Conditional Fees (Hansard, 7 October 1998)

§ The Lord Chancellor (Lord Irvine of Lairg)
My Lords, lawyers have traditionally been paid whether they win or lose. Under conditional fee agreements they are paid only if they win. For sharing the risks of litigation with their clients under conditional fee agreements they are paid a percentage uplift on what their fees would otherwise be. Generally that uplift is less than 50 per cent. I am minded to make the amount of that uplift recoverable from unsuccessful defendants. They will then be able to challenge the reasonableness 432 of uplifts by court taxation of fees. That will be a very effective form of monitoring in practice. I do not believe that there is any problem of excessive uplifts, but nonetheless my department is currently considering research projects, and I have decided to authorise one into the operation of conditional fees.

§ Lord Ackner
My Lords, I thank my noble and learned friend for his Answer. Does he recall taking part in the debate on his predecessor's Green Papers and saying: I regard contingency fees in any shape or form, however diluted, as abhorrent", to which Hansard records a series of "Hear, hears"? The noble and learned Lord concluded his short but by no means complimentary observations in this form: Flirting with contingency fees is another gimmick to avoid state responsibility and to secure justice on the cheap. Like so many bargain basement practices, the lawyers would be no exception to the risk that shoddy standards would result".—[Official Report, 7/4/89, col. 1326.] In the light of those sentiments, was my noble and learned friend well advised to extend the ambit of contingency fees to the whole area of civil claims without any form of research into how they worked?

§ The Lord Chancellor
My Lords, there is an important distinction between contingency fees and conditional fees. Contingency fees arise where the lawyer gains a slice of the outcome; that is to say, the damages are recovered. Conditional fees are an agreed uplift on the costs that he would otherwise receive. It is well known that the noble and learned Lord is opposed to conditional fees in principle. He has condemned them in this House as inherently immoral, and that colours everything that he says about monitoring. To harp continuously on the need for the them to be monitored is to raise a scare that they will be abused when there is not a shred of evidence that they are being abused.

§ Lord Hunt of Wirral
My Lords, is the noble and learned Lord still reflecting upon the points raised upon conditional fees in this House on 23rd July, in particular the notion that successful defendants should pay the costs of unsuccessful plaintiffs through the measure that he is minded to introduce? Is it proposed that defendants, including health authorities and insurance companies, should pay the success fee and the insurance premium, thus asking defendants to pay for the cases that they have won through a levy on the cases that they have lost? Does the noble and learned Lord accept that there is a great deal of support for his reforms to speed access to justice but that at its heart should be the principle of fairness in particular as between the parties?

§ The Lord Chancellor
My Lords, I see nothing whatsoever offensive in principle in the proposition that a plaintiff who succeeds against a defendant, who for example was negligent, should recover all the costs that he has incurred in order to get justice from the defendant, including the insurance premium and the uplift on costs.

Lord Renton
My Lords, does the noble and learned Lord remember that conditional fees were introduced 433 mainly in the hope that they would reduce the cost of legal aid? Can he say whether they have done so: and. if so, to what extent?

§ The Lord Chancellor
My Lords, there is no intention to reduce the cost of legal aid through the medium of conditional fee agreements. What is intended is to refocus the existing legal aid budget away from those areas which can be taken out of legal aid by reliance upon conditional fee agreements.
I have to say this to noble Lords. I receive letters of complaint almost on a daily basis from Members of another place about the operation of the legal aid system. However, in the period since conditional fees have been introduced I have not received a single letter of complaint about their operation in practice.

§ Lord Bridges
My Lords, has the noble and learned Lord had the opportunity to study the far-reaching social effects of the contingency fee system operated in the American courts? When living in the United States some years ago it was my understanding that access to private medicine, for example, had become largely impossible for the ordinary citizen due to the cost, given the generous awards made by the American courts to litigants in medical malpractice cases. There would seem to be some lessons to be learned.

§ The Lord Chancellor
My Lords, I welcome the opportunity to draw again the sharp distinction between contingency fees and conditional fees. Conditional fees, which we sanction, are an uplift on what the cost would otherwise be. Contingency fees are a proportion of the recovery—perhaps many millions of dollars—which a plaintiff in a civil action in the United States of America may recover before a jury. In America there are juries in civil actions, although not in this country. I do not regard the problems that arise from contingency fees in the United States of America as any deterrent to the introduction of quite different conditional fees here.

§ Lord Mackay of Drumadoon
My Lords, is the noble and learned Lord the Lord Chancellor aware that these Benches welcome his decision to consider further research in this important area? While in principle we support the idea of conditional fee agreements, a number of aspects give rise to a measure of concern.
Does the noble and learned Lord agree that such research would involve conducting interviews with lawyers, both those who have acted under conditional fee agreements and those who have declined to do so? Is he satisfied that he has the necessary statutory powers to carry out such research requiring lawyers to divulge information which might otherwise be confidential?

§ The Lord Chancellor
My Lords, I do not envisage that the research project which I have undertaken would entail obliging lawyers to make available confidential information.
However, I encourage the noble and learned Lord to read an article in this week's The Lawyer magazine by a senior barrister's clerk explaining how more than half the tenants in his chambers have undertaken work on a 434 conditional fee basis for plaintiffs in personal injury cases. He wrote that CFA work represents an opportunity and not a threat.
However, I am perfectly content to carry out a managed research project into the operation of conditional fees. When the terms of reference are settled for the researchers, I shall inform the noble and learned Lord.

§ Lord Ackner
My Lords, can my noble and learned friend confirm, as has been stated in the response from the National Consumer Council, that he and his department have had many meetings in which the council has expressed concern at the lack of research into how conditional fees are working in practice?

§ The Lord Chancellor
My Lords, I am afraid I do not recognise those meetings myself. However, all that I can say is that everything I have heard about conditional fees, including the 47,000 personal injury cases which have been carried forward under one insurer in particular, has been to the credit of the system. I have not seen a scrap of evidence to suggest that the legal profession has in any way abused its position in relation to the amount of the uplift. Noble Lords will bear in mind that the amount of the uplift can be taxed at present by an officer of the court.