Court Fees

HL Deb 14 July 1997 vol 581 cc863-81

5.51 p.m.

Lord Ackner

rose to ask Her Majesty's Government what action they have taken or propose to take to protect the constitutional right of access of a litigant of modest means from the impact of new and increased court fees.

The noble and learned Lord said: My Lords, since I have no right of reply at the end of this debate, I thank noble Lords who will take part, and in particular my noble and learned friend the Lord Chancellor, even more so as I believe this is the first debate to which he will reply. He and I have always seen eye to eye in our encounters in this Chamber. I am sure that that tradition will continue to flourish.

The stimulus for this debate arises out of certain court costs orders made at the end of 1996 by the then Lord Chancellor under powers conferred on him by Section 130 of the Supreme Court Act 1981. These orders not only more than doubled fees but added new fees where previously there had been none and removed certain exemption provisions. I have given notice to my noble and learned friend the Lord Chancellor that this debate gives rise not merely to questions of practical concern as to the extent to which access to justice is being denied or restricted by the quantum of the increases. It raises a major policy issue, with wide-ranging implications, which has never been the subject of public debate. Historically, it has been government policy for salaries and pensions of judges and the cost of court accommodation in civil litigation to be paid by the state out of public funds, while other administrative costs should be met by litigants. However, in 1982 the Government decided that accommodation costs, such as the notional rent for the Royal Courts of Justice, should be included in the costs borne by litigants, and in 1992 judicial salaries should be included. In short, the civil justice system should become self-financing.

What is quite remarkable is that this radical departure from previous practice, not heralded by any White or Green Paper, has not been the subject of public debate in Parliament or elsewhere. Indeed the previous Government have acted in a way which seems to border upon the arrogant. Let me explain. Last year the Government introduced a Housing Bill. Tucked away in Section 83 was a seemingly harmless provision enabling an application to be made to a leasehold valuation tribunal, instead of the county court, when there was a dispute as to the value or provision of services provided by a landlord.

During the Committee and Report stages it emerged that the applicant to such a tribunal was to pay the entire costs of that tribunal. Indeed the noble Lord, Lord Lucas, cheerfully observed that this would include even the milk for the office cat, assuming such existed. What was distinctly worrying was the concession by the noble Lord, Lord Lucas, that the tribunal's costs could amount to as much as £2,000 per day. This was roundly condemned from all sides of the House and the Government were defeated on Third Reading on an amendment moved by the noble Viscount, Lord Bledisloe, with a majority of 136 to 119. There was more than an hour's debate on that issue.

In the debate, to the surprise of those present, the Government revealed that they intended that full costs were to be applied to all courts. To this the noble Viscount, Lord Bledisloe—who is on the speakers' list but who may be impeded from attending—observed, So be it. If that is what they"— that is the Government? — want, let them introduce a Bill to that effect. Let us see and debate the various consequences and safeguards; and let us hear the considered views of judges, lawyers, litigants, etc. Let us tackle the problem face on, in its entirety".—[official Report, 17/7/96: col. 861.] Those sentiments were, I believe, shared by all those who spoke in favour of his amendment.

But not a bit of it—there was not even prior discussion with the senior judiciary. When the heads of division queried the necessity for these drastic fee increases they were told that the increases were essential to enable the Lord Chancellor to balance his departmental budget. It was on this occasion that the heads of division, whose concurrence to these new fees was required, were told that it had for some years been the established government policy that the civil justice system should be self-financing. The annual subvention from public funds for the Lord Chancellor's Department is apparently nowadays calculated on the footing that nothing need be allowed for the civil justice system as its costs will be met by litigants. Thus without these recent increases in fees and the imposition of new fees the Lord Chancellor could not have—having regard to the annual sum allowed his department by the Treasury—met the expenses of the system for which he is responsible. Not surprisingly the heads of division felt obliged to give their concurrence to the orders, which I understand are expected to raise in excess of £50 million and a further £50 million by orders to be made this year.

In regard to the above facts I am indebted to the vice chancellor, Sir Richard Scott, who is also head of civil justice, for a transcript of a highly critical speech given by him on 13th March 1997 to the Kent Law Society in the Keith Tucker lecture. I agree with the views expressed by the Vice Chancellor in that lecture; namely,

that the civil justice system is an integral and indispensable part of the structure of administration of justice that must be put in place by every State in which public and private affairs are to be conducted in accordance with the rule of law; and that a policy which treats the civil justice system merely as a service to be offered at cost in the market place, and to be paid for by those who choose to use it, profoundly and dangerously mistakes the nature of the system and its constitutional function". In my remaining few minutes, I turn to issues of practical concern, hoping that others may develop the matter fully. The previous orders were made in 1980 and contained provisions relieving litigants on income support from the obligation to pay fees, and, in addition, giving the Lord Chancellor a discretion to reduce or omit a fee where,

it appears to the Lord Chancellor that payment by a party & would involve undue financial hardship because of exceptional circumstances of the particular case". Article 3 of the 1996 orders removed those provisions. I fear that I can spare no time on the humiliating decision suffered by the previous Government as a result of the application made by Mr. Witham to the divisional court within weeks of the orders coming into force. It declared that Article 3, to which I made reference, was unlawful. The value of the case for present purposes lies in the recognition by the court of the constitutional importance of access to the civil courts.

The House will recall from the recent debates on the provisions of the Crime (Sentences) Bill, in particular those provisions dealing with mandatory life sentences and minimum sentences, that those words "exceptional circumstances" are inevitably interpreted in a very restrictive manner. Although they do not amount to once in a blue moon, they get very close to that situation. There are clearly many litigants unable to obtain legal aid who cannot afford to pay court fees and whose circumstances are therefore not only unexceptional but extremely common. In regard to those persons, if access to justice is not to be entirely illusory, then the limitation on the exercise of the discretion must be changed. I would have thought it far more appropriate for the discretion to be exercised by the district judge and the words "exceptional circumstances" deleted.

Perhaps I may take the comfort of ending with three short quotations from brother Law Lords. First, in the case of ex parte Lwch in 1994, in Queen's Bench 198, Lord Justice Steyn said: It is a principle of our law that every citizen has a right of unimpeded access to a court". In Raymond v. Honey, 1983, 1 Appeal Cases 13, my noble and learned friend Lord Wilberforce described it as a basic right. He said: Even in our unwritten constitution it must rank as a constitutional right". Finally, in his interim report on civil justice reforms, the noble and learned Lord, Lord Woolf, said at page 205: Court fees can have an adverse effect on access to justice if the litigant regards them as putting the cost of litigation out of proportion to the remedy sought. As part of the review of courts' fees I would therefore wish to see the position of the litigant of modest means being protected from the undue impact of increased court fees". I await with, I hope, justifiable confidence the reply of my noble and learned friend the Lord Chancellor.

6.4 p.m.

Lord Mishcon

My Lords, the House will be indebted, as it often is, to the noble and learned Lord, Lord Ackner, for raising an important public matter. I am indebted to him for the comprehensive way in which he has dealt with the question, thus leaving me comparatively little to say.

I have always loved that chapter in possibly the most eloquent of the Old Testament prophets, Isaiah, which commences with the Almighty, through the prophet, having a discussion with us mortals. The chapter begins with the expression, "Come, let us reason together". I use the phrase not because I wish in any way to deify my noble and learned friend the Lord Chancellor (even though he may have as part of his traditional duty to be the conscience of Her Majesty the Queen) but because it is the right note to sound when one recognises the fact that, before the noble and learned Lord commenced to grace the Woolsack, all the matters of which the noble and learned Lord, Lord Ackner, complained had been completed. Therefore, knowing well the breadth of the Lord Chancellor's mind, I ask that certain considerations be uppermost in the noble and learned Lord's mind when reviewing the matter.

The noble and learned Lord, Lord Ackner, had limited time in which comprehensively to deal with the subject. He started by saying that there were some practical considerations but that he would talk about principles of grave concern. Perhaps I may therefore deal with some of those practical matters.

Fees were altered—the noble and learned Lord, Lord Ackner, said that it was without any public debate or discussion, and without full consultation, as I understand it, with the Bar Council, the Law Society or the judiciary—on the following scale. On purpose I take examples which I believe will appeal to your Lordships as being of grave social concern. In 1995 and 1996, one had to pay a fee of between £20 and £50 for wardship applications. Those are often applications to protect the physical well-being of youngsters, or to ensure that they remain within our jurisdiction, and are cared for in a proper way. From January 1997 the fee to commence the application was £100.

I turn to a debtor's petition in bankruptcy. Your Lordships will appreciate that when a debtor files his own petition, one takes it for granted, if he is an honest man, that he has literally nothing in his pocket; otherwise he would make an offer to his creditors, however small that may be. The fee used to be £20. In order that the debtor can file his own petition, from January 1997 the fee was increased to £50.

Lastly, as an example, would your Lordships take it for granted—noble Lords will have become familiar with this type of case having read the newspapers, if not from having followed it as lawyers would—that someone has been grievously injured for the rest of his or her life by the negligence of a doctor? Will noble Lords take it for granted—let me bear the pain of saying this—that a client of a lawyer has suffered immeasurable damage as a result of that lawyer's negligence? Will your Lordships take it for granted that, when the matter is as serious as I have tried to explain, the damages claimed may well be £100,000 or more? Before a writ could be issued, in October 1995 the fee payable was £100; in 1995–96 it became £120. Before the writ can be issued, since January 1997 a fee has now to be paid of £500. The people whom I know the noble and learned Lord the Lord Chancellor will have in mind as much as anybody are those who fall just outside the net for legal aid. They are always the people who have the gravest difficulty in using our courts as they are intended to be used. They are the ones in the middle. The very poor are looked after; the very rich can afford it. The people in the middle are those who suffer most. It is in regard to them that I believe your Lordships will be especially sympathetic.

Perhaps I may make a plea to the noble and learned Lord following upon the remarks of the noble and learned Lord, Lord Ackner, in relation to those on income support. They are now exempt. But there are means-tested classes within our community whom I want to mention in particular. They are those in receipt of jobseeker's allowance, disability working allowance, and family credit in those cases which are not family cases by way of the type of jurisdiction that the person concerned is trying to have exercised. If they are family cases, there is an exemption. I want to plead with the noble and learned Lord—although in his case I do not need to be of an unnecessarily pleading mind, because he will have these considerations very much in his concern. I ask that urgent consideration be given to exempting those who, I repeat, are means-tested from the increases that have taken place. Indeed, I want them, as I believe will your Lordships, to be completely exempted. Very apposite quotations were made by the noble and learned Lord. Since he referred to the case of in re Witham, I wish to quote Mr. Justice Laws, who delivered the main judgment in that case. He said: The right to a fair trial which of necessity imports the right of access to the court is as near to an absolute right to any which I can envisage". Perhaps I may repeat, very humbly, the words of that very learned judge and hope that the House will endorse that judgment and that the noble and learned Lord will act within its spirit.

6.14 p.m.

Lord Hacking

My Lords, we are all grateful to the noble and learned Lord, Lord Ackner, for introducing this timely debate. It is timely not only because of the vast recent increase—in January this year—in court fees; but also because of the speech that the noble and learned Lord made at the annual conference of the Bar of England and Wales on 28th September last year, a speech to which he referred in his remarks during the Second Reading debate on the Civil Procedure Bill on 5th November last year. Perhaps I may remind the noble and learned Lord of what he said: an incoming [Labour] government would immediately undertake a wide-ranging review both of the reform of the civil justice system and of civil legal aid. That review would include the noble and learned Lord's reports"— that is, the reports of the noble and learned Lord, Lord Woolf. That remains the position of the Opposition. A rigorous cost-benefit analysis there must be".—[Official Report, 5/11/96; col. 611.] Before I go any further, I should declare an interest. I am President of the Civil Court Users' Association, formerly the County Court Users' Association, which is chiefly concerned with consumer judgments and debts. I therefore much look forward to hearing where the noble and learned Lord is on this immediate, wide-ranging review of the civil justice system.

I believe that the noble and learned Lord, Lord Woolf, and his colleagues have put their finger on the right button. In its interim report, the Woolf Committee stated: The problem of cost is the most serious problem besetting our litigation system". In Chapter 7, on page 78 of the final report, the noble and learned Lord, Lord Woolf, and his colleagues said: Fear of costs deters some litigants from litigating when they would otherwise be entitled to do so and compels other litigants to settle their claims when they have no wish to do so. It enables the more powerful litigant to take an unfair advantage of the weaker litigant. The scale of cost per case has an adverse effect on the scope of the legal aid system. It also adversely affects the reputation of our civil justice system abroad". The cost of litigation has therefore been a subject of increasing concern since I began practising some 34 years ago, and in recent years it has been of escalating concern.

The noble Lord, Lord Mishcon, referred to some of the increases. I should also like to point with some particularity to them. Prior to October 1995, the fee for a divorce petition was £40; from January 1997 it is £150. Then there is a new fee for amending that divorce petition of a further £50. Prior to October 1995, the fee for a county court summons was £80; it can now go up to £500. As the noble Lord, Lord Mishcon, said, a High Court writ prior to October 1995 was £100; it is now up to £500. The fee for the debtor's petition, a point also mentioned by the noble and learned Lord, Lord Mishcon, has risen from £20 to £50.

This increase in fees also has a cumulative effect. Let us take as an example a summons in the county court for a claim of between £50,000 and £100,000. Prior to October 1995 there would have been a fee on that summons of £80; then, perhaps if the litigant wanted to have some interlocutary hearings before the district judge, the cost would have been £10 per hearing; if there were three of them the cost would have been £30; and with the hearing before the judge the total would have been £210. From January 1997 the cost of the summons has risen from £80 to £300; the fee for the three interlocutary hearings has risen from £30 to £90; the hearing before the judge has gone up to £150; and the setting down for a trial, which is a new fee, is £100. The total is £640.

What is therefore the impact? It might be said that a litigant is in the big business of litigation if he is claiming something between £50,000 and £100,000, which carries a court fee of £300. It might also be said that a litigant is in the big business of litigation if he has a claim in excess of £100,000. That is not necessarily the case. As the noble Lord, Lord Mishcon, pointed out, someone with personal injuries—a quadriplegic or someone with brain damage—may have injuries valued at well over £100,000.

Take another example of a lorry which crashes into a village shop whose owners are either not insured or under-insured. The damages to the fabric of the building, to the business and perhaps for personal injuries can amount to well over £100,000.

Let us also look a little more precisely at the cost of divorce proceedings. The cost is £150 and another £50 for amending the petition, on top of all the other costs that rain on a person going through divorce proceedings, including the cost of running two households. These court fees are hardly an inducement to litigants to end unhappy marriages.

Not only were these increased fees announced in January this year, but there were rumours last year of daily hearing fees, of £800 in the county court and £2,000 in the High Court. If those fees were introduced and passed into pensions and salaries for judges, the noble and learned Lord, Lord Ackner, would never need to raise again in your Lordships' House his well known concerns over judicial salaries and pensions. An enormous increase in court fees would result.

I hope, therefore, that the noble and learned Lord the Lord Chancellor will be able to tell your Lordships' House that there are no such plans for daily hearing fees.

As the noble and learned Lord, Lord Ackner, said, the great importance of this debate—whether the litigant should pay the full cost of the administration of justice in our courts—is that it has never been considered and debated in Parliament. If the litigant does not undertake the full cost, then the taxpayer to some extent subsidises access to justice. But he and we should do so, particularly if to do otherwise would be a deterrent or a denial of access to justice.

6.23 p.m.

Earl Russell

My Lords, in thanking the noble and learned Lord, Lord Ackner, for introducing this Question, I am not merely making a conventional remark. It seemed that this debate was originally going to fall to me. I persuaded the noble and learned Lord to introduce it on the ground that he would do it better. I should like to thank him not only for doing so but also for proving me right.

I should also like to congratulate the noble and learned Lord on the Woolsack. I think that this is the first time that we have exchanged words in a debate since his arrival there. We have so far tended to have the good fortune to agree and I hope that that will continue.

I appreciate that I am criticising measures which the noble and learned Lord was not responsible for introducing. I hope he will not reply with the words used about Parliament by King James VI of Scotland and I of England in an unguarded moment of bad temper: "I found it here when I arrived so I am obliged to put up with what I cannot get rid of".

I hope that the noble and learned Lord will take a rather wider view of the subject. If his right honourable friend the Chancellor of the Exchequer should say to him that he cannot afford the cost of changing this measure, I hope that the noble and learned Lord will ask him to consider the cost of not changing it. This Government have so far been much better than their predecessor in considering the cost of not spending money as well as the cost of spending it. I hope that the noble and learned Lord will not allow the first exception to that improvement to arise in his own department.

A long time ago, when I was an undergraduate, I took part in a large protest march. We passed through a medium-sized county town where the town council decided to forbid the marchers to use the town's public lavatories on the ground that, if they did so, they would cause a mess. Fortunately, the council was at the last moment persuaded that it would cause a great deal more mess if they were not allowed to use them. Similarly, I believe that, if the Government do not change the policy on these fees, it will cost a great deal more than if they do.

The noble Lord, Lord Mishcon, quoted to us the words of Mr. Justice Laws, in which the learned judge spoke for his predecessors and our ancestors. When our medieval predecessors fought so strongly for the principle of access to the courts, they did so because they knew very well what people would do if they did not.

When John Lilburne's father was the last man but one to claim trial by battle in English law, he did so because his opponent had burned down his house with his evidence inside it. I recall the right reverend Prelate the Bishop of Liverpool making precisely the same point in a memorable plea for the law centre in Liverpool, Toxteth. We must encourage access to the courts because we know what people will do if they do not have it. It is a live tradition and it deserves a hearing.

I have had experience of the introduction of full cost fees in another context, in the photographic service in the Public Record Office. It caused such astonishment among the customers of that office that those managing it were finally reduced to displaying a Hansard page reporting a Starred Question in your Lordships' House, in reply to which the then Lord Chancellor explained that the costs covered the whole costs of the office. That was done because the office was becoming extremely unpopular as a result of collecting those costs. It is not in the public interests that our courts should become unpopular in that way.

It is clear as far back as records go that the maintenance of the courts is one of the Crown's basic responsibilities. Judges' salaries have been paid out of the Exchequer even at moments of greatest poverty in the Crown's experience. Nothing like the present proposal has been carried out, even in the reign of King Richard I, who, according to his critics, would sell his grandmother if he could be sure to get a good enough price.

This is a tax increase. The noble and learned Lord should perhaps portray it as the twenty-third increase introduced by the previous government.

It applies to all sorts of things. It is said that worse will happen if there is not this increase. There is a Treasury guideline to the effect that any Minister of the Crown proposing a saving on his departmental budget must consider the resource implications for other departments. I do not know whether the noble and learned Lord can discover how far that was done in the introduction of this measure, but I am a little curious as to how the calculations might have been carried out.

Civil disputes easily turn to fighting if there is no resolution in the courts. People notoriously do not obtain a divorce if it is too expensive, which leads to a confusion of matrimonial relationships, differing from partnerships. Noble Lords will understand what I mean if I say that this could almost be described as Sadducean legislation.

As regards debt, the remarks of the noble Lord, Lord Mishcon, about bankruptcy are well taken. His remarks about compensation bear on actual cases. There are people who are entitled to large sums of compensation who, for the lack of a few pounds to begin proceedings, will never get it.

It applies also to eviction. In one case it was avoided because the citizens advice bureau in North Yorkshire paid the court fee out of a charitable fund of its own. But that cannot be a regular policy. Does anyone really suppose that the cost to the Government of eviction is ever as low as £10 per case? The arithmetic is a little curious, especially when we take into account the £14 million increase in the legal aid budget. That is what the noble Baroness, Lady Thatcher, used to describe as "churning". It is an exhausting and expensive activity.

We should also consider the effects on the benefits system. I am extremely surprised that income-based jobseeker's allowance has not been included under the terms of Mr. Justice Laws's judgment. The court which decided that did so on the ground, mistaken in point of fact, that it was more than income support. It makes my point that no appeal was possible because the fees could not be afforded. That creates injustice to other people as well as the particular litigant.

It is also a great concern to the Chancellor of the Exchequer and the Department of Social Security to eliminate poverty traps from the benefit system. There are far too many cases in which people who get into work are worse off than when they were on benefit because of the loss of a whole series of means-tested privileges. These fees add just one more to those privileges. I do not see why they do not apply to family credit or to disability working allowance.

If the Government do not intend to scrap those fees—as I believe, with proper costing, they probably would—I hope they will refer to Mr. Martin Taylor's review of poverty traps in the benefit system, which I welcome. The reason why it should go to such a review is that what is important is that the steps in costs as a person comes off benefit should not all happen at the same place. Otherwise there is a mountain. So they should be considered by somebody who is considering the other poverty traps. Instead of having steep steps, they should be spaced out, like a ramp for wheelchair users. Then people can come up a little further. I think that is something which only Mr. Martin Taylor can do.

We are told that it is difficult to deal with anything of this kind. But the Government do have certain basic duties. Doing justice is one of them; defending the realm is another. The noble and learned Lord was in the House at Question Time when the noble Lord, Lord Gilbert, answered the noble and gallant Lord, Lord Craig. Speaking on the Eurofighter, he said that the defence of the realm was one of "the" basic duties of government. Doing justice is the only duty which comes on a level with that.

In 1637 in the Ship Money case, Lord Fynch, Chief Justice of the Common Pleas, said that if an Act of Parliament were to enact that the King should not defend his kingdom it would be void. That never came to judgment. It was not tried. I do not know, if there were an Act to say that the Queen should not do justice, whether it would equally be void. I should rather not find out.

6.34 p.m.

Lord Meston

My Lords, the starting point and the governing principle for this debate must be the maintenance of effective access to justice. That is a basic right which is provided and guarded with equal force, both by the common law and by the European Convention for the Protection of Human Rights.

In the Witham case, the divisional court held that the 1996 amendment order impeded that right. Even without that trenchant decision of the divisional court, fee increases of that kind of level would have caused uproar, if they had been applied to, say, car tax or prescription charges. Today's debate has given an opportunity for the new Government to indicate whether matters are to remain in the unsatisfactory state left by the Witham case or whether there has been—or, at least, whether there will be—a more thoughtful review of the structure of court fees and the underlying policies and targets for any such structure. That is a review which should take place against a background of developing civil justice reform. In that context I am very glad that the noble and learned Lord, Lord Ackner, quoted what the noble and learned Lord, Lord Woolf, said in his interim report about court fees.

The noble Lord, Lord Mishcon, characteristically selected an appropriate quotation from the Old Testament about reasoning together. Like many noble Lords participating in this debate I have been trying to grapple with what is the underlying rationale for any structure of court fees, particularly as it is a subject about which I suspect that most of us have not had to think very profoundly until, all of a sudden, there was this enormous uplift and an adverse decision, from the then Government's point of view, of the divisional court.

I am by no means sure that it is possible to reconcile effective access to justice with a full cost recovery, which was the policy of the last government. I suspect that, among other noble Lords, I am not the only one who has received the useful briefing material provided by the Legal Action Group which tells us something of what happens in other countries. It says: The proposal to raise the full cost of the courts through fees has been rejected in both the United States of America and Australia. The Judicial Conference of the United States discussed whether court fees should be raised to meet the running costs of the courts and rejected the idea. In Australia, a Government-appointed committee recommended: 'that fees should neither encourage nor be perceived as encouraging decisions by court administrators designed to maximise revenue. Accordingly, we are firmly of the view that there should be no budgetary link between revenue raised by the collection of fees …. and the appropriate use of monies'". I suggest that it is necessary to ask whether full cost recovery is the policy of this Government and, if so, how that will operate in practice. For example, how will it operate as between the charges for issuing formal pieces of paper—which is what we have been discussing today—and charges for subsequent use of the court facilities once the necessary pieces of paper have been issued? That was a point raised by the noble Lord, Lord Hacking.

If full cost recovery is still the policy, what practical account is to be taken in the future of the impact on potential litigants of negligible or modest means? If full cost recovery is not the objective of the present Government, what is their policy and its rationale as between different categories of case and different categories of litigant; and what future uprating can be expected?

The present situation is unsatisfactory for a number of reasons: first, it does not give automatic exemption to those in receipt of benefits, apart from income support—a point made by my noble friend Lord Russell, and the noble Lord, Lord Mishcon; secondly, the undue financial hardship test creates uncertainty and takes time; and, thirdly, it bears hardest on those who are poorest, even if just above income support and legal aid limits.

In the Witham case, Mr. Justice Laws said: It is clear on the evidence before us that there is a wide ranging variety of situations in which persons on very low incomes are in practice denied access to the courts to prosecute claims, or, in some circumstances, to take steps to resist the effects of claims brought against them". It may be said that the right of access to justice is not an absolute right. Nor is it; yet for most people, litigation is a last resort and, for many people, it is not a choice. Statistics show a decline in the number of civil cases being started. There is, quite properly, a growing emphasis on mediation and alternative dispute resolution. Apart from that, responsible lawyers always try hard to keep their clients away from the court, pushing them sometimes reluctantly to compromise and impressing upon them with firm advice the costs and hazards of litigation. Yet there will always be cases which need quick and easy access to the courts, sometimes urgently, and there will always be other cases in which a negotiated settlement can only be achieved in practice with litigation concurrently progressing to trial and concentrating minds.

Because some proper rationale for court fees is required, it perhaps does not help to focus the argument on particular categories of case, nor to try to compare or rationalise the different categories of case—for example, the fee for a bankruptcy petition, or that for a road accident claim, although, very properly, attention has been drawn to the enormous increases in those particular types of case. However, the public, and the court service itself, have an interest in compromising disputes. So why does there have to be a fee for amending a divorce petition? That usually reflects the fact of a compromise to enable a civilised end to a marriage on an agreed basis. Why does there have to be a fee for a consent application for ancillary relief following divorce? Likewise, that would normally reflect a cost-effective compromise rather than hostile litigation.

Finally, access to the courts for the protection of children should be the least impeded part of our system. Obviously children need to be protected—a point well made by the noble Lord, Lord Mishcon—but it is also the form of litigation least likely to be covered by any form of insurance on either side, and in which it is least likely that the costs will be recouped from the other parties to the litigation. Surely a nominal fee, if any, is all that is appropriate.

Another category upon which I focus briefly is adoption. There is, as we have heard, an increased fee for an adoption application. Surely adopters, or prospective adopters, have more than enough hurdles already to overcome before they reach court, and once they get to court after the court process has been initiated. It is wrong to have a substantial fee for an adoption application, whether that bears upon the pocket of the individual adopters or upon that of the limited funds of the adoption agencies which support them.

Those cases are of course about access to justice, but they are about something much more. They are examples of situations in which the court is providing a public service, which any decent society would afford to its citizens for no more than a nominal charge.

6.43 p.m.

Lord Kingsland

My Lords, I regret that my noble and learned friend Lord Mackay of Clashfern is unable to speak in the debate. I am sure that he will take an early opportunity to bring his immense intellectual and moral authority to bear on this topic. I thank the noble and learned Lord, Lord Ackner, for bringing this subject to the attention of the House. Perhaps I may suggest a few principles upon which the noble and learned Lord the Lord Chancellor might base the decisions that he will soon have to make on it.

First, the noble and learned Lord should endorse in its entirety the judgment by Mr. Justice Laws in Witham. Secondly, he should endorse the principle so eloquently explained by the noble Earl, Lord Russell, that the administration of justice is a matter for the taxpayer. That is not merely an important constitutional principle; it makes good economic sense. The vast majority of people do not use the courts. On the other hand, it is in their interests that the courts are there, just in case they want to use them. It seems to flow logically from that that they should pay for the fact that the opportunity is available if they wish to use it.

A further principle that I should like to emphasise is that any decision that the noble and learned Lord the Lord Chancellor makes about the structure of fees should wait until Sir Peter Middleton reports on the whole question of financial assistance to litigants; and, in turn, his views, which we eagerly await, about the implementation of the Woolf Report. One cannot make an objective assessment about the structure of fees in courts without also taking a view about the provision of legal aid, and, indeed, the whole running of court services. They have all to be seen together. I should not expect the noble and learned Lord the Lord Chancellor to come to any conclusion about the subject matter of the debate until well into the autumn.

I have something to say now—not very much your Lordships will be delighted to hear—about the structure of costs themselves. Given the fact that they will pay only for the cost of litigating, and not for the administration of the courts or the judges' salaries, considerable thought could still be given, with benefit to the—if I may put it this way—shape of the structure; for example, if one looks at most county court actions, the plaintiff wins a high proportion of them. Yet it is the plaintiff who seems to bear the initial costs. There are certain circumstances in which defendants behave rather badly. In those circumstances, why should they not have to put their money up first before their pleadings? That leads me to think that a greater degree of discretion should lie in the hands of the masters and the judges in taking decisions about the costs of interlocutory proceedings.

My other thought about the structure of costs is that at present they seem rather front-loaded—as the financial experts in the City say. The further into an action one gets, the higher the costs. At the moment the burden of costs seems to fall earlier rather than later in the procedure. Those are reflections which the noble and learned Lord the Lord Chancellor, I hope—I say this with due deference—will take into account when he applies his mind to the whole picture.

He has a difficult task in front of him. Treasury Ministers must be putting great pressure on all departments of government, including the noble and learned Lord's, to keep down costs. He will have a big internecine battle to fight with his own colleagues in the Cabinet. If he sticks to the principles that have been so well outlined by so many noble Lords today, and stands up for them when it really matters, we will make real progress on what is, after all, an absolutely central constitutional issue.

6.48 p.m.

The Lord Chancellor (Lord Irvine of Lairg)

My Lords, I welcome the kind words at the outset of the debate of the noble and learned Lord, Lord Ackner. His one-man opposition to the previous administration on issues concerning the administration of justice was one which the official Opposition, before the general election, from time to time joined. I hope that we may continue as allies generally, but I cannot undertake always to agree with him. I fear that this may be one of those occasions, but I hope that much that I am about to say he will find encouraging. I hope, too, that the views I express in the debate will satisfy the noble Earl, Lord Russell, that I have taken a wider view than my predecessor, though he, too, may not agree with everything that I am about to say.

The question in terms confines itself to the case which makes the strongest appeal: to protect the constitutional right of the litigant of modest means from the impact of new and increased fees. I expressed in your Lordships' House on 27th January this year my concern about the position of a family on income support unable to pay the £10 fee that was formerly required to reschedule a rent or debt obligation. I urged my predecessor to reverse his decision to remove exemptions and remissions. That decision of my predecessor came into effect on 15th January 1997, but in fairness to him—the point has already been made by the noble and learned Lord—I should add, with the concurrence of the higher judiciary who signed along with him the necessary fee order. Without their consent these changes could not have been made in the High Court. As a new Lord Chancellor, I hope that I will not be convicted of schadenfreude if I say that the fact that my predecessor could, with the concurrence of the Heads of Division, sign a statutory instrument which the courts in due course held to be ultra vires gives me a little confidence for the future, although I, of course, cannot guarantee to do any better.

My view, expressed in your Lordships' House, was supported by the Divisional Court in the Witham case, so I would say to the noble Lord, Lord Kingsland, with respect, that I really have no need to endorse it. My position was well known before that court ever gave judgment. Its judgment was not appealed by my predecessor. It reinstated exemptions and remissions in the Supreme Court. Subsequently, my noble and learned predecessor also reinstated them in the county courts and in family proceedings.

It is right that those caused undue hardship by a requirement to pay fees should be protected; and they now are. I could not personally accept any other proposition, as I made plain from the Opposition Front Bench in January. At the same time, of course, the legal aid fund helps those who are eligible by meeting their court fees and—an incomparably greater burden—by meeting the cost of their legal representation. And there is a general discretion, under paragraph 5(3) of the 1980 order, to reduce or rescind any fee where it appears that payment of it, would involve undue financial hardship because of the exceptional circumstances of the particular case". I could treat that as an entirely satisfactory answer to the noble and learned Lord's Question, and I could now sit down; but I do not propose to do so. Lurking beneath the Question on the Order Paper, although not in terms asked, is another question: whether fees should be charged at all to those using the civil courts. In a democracy governed under the rule of law there must be a court system. I accept, of course, that citizens have what may be called a constitutional right to a court system. They enjoy that right. However, I do not accept that they have a constitutional right to a free court system. Those who claim that claim too much. What the state provides free, or at a charge, is a matter of policy for government. They have to determine priorities in the allocation of scarce public resources. Those who argue for free access to the courts in all cases say that no issue of policy arises—no discretionary decision how to allocate scarce public resources—because they attach the label "constitutional" to the right for which they contend. The real question is whether they are correct to do so.

I would not, for example, accept that a citizen has a constitutional right to free medical services in all cases, although a powerful argument can be made that the state should give a high priority to the provision of free medical services; and it does.

Earl Russell

My Lords, I am most grateful to the noble and learned Lord. Would he accept a slight reformulation of the case he is putting? He said that decisions on charges are a matter of policy. Would he accept that they are a matter of policy so long as they do not prevent access; and that in order not to prevent access, the system needs to be slightly more generous than at present?

The Lord Chancellor

My Lords, I would accept only that a system of charging for access must be fair. I shall elaborate on what I mean by "fair" in the course of this speech. What I am saying very, very clearly is that those who attach the label "constitutional" to their arguments are doing so quite deliberately so as to put themselves into a position of arguing that government have no discretion left in the allocation of scarce public resources because to charge anything for the use of the courts would be unconstitutional. It is that position that I cannot give intellectual acceptance to. For example, I would not accept that before the National Health Service was set up on 1948 there was a "constitutional" right of citizens to free medical services which was being denied.

I read in my Times on Friday that Mr. Justice Ferris recently described as "profoundly shocking" figures which showed that all but £60,000 of the £1.68 million personal estate of the late Robert Maxwell would be swallowed up in professional fees. The judge said that if the amounts claimed by the insolvency firm appointed by the court to sell the remaining assets left after Mr. Maxwell's death were paid in full—and they were claiming at a billing rate of £270 per hour for senior staff and up to £195 per hour for other accountants—then the receivership would have produced, substantial rewards for the receivers and their lawyers and nothing at all for the creditors". The modest fees charged by the court service did not of course merit a mention. They were a drop in the ocean.

Now any civil litigant who does not represent himself, but is represented by a lawyer, will in practice pay fees to his lawyers vastly in excess of the modest court fees. It is the fact that there are number of QCs in this country who do earn £1 million a year and many who would regard £500,000 in one year as representing a very bad year for them. I have to acknowledge that until recently I had myself what I think I could fairly describe as an entirely satisfactory and rewarding practice at the Bar, so that, to some, my calling attention to incomes of this order might bear comparison to the conversation of St. Paul. On the other hand, I am in an especially good position to know the facts and I do not believe that facts should be suppressed. It is also fair to say that there are very many more who earn fair and reasonable incomes, largely from criminal legal aid, the level of whose incomes are not to be criticised.

We are not talking expressly about criminal litigation today, but we are talking plainly. It is a staggering fact that of the total criminal legal aid budget of £566 million per annum, the top 1 per cent. of criminal cases consume 24 per cent. of the total expenditure. In a Written Answer on 24th June I confirmed that £13.36 million had been paid as of 17th June 1997 from the legal aid fund to lawyers who acted in the recent Maxwell cases. I shall not know what the final costs are until early next year. It is the fact that top lawyers in this country easily earn at least four times what top surgeons earn. The main deterrent on going to law is not court fees but the price at which lawyers value their own services and, so far, have succeeded in charging. To argue that court fees act as a deterrent to litigants is rather like arguing that people are deterred from buying a new motor car by an increase in vehicle excise duty.

It is the overall financial cost and risk of ligation that affects decisions whether or not to litigate, not any particular component in the overall cost. I therefore question whether it can be right to suggest that one of the smallest components in that bill—court fees—is really the determining factor. Fat cat lawyers railing at the inequity of court fees do not attract the sympathy of the public. People who live in glass houses should not throw stones.

Let us for a minute consider the implications of any claim that users should not pay court fees. The total cost of civil business in the courts is £335 million per annum. Not all of this is required to be recovered in fees. The expression "full cost recovery" is a misnomer. The exemptions and remissions to which I have referred are funded by the taxpayer to the tune of about £15 million per annum. On top of this, the taxpayer, via the Legal Aid Fund, pays roughly £63 million of court fees. In all, a total of about £78 million of the costs of the civil courts is met by the taxpayer on behalf of the poorer users of the courts. The amount paid by court users out of their own pockets is, therefore, around £257 million.

And let us be clear who these court users are. We estimate that around £100 million of fees are paid by large concerns, either issuing claims on their own behalf or paying to support those taking advantage of legal expenses insurance. Far less than half the cost of civil business therefore falls on individual litigants.

If I wished to provide courts free to all those who wish to use them, whether corporations or individuals, your Lordships will appreciate that the £257 million currently taken in fees would have to be found from somewhere else. Should I deduct £257 million from a legal aid budget which last year totalled some £1.5 billion? That would not be met with acclamation, least of all from the noble and learned Lord. I do not think anyone would argue that I should withdraw criminal legal aid to any extent, although I am sure that everyone will agree that I should control its cost. Nor do I think that any of your Lordships would wish me to cease providing assistance to those of modest means bringing family proceedings, or cases under the Children Act, or those seeking protection from domestic violence. Over £1 billion of legal aid expenditure would therefore be regarded as representing categories of legal aid, which I think almost every one of your Lordships would regard as inviolable. Perhaps I could make the saving by an immediate wholesale abolition of the advice and assistance scheme? That would excite howls of protest and rightly. Anyway, we have a manifesto commitment to develop, not to abolish, community legal services. A high priority therefore attaches to the £151 million which they currently cost.

The remaining £250 million or so goes to provide full civil legal aid, funding help for those bringing or defending housing and personal injury claims, or bringing proceedings for judicial review. Noble Lords will have observed that this £250 million would be just about enough to enable me to abolish all court fees. But would it really be a sensible development of policy to tear away legal representation from an impoverished tenant under threat of repossession; or to cast aside a person who needs help to prove a claim for injuries at work or elsewhere? Can it really be right to cast such people aside as the price for exempting people who have the means from paying a small fee to use the court? I do not think so.

The plain fact is that to cut my budget by £257 million Would affect access to justice even more comprehensively than the current court fees are claimed to do. Is the truth not that those who argue for free access to courts for all are really arguing that the Government should charge taxpayers an additional £257 million and then increase my budget by that amount so that I can dispense with court fees?

Lord Mishcon

My Lords, will the noble and learned Lord accept that no one participating in this debate asked for no court fees, but did indeed ask that any rise in those court fees should be of a moderate nature and not induce hardship?

The Lord Chancellor

My Lords, although the unspoken premise is never articulated, the unspoken premise of much that is said on this subject is that courts are part of the constitutional fabric of the state and therefore should be provided free for all. It is that which lies at the root of argument on this subject, but the logic of that is very often not accepted and picked up and run with by those who tacitly are arguing that because they realise that they would not prevail in that argument. I am very clear as to what the noble Lord, Lord Mishcon, wishes to hear from me. I can see that the existing structure of fees is not as rational as it should be. The front-loading of fees, which involves those who pay a fee to commence a claim cross-subsidising that small group whose case proceeds all the way to a hearing, may be an anomaly. As noble Lords know, I have asked Sir Peter Middleton to review the proposed reforms of the civil justice system and legal aid together. That is what I said in my address to the Bar conference that we would do if we were elected. That is exactly what I have done in appointing Sir Peter to report to me. His review is well under way and it is expected that he will report to me by the end of September.

What Sir Peter Middleton is doing is looking at the problem both of the proposed Woolf reforms and legal aid together. But it is legal costs (lawyers' fees) which make up the overwhelming proportion of the total cost to litigants. Should I decide—and I am directly responding to the debate—following Sir Peter's report, to implement the Woolf proposals or to make similarly sweeping changes to the procedures of the civil courts, it is clear that fees will need to undergo a similarly radical restructuring. Changes to the procedures of the courts would remove or redefine the current charging points, by which I mean the stages in court proceedings where fees become due. Alongside any reform of procedures there will, therefore, of necessity be a restructuring of court fees. I intend to consult in the autumn on the principles which this restructuring of fees should follow. That is the clearest response to the point made by the noble Lord, Lord Kingsland, on that matter. I am very concerned to get this issue resolved and resolved right.

I began by talking about protecting the poorest among us from the impact of court fees, and I explained that I regard the protections already in place—in the form of provision for exemption from, or remission of, fees, and in the form of legal aid—as adequate to ensure that they are not precluded from access to justice by being required to pay fees they cannot afford. The nature of the fees that are charged, and the way in which they are levied, however, needs to be reviewed. That is what I intend. But my present judgment is that there is nothing wrong with a general principle that those who can afford to do so should pay a fair fee for the use of the courts to resolve their disputes. The courts are cheaper by far than the charges associated with commercial arbitration.

I have listened to this debate with great profit. I have listened to what the noble Lord, Lord Hacking, has said about daily hearing fees. I have no present plans to introduce them. The present principle is to recover the full cost of providing the civil courts, less an amount equivalent to the sum of exemptions and remissions. But I do not exclude any possibility from the review. There is a serious argument that court fees are excessively front-loaded.

Finally, in direct response to the noble Lord, Lord Mishcon, I acknowledge that the current provisions limiting the granting of automatic exemptions in the county court and the Supreme Court to those in receipt of income support is worthy of consideration. Other forms of benefit are in practice taken into account by court staff, to whom the day-to-day exercise of the power to reduce or remit fees is delegated. But as part of the review of the structure of fees I intend to examine the basis on which remissions are granted and I shall consider whether it will be appropriate for other categories of benefit to give rise to an automatic exemption from the liability to pay court fees.

In a debate which has not lasted as long as was thought likely, I apologise for having taken a little longer than I should, but I took the view that the importance of the subject matter merited it.

Lord Ackner

My Lords, before my noble and learned friend sits down, I wonder whether he can help me on one point. He referred to the Lord Chancellor's discretion, which is delegated, to remit or to reduce fees as being satisfactory. Would he not accept that adding the qualification that undue financial hardship must be shown and that that hardship must be due to exceptional circumstances renders that discretion very narrow indeed, since "exceptional circumstances" is a very restrictive qualification and rarely has any operation except to make the use of that discretion impossible to justify?

The Lord Chancellor

My Lords, I do not at present accept that the discretion is too narrowly framed. I shall, however, consider representations in the review that it is.