client will have succeeded and, if the agreement is disadvantageous to the client, the burden of proof will rest on the solicitor to justify it. If he cannot justify it he will not get the benefit of the uplift.
1585 I have dealt with the matters of principle. I ought to deal with the question of my noble friend Lord Renton. My understanding is that the law in this country disadvantages a lawyer who makes an agreement about going to service a case either in the European Commission or in the European Court of Human Rights. It is the law of this country which is dealt with. My orders are intended to deal with that aspect of the matter; namely, the enforceability of such an order in this country. Obviously, people could go from Scotland to the court in Strasbourg on the basis of the law there if the agreements were made there.
§ Lord Renton
My Lords, before he sits down, will my noble and learned friend confirm that he is therefore saying that when, for example, a London solicitor makes an agreement with a British subject who happens to be abroad at the time in relation to conditional fee arrangements before the European Court of Human Rights, the terms of the order which my noble and learned friend is asking the House to approve would not apply?
§ The Lord Chancellor
My Lords, I am saying that if the conditional fee agreement in question falls to be judged by English law then these regulations will apply if the agreement is covered by the regulations.
Since the point has been raised, perhaps I should say that I originally intended to limit the conditional fee regulations to personal injury cases. However, the Law Society and insolvency practitioners pointed out special problems in that regard, to which I need not refer in detail, and others concerned with European legislation pointed out problems there. It seemed to me relatively easy to deal with those problems. However, I have limited the scheme. It does not apply to all forms of action which are permissible. As my noble and learned friend the Lord Chief Justice said, I have approached the matter with a degree of canniness in relation to the types of proceedings which can be covered.
It would be wrong for me to detain your Lordships further. I strongly suggest to your Lordships that what I propose here is correct in principle and that your Lordships should approve it in principle. Otherwise your Lordships would be approving a kind of fudge which would only encourage people not to treat these as individual cases but as if we were allowing a form of modest taxation on all successful plaintiffs in order to service the claims of those who fail.
I invite your Lordships not to support the amendment of my noble and learned friend Lord Ackner.
§ 6.18 p.m.
§ Lord Ackner
My Lords, I have appeared in this House on a number of occasions on matters relating to legal subjects. This is clearly an important debate because I have never seen the House so well attended on any legal issue. It is an important debate because if the noble and learned Lord the Lord Chancellor has got it wrong, then very serious injustices, which his committee warned him about, would come about.
At the outset I wish to thank noble Lords who have taken part in the debate, particularly those who have supported my amendment. It is fundamental to the whole 1586 of the submission of the noble and learned Lord the Lord Chancellor that the uplift should not be disproportionate to the risk. The strange thing is that one finds no reference to that in the order or the regulations. The uplift features in the very last paragraph in the order which states:For the purpose of section 58(5) of the Courts and Legal Services Act 1990 the maximum permitted percentage by which fees may be increased in respect of each description of proceedings specified in article 2 is 100%".That is all. No indication is given as to when one should charge what.
My noble and learned friend the Lord Chancellor says, "We are giving thought to taxation so that we have a method of dealing with the situation." Why has it taken nearly five years for thought to be given and for nothing to be achieved? The noble Lord, Lord Mishcon, indicated the practical problems with regard to seeking to relate the uplift to the proportion of the risk, and, once an agreement has been reached, how difficult it is to challenge.
My noble and learned friend the Lord Chancellor has a detailed letter from his own advisory committee dated 7th April, 1995. It is a long letter stating that the committee remains gravely concerned that taxation will not in practice prove an effective safeguard. The letter states that there will be clear difficulties regarding a taxing master who is not an expert on assessing risk in actions and who will have considerable difficulty in knowing at what stage he should reach that decision. However, an important comment is made on page 2 that it will undoubtedly be argued, and probably successfully, that Parliament has sanctioned increases across the personal injury field of up to 100 per cent., that the client agreed the increase and that no reduction is therefore warranted. But taxation does not follow as night follows day. It could do so if the Lord Chancellor looked upon that method as being the system to provide such vital control. He could provide in the regulations that taxation must take place in every case. He could do better still. Instead of leaving it to a taxing master post hoc to seek to unravel the degree of proportionality to the risk, he could provide that before every agreement is put into effect it should receive the approval of a master of the High Court who would be expert in such matters. The written agreement would be handed in to the master with any supporting statements, and he would be asked to approve it. There one has the control.
However, we do not have obligatory taxation, and taxation is expensive. If the litigant demands taxation— he will have to demand it, the solicitor will not offer it— he will be told, quite rightly, "This can be a very expensive operation and if you do not accept what I am telling you about the reasonableness of my uplift, then you go ahead. But if you fail you will pay a costly figure for querying my judgment."
This matter has not escaped the attention of the Lord Chancellor's own advisory committee. If I were standing before your Lordships saying, "Would you please implement my views on what is appropriate and my views as to how to protect the litigant who is often vulnerable and at a difficulty?", I could understand the situation. But the Lord Chancellor has had the consistent, definite and quite firm advice—firm enough for the committee to feel so concerned that it published such advice in the press— that what is being done is fraught with danger for the 1587 litigant. That committee of 17, presided over by a Lord of Appeal in Ordinary, includes judges and other experts and has a majority of laymen. I have already described how the committee—so that it should not be thought to be in any way out of touch—has among its members a past president of the Law Society, a partner of the litigation department of one of the most experienced firms, and a past president of the Institute of Chartered Accountants.
Its detailed criticism is brushed aside as fudging. Some committee to fudge in the way in which the noble and learned Lord the Lord Chancellor suggests! The committee is concerned with one essential feature. If you bring in this new concept, as must happen—it is accepted—of conditional fees you have to take great care to ensure that the litigant is properly safeguarded.
I have dealt with taxation. Perhaps I may now turn to the question of the cap. As the committee said to the Lord Chancellor, "If you will not come down to 20 per cent. and insist on 100 per cent., the only way of safeguarding the litigant from having the whole of his damages swallowed up in the 100 per cent. figure"— a situation which the Lord Chancellor has conceded in correspondence can easily happen—"is to impose a limit from which the damages can be resorted to".
Perhaps I may deal with the points raised. First, my noble and learned friend Lord Nicholls accepts that there is potential abuse available, that the 100 per cent. could be an excessive figure. The figure of 100 per cent. without abuse can still absorb all the damages; it does not have to be a "guilty" 100 per cent. It is a question of figures. However, the noble and learned Lord accepts that there is potential for abuse. The idea of the cap is to prevent that abuse. Therefore, why not have it?
Secondly, there has been reference to the fact that the conditional fees are designed to apply not only to a plaintiff but to a defendant. How can one operate a cap on a defendant? The answer to that is perfectly simple. A cap has no relevance to a defendant. A cap protects damages or other sums recovered from being swallowed up. The defendant is present, unless he has a counter claim, in order to resist the claim. When he has resisted the claim successfully, there is no cap and therefore the risk of damages being swallowed up does not arise in any way.
The reason that the damages aspect is so important is this. The Law Commission brought out a short paper representing its views on the conditional fees and other proposals made by the Lord Chancellor in his Green Papers in 1989. One of the observations that the paper made was that to require the litigant—this must be the plaintiff—to pay any significant sum out of his damages detracts from the fundamental principle of English law that the courts strive to put a wronged person back into the position in which he would have been had he not been wronged. One writer said that any time a litigant has to pay representation expenses from his award, justice is not done. Those were the views recorded by the Law Commission. The cap seeks to face up to the position that the uplift will come out of the damages, but it will not wipe out the damages. That is its function; that is its principle. That is why the Lord Chancellor's own advisory committee has stated consistently that if one wishes to hang on to the 100 per cent., the only way 1588 to avoid a situation in which the litigant receives nothing, or virtually nothing, is a cap. What on earth is against that? I wave to one side the absence of power. It can be obtained. I do not accept, and nor do others who have considered it, that there is no power. What is against it? There is the reference to the defendant. It is an irrelevant concept to cap the defendant.
The other point is structured settlements. There can be an exception in regard to structured settlements. We spent five years contemplating the regulations and it is not beyond the wit of man to allow an exception. The noble Lord, Lord Coleraine, obviously realised that it is a difficult point. It is significant that a cap of 25 per cent. appears in the model agreements drafted by the Law Society. Why has the Law Society said in those agreements that there should be a cap of 25 per cent.? Because it realised the injustice of the applicant winning and then being left with under 75 per cent. Even 25 per cent. would not give him 75 per cent. because there is a difference between the costs that he receives by order of the court and what are called indemnity costs which he has to pay to his solicitors. So the cap is the opportunity to safeguard the situation.
I have had the greatest difficulty understanding the constant firm resistance of the noble and learned Lord the Lord Chancellor. The suggestion that he had no power came late in the day and it is followed similarly late in the day with structured settlements. It is now said that the defendant's position would produce an anomaly. That is not so.
There have been references to the consumer and consumer organisations and what they wish. I have received briefs from such organisations for the purpose of the debate and they all accept that the cap provides an enormous amount of protection. One said that if matters did not work out by the optional opportunity, then legislation would have to be considered. But the concept of the cap is obvious. It provides the protection. If, as the Lord Chancellor's committee suggested, the noble and learned Lord insists on 100 per cent., this is the appropriate compromise.
I make only one point about Scotland. If I had realised that point would be raised, I would have brought the document with me. There was a Bar meeting not long before our debate on 1st November when either the dean or the vice-dean informed the company present that conditional fee agreements were not being used. On Thursday or Friday I spoke to the Lord President about the experience in Scotland. He said that there was a small take-up and explained why. It was because the 100 per cent. was kept down. Because of the base fee, as he called it, to which the 100 per cent. could be applied, the method of taxation and fixing fees which can be obtained is quite different. Those were not his words but generally the base fee being screwed down meant that the 100 per cent. was of little advantage. Perhaps it is not a useful analogy to draw between the two countries. They are in an entirely different situation with regard to the supply and demand of that form of litigation.
I respectfully but, I hope, not too emphatically emphasise that if my noble and learned friend's proposals come into force without the cap being 1589 available, there will be occasions when this country will exceed the worst excesses of the United States. Let me make that proposition good. In the United States matters differ from state to state but the fee that is earned on the conditional fee basis is a percentage of the damages— 30 per cent., 40 per cent. But one cannot obtain more than 40 per cent. So the litigant is always left with 60 per cent. of the damages that are recovered. But, as the Lord Chancellor's advisory committee pointed out, what the noble and learned Lord proposes without a cap—as he has conceded over and over again—can result in the litigant who has won obtaining nothing at all. In my respectful submission, that situation is worse than the American system. Not only is it worse. To introduce such a situation would do a great disservice to the administration of justice in this country.
In the edition of The House Magazine of 22nd May, there is an article by the noble and learned Lord the Lord Chancellor vigorously defending some of his law reforms. The penultimate paragraph contains this sentence:If on any aspect of my reform proposals they can suggest improvements, I would be most grateful and delighted to consider them".While, of course, I accept without hesitation the sincerity of the noble and learned Lord's expression of gratitude and delight—which no doubt applies to this debate—his lack of sensitivity to the weight of argument not only in this House but to the continued representation by his own advisory committee obliges me to seek the opinion of the House on my amendment.
§ 6.37 p.m.
§ On Question, Whether the said amendment shall be agreed to?
§ Their Lordships divided: Contents, 100; Not-Contents, 105.1591
|Division No. 1|
|Ackner, L. [Teller.]||Fisher of Rednal, B.|
|Addington, L.||Gladwin of Clee, L.|
|Archer of Sandwell, L.||Gould of Potternewton, B.|
|Astor of Hever, L.||Greene of Harrow Weald, L.|
|Barnett, L.||Grey, E.|
|Beaumont of Whitley, L.||Hamwee, B.|
|Belhaven and Stenton, L.||Harris of Greenwich, L.|
|Beloff, L.||Hayhoe, L.|
|Birk, B.||Healey, L.|
|Blackstone, B.||Hilton of Eggardon, B.|
|Bridge of Harwich, L. [Teller.]||Hollick, L.|
|Bruce of Donington, L.||Holme of Cheltenham, L.|
|Campbell of Alloway, L.||Houghton of Sowerby, L.|
|Clanwilliam, E.||Howell, L.|
|Coventry, Bp.||Howie of Troon, L.|
|Craigavon, V.||Hylton-Foster, B.|
|Darcy (de Knayth), B.||Jeger, B.|
|David, B.||Jenkins of Putney, L.|
|Dean of Beswick, L.||Kennet, L.|
|Dean of Thornton-le-Fylde, B.||Kilbracken, L.|
|Desai, L.||Kinloss, Ly.|
|Dilhorne, V.||Lauderdale, E.|
|Donaldson of Kingsbridge, L.||Leigh, L.|
|Elis-Thomas, L.||Lloyd of Berwick, L.|
|Farrington of Ribbleton, B.||Longford, E.|
|Lowry, L.||Seear, B.|
|McGregor of Durris, L.||Sefton of Garston, L.|
|McNair, L.||Serota, B.|
|Mallalieu, B.||Shaughnessy, L.|
|Mar, C.||Shaw of Northstead, L.|
|Marlesford, L.||Shepherd, L.|
|Masham of Ilton, B.||Simon of Glaisdale, L.|
|Mayhew, L.||Strafford, E.|
|Monkswell, L.||Strathcarron, L.|
|Napier and Ettrick, L.||Taylor of Gosforth, L.|
|Nicol, B.||Templeman, L.|
|Norrie, L.||Thomas of Gwydir, L.|
|Oliver of Aylmerton, L.||Thomas of Walliswood, B.|
|Park of Monmouth, B.||Thomson of Monifieth, L.|
|Pearson of Rannoch, L.||Tope, L.|
|Perry of Walton, L.||Tordoff, L.|
|Peyton of Yeovil, L.||Varley, L.|
|Plant of Highfield, L.||Waverley, V.|
|Rawlinson of Ewell, L.||Wedderburn of Charlton, L.|
|Rees, L.||Whaddon, L.|
|Renton, L.||Wharton, B.|
|Rodgers of Quarry Bank, L.||White, B.|
|Roskill, L.||Wigoder, L.|
|Russell, E.||Winchilsea and Nottingham, E.|
|Sandwich, E.||Young of Dartington, L.|
|Addison, V.||Henley, L.|
|Ailsa, M.||Hives, L.|
|Aldington, L.||Hogg, B.|
|Allen of Abbeydale, L.||HolmPatrick, L.|
|Allenby of Megiddo, V.||Hooper, B.|
|Annaly, L.||Howe, E.|
|Ashbourne, L.||Inglewood, L. [Teller.]|
|Astor, V.||Jeffreys, L.|
|Balfour, E.||Jenkin of Roding, L.|
|Blaker, L.||Johnston of Rockport, L.|
|Blatch, B.||Kenilworth, L.|
|Borthwick, L.||Kimball, L.|
|Boyd-Carpenter, L.||Kinnoull, E.|
|Brabazon of Tara, L.||Kirkhill, L.|
|Brougham and Vaux, L.||Lane of Horsell, L.|
|Butterworth, L.||Lindsay, E.|
|Byron, L.||Long, V.|
|Cadman, L.||Lucas, L.|
|Caithness, E.||McColl of Dulwich, L.|
|Campbell of Croy, L.||McConnell, L.|
|Carnock, L.||Mackay of Ardbrecknish, L.|
|Chelmsford, V.||Mackay of Clashfern, L. [Lord Chancellor.]|
|Clark of Kempston, L.||Massereene and Ferrard, V.|
|Cochrane of Cults, L.||Merrivale, L.|
|Cocks of Hartcliffe, L.||Mersey, V.|
|Coleraine, L.||Miller of Hendon, B.|
|Colville of Culross, V.||Milner of Leeds, L.|
|Colwyn, L.||Milverton, L.|
|Courtown, E.||Monteagle of Brandon, L.|
|Cranborne, V. [Lord Privy Seal.]||Mottistone, L.|
|Crathorne, L.||Nicholls of Birkenhead, L.|
|Crickhowell, L.||O'Cathain, B.|
|Cumberlege, B.||Onslow, E.|
|Denham, L.||Orkney, E.|
|Downshire, M.||Orr-Ewing, L.|
|Dundonald, E.||Oxfuird, V.|
|Elles, B.||Pender, L.|
|Erne, E.||Rankeillour, L.|
|Erroll, E.||Rawlings, B.|
|Fanshawe of Richmond, L.||Renwick, L.|
|Fraser of Carmyllie, L.||Rodger of Earlsferry, L.|
|Gray of Contin, L.||St. Davids, V.|
|Gridley, L.||Savile, L.|
|Hacking, L.||Seccombe, B.|
|Harding of Petherton, L.||Shannon, E.|
|Harman-Nicholls, L.||Sharples, B.|
|Skelmersdale, L.||Trumpington, B.|
|Skidelsky, L.||Wakeham, L.|
|Stanley of Alderley, L.||Whitelaw, V|
|Stewartby, L.||Wise, L.|
|Strathclyde, L. [Teller.]||Wolfson, L.|
§ Resolved in the negative and amendment disagreed to accordingly.
§ On Question, Motion agreed to.