Community Legal Service (Cost Protection) Regulations 2000

HL Deb 02 March 2000 vol 610 cc743-53

8.33 p.m.

Lord Bach

My Lords, I beg to move the first two Motions standing in my name on the Order Paper en bloc. With the leave of the House, I shall speak also to the Funding Code, although I shall later move that formally.

These instruments, together with negative procedure regulations that are currently lying before the House, and orders dealing with remuneration and transitional provisions that will be tabled shortly, constitute the framework for the community legal service fund that will replace civil legal aid in April this year.

I am sure the House will agree that legal aid, created by the post-war Labour government over 50 years ago, has been and remains an extremely valuable and important public service. But in recent years the structure of the scheme has increasingly begun to show its age. It provides few effective mechanisms for controlling expenditure, with the result that spending can spiral, and in the recent past has spiralled, out of control. And it contains no mechanisms for targeting spending on priorities, with the result that the shape of the scheme on the ground is largely determined by the types of work that private-practice lawyers prefer to do and where and how they prefer to practise.

By contrast, the new scheme—the community legal service fund—is designed to enable the Government, through the new legal services commission, to target the public resources available for funding legal services on priority categories and the most worthwhile cases. This House hardly needs to be told that Section 8 of the Access to Justice Act requires the commission, to prepare a code setting out the criteria according to which it is to decide whether to fund (or continue to fund) services as part of the Community Legal Services for an individual … and if so what services are to be funded". The Funding Code is the principal mechanism for achieving that.

Section 8(5) provides for the code to specify the procedures for making these decisions, including conditions that the individual must first satisfy and procedures for appeal. Section 8(8) requires a process of consultation before the code is submitted to the Lord Chancellor and Parliament for approval. In fact there has been a two-stage consultation conducted in the spring and autumn of last year.

As implicitly required by the Act, the code is in two parts: the first contains criteria, the second procedures. The latter broadly replicates provisions in the existing legal aid regulations; for example, about granting and discharging certificates. I do not intend to try the patience of the House by describing these procedures in detail or at all.

The code criteria are based on a number of levels of service, defined in sections 1 and 2—and I am referring to sections of the Funding Code and not of the Act and when I refer to sections in the remainder of my speech, I shall be referring to the code—and designed to ensure that the services provided are proportionate to the matter in hand. The most important levels are, first, legal help, equivalent to advice and assistance now; and, secondly, legal representation, broadly equivalent to full civil legal aid. Legal help is delivered under the Legal Aid Board's general civil contracts which noble Lords will know came into effect on 1st January this year. Legal representation, like civil legal aid, will usually be administered through the issue of a certificate in each case.

Section 4 lists standard criteria that apply to all levels of service: for example, the case must be within the scope of the Act and the client must be financially eligible under regulations. The heart of the code, however, is section 5—the general funding code. That contains separate criteria for each level of service (except those unique to family cases). The criteria for legal help in section 5.2 apply across the board to all categories of case. It would be neither appropriate nor practicable to apply more detailed and specific criteria when a client first seeks help.

On the other hand, the criteria for legal representation in sections 5.4 to 5.7 apply to civil cases (other than family cases) that do not fall in a priority or specialist category. Sections 6 to 13 replace or amend those criteria to reflect the priority or other special features of particular categories of case. The principle underlying most of the criteria in the code is that the public purse should support only cases that a reasonable and prudent private client, of adequate but not unlimited means, would choose to fund with his own money. The exception is where different criteria apply because the case has a significant wider public interest.

The most important criteria, reflecting the private client principle, concern prospects of success and cost benefit. In most circumstances, before cases can be considered for funding they must demonstrate prospects of success of at least 50 to 60 per cent at trial; and hence, a much higher chance of a successful settlement. Similarly, the commission will not fund cases where the likely benefit to be obtained by the client does not justify the likely cost. In the case of quantified financial claims, criterion 5.7.3 sets specific ratios of damages to costs, which vary according to the prospects of success. That provision reflects the kind of calculation that a private client would make before risking his own money. The cost-benefit test for unquantifiable cases is necessarily expressed in more general terms and will require judgment to apply. The intention is to take the quantified test as a guide when making such judgments, and in particular, to require cases with less strong prospects of success to demonstrate greater likely benefits relative to cost.

Sections 5.8 and 5.9 set out the criteria for support funding, which is the new type of funding designed, in particular, for exceptionally expensive personal injury cases. Support funding will be available where the case is pursued primarily under or with a view to obtaining a conditional fee agreement and the investigative or total costs exceed the thresholds prescribed in the criteria. There are requirements also relating to the form of the conditional fee agreement and the existence of adequate insurance against the opponent's costs. The other criteria are the same as those for legal representation.

Section 6 contains additional criteria that will apply in very expensive cases. Those are defined at C23 in the part of the code relating to procedures as cases likely to cost £25,000 to settlement or £75,000 if taken to trial. A few expensive cases take up a disproportionate share of the available resources and it is vital that they are particularly closely controlled. Criterion 6.3 requires all highly expensive cases to be subject to a satisfactory case plan for progressing the litigation. That will form part of an individual case contract between t he commission and the lawyers. Criterion 6.4 requires the commission to consider the availability of resources before granting funding in highly expensive cases, other than those in top priority categories. The Lord Chancellor has issued a direction to the commission setting a central budget for that purpose and explaining in detail how it has been calculated. A copy of the direction is in the Library of the House.

Sections 7 and 8 set special criteria for judicial review cases and claims against public authorities alleging serious wrongdoing, abuse of position or power or significant breach of human rights. The priority given to such cases reflects the general public interest in ensuring that public bodies can be held properly to account through the courts. In particular, the House will note criterion 7.5.2 which provides that a presumption of funding will be granted in all judicial review cases where permission has been given by the court and the case has a significant wider public interest, overwhelming importance to the client or raises significant human rights issues.

Section 9 amends the normal criteria for clinical negligence cases, in particular by providing less stringent cost-benefit ratios. Those replicate guidelines introduced by the Legal Aid Board in December 1998, shortly before the specialist clinical negligence franchise category was created in February 1999. Funding was restricted to specialist practitioners from August 1999. Because those important reforms have been in place for so short a period, it was not thought appropriate to make a further change in the code at this stage. However, I am glad to say that there are already indications that the new guidance and the restriction to specialists arc bearing dividends by excluding weak cases from the scheme. The future funding of clinical negligence cases will be kept under review.

Section 10 contains criteria for housing cases. That reflects the priority being given to social welfare law generally as part of the Government's programme for tackling social exclusion. Housing is the principal category within the area of social welfare where legal representation is most likely to be required for proceedings.

Section 11 is a comprehensive set of criteria for family cases. New levels of service are introduced for family cases. Help with mediation covers legal advice in support of the mediation process. General family help funds a solicitor to negotiate a settlement to a matrimonial or other family dispute without recourse to contested legal proceedings. The new levels exist to ensure that wherever possible family disputes are resolved without unnecessary or unduly adversarial proceedings in court. In relation to legal representation in family cases, top priority is given in criteria 11.7 and 11.8 to child care cases, for which funding is available automatically. Other cases concerning the welfare of children and domestic violence also have a high priority, reflected by the relatively generous criteria in sections 11.9 to 11.11.

On the other hand, the criteria for matrimonial cases about financial provision in section 11.12 are broadly similar to those in the General Funding Code, with the addition of a requirement to attend a meeting with a mediator before representation can be provided. In effect, that continues the approach currently applied under Section 29 of the Family Law Act 1996; that in certain circumstances, clients must explore the possibility of family mediation before receiving funding for litigation. The inclusion of this provision in the code accords with Section 8(3) of the Access to Justice Act which requires the Code to, reflect the principle that in many family disputes mediation will be more appropriate than court proceedings". Sections 12 and 13 contain criteria for cases before mental health and immigration tribunals. As noble Lords will know, funding for immigration tribunals has been available under existing powers only since January this year. It did not form part of the legal aid scheme when the Access to Justice Act was passed and for that reason the tribunals are not listed in Schedule 2 to the Act, which defines the scope of the scheme. The Community Legal Service (Scope) Regulations before us today rectify that omission by amending the schedule. The regulations further amend the schedule to exclude certain proceedings under the Crime and Disorder Act 1998; specifically, proceedings concerning anti-social behaviour orders, sex offender orders and related parenting orders. Although those are technically civil proceedings, they are closely akin to criminal proceedings and are more usually undertaken by criminal practitioners. The Government have therefore decided that it would be more appropriate for them to be funded as part of the Criminal Defence Service. In due course, they will be included in regulations defining the scope of the Criminal Defence Service. Meanwhile, legal aid remains available.

Finally, I turn to the Community Legal Service (Cost Protection) Regulations. Section 11(1) of the Access to Justice Act provides that, Except in prescribed circumstances, costs ordered against an individual in relation to any proceedings … funded for him [as part of the Community Legal Service] shall not exceed the amount (if any) which is a reasonable one for him to pay having regard to all the circumstances, including—

1. (a) the financial resources of all the parties to the proceedings, and
2. (b) their conduct in connection with the dispute to which the proceedings relate".

That provides the same protection that legally-aided litigants currently enjoy under Section 17 of the Legal Aid Act 1988. Regulation 3 of the cost protection regulations prescribes the exceptions to this rule. Cost protection does not apply where the client receives legal help or help at court. That broadly reflects the position under the current Act which does not provide cost protection where a litigant-in-person receives green form advice and assistance but is not formally represented by the solicitor in the proceedings. However, regulation 3(2) slightly extends the existing protection to cover the case where a client receives legal help before the issue of proceedings in which he subsequently receives legal representation. Cost protection now applies to any costs incurred by the opponent as a result of steps taken under legal help before the issue of proceedings—for example, steps required under a pre-action protocol.

Secondly, cost protection does not apply where the client receives litigation support or in most cases investigative support. These are the two forms of support funding in very expensive personal injury cases which I described earlier. These cases will primarily be pursued under a conditional fee agreement. That means that if the funded client's opponent loses the case, he or she will probably be liable to pay a success fee as well as normal costs. In those circumstances, we believe that it would be quite unfair if a successful opponent was unable to recover costs as a result of cost protection. It will therefore be a condition of litigation support that the funded client has insurance against the opponent's costs. The commission will approve the insurance policy in advance, and should the amount insured prove inadequate, Regulation 6 requires the commission rather than the client to meet the shortfall.

Regulation 4 deals with the enforcement of any costs order against the funded client, and broadly replicates the current position. Regulation 5 sets out the circumstances in which costs can be ordered against the commission in cases where cost protection does apply. This replicates the provision in Section 18 of the 1988 Act.

I have taken some time in going through the funding code and the regulations with which we are dealing. However, these are significant matters. These instruments are central to the new scheme that will replace civil legal aid in April. I commend them to the House.

Moved, That the draft regulations laid before the House on 21st February be approved [11th Report front the Joint Committee].—(Lord Bach.)

Lord Goodhart

My Lords, the regulations, and even more the funding code, implement the policy behind the Access to Justice Act. That policy includes a shift of negligence claims almost entirely to conditional fund agreements and involves the cash limiting of civil legal aid.

In the debates on the Access to Justice Bill, we expressed concern on both those issues. We were doubtful whether CFAs will prove as useful as the noble and learned Lord the Lord Chancellor believes. We reluctantly accept the principle of cash limiting but we fear that one result will be a real reduction in funding for civil legal aid, while the uncapped funding for criminal legal aid increases. However, that policy has been decided and it is not appropriate to debate those issues again today.

I should like to start a more detailed study of the code by stating that it seems to me to be extremely well drafted. I am someone who knows professionally a good deal about draftsmanship. It is clear, well laid out and, given the complexity of the subject matter, easy to understand. There are, however, a number of points I should like to raise.

The Law Society is particularly concerned about the timescale involved. The code is not only a lengthy document, but is accompanied by some 290 pages of guidance. The guidance, as I understand it, has had to go to print while still under continuing consultation. I understand that the documents will not be made available to solicitors in hard copy until after 28th March, only four days before the orders and the code come into force.

Even starting from now, four weeks is not enough time to enable solicitor firms to train their staff and partners on the operation of a code which comes into force on 1st April. We believe that it would have been better to leave it for a few months longer, rather than to bring it into effect in an enormous rush.

I also have some criticism of the contents. Section 2.3 assumes that prospects of success can be forecast in a mechanistic way which can be expressed in an accurate percentage. Anybody with experience of practice will know that it is impossible to be anything like that precise. There is also an ambiguity in the text. For example, what is said to be a good prospect is a 60 to 80 per cent chance of success; a moderate prospect, 50 to 60 per cent. If the chance is estimated at 60 per cent, is it good or moderate? I believe that the code should say that "good" means at least 60 per cent but less than 80 per cent, and "moderate" means at least 50 per cent but less than 60 per cent.

Perhaps more seriously, there are problems with the fluctuations in prospects. Prospects, as seen by a client's lawyer, constantly alter throughout the run-up to a hearing. Documents may be disclosed on discovery which are either helpful or the opposite. New evidence may be obtained on behalf of one side or the other. What happens if, as a result of such fluctuations the prospect is downgraded from, let us say, very good to good and the case then ceases to meet the cost-benefit criteria in section 5.7.3? Will the funding then be withdrawn under section 14.2, even though the chances are still good? If section 14.2 is permissive, and that is what it appears to be, on what basis will a decision be made whether to maintain or withdraw funding?

Section 2.4 contains a definition of what constitutes the overwhelming importance of a case to the client, that being a factor in deciding, in a number of cases, whether or not assistance should be granted to the client. "Overwhelming importance", according to section 2.4 is limited to the preservation of life, liberty or physical safety or to preventing the loss of housing. But what about the loss of livelihood? Let us suppose that a teacher wants to challenge, by judicial review, a decision to put him or her on the list of those who are not allowed to work in schools. Is not that as important as housing? I am not referring here to the loss of a particular job, but to the loss of an entire career.

The overwhelming importance to the client is an expression which occurs in many places. Section 5.7.2, for example, states that full representation will be refused if the prospects are borderline, the case does not have significant public interest and is not of overwhelming importance to the client.

Section 11.11 deals with private law children's cases; proceedings for residence, contact, and so forth. Section 11.11.5 states that legal representation is refused if the prospects of success are poor. That means, clearly, less than 50 per cent. I can see that representation should be refused in such a case if the case is, indeed, hopeless. But if there is a 25 to 30 per cent chance of success, for example, which is plainly not hopeless, should not the parents have a right to representation? After all, decisions on the care of a child, where the child is to live and what contact a parent is to have with a child can be absolutely shattering to the loser. It seems to me that to refuse assistance simply because the chances of success are clearly less than 50 per cent is inappropriate.

I turn to procedure. I have a minor point on Condition 8 which I shall raise simply out of curiosity. It concerns clients who are resident outside the United Kingdom. Section C8.2 states that the applications have to be in English or French. I just ask why French, and, if French, why not German, Dutch and Spanish, and so on?

Finally, section C61, again on procedure, gives power to the funding review committee, on appeal from a decision of the regional director, to reconsider that decision on most issues—for example on the question of the regional director's decision on prospects of success or whether the case is of overwhelming importance to the client—and the funding review committee can substitute its own decision. For some reason, where the issue is whether the case has a wider public interest, the powers of the funding review committee are limited to only judicial review. The committee can alter the decision of the regional director only if that decision is irrational. I wonder why that distinction is drawn.

I apologise for raising a number of detailed points. However, I believe that the code is of great importance. I shall plainly not object to the code on this occasion. However, I believe that it contains difficult issues which may need to be reconsidered, and that such reconsideration may need, in some cases, to be sooner rather than later.

9 p.m.

Lord Kingsland

My Lords, like the noble Lord, Lord Goodhart, I do not think it appropriate at this stage to make observations about the principles that lie behind the code. A great deal was said about the principles in the course of the passage of the Access to Justice Act. Those discussions are now over and we must get on with administering the new regime.

However, like the noble Lord, Lord Goodhart, I share a concern about the way in which the code and its guidance are being implemented. As I understand it, although there has been ample consultation on the code itself, the first draft of the guidance came out on 17th December and the procedure for consultation had to be completed by 10th January. Moreover, it is my understanding that the guidance did not, in that first edition, cover the code procedure. If those facts are true, then I suggest to the Minister that the consultation on the guidance at that stage was woefully inadequate. I suggest also to the Minister that the code without the guidance is no guidance at all.

There is now a second edition of the guidance, but it has only just appeared and I understand will not be in hard copy form in the hands of the relevant solicitors until the last few days in March. If the whole system is due to come on stream on 1st April, then I entirely share the concern expressed by the noble Lord, Lord Goodhart, about the unfair effect that that will have on practitioners. In those circumstances I, like the noble Lord, Lord Goodhart, urge the Minister, even at this late stage, to reconsider the timing of the implementation of the code. A further six months would probably be a fair solution.

My second set of observations concerns the budgetary measures that lie behind the code. I also share the concern expressed by the noble Lord, Lord Goodhart, that the introduction of budgetary constraints on legal aid was a bad move by the Government. Is the Minister in a position to tell your Lordships' House whether or not each one of the categories from six to 13 under the code will have its own special budget line? If so, is he also able to tell your Lordships' House what will happen in circumstances where one line runs out? Is there some central reserve which can be called upon or are the cash limits going to be implemented with peremptory severity?

Those questions are important, not only because of the views expressed by the Opposition during the passage of the Act and shared by the noble Lord, Lord Goodhart, but also because of the impact that the European Convention on Human Rights might have on the implementation of the Bill. If these budgetary limits bite too severely and affect cases that would otherwise, on the criteria laid down in the Bill, be meritorious, then I suggest to the Minister that the Government are in danger of transgressing their own legal flagship.

Finally, I have one other point, and I shall express it tersely, in relation to the Community Legal Service (Cost Protection) Regulations 2000. I was disappointed that the Minister and Her Majesty's Government did not take the opportunity, under regulation 5(3)(a) to (d), to make life a bit easier for the non-funded defendant who faces an unmeritorious claim by a funded claimant.

Lord Bach

My Lords, I thank the noble Lords from the two Front Benches who have spoken and made their comments on these important regulations. I shall do my best to answer their questions. Indeed, that may be easier with the questions asked by the noble Lord, Lord Goodhart, not because they were easier questions as—such they certainly were not—but because he was good enough to give me some notice of what he was going to ask I have been able to make some inquiries concerning them.

I deal with his points not necessarily in the order in which he raised them. It is important to deal, first, with the issue of timing. It is our intention that the Funding Code should come into operation on 1st April and we point out that the changes were originally announced a long time ago—October 1997. Since then, every element of the new system has been subject to extensive consultation—a point accepted by the noble Lord, Lord Kingsland. We believe the profession has had every opportunity to prepare for change.

The Funding Code was subject to two rounds of consultation last year. Every firm that bid for a contract was sent a draft of the code in October last year and invited to comment. The final draft which contains relatively few changes together with the related guidance has been available on the board's website since early February. A full list of the changes to the code since October will be sent to every legal aid account holder next week, together with copies of all the new regulations that will take effect on 1st April.

There was an initial period for consultation to January, but the formal consultation period on the guidance ran to the 28th of last month. The guidance will be amended as required after the first two months of the scheme. I hope that that goes some way towards alleviating the fears of both noble Lords and of practitioners that those concerned will be put in difficulty by the timing involved.

Perhaps I may deal, first, with some of the points raised by the noble Lord, Lord Goodhart. I shall begin with the easiest one. The noble Lord asked why French as well as English is used. I am told—and I merely pass the information on to the noble Lord—that this is a treaty obligation. I understand the reason for this is that English and French are the two languages recognised by the Strasbourg convention on the transmission of legal aid applications.

The noble Lord asked about the 60 per cent "prospect of success" and questioned whether that signified moderate or good. As all of us who have practised know—even at the criminal Bar—estimating prospects is not a precise science, especially not at the criminal Bar. It is not possible to distinguish a 60 per cent case from a 59 per cent case or indeed a 61 per cent case. The bands based on the existing approach to estimating prospects of success, which are set out in the Bar Council's Guidelines on Legal Aid Opinions, reflect a broader judgment than that. A 50 to 60 per cent, or moderate case, will be a difficult case with arguments either way but one which, on balance, is more likely to win than not. However, a good case, with a 60 to 80 per cent chance of success at trial is one that will usually obtain a satisfactory settlement well before that stage.

I turn now to the noble Lord's point about "overwhelming importance" and whether that should include loss of livelihood. This criterion is intended for wholly exceptional cases. The effect is to apply the other criteria to them less stringently; for example, funding would be refused only if the prospects of success were poor. Unfortunately, loss of livelihood is a very broad term and could apply to any case where a person lost his job or business as a result of, say, injury or contractual dispute. Where such cases are within scope, it is right that the normal criteria for prospects and cost benefit should apply.

The "overwhelming importance" criterion is not relevant to child residence cases because the concept is not used in section 11.11 of the code. That already provides that private law children cases may be funded, provided that the prospects of success are not poor. We believe that it would be quite wrong to provide funding for legal representation in residence and contact cases that are clearly more likely than not to lose. Adversarial proceedings are best avoided in children's cases in any event. Children need stability and certainty in their lives, not repeated and probably pointless legal disputes between their parents.

There is no "prospects of success" criterion for funding for general family health or family mediation. In the context of private children cases, "prospects of success" means the prospect of securing what the client would regard as a significant improvement in arrangements for the children.

A good question is: what happens if the prospects of success change during the case? As the noble Lord, Lord Goodhart, said, criterion 14.2 provides for funding to be withdrawn if the criteria for grant are no longer satisfied. Funding would almost always be withdrawn if prospects fell below the minimum level to justify a grant. If prospects fell into a lower band so that the cost-benefit criterion was no longer satisfied, funding would normally be withdrawn as well. However, the guidance provides for two exceptions under paragraph 13.8.3: The Commission has discretion to delay discharge of the certificate for a limited period to allow a settlement to be negotiated … and discretion to continue funding, if it is in the interests of the Community Legal Service Fund to do so". That would apply where substantial costs had already been committed to a case that was approaching its conclusions. The limited prospects of winning and recovering those costs might then outweigh the certainty of losing them if the case was abandoned.

I move on now to the example given by the noble Lord, Lord Goodhart, about the teacher. The criteria for judicial review also refer to significant human rights issues. That might well apply in the case of the teacher to whom the noble Lord referred and have a similar effect of classifying the case as one of "overwhelming importance".

I have done my best to deal with the points that were helpfully raised by the noble Lord, Lord Goodhart, and I now turn to those raised by the noble Lord, Lord Kingsland. As regards budgetary constraints, I can tell the noble Lord that there is a special budget that applies only to section 6 of the code—the high-cost cases—and not for other types of case. As I understand it, the question does not arise as far as concerns sections 7 to 13 of the code. I am conscious that I have taken much of your Lordships' time. I hope that my answers are satisfactory to some extent. I commend the draft regulations to the House.

On Question, Motion agreed to.