Legal Aid, Sentencing and Punishment
of Offenders bill
The Committee consisted of the following Members:
Kate Emms, Committee Clerk
† attended the Committee
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages or other relief in relation to an act in the nature of an interference with personal information or privacy.’.— (Mr Slaughter.)
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for death or for physical or psychological injury resulting from breach of any duty owed by an employer to an employee.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for death or for physical or psychological injury resulting from any breach of duty or trespass to the person.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for physical or psychological disease or illness resulting from any breach of duty or trespass to the person.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for loss resulting from breach of any duty to exercise professional care or skill.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a money claim for the benefit of the estate or creditors of an insolvent body corporate or partnership against persons concerned (or formerly concerned) in its management.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to clinical negligence proceedings (within the meaning of section 58C).’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for judicial review of a decision or of a failure to decide by a public body.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings in which—
(a) the parties are businesses, and
(b) one of those parties is a business which is a sole trader, partnership or limited liability private company whose turnover is less than 20 per cent. of the other or another party, and
(c) the success fee is part of a conditional fee agreement made by that party.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings in which—
(a) one party is an individual who has purchased, commissioned or ordered goods or services from the other party, and
(b) the other party is in business to provide such goods or services, and
(c) the success fee is part of a conditional fee agreement made by the party referred to at (a) above.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings which include a claim for damages or other relief in relation to an act in the nature of an interference with personal information or privacy.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings which include a claim for death or for physical or psychological injury resulting from breach of any duty owed by an employer to an employee.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings which include a claim for damages for death or for physical or psychological injury resulting from any breach of duty or trespass to the person.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings which include a claim for damages for physical or psychological disease or illness resulting from any breach of duty or trespass to the person.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings which include a claim for damages for loss resulting from breach of any duty to exercise professional care or skill.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings which include a money claim for the benefit of the estate or creditors of an insolvent body corporate or partnership against persons concerned (or formerly concerned) in its management.’.
‘(4) The amendments made by this section, other than the definitions of “clinical negligence”, “clinical negligence proceedings” and “proceedings” which subsection (2) inserts into the Courts and Legal Services Act 1990, do not apply in relation to a costs order made in favour of a party to clinical negligence proceedings (as so defined).’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings which include a claim for judicial review of a decision or of a failure to decide by a public body.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings where—
(a) both parties are businesses, and
(b) the receiving party is a business whose turnover is less than 20 per cent. of that of the paying party and the receiving party is a sole trader, partnership or limited liability private company.’.
‘(4) The amendments made by this section do not apply in relation to a costs order made in favour of a party to proceedings where—
(a) the receiving party is an individual who has purchased, commissioned or ordered goods or services from the other party, and
(b) the paying party is in business to provide such goods or services.’.
Mr Andy Slaughter (Hammersmith) (Lab): I am pleased to see you back in the Chair, Mr Sheridan. For your benefit and for the benefit of Members, I shall summarise where we are before making my six speeches on the amendments in the group. Before the Minister with responsibility for prisons starts doing those things with his eyebrows, I should say that they are six separate speeches, not one—there will be clear distinction, but they will run seamlessly together.
I hope that before we adjourned for lunch, I had corrected some of the misapprehensions about the costs of the civil litigation system. I identified some problems with referral fees and other abuses of the system that need to be corrected—there is common ground with the Government on that—and suggested some solutions, but I took issue with some of the Government’s proposals. It is peculiar that referral fees, which should have been the start of correcting problems with the current process, turn out to be the end; and that other abuses are yet to be corrected, but we are pressing on quickly into virgin territory. It is strange that we are examining success fees before dealing with base fees—that, too, seems to be head over heels—and that we intend to get rid of success fees and replace them with contingency fees without making any real assessment of the position afterwards.
The Minister has asserted that the new system will be better than the old, but the people who know about these matters, the practitioners, who can make a realistic assessment of how they will behave—after all, it is not the lawyers who will suffer but their clients—say they
We also mentioned defendants’ behaviour. It reminded me—I am sure that the Minister is familiar with the document, and I hope that he has committed it to memory—of the response to the Government’s proposals of three costs judges at the senior courts costs office, who perhaps know the most about the day-to-day dealings relating to civil litigation costs. The Government state:
“In theory CFAs are thought to discourage weak claims as lawyers carry the risk of not being paid if the case is lost. However, defendants in some types of proceedings argue that the claimants’ lawyers use CFAs to prolong the litigation process by taking the case to trial in order to secure 100% success fees.”
“No evidence is advanced to support this statement. Our experience is the reverse. In numerous cases it is the Defendant who enables the claimant to ‘secure’ the 100% success fee by failing to make an effective Part 36 offer, or by settling the case late, after the work necessary to bring the matter to trial had been done. Many defendants, having run the litigation adversarially to the door of the court, then complain when they are faced with a bill which seeks a success fee of 100%. There is no justification for such complaints where the running of the case to trial has been deliberate or where it has happened through incompetence.”
I commend the whole report, which not only debunks many of the claims made by vested interests, which the Government appear to have swallowed, but also suggests practical ways of curbing current abuses, including mentioning that there is nothing sacrosanct about 100% success fees.
We have talked about qualified one way costs shifting and the uncertainty about that. It would be nice if the Government conducted even-handed comparisons of the effects of after the event insurance and QOWCS on civil litigation. If they did, I suspect they would find that ATE is a better filter, and, when they finally make up their mind about what QOWCS is, that that is a far less reliable guide to the way in which civil litigation will progress. There is a risk of nuisance claims, as I think a number of experts in the field have acknowledged. If QOWCS are drawn too loosely, that brings the risk of discouraging litigation beyond what the Government say they want; if they are drawn so tightly that there is no risk, that will encourage nuisance litigation, making the situation worse for defendants.
The number of unresolved questions and the chaotic way in which the Government are presenting the measures, with rumours of new clauses that should be in the Bill already if they are to be in it at all being tabled later this year or even next year, and other measures being withdrawn at the last minute, suggest that they have not thought the proposals through and would do better to consider the matters raised in consultation before rushing to legislate.
I often turn to the Attorney-General for advice on such matters and I read again from a long interview that he gave to the Law Society, only two years ago—not
“it bears no relation to the memory I have of how legal aid was available when I started in practice as a barrister in the 1980s. In truth, I think it is questionable whether the decision to move progressively to the ‘no win, no fee’ method was the right decision.”
Ten years after the introduction of conditional fee agreements, the then shadow Justice Secretary was lamenting their arrival, yet within two years the Government have leapfrogged them and gone to the stage beyond. That is why I say they are in danger of legislating in haste and repenting at leisure.
I shall deal with the amendments in their order on the amendment paper, which is not necessarily the order of their importance. I begin with privacy, which is a rather pregnant issue at the moment. Privacy claims are brought by people whose privacy has been seriously breached by another party. The current system allows citizens to take action against large media groups and newspapers that are far better resourced than them—an example would be the recent case involving the News of the World, when action was taken by people including Bob and Sally Dowler using no win, no fee arrangements. In a meeting yesterday, I spoke to the Dowlers’ solicitor about this very subject.
Damages in privacy cases are, in the main, quite small; ATE insurance and the claimants’ lawyers’ success fees would therefore swallow up much of the damages and more. If a proportionality test is brought in for success fees, the success fee will be so small that it does not allow the creation of a risk pool—what the CFA system relies on. In short, lawyers will be forced to take only cases with a close to 100% certainty of winning. As a result, many meritorious applicants will not get justice. Lawyers who offer CFAs take a huge risk that they will be paid nothing for their services. If it becomes uneconomic for them to accept that risk, individuals who do not have the means to pay lawyers as the case proceeds will be left unrepresented. If the percentage allowed is too high, the claimant will be deprived of a substantial part of the compensation to which they are entitled. If it is too low the lawyers will not accept the risk. In either event, lawyers will be willing to act only if the anticipated amount of damages is large.
Most claimants in privacy or media-related cases desire not money, but an apology or to prevent publication of material. Although on rare occasions six-figure awards for damages have been upheld in defamation cases, awards are usually much smaller. As I mentioned, because abuse of the system was perceived to have occurred in one or two high-profile cases involving celebrities using CFAs, the previous Government sought to reduce success fees from 100% to 10%. That proposal was defeated in Parliament, and I am not sure that that was exactly the right way to proceed, but it shows that, should we wish to deal with the issue, we have a ready tool that does not involve throwing the baby out with the bathwater. CFA reform is already underway. Removing the amount of recoverable success fees will be to the detriment of those who cannot afford to litigate in normal circumstances. Legal fees associated with damages are not only unfeasible in many cases, but go against the nature and purpose of
“If, contrary to my recommendations, additional liabilities continue to be recoverable and the costs shifting regime remains as now, then my fallback recommendations are as in chapters 9 and 10 above. In other words there should be fixed and staged success fees, staged ATE insurance premiums and so forth.”.
There is a myth that CFAs in media cases are limited to those acting against publishers. In fact, many of those who get help from a CFA are seeking protection against being sued themselves. Those are matters being dealt with in libel reform. A number of people have successfully sought protection for freedom of speech with the help of a CFA. I will cite some interesting cases. In 2011, His Holiness Sant Baba Jeet Singh Ji Maharaj eventually abandoned his case against Hardeep Singh regarding an article published in The Sikh Times in 2007. Hardeep Singh fought the case on his own without help, but in later stages received support from a CFA. In a case that may be of interest to members of the Committee, in 2008 Heather Brooke, when the previous Speaker of the House of Commons appealed against an order to disclose MPs’ expenses claims, challenged the appeal using a CFA.
In a well known case, the scientist Peter Wilmshurst was sued by an American pharmaceutical firm after his criticism of its research at a US cardiology conference in 2007 was quoted by a journalist. The Danish radiologist Henrik Thomsen was sued by GE Healthcare for comments made about a drug and the firm at a conference in 2007. Mark Lewis, the lawyer in both those cases, says:
“CFAs are used by defendants as well as claimants… One of the main cases that underlines the need for libel reform is that of Dr Peter Wilmshurst… The report that launched Libel Reform featured Dr Wilmshurst and…Nigel Short. The Wilmshurst case is continuing, Nigel Short was defended successfully with CFA funding. Without CFAs Nigel would have been forced to capitulate and Peter Wilmshurst would be forced into defending himself.”.
Robert Murat, who was grossly defamed after the disappearance of Madeleine McCann, won significant damages from a dozen news outlets; he was supported by a CFA. In a famous case, Christopher Jefferies was “monstered” by the press after he was arrested for questioning by police in the Joanna Yeates murder trial. He was released without charge after two days and is now pursuing legal action, which he can do on the basis of a CFA. Without that, it is difficult to see how Jefferies could seek redress.
The Parliamentary Under-Secretary of State for Justice (Mr Jonathan Djanogly): The Government are not proposing to get rid of CFAs. The hon. Gentleman needs to explain why individuals in such cases would not receive CFAs in the future.
Mr Slaughter: I have some rather complicated figures that I could read into the record, but it would probably be easier, albeit unusual, if I wrote to the Minister giving an explanation; otherwise we will be here all night. I have just given some figures—admittedly, they are from lawyers, but they are based not on propaganda but on commercial calculations about the difference between the opportunity to take cases under a CFA and the opportunity to take cases under damages-based
What defendants and claimants who use CFAs in such cases have in common is that they are the underdog. They are either the person who has been libelled by media outlets or the person who has made a statement in good faith—particularly in the cases involving scientific research—and who are then sued by large corporations that do not like what they are saying. It is difficult to see how cases that currently use CFAs will be able to get into court on the basis of a damages-based agreement.
“these reforms will irrevocably shift the balance of power to an even greater extent in favour of large media corporations (often foreign owned) as against the individual. Fewer lawyers will be able to take the risk of acting on ‘no win no fee’ agreements. The ATE insurance market in this area of the law will disappear.
But for CFAs, the Dowler family and many others…would have been unable to pursue their claims. Some newspapers have a habit of dragging out cases for years to deter individuals from pursuing claims, taking advantage of the vast disparity in resources between the Press and the claimant. In the phone-hacking scandal it took the News of the World four years to admit the scandal was not limited to just one rogue reporter. It did so only when it was faced with overwhelming evidence obtained through Civil Court action.”
Ben Gummer (Ipswich) (Con): The hon. Gentleman has chosen an inappropriate example. It was the doggedness of his colleague that forced the phone-hacking scandal to come to a head, not a court action. Surely he could find a more appropriate example to prove his case.
Mr Slaughter: Although not all of them, many of the cases that are going to court are doing so with conditional fee agreements. I ask the hon. Gentleman to accept that. If that form of litigation were not available, that would be unlikely to happen because people are not in the position to take that degree of risk. Solicitors are in a position, because of the way the system works at the moment, to take that degree of risk—but they are unlikely to be so in the future. In the interests of economy, I will leave that matter there.
That is a discrete area that happens to be important now. I refer to it because the Government and their supporters claim that it is an area of abuse. I do not see it as such, but it is a clear example of where individuals—even, from time to time MPs, who are libelled by the newspapers—have virtually no opportunity to challenge those decisions. The Press Complaints Commission has been revealed as a straw man. Without a route to litigation being available, and in the absence of any better body designed to protect the individual’s rights against the press, it is unlikely that any of these matters will receive justice. That is the point.
This seems to me to be somewhat perverse. I will talk about clinical negligence in a little while, but there is a close association between it and professional negligence. Clinical negligence is a type of professional negligence. In many cases, this would exclude most professional negligence cases, including, for example against lawyers, surveyors, accountants or banks, for negligent advice or conduct. Retaining the ATE and CFAs would allow such cases to be brought.
In the case of professional negligence, we also have the issue of QOWCS. This will be a huge double whammy costs risk barrier to anyone attempting to litigate a non-personal injury case without the protection of ATE or the shield of QOWCS, such as it is. I will acknowledge the Professional Negligence Lawyers Association, both because the Minister likes it and because it has attended today, particularly the author of its briefing, Katy Manley, who herself is here. I am grateful for that body’s observations, because this is not an area of expertise for me. The association states:
“Under section 41 onwards of the proposed Legal Aid Sentencing and Punishment of Offenders Bill no claimant in any civil litigation will recover any damages under the proposed system if their claim is equal to the success fees plus ATE premium. Worse the claimant could win the case and go into debt to their own solicitor and ATE insurer if their claim is less than the success fees plus the ATE premium. This formula is impossible to calculate at the outset of the case. A risk averse claimant would never bring a claim if the Bill is passed…Recovery of success fees and ATE premiums has filled the gap in Civil Legal Aid so that claimant solicitors and ATE insurers have carried the cost and risk of access to justice unless and until the case succeeds, when most of the costs can be recovered from a wrongdoing/losing defendant.”
“A surveyor negligently fails to spot subsidence in his report for first time home buyers––the property is a ‘home from hell’ and subsides––they lose all their money, as it is worth only site value, and still have to repay the mortgage…A solicitor negligently helps a dishonest nephew to get his elderly aunt to sign away her home to him––he then throws her out leaving her homeless…A barrister only reads the papers the night before the trial and forgets half the evidence so the case is lost.”
“A financial adviser negligently invests in a high risk investment that fails so the claimant with a spinal injury loses all the damages award they received for their care…An insurance broker negligently forgets to send the form for buildings insurance and the home burns down in a fire––the claimants lose their home and all their possessions…An accountant negligently fails to prepare proper accounts for a business––HMRC then claim a large payment for tax which the business cannot pay and it goes into liquidation…A solicitor negligently tells a client that litigation has a good chance of success but then changes his advice just before the trial forcing a settlement involving payment of the opponents’ costs––the solicitor keeps his fees while bankrupting his clients…A probate solicitor takes 3 years to deal with a mother’s estate after her death––then charges huge fees, some of which were used dishonestly for his own lifestyle…A negligent insolvency practitioner does an administration pre-pack––leaving dishonest directors and shareholders of the company with all the assets and the company creditors without any payment.”
Those are snapshots, but they are credible actual cases. Of course, the vast majority of professional people in this country do a good job, and when things go wrong it is often no one’s fault. However, when things do go wrong, they often leave individuals and small businesses that have suffered significant loss—as in many of the examples I have just given—and cannot then fund litigation. The fundamental problem is that large success fees are directly caused by the defendant’s conduct in defending the claim, and they cannot be calculated or predicted with any certainty at the outset. The Government’s proposals do not recognise that wrongdoing defendants choose to fight strong claims, and only if they do that do they have to pay the high claimant CFA/ATE cost award. The existing system places the risk on the wrongdoing defendants; if they choose to defend a claim, then the costs, including success fees and ATE premiums, are the defendants’ risk and they pay those costs if they lose the case.
The Government’s proposed new system places the risk on the claimant so, if the defendant chooses to defend the claim, the success fee and the ATE premium cannot be recovered and come out of any damages that the claimant receives. Even if liability is admitted in such cases, technical legal defences commonly raised include: causation, which is that, even if there were negligence, it did not cause the lost claim; contributory negligence, which is that the claimant should share the blame; and failure to mitigate, which is that the claimant has not done enough to reduce the loss, and the defendant should not pay because the claimant did not act soon enough.
Such cases are always complicated. They often take two to three years to resolve, and the parties might well incur costs of about 100 hours each. The PNLA ATE scheme premium is set at a level increasing in four stages, starting at about £2,000 pre-action and ending up at about £50,000 for trial. The proposed reforms offer no realistic alternative funding for claimants. Claimants will run the risk of paying the defendant’s costs if they lose without ATE cover an amount that cannot be predicted at the outset.
“Although I have been in practice now for nearly 40 years, my practice for the last 12 years has been concerned exclusively with litigation in the fields of pensions, financial services, savings and investments. My clients are typically successful entrepreneurs, professional men and women and the retired. I have some pension fund and charity trustees as clients as well. I lead a team of 8, and we have recovered about £30m over the last 10 years, mostly from life assurance companies and banks, which are my typical opponents. My biggest single case so far was for over 400 Equitable Life annuitants, whose claim was funded with a series of CFAs, a mutual costs sharing agreement and limited BTE and ATE cover…As a firm we use CFAs and ATE insurance extensively, mainly for claimant work but also for defence work. The costs of litigation are so high that even wealthy people and small businesses find it imprudent not to hedge against disastrous results. For example, my property litigation colleagues used a CFA to defend an unfounded dilapidations claim for a well known health charity.”
“Already big business, by threatening high costs, can defeat meritorious claims by deserving people. I have seen recently costs estimates from banks of over £500,000 for a single case. This is
“would not affect the tax payer nor ordinary people as to their insurance premiums––professionals pay their indemnity insurance premiums normally as a professional conduct requirement of their professional bodies. Underwriters currently can base the level of premium on the risk of claims using the current legal system and judicial process. Civil claims arise in this area of practice in highly unpredictable and unpredicted situations and, in all cases, a trusted professional has let down their client. Cases are only brought if lawyers for the claimant assess the chance of success at 60% or more, which is the normal minimum requirement for ATE cover to be obtained. Professionals and their indemnity insurers frequently and vigorously defend claims, even if their defence is weak perhaps for reputational or other reasons. It is only if they are found liable that the claimant’s success fees and ATE premiums are payable by the wrongdoing defendant… Professionals and their indemnity insurers are highly skilled at defending claims and for claimants to be unable to fund a claim––even with a 60% or more chance of success––it is likely to cause considerable injustice with predictable consequences in local communities––whether geographic or niche business communities…It is an area of practice which generally is a long way from the type of volume low value claims which interest claims management companies in the personal injury sector. Ordinary people and small businesses can have high value claims, eg a first time buyer purchasing a ‘home from hell’ based on negligent advice from a surveyor or conveyancing solicitor.”
I am trying to keep Government Members entertained, and I probably do that better by citing examples of cases rather than by reading out mathematical calculations and figures. It is surprising that they do not seem persuaded by my argument, because several Conservative Members know about such cases either through their own experience or in their surgeries. Professional negligence cases might not be that common, but I suspect that they are becoming more commonly referred to by agencies. One example concerns a class action by 45 individual claimants against two multinational banks for their part in the negligent mis-selling of a pension product that the claimants had purchased.
The claim concerned a failed UK pension liberation scheme and an offshore trust administration service worth in excess of £20 million. The case took more than four years to reach a conclusion and only settled two weeks into the 12-week trial on confidential terms. The claimants were represented on no win, no fee agreements by their solicitors and their junior and leading counsel, coupled with after the event insurance totalling £6.5 million, which was believed to be a record for a commercial case. One client commented:
“Before we found solicitors willing to act on our behalf on a no win-no fee basis, an individual on the other side of the litigation told me that he wasn’t bothered about our claim because he knew that he could out-resource us.
The man in the street needs to have access to the law or else he becomes disenfranchised from society. No win-no fee agreements provide such access to justice and seeing how they work in practice has restored my faith in the law as a force for good to allow ordinary people to protect their rights and deter corporate bullying of individuals.
If we had not had ‘no win-no fee’ legal representation I would have lost my entire life savings and my home. I would have been declared bankrupt in my late fifties without any form of pension despite having worked and saved all my adult life. In the circumstances it would not have been inconceivable that my marriage would have also have ended and it is important to remember how far the fabric of life and society and the lives of innocent parties are affected when access to justice is taken away from an ordinary person.”
The next case concerns a claimant who, in late 2000, to secure funds for his retirement, invested the proceeds of the sale of his successful estate agent business in an enterprise investment scheme run by a private bank. A large six-figure sum was invested in the EIS, but the investment was disastrous, leaving the claimant with very significant losses. The claimant instructed the defendant firm of solicitors to make a claim against the bank over the management of the investment. A claim was prepared, but the defendant’s solicitors failed to serve proceedings within the prescribed period. Not only had the claimant lost most of his savings, but he had lost the opportunity to sue the bank for those losses.
The claimant had wasted precious funds on the defendant’s legal services and had insufficient funds to pursue an entirely new and very much more complicated claim. The resources to defend that claim were not an issue for the defendant firm, which was insured. Solicitors and counsel agreed to act on a no win, no fee basis coupled with after the event insurance. The defendant firm vigorously disputed quantum, which turned on the assessment of the merits of the original claim against the bank, and expert accountants were instructed. Following protracted negotiation, the case was finally settled in September 2010, and the claimant received a six-figure sum in damages.
My final case is concerns a claimant who was an advertising salesman who had been employed by the defendant in the United Kingdom. The defendant was a publisher of specialist trade publications and organised trade exhibitions across Europe. By an agreement, the claimant was appointed as a sales agent to the defendant for various European territories in respect of the defendant’s products. In breach of the express terms of the agreement, the defendant failed to pay the claimant for outstanding commissions that the claimant had earned. The claimant made attempts to negotiate with the defendant for the payment of the outstanding commissions, but those negotiations were unsuccessful. The commission earned by the claimant was the sole source of revenue for the claimant and his wife. The claimant had no alternative but to sue for breach of contract if he was to recover the sums owed to him, but he did not have the financial resources to fund litigation, a fact that would not have been lost on the defendant. The solicitor and barristers agreed to accept instruction on a no win, no fee basis and proceedings were issued. The case was eventually resolved on the basis that the outstanding sums owed to the claimant were paid to him along with his legal costs and disbursements.
In his reply, I hope that the Minister will show the courtesy that I have shown him and consider these areas of law discretely, and tell us exactly where the Government stand on professional negligence.
I move on to another area of interest to the business community, namely insolvency. Insolvency practitioners are appointed to help insolvent companies sue dodgy directors to recover money for creditors owed money by the insolvent company. The companies are insolvent, so they cannot pay for a lawyer; they have no assets. As practitioners and regulators have warned, alongside Her Majesty’s Revenue and Customs and the Insolvency Service, such actions will be severely compromised in future. As the state is the major creditor to many insolvent companies, the public purse will itself be hit. That is why HMRC is lobbying the Ministry of Justice for an exemption, but to no avail.
I appreciate the matter came up at first orders, and I heard the Minister’s answer. I cannot remember which of my hon. Friends put to him the point—[ Interruption. ] The reason I cannot remember is because there were so many questions on civil litigation.
Mr Slaughter: The Minister remembers, but he did not give a very good answer. I apologise to my hon. Friend the Member for Makerfield. She is everywhere, so I do not see every contribution that she makes. The Minister said that he was talking to HMRC three months ago and my hon. Friend asked how far he had got, to which he replied, “I am talking to HMRC.” I do not know whether it satisfied my hon. Friend.
“The Government’s planned changes to civil litigation costs and funding in the Legal Aid, Sentencing and Punishment of Offenders Bill will severely restrict creditors’ ability to recover money taken by directors who have acted improperly”.
“Creditors owed money are often other well-run businesses that may be put under severe cashflow pressure as a result of delinquent directors’ behaviour. In addition, the Government, in particular HMRC, are also major creditors. As such, the proposed reforms would effectively result in public money being retained by delinquent directors. In these circumstances it is important that creditors should be allowed to recover both their losses and the cost of recovering those losses from the director.”
“insolvency was specifically recognised as a category for which ‘no win, no fee’ litigation should be available. The logic behind the introduction is just as robust now…The existing system allows Insolvency Practitioners to pursue directors who have acted improperly and caused damage to a company or financial costs to HMRC. If this were to change, Insolvency Practitioners would be discouraged from undertaking litigation and perpetrators would get away with
“includes taking money out of the business for personal use, concealing assets and committing fraud. In some cases these actions directly contributed to the businesses’ failure...An Insolvency Practitioner’s overarching legal duty is to maximise returns to creditors. In cases where directors have acted improperly this may involve undertaking litigation to return money rightfully owed to creditors, including the business community and HMRC. Without the use of litigation, directors would get away with dishonest practice and businesses would lose money.”
“In insolvency situations a company by definition has no money. As a consequence there are no funds available to pay the legal costs involved in pursuing litigation. The creditors’ only realistic hope of recouping money owed to them is for the Insolvency Practitioner to engage solicitors on a Conditional Fee Arrangement (CFA). In addition to this, Insolvency Practitioners may be personally liable for costs incurred as a consequence of litigation so must be properly protected with After the Event insurance (ATE). As the system currently exists CFA success fees and ATE insurance premiums are recoverable from the defendant if a judge, on the merits of the case, considers them to be liable...Unlike personal injury cases there are very few insolvency claims against public authorities. In fact Central and Local Government are one of the biggest creditors and beneficiaries of the recoverability of CFA success fees and ATE insurance premiums.”
“the Insolvency Practitioner does not pursue frivolous claims. In fact the opposite is true of insolvency litigation; as an officer of the court, the Insolvency Practitioner must avoid bringing unmeritorious claims and the Insolvency Practitioner risks incurring considerable personal costs if the case is unsuccessful. Given the considerable risks involved an Insolvency Practitioner will only commence litigation on advice and once satisfied that it is economically justifiable for the creditors…Practitioners would be discouraged from undertaking litigation and ‘dodgy directors’ would get away with sharp practice to the detriment of the following parties”.
“The current system is particularly helpful in insolvency litigation because it allows Insolvency Practitioners to maximise the assets available for distribution to creditors. If the costs were instead to be borne out by the insolvent estate, it would substantially reduce the amount of money returned to creditors. At a time when businesses are struggling, it would seem counter-productive to implement measures which would reduce their returns…the business community would also suffer as the Government’s proposals would discourage an Insolvency Practitioner…from taking action against a delinquent director…Given the considerable risks involved in insolvency litigation an Insolvency Practitioner will only commence litigation on advice and once satisfied that it is economically justifiable for the creditors. If the payment of CFA success fees and ATE insurance premiums were to be borne out of the estate, the Insolvency Practitioner would be discouraged from taking this course of action, leaving blameworthy directors free to prey on other companies.”
“analysed a sample of 23 case studies where Insolvency Practitioners undertook litigation against a director or third party, using a Conditional Fee Arrangement and After the Event Insurance. If the Government’s proposals were to go ahead, the total impact on creditors (both in terms of cases not going ahead and a reduction in returns) in the 23 cases analysed would be an approximate loss of £3.6 million; a 47% reduction in returns to creditors.”
Since R3 prepared that brief, it has done more work, and it now estimates that the cost to the Revenue alone of the changes, if they go through unamended, will be about £125 million a year. The Minister may wish to bear that figure in mind in his continuing negotiations.
“HMRC is the largest unsecured creditor in formal insolvencies in England and Wales. In recent years HMRC has become the single largest beneficiary of insolvency litigation, which aims to maximise returns to creditors. It has been said that the removal of the recoverability of Conditional Fee Arrangement success fees and After the Event Insurance premiums could cost HMRC a significant amount of money each year”.
“This considerable benefit to the taxpayer is not mentioned anywhere in the Consultation paper/impact assessments and given the current economic situation it would seem counter-productive to implement measures which would remove this revenue.”
“The prospect of the losing party paying costs provides a strong incentive for delinquent directors or third parties to settle at an early stage, and avoid the costs of litigation altogether. The removal of this incentive could potentially place an additional burden on the courts. With wide ranging cuts to the justice system this is something which the Ministry of Justice is presumably eager to avoid.”
“The director of a manufacturing company had used the company’s money to pay off a loan that he had personally guaranteed before liquidating the company and leaving the creditors with nothing. Insolvency Practitioners undertook litigation against the director and approximately £100,000 of additional money was returned to creditors as a result. The success fee and ATE premium amounted to £15,000. In this case the Insolvency Practitioner said:
‘We would not have pursued the claim if the CFA and ATE fee were not recoverable. In addition the inability to recover the fees would have affected our negotiating position and the defendant would have dragged the proceedings out for longer rather than settling early, which would have increased costs for all involved.’”
“An Insolvency Practitioner undertook litigation against the director of a property development company, which had gone into liquidation following the completion of a development of 16 flats. It was found that the director had faked invoices and transferred 13 of the 16 flats to another company he owned, leaving the creditors with nothing. Just over £500,000 was recovered for the creditors as a result of the litigation and the CFA success fee and ATE insurance premium amounted to £150,000.”
“In insolvency litigation the recoverability of success fees and ATE insurance premiums is a real and tangible benefit to society and the business community. Not only does it ensure that delinquent directors do not get away with sharp practice, but it also increases the returns available to creditors, including HMRC and the business community. If the court determines that a director acted improperly; stripping the value out of a company prior to insolvency, and leaving the creditors with nothing, creditors should be allowed to recover the full cost of funding from the delinquent director.”
The Minister may also have seen the briefing provided by the Institute of Chartered Accountants—if he has not, I will tell him a little about it. It welcomes some of the litigation; it is not wholly opposed, as some of those who have made representations are. On insolvency, however, it says:
“Unless claims brought by insolvency practitioners are exempted, this legislation would prevent potential recovery from incompetent or fraudulent directors or bankrupts, which will result in greater losses being borne by innocent creditors when a business is made insolvent…Those creditors are usually small businesses or HMRC, who would lose potential tax receipts, a cost ultimately to the taxpayer. Furthermore, fraudulent directors and bankrupt sole traders would keep the gains they made from irresponsible management of their business…If these exemptions”—
“Insolvency practitioners have an overarching legal duty to maximise returns for creditors, but this Bill may limit their ability to fulfil it…if the Bill proposals go ahead, solicitors and barristers may not be prepared to agree to acting on behalf of the insolvency practitioners on CFA terms…the claim would reduce the level of potential recoveries, and so it may be more difficult to convince creditors to agree the pursuit of a court action, meaning funds would go unrecovered…Furthermore, as Insolvency practitioners pursue cases in their own name, they may become less willing to commence cases, especially if there is a risk that the success fees and ATE costs might exceed the damages award”—
“as any shortfall would fall to be paid by the Insolvency practitioner out of their own pocket…Another likely consequence is that insolvency practitioners will be less likely to take on appointments where there are no estate funds, which is likely to significantly increase the workload of the Official Receiver and the Department for Business, Innovation and Skills legal departments, at taxpayers’ expense, but with no benefit of recovery for the creditors…The proposals in the Bill will therefore essentially change the risk/reward balance for bringing claims on behalf of an insolvent estate. Many cases that would have been brought on behalf of creditors under the old rules would not be brought under the new system.”
“of a recent case brought by one of our members, who was appointed as liquidator of a property development company by HMRC…On behalf of the creditors, the liquidator successfully pursued the directors for monies the directors owed to the company and was awarded £250,000 plus interest plus costs…The costs were approximately £95k, plus a CFA success fee of £75k, plus ATE insurance premium of £85k…Under the current system, the full £250k is payable to the estate and ultimately creditors, with costs payable by the defendants. However, under the proposals in the Bill, the success fee…and ATE insurance premium…would be payable out of the damages, reducing damages to £90,000 (compared with the £250,000 under the old system).”
“has informed us that this case would almost certainly not have been brought if the proposed recoverability restrictions had been in place, meaning the creditors would not have received any of the monies owed by the directors, and the errant directors would have kept such funds that were owed”.
There has been quite a lot of press interest in this issue, perhaps because the case is so clear, and I am sure the Minister is aware of that. We have been told that he
“We are considering the impact of abolishing CFA recoverability in insolvency and related proceedings. These proceedings can bring substantial returns to creditors, including Her Majesty’s Revenue & Customs. We are therefore discussing the specific implications with a view to reaching a satisfactory conclusion.”
I urge the Minister once more to tell us, if he can, what the conclusion is. It is all very well to say that discussions are continuing, but we are now discussing the matter in Committee. How much longer will it take? When will we have a decision? If the Government will not accept the amendment that we have tabled, will they introduce their own amendments and, if so, when?
Mr Slaughter: I move on seamlessly—I am seeing whether the Minister’s Parliamentary Private Secretary is paying attention—to clinical negligence. Clinical negligence claims are very complex to run and very expensive to fund. Medical reports can often cost hundreds or thousands of pounds. That cost is outside the scope of many people. ATE insurance is required to fund those additional costs. The amendment would retain ATE insurance and the success fee, which incentivises solicitors taking on complex yet meritorious claims, avoiding the cherry-picking of cases. Of course, that is what will happen. Lawyers will stay in business. As the Minister said earlier, lawyers will continue to do CFA cases, but they will cherry-pick them. They will cherry-pick only the sure-fire winners, and a whole band of cases, which currently go to court, win in court and recover the type of damages that we have heard about in other examples, will simply not occur.
However, there are additional problems in relation to clinical negligence, which the Government have in part recognised. Clinical negligence claims are caught in the lacuna between the ending of legal aid for these cases and the Jackson alternative. Lower-value cases may be less likely to be pursued due to the high investigation costs, including the need for specialist medical evidence, and the uncertainty of the outcome.
It is interesting to note, even though we have noted them before, Lord Justice Jackson’s comments on the interrelationship between his original proposals and legal aid. Lord Justice Jackson stated this again recently, within the last two to three weeks. He said in his report:
“Legal aid is still available for some key areas of litigation, in particular clinical negligence, housing cases and judicial review. It is vital that legal aid remains in these areas. However, the continued tightening of financial eligibility criteria, so as to exclude people who could not possibly afford to litigate, inhibits access to justice in those key areas. In my view any further tightening of the financial eligibility criteria would be unacceptable…I do not make any recommendation in this chapter for the expansion or restoration of legal aid. I do, however, stress the vital necessity of making no further cutbacks in legal aid availability or eligibility. The legal aid system plays a crucial role in promoting access to justice at proportionate costs in key areas.”
This issue shows the contiguous nature of legal aid cuts and the civil litigation reform. One prevents access to justice for the poorest, the other for the squeezed middle. That last bit is me, rather than Lord Justice Jackson—actually, I think it was originally my right hon. Friend the Leader of the Opposition.
The Government have made several suggestions in relation to clinical negligence cases. I wonder whether they are workable. Shared reports on liability are unlikely to be practical, given that the proposal is that they will be commissioned by the defendants themselves. The claimant will have no confidence that justice has been done in the event of a report that does not find negligence, even if it is correct, when it is the NHS itself, for example, that has produced the report. Moreover, that would occur in those cases in which the NHS Litigation Authority sees that the claim is likely to succeed, leaving a smaller number of higher-risk cases without medical report funding, except through ATE, which would not be viable, for the reasons that we have described.
Equally, one can consider disbursement-only ATE policies. Again, this matter will be dealt with in regulations. I would be grateful for as much guidance as the Minister can give us on how disbursement-only ATE policies will work in clinical negligence cases, because practitioners believe that as proposed by the Government, they are not commercially viable, given the high failure rate of clinical negligence claims. The screening process can weed out between two thirds and three quarters of claims pre-litigation. Assuming that medical reports were obtained in those cases to enable informed decision, under the Government’s proposals the recoverable premium in the one third or one quarter of cases representing the successful claims total would have to be sufficient to meet the written-off disbursement costs in the remaining unsuccessful cases. The premium for any operating costs or profit element would have to be three or four times the average cost of the report. Even if reports were obtained in an average of only half the cases to assess them, the premium would have to be double that average cost for the ATE insurer to break even. That is clearly an uneconomic option, and in any case it must remain in doubt if, by analogy, what is happening with the scope changes in legal aid is right.
It is all very well the Minister saying that the Government are cutting legal aid by 100% in some areas, and 60% in others, but that they are maintaining legal aid for the most desperate cases. However, practitioners and not-for-profit practitioners will not be able to function in that way. Similarly, it is difficult to see that when the ATE market has been virtually stripped out with only a tiny part remaining, it will be able to function at all. If it does, it is unlikely to be able to do so in this specific area.
Equally, on the loss of the ATE screening function, it is important to recognise the impact of the potential increase in unscreened claims that will result from removal of ATE recoverability. If a solicitor believes that a claim is worthy of pursuing, they will approach an ATE insurer to underwrite the claim. ATE insurers are very risk averse, given the high cost of such cases, and screen out a high proportion of solicitors who are considered to be viable, which I submit is contrary to the position with qualified one way costs shifting.
For example, in 2009-10, the last year for which figures are available, self-funding or BTE cases totalled 1,109, legal aid cases totalled 1,822, and CFA cases totalled 5,842. The success rate for damages was respectively 61%, 69% and 73%. That demonstrates that the checks in CFA cases weed out a higher proportion of unmeritorious cases than other forms of funding. QOWCS has no mechanism to deliver such a review, so even on those figures there could be at least 12% more unsuccessful cases under QOWCS, which the NHSLA would have to deal with at a cost, even if those cases failed to secure damages.
I am talking about perverse incentives under QOWCS to pursue weaker claims, and that is obviously particularly true in clinical negligence cases. ATE insurers act as an important brake on clinical negligence cases, screening out claims, as we have seen, that might otherwise be brought under the QOWCS scheme. QOWCS does not provide a deterrent to such cases. Indeed, if anything, it incentivises them as the impact assessment suggests. That is because QOWCS removes the check on claimants’ enthusiasm, represented by the risk of meeting the defendant’s costs, albeit covered by ATE. Even if they fail, such speculative cases will result in considerable extra costs to the NHSLA.
A calculation has shown that the actual additional cost to the NHS will be quite dramatic, and is a combination of NHS losses from reduced treatment cost recoupment, because clearly if there is less litigation with CFA, there will be less recovery of damages by injured claimants, who will then fall back on treatment by the NHS—which will not be paid for—and indeed on welfare benefits. There will also be NHS losses from unrecovered costs for unsuccessful claimants’ ATE policies.
The supposed savings in the Government’s rather thin impact assessment are predicated on the assumption that the number of claims remains the same. That will not happen for two reasons. The first is the loss of the screening function provided by the ATE insurer who weeds out less strong claims. The second is the perverse incentive under QOWCS to pursue weaker claims in the general absence of the costs risk of losing. The Government predict savings for the NHSLA from ending recoverability success fees and ATE premiums of £38 million and £19 million respectively, offset by £3 million extra in damages for the 10% general damages uplift. Overall savings are predicted at, of course the Minister’s £50 million figure, which is about 11% of the overall cost bill.
The impact assessment, however, makes it clear that the assumptions are based on the current level of cases, and that they do not take account of the incentivisation to pursue more cases under QOWCS or of the impact of the rule changes to part 36 offers. Moreover, they do not reflect the consequences of the loss of ATE screening from the proportion of cases funded by CFAs, which, from parliamentary answers, has been established to be two thirds of the current case load.
If, on a conservative estimate, only half of the claims that are presently weeded out by ATE proceed, the potential increase in claims will be up to a third more, because two thirds of cases are presently funded that way. Even if only half of those succeed, that would be an increase of just over 15% in costs on successful cases, to which should be added the additional damages in
If all those figures are put together, the additional cost is about £74 million. The cost of successfully defending claims will no longer be recoverable under QOWCS. The impact assessment has not accounted for the potential loss associated with QOWCS, which should also be added. Parliamentary answers have shown that defence costs over the three years to 2010-11 totalled £134 million for ordinary claims, and £43 million for periodic payment cases, which is an average of £59 million for each of the three years, including all costs.
The defence success rate was 34% over the past three years so, under the non-recoverability rules of QOWCS, the NHS would not recover the 34% of the total that it presently receives from the ATE insurers of unsuccessful claimants. That is a further loss of just over £19 million, based on current cost loads, which is also not reflected in the calculation. Of course, if the number of cases increases by a third, as is predicted, the figures will also increase pro rata to £26.35 million, which is not reflected in the overall total for the extra cases. That total should also take into account the loss of recoupment of NHS treatment costs, which I have already mentioned, and the reduction in recoupment of Department for Work and Pensions benefits.
The NHS reclaims treatment costs from the insurer of the person responsible for the injury, subject to an overall cap. Although that is not confined to clinical negligence, it is best referred to in the context of the impact on the NHS. Research has identified that there are approximately 600,000 CFA cases a year in total in all categories. Other research suggests a total of 850,000. The Government estimate that there will be 50,000 fewer cases, which represents 8.3% of the overall total, but our estimate is a fall of 25%, which is again a conservative estimate. In the year 2010-11, the NHS recovered £169 million in repaid treatment costs. On the Government’s figures, a fall of 8.3% would amount to a loss of £14 million or, on our estimate, a fall of £42 million.
I could go on. I can supply the figures, which are available in briefings, and the Minister may well have seen them. I have dealt with them in detail, because the Government are peddling a myth. They have a difficulty with part 2 of the Bill in looking for a cost saving, because in many of the areas of the law that we have covered there will clearly be no cost saving to the taxpayer. Indeed, if the figures for insolvency are correct, there will be a substantial cost to the public purse.
The one saving that the Minister can attribute is that in the NHS budget. I will talk in a moment about the legitimacy of bringing negligence claims against the NHS and the volume of such claims, but of course they also have a cost. I went through the figures in detail to show that, when they are broken down, it is quite likely that either through intended or unintended consequences the overall effect will be an additional cost burden on the NHS and certainly on the state as a whole.
I will deal briefly with the comments made by Action against Medical Accidents. I know that the Minister has met that organisation, and I have spoken at functions where both he and his ministerial colleague have been
“We believe it is wrong in principle to force solicitors to eat into the damages that claimants need and deserve in order to pay for a new system that the Government is imposing…Not only does this go against the well established legal principle that the claimant is entitled to damages to compensate him/her for the injury but serves to increase the likelihood of a conflict of interest arising between solicitor and client. We strongly support the principle is that the ‘polluter pays’. Further, no account has been taken of the situation where past losses are held in trust for another, such as where there is a claim for past care provided by a relative, the so called ‘gratuitous care’ claim…If the proposal to pay for solicitors’ success fees by allowing deductions from claimants’ damages goes ahead, the increase in general damages needs to be considerably greater to cover the expected rate of success fee…The Ministry of Justice has so far failed to explain how it can guarantee an increase in general damages in any case.”
“The Ministry of Justice accepts that in order to make the new arrangements for no win, no fee work and to make insurance to cover claimants from costs payable to defendants in the event that they lose unnecessary, people need not to be liable for the defendants’ costs. It proposes what it calls ‘qualified one-way costs shifting’. It is said that all but the very rich will benefit from this arrangement. However, either this arrangement should be available to all, or there needs to be a specific rule about what constitutes a degree of wealth such that a claimant would not benefit from ‘one way costs shifting’.”
“It is an essential component if access to justice under no win, no fee is to be preserved and should be on the face of the Bill. We believe that one-way cost shifting should be available to all, or at least there should be no uncertainty as to what constitutes ‘conspicuously wealthy’…the opportunity should also be taken for defendants to be incentivised to investigate and settle claims promptly where appropriate…Investigation of legal claims provides a powerful incentive for the NHS to improve safety and often results in vitally important lessons which would not otherwise come to light. This includes the ‘unsuccessful’ claims investigated under legal aid but dropped often for technical legal reasons, but which still uncover failings in care. Putting aside the human cost, just one additional successful clinical negligence case involving serious and persisting injury, as a result of weaker patient safety, could on its own wipe out the estimated annual ‘savings’ from scrapping legal aid.”
“relinquishing the degree of quality control afforded by the legal aid system for clinical negligence will throw the market open completely to non-specialist and less scrupulous solicitors and claims farmers.”
When we discussed legal aid, I quoted the NHS Litigation Authority’s views on the provisions. Its conclusion is not as the Government would wish; it does not enthusiastically embrace everything that they are doing. Its principal point in response to the Ministry of Justice consultation is its “serious concerns” about withdrawing legal aid from clinical negligence claims. It makes the point that I made this morning—that that is the cheapest way for the NHS to deal with such claims. It regrets that such a measure is part of this double whammy.
I shall conclude on clinical negligence by providing one or two case examples. First, a Mr Tunney sustained appalling injuries after being subjected to unnecessary
“The fact that the surgeon managed to remove perfectly health tissue rather than a sample of the tumour tissue is, in itself, an appalling error. To then find that the procedure was totally unnecessary because clinicians had failed to review a blood test really does add insult to injury. The failings of the surgeon involved are so serious that the family is calling on the GMC to investigate his actions. We also very much hope that the trust has reviewed its procedures and, where necessary, retraining has taken place to ensure that lessons are learned to protect patients’ safety”.
That is a good example of how vital it is that lessons are learned. If individuals are culpable, they should be dealt with in whatever way is appropriate, but a substantial sum of compensation should clearly be paid to those who suffer severely debilitating injuries.
Another example is Mr Leslie Dye, a taxi driver, who was stabbed in the neck by a fare but was left severely brain damaged after a hospital blunder. At the High Court, he won a multi-million pound award from the NHS trust, which admitted clinical negligence. The staff at Princess Alexandra hospital in Harlow in Essex failed to spot brain bleeding, which led to a cardiac arrest. Mr Dye is now totally dependent on others, and is cared for around the clock at the neurological centre in Hertfordshire. His counsel, Richard Barraclough QC, told the court that Mr Dye had to be taken to the hospital in 2003 after being stabbed in the neck. The Princess Alexandra hospital NHS trust, which will pay a lump sum of £850,000 in annual payments, starting at £109,000, has apologised.
I could refer to other cases, all terribly tragic and of the utmost severity and all of them leading to substantial settlements. Yes, the money comes from the NHS, and it would otherwise be spent on patient care. Nevertheless, however rare such cases may be, it must be right that the victims should have the opportunity to go to court—those who represent them believe that that opportunity is being threatened—and that adequate settlement should be made of the order that I have indicated.
I wish that we heard slightly less from the Government about money that is being “wasted” in CFA litigation. If the Minister believes that money is being wasted—that too much money is being taken out of the system by lawyers—he should address that matter. It should not be used as a cover for ensuring that people with meritorious claims, particularly for injuries of the utmost severity, do not receive adequate compensation and may not even get their cases to court.
There is some confusion, but as it is relevant I shall mention another matter. It is the talk given by Lord Justice Jackson on 5 September, and the Minister may wish to comment on it. Lord Justice Jackson was talking
“First, there is practicality. I do wonder whether ATE insurers will be willing to provide insurance cover for the cost of expert reports in respect of viable cases on the terms envisaged in section 58C(2) to (5). The answer to this concern may turn out to be that they will be willing, provided that the price is right. Therefore my first concern may not turn out to be a fatal objection. However, if the first concern is not a fatal objection, the proviso which I have just mentioned certainly reinforces my second concern.”
Lord Justice Jackson’s second concern is cost. He indicates that the draft regulations that will introduce the recoverable ATE premium will have the difficult task of setting premiums at a level that will attract ATE insurers but not admit undue reward. He also mentions targeting and complexity, but none of those matters appears to be adequately addressed in what the Government propose.
I shall leave clinical negligence because I think that we have spent enough time on it. I could give more examples and cases, but my point has been reasonably well made, so I will move on to two other areas––more briefly, as I know my hon. Friends have other issues that they wish to raise. First, there is the question of small businesses. Now, that is not an area of law—it is not clinical or professional negligence—but it is very pertinent. We raise it specifically because the Government have commented—do not ask me exactly where: if the Minister is asked, so be it—that they believe that the way the current litigation costs work is unfriendly to small businesses.
The opinion of many small businesses and of their representative organisations is that CFAs provide, in many cases, the only opportunity to get meritorious cases to court. That could often be because they are up against larger and better funded companies, or even individuals for whom they have provided a service.
Someone came to one of my surgeries recently, having in good faith invested his savings in a retail outlet—a takeaway. He had been paying rent to the landlord, or the person purporting to be the landlord, and had spent some £10,000 on equipment. He began to trade successfully in Wandsworth high street. He paid his rent and disbursements regularly, only to find out that the person representing himself as the landlord was in fact an intermediate landlord, with a short lease from the actual landlord, which was a respectable company. That person was not paying his rent to the landlord.
The outcome, however, was not the eviction of the intermediate landlord: by somehow persuading bailiffs to enter the property and change the locks, he had my constituent locked out, so he could no longer trade. My constituent had staff whom he had to lay off. Then he found that the equipment in which he had invested had mysteriously disappeared. He found that the intermediate landlord, believing that he would get a higher rent, was seeking to rent the shop to a new owner.
All sorts of legal issues arise, but the police are unlikely to get involved in most of them. They would say that on the whole it was a civil matter: I am not sure whether that is true, but it is what they would say. Therefore my constituent needs to go to law. He will clearly not get any joy out of the intermediate landlord. The actual landlord is sympathetic but will not act; the company is more concerned about getting its rent. The
It is not easy at the moment, but I think it will become far harder for someone in that position to find representation, and if he cannot find it, frankly that is it. Unless his remedy is self-help, which is perhaps not advisable on such occasions, he is stuck. A rogue has interposed himself in a situation where my constituent has acted in good faith, yet he has no redress.
Other examples might be a small engineering components company in the motor industry, without the resources to pursue a dispute with a large multinational car manufacturer, which unfairly refuses a shipment or fails to pay over a quality dispute; a farmer in dispute with a supermarket chain that claims that his produce does not meet the required standards; or a small business in dispute with a major utility company that refuses to budge over an unjustified and excessive bill.
I hear about such cases all the time, involving major corporations—utility companies are particularly obdurate, and just do not want to know. It is all very well suggesting that people write to the chief executive, or get their MP to do it. Frankly, some of those unaccountable bureaucracies are not interested. They have a regular revenue stream from us, the consumers, and when they get things wrong they are almost impervious to persuasion.
They are not, however, impervious to legal action, but it is almost impossible to get to court against a company of that kind given the risk that is entailed without CFAs. I am not saying that it is a discrete area of law, but it is common sense and an area that I hope appeals to Government Members, who say that they have at heart the interests of small businesses.
My seventh and final area is judicial review, for which legal aid will remain available in part, but again it is subject to means and other restrictions. Judicial review is subject to the art of pre-action protocols, to weed out unmeritorious cases. There are cases, however, in which a decision, in this case by the state or an emanation of the sate, needs to be challenged and in which, again, the typical costs of bringing a judicial review are £10,000 to £20,000. Regardless of the requirement, if one loses, to pay a defendant’s costs, which may take the bill up to £30,000, that is not something on which anybody is likely to embark. In this respect, however, we have not only the common sense view that the citizen should be able to challenge the state, but obligations under international law. We also have the Aarhus convention and we may not be fulfilling our obligations thereunder if we go down this route. I do not think that I need to quote from it, because the issue is self-evident.
My final point on judicial review relates to what Lord Justice Jackson has said. I respect entirely his judgment on these matters. He wanted his proposals to be taken as a package. He had alternative proposals, but essentially he put forward his case as it was and did not resile from it in many cases, one of which was judicial review. His recommendations were that
I think that I have run my course. The common theme in these cases is that CFAs and ATE premiums are, at present, the mechanism by which those on low or moderate incomes, or those who cannot match the resources of the party that either they are suing or that is suing them, can level the playing field. It has been a surprisingly effective method. There was a great deal of scepticism in the profession and elsewhere about CFAs when they were introduced, but I think that that has been proved wrong. That does not mean that CFAs are perfect. We have never said that. Neither have we ever said that the system may not need to be changed wholesale at some stage. Before the whole system is junked after 15 years of experimentation and litigation and of improving the systems—we have discussed the ways in which they are now being restrained via the curtailing and curbing of costs in all the major areas of expenditure, and there is a prospect of more of that to come, of more control through portals and more control by limitation on recoverable fees, let alone referral fees and all that go with them—why are the Government deciding to take a step in the dark?
The Government may think that it is a quick and dirty solution to a number of problems and they do not have the will, wit or resource to tackle those problems, or they may have a wider agenda that, as many commentators have noted, involves a retrenchment of access to justice. That manifests itself not only in part 2 of the Bill but also in part 1, and can be seen in the court closure programme and in 101 different Government initiatives that will not restrict the right to litigate willy-nilly or to always obtain representation if one does not have the means—that is a caricature of the current situation. Instead, those initiatives affect a person’s ability to fall back on the law, having tried every other course of action, and obtain access to representation and justice in claims that range across the piece and are not confined, as the Minister would have us believe, to road traffic cases about which there are proposals to control anomalies and abuses. The provisions cover all the areas I have indicated, and some of those that my hon. Friends are about to indicate. That is why we would like specific answers on all the points raised. I hope that the Minister will confound my opinion of him, and my belief that he is simply finding a quick and dirty solution, and that actually he has considered each area of law carefully and scrupulously and is using the scalpel rather than the sledgehammer. At the moment, however, I remain profoundly unconvinced.
Kate Green (Stretford and Urmston) (Lab): It is a pleasure to participate in the debate under your chairmanship, Mr Sheridan. Let me endorse my hon. Friend’s comprehensive remarks, and point out that they cover seven different areas of law—that averages out at a little more than 10 minutes per subject area. I will speak to amendments 202 and 203, which deal specifically with claims relating to industrial illness and disease. Before I get to the substance of my remarks, let me put on record my gratitude to the Greater Manchester Asbestos Victims Support Group. It has provided me with extensive briefing, and representatives from that
There is a special interest in that subject in my constituency and, I suspect, in those of a number of other hon. Members with a strong industrial tradition and history. My constituency is home to Trafford Park, the largest industrial estate in Europe. At one time, it employed something like 500,000 workers across a range of heavy industrial activities that went back to the beginning of the 20th century. At that time, standards of health and safety in industrial premises were lower, but none the less, it was realised early on that asbestos, and handling asbestos, presented special risks. Several companies in Trafford Park employed substantial numbers of people from my constituency and the Greater Manchester area, and—regrettably—over decades, asbestos-related illnesses have been the result.
I want to pay special tribute to one of my constituents, Mrs Elaine Haskyns, who came to see me shortly after I was elected to talk to me about the scandal of asbestos-related illness in the community I represent. She spoke to me about her husband who had died in 2005 from mesothelioma that—as she stressed—he had contracted, although in fact it had been imposed on him due to the nature of his work. He had worked all his life in industrial settings, and had frequently worked overtime to support a growing family. As Mrs Haskyns put it, “He did not go to work to die.” Yet, shortly after he retired, he regrettably took ill and did not live to enjoy his retirement, as a result of this terrible disease.
These illnesses are extremely cruel, with sufferers losing the ability to breathe because their lungs become totally congested. The onset can be sudden, even though the circumstances that gave rise to the condition might have occurred many years or decades before. The diseases can be identified quickly and death can follow swiftly. Mesothelioma is always a fatal disease; no cure has been found. Just when people should be enjoying their retirement they can be hit by this appalling illness, and just when their families are looking forward to having more time with them, they can lose a loved one. I stress that it is not just people who have worked in industrial settings who can be subject to the diseases. There are cases of family members affected because asbestos dust was brought into the family home on work overalls or equipment.
It is also important to note—I did not appreciate this until the Greater Manchester support group began to work with me—that the risk of contracting these asbestos-related illnesses remains to this day, and will stay with us for decades to come. Although we are now much more aware of the risks of asbestos, and its use in new buildings and settings is outlawed, many buildings, including hospitals and schools, still have asbestos within them and the risk levels remain high because of the handling of the material when buildings are renovated or demolished.
The problem is not going to go away in any short order, and it is therefore important not only to have a legislative and legal framework that properly compensates people who have suffered these appalling illnesses through
Mr Robert Buckland (South Swindon) (Con): The hon. Lady speaks with extreme cogency about asbestos-related diseases such as mesothelioma, and she rightly points out that in industrial areas such as the one she represents there is a prevalence of such cases, as there is in respect of the industrial heritage of Swindon that I represent. They can be triggered by innocuous things such as influenza or colds, with minor influenza triggering the diseases long after the period of employment.
I hear what the hon. Lady says about the importance of public safety and employer awareness. Does she agree that the legal aid changes back in 1999 dramatically altered the picture with regard to access to justice, and that the problem I think she is about to describe relates to cases in which the proportion of damages would be special damages, for the particular heads of loss of earnings or pension rights, and that her concern is based on the inadequacy of the 10% uplift in general damages in dealing with those heads of the claim? Am I right in my assessment of her position?
Kate Green: I am grateful to the hon. Gentleman. He raises a detailed point. My understanding is that there is a concern that damages generally can be low in such cases, and insufficient therefore for success fees and after the event insurance premiums to be taken out of the compensation awarded. I also understand—I am sure that all hon. Members will appreciate this—that the costs of pursuing such cases can be quite high. Finding the evidence can be difficult, as with some of the issues that I was discussing this morning. Sometimes years pass before a disease is identified. Over that time, employers can go out of business. Even household names of 20 or 30 years ago, let alone 40 or 50 years ago, can disappear. The insurers that provided cover for those employers at the time that they were in business sometimes cannot be traced. We also have complications in cases where people work for a number of different employers in different industrial settings. Some 20 or 30 years down the line, it could be quite difficult to attribute where the blame or fault lies or where the negligence took place. Despite the simplicity of cause and consequence at a superficial level, there is an underlying complexity in such cases, which bring with them a need for detailed investigation and medical and industrial reports. Costs are therefore often high.
Helen Goodman (Bishop Auckland) (Lab): Like my hon. Friend, I have a constituency with a large industrial heritage. When we did the arithmetic on the number of people with such claims in my constituency, 6,000 were being processed. Many of those people had been miners, and some had worked in shipbuilding and in the steelworks in Consett before they were closed by the previous Tory Administration. Does she agree that a great concern with the cuts is that many people acquired such diseases while working in nationalised industries? Because of that, the Government and the nation as a whole have a particular duty of responsibility to such people.
Kate Green: My hon. Friend makes a good point. The history in my own constituency was more with private enterprises, but I take her point. Our nationalised industries of 40 and 50 years ago have also largely been disbanded and broken up into numerous individual private enterprises. That will add to the complexity of identifying where responsibility for any early negligence may lie. The Government’s proposals on capping success fees and taking such fees and after the event insurance premiums out of compensation fail to recognise that as a consequence people will not be able to go to the law or access justice in those cases.
The Access to Justice Action Group also points out that the changes are unnecessary, because most cases are already covered by the fixed costs regime. Introducing such changes will destabilise it and leave some serious cases unfunded. The changes fail to recognise the costs and risks that are involved in claims regarding serious industrial disease, which are different from, say, a simpler road accident case. It is important to acknowledge that success fees are calculated as a fixed percentage of base cost. That is a different fixed percentage for different kinds of case, designed to make it possible to take cases that have a higher risk. As I was saying in response to the hon. Member for South Swindon, taking ATE insurance premiums and success fees out of compensation will deplete what are the often relatively small amounts received. The consequence for claimants is that the financial risk that they would face for pursuing legal action is simply unacceptable.
Although a disease can be caused by events many years earlier, it can progress swiftly from the moment of diagnosis to death. I was interested in the Minister’s answer this afternoon at Justice questions to my hon. Friend the Member for Chesterfield (Toby Perkins). He said that he would look at how some of the cases could be speeded up. I very much hope that this afternoon the Minister will take the opportunity to tell us more about what exactly he is looking at, because AJAG says that fast-tracking is rarely possible when there are fixed costs and non-recoverability of success fees as the cases are so unpredictable. It also makes the point that multi-track cases will not even be considered by lawyers as suitable to take on, because even if they cherry-picked cases, they would need to undertake substantial preliminary research and investigation in order to determine which would be most likely to succeed.
The current system of success fees and after the event insurance is a prerequisite of such cases being able to go to law. Without that, they simply would not be affordable, and that would be deeply unjust to hard-working people and their families. That perhaps explains why the proposals have caused great bitterness and anger among my constituents and other members of the Greater Manchester support group.
Over the past few months, the group conducted a survey in which victims and their families were asked for their views on the Government’s proposals. I am sure that other hon. Members have seen the 12 pages of comments that I received—so far, 135 separate comments. I understand that comments are continuing to come in to the support group. Let me pick out a few. I shall certainly not read out all 135:
Earlier this summer I was privileged to attend the Action for Mesothelioma annual public meeting held in Manchester. Talking to some of the families really brought home to me not only their determination and dignity but the scale of the hurt, anger and injustice. They were a wide range of working people, whom I am very proud to represent. If the proposals go ahead, those working people will not be able to afford to go to law. The compensation that they receive will be eaten up by costs. They will be forced to rely instead on the Government’s compensation scheme, which offers a maximum of £16,000 to sufferers if they do not get compensation through the courts. I know that the Minister has in the past exhibited interest only in costs in his own Department, but can he tell us what assessment he has made of the increased costs borne by the Government compensation scheme if people do not go to law? Can he tell us what costing has been done? Which Department will bear that cost, if not the Ministry of Justice? What discussions has he had with ministerial colleagues?
Helen Goodman: I can help out not only my hon. Friend but the Minister. The Department for Work and Pensions will bear the cost. It would be interesting to know whether that has been discussed with the Department.
In conclusion, sufferers from asbestosis, mesothelioma and other conditions will face huge uncertainty about their prospects if the proposals go through unamended. They will be forced to put their personal assets on the line. As one of the respondents to the survey said:
The respondents to the survey are outraged that their legitimate claims are being conflated with the Government’s rhetoric on frivolous claims for compensation. There is nothing at all frivolous about suffering from this appalling disease. There is no compensation culture in relation to these claims going through the courts. Modest sums are recovered for a very deeply distressing and life-threatening illness that people have contracted through no fault of their own.
I hope that the Minister will be able to offer some reassurance that he and his colleagues will be thinking about ways to secure and ensure access to justice for those families. I look forward to hearing his remarks. [ Interruption. ]
The Chair: Order. Before I call the next speaker, I must say to Mr Gummer and Mr Wallace that your conversations are becoming longer and louder and you are showing great discourtesy to the rest of the Committee.
Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC): I shall confine myself to the area of environmental damage. This morning, the hon. Member for Stretford and Urmston spoke very passionately and to great effect about such actions happening abroad in developing countries. However, we can also look nearer home. In many industrial areas in the United Kingdom, people’s lives have been blighted by developments of large industrial corporations. I would like to confine myself briefly to a few remarks about that.
“I accept that private nuisance claims sometimes involve parties in an asymmetric relationship: for example local householders suing a sewage works. However, this is not always the case. Furthermore householders can take out BTE insurance against the costs of such claims, if they choose to do so.”
I have spoken with several firms of solicitors who specialise in this kind of work and, contrary to popular belief, before the event insurance is almost never available in those cases due to various policy restrictions and exclusions, such as having to report something within three months. In cases that have been handled to date by such firms—I have spoken to one recently—fewer than 1% of households have successfully taken action under before the event insurance. Therefore, with great respect to Lord Justice Jackson, confidence in the reference to before the event insurance is somewhat misplaced.
Of course, the importance of environmental issues is plain for all to see. It is particularly important now given the very recent changes, or those that are afoot, in planning law practice, which some say could be carte blanche for developers. However, ensuring access to justice in these cases, which I broadly refer to as environmental cases, is vital. Private residents, who are usually in downtrodden areas, should be able to enforce their long-established common law rights to protect their home life and environment against a corporate defendant. The majority of cases are settled under terms of confidentiality that provide for compensation for residents and involve detailed agreements with defendants, resulting in works of abatement to the blight complained of.
Those cases will also help to relieve the pressure on hard-pressed regulators who are commonly unable or perhaps sometimes unwilling to take action. They also enable claimants to enforce their human rights as enshrined in the European convention on human rights. Article 6 enshrines the right to a fair trial; article 1 of the first protocol protects the right to peaceful enjoyment of possessions and property; and article 8 encompasses the right to respect for private and family life.
“This case raises important issues of general public importance in the question of whether a company that has a permit to engage in landfill near a residential area and who complies with its permit and is not negligent in its work can be liable in nuisance by private landowners who assert that the odour inevitably resulting from depositing waste in the landfill is a nuisance.”
That case would not have been brought without a contingency fee under the present arrangements, which it is sought to change. There are numerous other cases of general importance in the body of environmental law.
The fact that cases are successfully handled on conditional fee arrangements is evidence that at present the requirements of the third pillar of the Aarhus convention are met, ensuring that the public have the right to recourse to procedures in cases where a party violates or fails to adhere to environmental or convention principles without prohibitive cost. The United Nations Economic Commission for Europe via the Aarhus convention, to which the UK is a signatory, can commence proceedings against the UK in the European Court of Justice, and has previously found the UK non-compliant with the convention.
If the proposed reforms go ahead as currently drafted under clauses 41 and 42—the non-recovery of success fees at the previous rate and after the event premiums—residents will be unable to bring cases of this nature as the cost of doing so will inevitably become prohibitively expensive. Claimants in such cases are often of low or at best average means. If faced with the prospect of running the risk of adverse costs in a case against a limited company or having to meet a substantial ATE premium, only the very wealthy are likely to be able to proceed.
The primary objective of such cases is to secure an abatement of blight. Damages in nuisance cases are at such a level that even if claimants bring cases as part of a group action, they can generally never expect to be in a position to meet even a fraction of the cost of an ATE policy from damages, let alone any success fee that might be payable to their solicitor.
The proposed reforms would therefore mean that claimants would be unable to enforce their long-established legal rights. There would be additional pressures on regulators. Claimants would be unable to enforce their human rights, as I noted earlier, and it is possible that the UK would be in breach of the Aarhus convention, which is the main convention in this area of law.
The Government should consider the matter very carefully, bearing in mind the remarks of the hon. Member for Stretford and Urmston with regard to mesothelioma and the toxic occurrences that give rise to awful illnesses. It is important that we reconsider this area of law. There has been little consideration, and exclusion would clearly be warranted in relation to an environmental case. There is no reason in principle to treat claimants in such cases less favourably than foreign nationals pursuing toxic tort cases, or indeed claimants seeking damages for whiplash or other personal injury. There are, in fact, important policy reasons to ensure access to justice in that area and to ensure national compliance with Aarhus.
I do not intend to delay the Committee, except to say that I have been in discussion with several firms of solicitors, one of which is Hugh James of Cardiff and the south Wales valleys—a well-known and highly regarded firm of solicitors. The hon. Member for South Swindon is nodding his head. He is well aware of the firm’s work. It has typically embarked on landmark cases against,
The firm has lobbied hard on such matters, and has not been self-serving. The landmark cases establish and preserve people’s legal rights in an important way, and are creating a body of law. Environmental law is becoming more important and, unless it is amended, the Bill will be a brake on that progress. It will undo a great deal of good work by firms such as Hugh James, which is willing to litigate with vigour on behalf of claimants, who are vulnerable people in the main and who really require those excellent services.
By the way, Hugh James was the lead firm of solicitors that established compensation for coal miners suffering from knee injuries and so on. It has a long, honourable track record. I am not just blowing the firm’s trumpet. I am making the point that environmental law seems not to have been considered carefully in the context of the proposals. It should be a special case, because it will have application way beyond individuals. Whole communities in industrial areas will need to come together to put matters right, and there is a real fear outside this place that the proposed changes to planning law will exacerbate an already difficult situation for many people.
I agree with everything that has been said by the hon. Members for Stretford and Urmston and for Hammersmith. I associate myself with what they said earlier. I needed to put the matter on the record, and I believe that it will be considered seriously in the other place. I hope that this debate will form a trigger for that further and probably longer debate.
Karl Turner (Kingston upon Hull East) (Lab): I rise to speak about amendments 198 and 214 to clause 41, and amendments 199 and 215 to clause 43. First, it is fair to tell the Committee that I have been helpfully assisted in preparing my speaking notes by the briefing prepared by Consumer Justice Alliance. I do not want to be criticised by those on the Government Benches for having the audacity to read out briefings prepared by various organisations, which, in my view are expert at their work. If I were to criticise any aspect of the briefing, it would be its title: “Bitesized note for MPs and Peers”. I am sure that the Minister will have read it and found it instructive.
Clause 41 amends sections 58 and 58A of the Courts and Legal Services Act 1990, which regulates conditional fee agreements. The effect of the clause is to remove the recoverability of success fees from losing parties in proceedings. Such fees will be taken from claimants’ general damages should they win, but will be capped at 25%.
Two matters arise: first, it is wrong to take a quarter of a bereaved family’s or injured person’s compensation; secondly, a 25% cap on general damages will make it economically unviable for many legal firms to take on cases. Damages are paid to restore the injured party, as near as is possible, to the position that they were in before the tort that led to the claim. The Government seem to struggle with that concept—they regard damages
Amendments 198 and 214 aim to improve the Bill by building on the concessions already made by the Government to Lord Justice Jackson’s recommendations on clinical negligence cases. I welcome the Government’s recognition that some cases involve complex, costly, protracted investigations and that such cases should be excluded from the clause. In their response to the consultation, the Government were concerned about the high costs of expert reports. They stated that they needed
“The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for death or for physical or psychological injury resulting from breach of any duty owed by an employer to an employee.’.”
That would be an important addition to the Bill. The serious lifelong financial implications for bereaved families—if the breadwinner dies, for example—cannot be overstated. Similarly, employees who have suffered physical or psychological injury as a result of their employers’ negligence may need bought-in care for the rest of their lives. It cannot be right that such victims must contribute to the costs of their cases out of their hard-won compensation. The legal bill should fall to those responsible for the act or omission leading to the claim. Lord Justice Jackson’s recommended 10% uplift to damages will not soften the impact of the change, because 10% is insufficient, especially when it is balanced against the 25% reduction from damages for the solicitor’s success fee, which a successful claimant must pay.
Clause 41 will restrict access to justice for those who have suffered bereavement or injury at work and cannot afford to risk paying their own legal costs. It will deter people who have limited means from taking on the legal might of employers such as Departments, local authorities or other large corporations. According to evidence submitted by Thompsons solicitors:
I agree. They would include many employment cases. The complexity of proving liability for psychological injury suffered at work may take years and will require complicated medical reports and assessments. Such cases are enormously difficult to prove. For example, if a claimant is taking on the might of the Ministry of Defence and it denies any wrongdoing—as the Minister accepts, that is often the case with most litigators—the size of the task for any victim is clear.
Many of those who are denied access to a lawyer in employment cases may go it alone; they may have no choice but to try and fight for financial compensation if they have been paralysed for life at work and can no
Under the current system, the cost of treatment for injuries and lost wages can be claimed from employers through successful claims for general and special damages. If clause 41 remains unchanged, many more people will become reliant on the state for benefits and treatment, and that will place additional pressure on the NHS. At best, the Government have recognised those points but ignored them, or—worse—they have failed to understand them.
Thompsons solicitors has provided many examples, but one, the case of Gary Corcoran, is particularly relevant. Gary was employed by a car manufacturer and suffered a head injury caused by unsafe machinery at work. He states:
“My injury will affect me and the people that I hold dear for the rest of my life. I will forever be a different man after an accident that was not my fault…I had the support of my…solicitor in facing a big business that denied responsibility from the very beginning and tried to silence my voice. Without professional help I would not have been able to get justice and my employer would not have introduced the safety precautions in my workplace that they did. Under the government proposals the next person injured will not get justice.”
As I said, I welcome the Government’s recognition that some cases such as clinical negligence are complex and require expert input at an early stage. When speaking with solicitors who practise in this area of law—I did not—they tell me that expert reports are often required to allow the solicitor to assess whether the claim has any chance of success, and they advise the client according to those situations.
I urge the Government to go further and recognise that just as clinical negligence cases are complex, other cases such as those involving carbon monoxide poisoning or accidents in the workplace often require expert reports at an early stage, and the costs for that will no longer be recoverable. I hope that I have fully expressed my opinion that the Government should exempt some employment cases from the provisions in clause 41. I will now set out why they should also exempt some consumer cases.
Amendment 214 would insert—at page 29, line 21— proposed new subsection (2A):
“The amendments made by subsections (2) and (4) do not apply in relation to proceedings in which—(a) one party is an individual who has purchased, commissioned or ordered goods or services from the other party, and (b) the other party is in business to provide such goods or services, and (c) the success fee is part of a conditional fee agreement made by the party referred to at (a) above.’.
Consumer cases do not necessarily evoke the same images as a bereaved family or the family of a paralysed worker. Yet many people have their lives destroyed when goods or services are negligently sold by businesses that supply them. I am in danger of reiterating points that I have already made, which I do not want to do, but I hope that the Government will take my representations seriously.
On amendments 199 and 215, I have already stated that the Government should reconsider exemptions regarding proposals for CFAs in complex employment or consumer cases. I urge the Government to consider the same scenarios in relation to ATE insurance premiums. Clause 43 will repeal section 29 of the Access to Justice Act 1999, which provides that ATE insurance premiums are recoverable from the losing party. The effect of the clause will be that the cost of any insurance policy taken out by a party to insure against the risk of having to pay their opponent’s costs and own their disbursements, if they lose, cannot be recovered from a losing party except in certain limited circumstances. The rationale for the amendments is underpinned by the fact that those insurance premiums would simply be out of many people’s financial reach. The cost of premiums for ATE policies can run into thousands of pounds, which is out of reach for most ordinary people. Under the Government’s proposals, the entire cost of the premium will instead be taken from the injured person’s compensation.
Another important point is that ATE premiums are often a filter for unmeritorious claims. Solicitors have systems for checking whether a case has any credibility or might be successful, but insurance companies will also consider the legal case to check whether it has a real chance of success. I doubt whether the Government have taken that on board in drawing up the Bill.
Mr Djanogly: The debate has been full and lengthy. Many specific points of interest have been raised, which I shall address after I have made some general points about the Government’s position on funding civil litigation.
Amendments 196 to 215 seek to disapply clauses 41 and 43 in respect of certain civil claims or, in some cases, the parties involved in those claims, thereby retaining the recoverability of CFAs, success fees and ATE insurance premiums from the losing parties in those cases. Amendments 200 and 201 would apparently maintain the recoverability of success fees and ATE insurance premiums in all personal injury claims. Personal injury is by far the largest category of case in which CFAs are currently used, and exempting such claims from the changes would undermine the overriding objectives of the package of reforms, which are to make the costs of civil litigation more proportionate and to deter frivolous claims.
The other amendments would disapply clauses 41 and 43 in privacy claims, employer liability claims, disease and illness claims, professional negligence claims, insolvency proceedings, clinical negligence claims and judicial review. Amendments 212 and 213 would allow smaller businesses to recover success fees and after the event insurance premiums in claims against larger businesses. Finally, amendments 214 and 215 would retain recoverability for individual consumers against businesses.
Let me first point out to the hon. Member for Hammersmith that the Government are not legislating in haste, as he said earlier. Lord Justice Jackson carried out a year-long review and the Government then carried out a full 13-week consultation. We have carefully considered responses and we are in ongoing discussions with all key stakeholders on the detail of the rules and regulations. I should add that a difficulty with the proposed amendments
Rather than start with the not unimportant but relatively small number of human rights claims, defamation claims, environmental claims or clinical negligence claims, let me tell hon. Members a very simple story identifying a case that represents the vast majority of claims: low-value motor vehicle claims. The following e-mail came in from a solicitor. I do not know who he is, but I can tell hon. Members that I have had many such e-mails. He wrote:
“Someone went into the back of my car a while back and I suffered no injury whatsoever. My car was repaired, the guy paid and all good. Then approx 9 months later I get a phone call out of the blue from someone stating I was to be paid £3,000 if I would sign a form as this was standard in the circumstances. Of course, I said, ‘Compensation for what?’ and they replied, ‘This happens anytime anyone gets in an accident.’ So I asked to speak to the supervisor…asking on what basis this compensation was based. He said, ‘Your injury.’ I said, ‘I don’t have one.’ He said, ‘Doesn’t matter.’ Of course, I told him to poke off as I was a lawyer, this would be a claim without basis etc…but I was astonished.”
In response to the hon. Member for Hammersmith, I should say that, of course, the Government are business friendly. However, it is just as important to note that the main beneficiaries of our proposals to cut excessive litigation will be, for instance, the ordinary honest motorist whose insurance premiums have increased by 40% in the past year. The ABI has said that CFA reform combined with a ban on referral fees will reduce premiums. I do not think that the country is with the hon. Gentleman or his party on this issue. If he had stayed in the Chamber earlier today to hear his right hon. Friend the Member for Blackburn (Mr Straw), he would have heard some good sense on the issue coming from his party.
Mr Slaughter: I was at a speaking engagement, which is why I was not in the Chamber between first orders and Committee. I will read what was said with interest and I have no doubt that I will approve of what my right hon. Friend said because, as I indicated very fully in my comments this morning, he is leading the Government by the nose on these issues. Although the Government may quarrel with some of the details of the clauses of my right hon. Friend’s Bill, I hope that they will indicate that they will support it because it will remedy real problems in the industry and in the claims system. The Minister has elided that into referring to the entire system. The following is an example from the insurers Aviva going back to two years ago:
“the insurer has computer-modelled Jackson’s final report and found that civil litigation costs under the proposed system would increase, rather than fall as intended. He said the extra costs would have to be passed on to all policyholders in the form of higher premiums.”
Mr Djanogly: Perhaps I sense some consensus coming to the Committee. That is all to be welcomed, as are the comments of the shadow Secretary of State for Justice, who apparently said that it is difficult to disagree with Jackson.
The hon. Gentleman also touched on the issue of what businesses think about these proposals. Businesses are calling on the Government to take action, as we are doing in this Bill. A leading supermarket responded to our consultation to say that the average cost paid out to claimants for slips and trips increased by 40% between 2005 and 2010 and that 60% of the money paid out goes to claimant lawyers and only 40% to the injured party.
The Federation of Small Businesses supports the proposals, too. It says that no win, no fee is not the answer and is not used for the majority of small business litigation. Its internal research suggests that its members use the small claims track in the county court more often than any other means of resolving litigation. We have recently consulted on increasing the small claims track outside of personal injury and housing disrepair, which would be more good news for small businesses.
I have considered the amendments individually. Our proposed changes to the conditional fee agreement arrangements are intended to apply across all areas of civil litigation where CFAs are used, particularly where success fees and ATE insurance are available. That is not an oversight or an unintended consequence but the intention of the policy and of Lord Justice Jackson’s recommendations. I should emphasise that Sir Rupert did not recommend that any area of civil litigation should be exempt from the CFA changes. It is important to note why his report was commissioned by the senior judiciary, which led to Sir Rupert’s extensive year-long investigation and report. It was because of a widespread concern that the cost of civil litigation had become unsustainable. Sir Rupert found that these high costs were fuelled in large part by the CFA regime, with recoverability introduced by the previous Government under the Access to Justice Act 1999. There was a warm reception by the then Labour Government to Sir Rupert’s report when it was published in January last year. That support has been maintained by the right hon. Member for Blackburn. However, the current Opposition Front Bench now seems to be less concerned about tackling the high cost of civil litigation and the consequential impact for all claimants and defendants of civil litigation and all those who pay for it, including taxpayers, council tax payers and insurance premium payers. The situation is such that the current Opposition seem determined to reject these proposals in every regard and basically ignore the problems that have come out of its 1999 legislation.
We have departed from Sir Rupert’s recommendations in one important aspect—on allowing the recoverability of ATE insurance premiums in respect of experts’ reports in clinical negligence cases as provided for in clause 43. This exception was the result of representations
Aside from that one exception, we agree with Sir Rupert and the Lord Chief Justice, the Master of the Rolls, and the other senior judiciary who agree with him that the cost of civil litigation under CFA has become too high and that these proposals are the right way to address the matter. Sir Rupert’s recommendations and his comments that recoverable success fees are the worst possible way to tackle the problem of funding litigation are intended to apply across the board.
It is worth emphasising that recoverable success fees and ATE insurance premiums do not exist in any other jurisdiction in the world and are major contributing factors towards the current high cost of civil litigation in England and Wales. We are not currently persuaded that there should be additional exceptions.
I should point out to Scottish members of the Committee and anyone who practises in Scotland that Scotland has never allowed for recoverability of success fees and has a system of CFAs or what it calls speculative fees that is somewhat similar to the system proposed in the Bill.
Our intention is to discourage unnecessary or frivolous claims and to make the cost of all civil cases more proportionate to the sums and matters at issue. Those objectives are not limited to particular classes of litigation. For example, it is not just in low-value personal injury claims that the current CFA regime encourages disproportionate costs, but in all cases where CFAs are used. We certainly do not see damages as being some sort of lottery, as the hon. Member for Kingston upon Hull East suggested. Under our reforms, people will still be able to bring cases on CFAs in areas where they are currently used. In effect, we are returning the CFA arrangements to their original form. They worked satisfactorily when they were first introduced in the mid-1990s, prior to the disastrous reforms initiated by the previous Administration in 1999, which provided the mechanics for the compensation culture that this Government are determined to reverse.
This Committee is concerned with the provisions in the Bill, but I remind it that we will be implementing other provisions through amendments to the civil procedure rules, and secondary legislation, as well as banning referral fees, which together form a package of measures aimed at reducing the volume of unworthy claims and reducing the high cost of litigation by evening out the position between claimants and defendants. In effect, access to justice must apply to defendants as well as to claimants.
Significantly, we are also introducing measures that will help claimants to pay solicitors’ success fees and, if necessary, ATE insurance premiums. There will be a 10% increase in damages for non-pecuniary loss such as pain, suffering and loss of amenity. In personal injury claims there will be a cap on the success fee that a lawyer may charge, which will be set at 25% of damages awarded, excluding damages for future care and loss. That will help to protect the claimant’s damages.
I particularly want to pick up the Minister’s point about the 10% uplift. In some 97% of cases covered by my amendment, defendants make an offer, and that covers all aspects of the claim. It would be impossible to know in such circumstance whether there has been an uplift. I would like the Minister to explain how that will work to secure justice for claimants in such cases.
We are also introducing a system of qualified one way costs shifting in personal injury claims, so losing claimants will generally not have to pay a winning defendant’s costs, which in turn will avoid or significantly reduce the need for expensive ATE insurance products. We are introducing a package of reforms to operate across the board, and I turn to the individual points and areas of claim raised in the debate.
The hon. Member for Hammersmith queried whether the Government’s changes to no win, no fee or conditional fee agreements will reduce access to justice in the round. I do not believe that we are compromising access to justice for claimants by making it fairer for defendants. We are restoring a fair balance to civil justice by going back to the regime that was introduced by my noble and learned Friend Lord Mackay of Clashfern, when he was Lord Chancellor in the 1990s.
The hon. Members for Hammersmith and for Stretford and Urmston noted that the new RTA claims process and fixed costs already cover 75% of claims, and asked why the Government are taking forward these proposals. We intend to implement changes to mark a whole new approach to costs in civil litigation. The RTA claims process has had an essential role to play in streamlining proceedings and controlling costs, as I believe hon. Members recognise.
We have recently consulted on introducing a similar, simplified claims procedure for more types of personal injury claims, exploring the possibility of extending the framework of such a scheme to cover low-value clinical negligence claims, and examining the option of extending the upper limit of those simplified claims procedures to £25,000 or £50,000. However, the Government have decided that CFA success fees and ATE insurance premiums should no longer be recoverable from the losing side.
The hon. Member for Hammersmith discussed the phone hacking scandal and defamation-type claims. We are aware of the concern about access to justice, and the ability of those with modest means to pursue claims, often against powerful media organisations. However, we do not believe that it is necessary to make special provision for the cost of privacy or defamation proceedings. We will continue to monitor the position following the introduction of the CFA reforms and other reforms to the law and procedure for defamation claims on which the Government have recently consulted. In the light of experience, we will consider whether further changes are necessary.
It must also be borne in mind that the European Court of Human Rights in the case of Mirror Group Newspapers Ltd. v. The United Kingdom, the Naomi
It also breached article 10, the freedom of expression part of the European convention on human rights. That means that retaining the current CFA regime in its present form for such cases is not a viable option.
A significant number of contributions were made about qualified one-way cost shifting. I have said that we asked the independent Civil Justice Council to consider how QOWCS should operate. It is considering the details now, and the matter will be discussed more widely at a conference of experts at the end of October. That and details of who is to sit on the working group are set out on the Civil Justice Council’s website. I agree that these are difficult issues, which is why we asked the Civil Justice Council to consider them. We have asked the CJC to develop realistic optional solutions and to provide advice on the pros and cons of each.
The question then arose as to why we should not extend QOWCS beyond personal injury cases, and the hon. Member for Hammersmith asked why we do not propose doing so. Although Lord Justice Jackson suggested that QOWCS might be introduced in some non-personal injury claims, the Government are not persuaded that a case has yet been made for doing so. CFAs are a minority form of funding in non-personal injury claims, and rolling out QOWCS to them would distort the market by imposing substantial changes on all cases in a particular category of proceedings for the benefit of a small number of claimants. The Government will examine the experience of QOWCS in personal injury claims before considering whether the scheme should be extended.
The hon. Member for Hammersmith then asked whether QOWCS would make it easier to bring claims. As I said, QOWCS is part of a package of measures to improve the current system and to deter frivolous or unnecessary claims. The Government will continue to discuss with stakeholders how the rules should be drafted, including whether a minimum payment to a successful defendant’s costs should be payable by the losing party in order to prevent speculative claims.
The hon. Gentleman suggested that defendant behaviour increased costs, and asked what we were doing about it. I agree with Lord Justice Jackson that a major reason for the current high cost of civil litigation is the recoverability of success fees and ATE insurance premiums, which the Government are tackling through the Bill. However, I also agree that costs can be increased by the litigation behaviour of both parties and their legal representatives. For example, I have heard many complaints that defendants do not engage early enough in their attempts to settle claims. The Bill includes a provision to permit the courts to impose an additional sanction on defendants who do not accept a claimant’s reasonable offer but who do not beat that offer at trial. This will encourage claimants to make, and defendants to accept, reasonable offers, and will reduce the costs of both parties.
The new test of proportionality that we propose will also ensure that a party that incurs disproportionate costs in pursuing a claim will do so at their own expense.
The question therefore arises as to how professional negligence cases be funded. Under our reforms, people will still be able to bring cases on CFAs in areas where they are currently used. After all, we are returning the CFA arrangements to their original form. I am aware of concerns on professional negligence claims—the hon. Member for Hammersmith gave some examples—which can involve claims against negligent building surveyors, accountants or solicitors. We carefully considered the consultation responses on those sorts of claim, but we remain unconvinced that there are any fundamental differences that would justify an exemption from the general principle of no recoverability of success fees and after the event premiums. Before the event legal expense insurance could offer an appropriate solution in such cases. The Government are keen to encourage a greater uptake of BTE legal expense insurance. Policies bought at relatively modest cost can help with the cost of legal cases.
Mr Slaughter: The Minister will not extend QOWCS to professional negligence, even though it would apply to personal injury and clinical negligence cases, because it is too convoluted. However, he expects a lay person to take out some form of insurance against any contact that they have with a professional, whether it is a surveyor when they are buying their home, a solicitor or any other example. I deliberately gave a whole number of workaday examples. The issues are serious, but the Minister has just brushed over them. It will not be feasible, because of the risk of costs, for people to take professional negligence cases in the way that they can now.
Mr Djanogly: Many individuals or businesses take out insurance in any event, as part of their activities. There is already significant before the event insurance. Other people will have BTE insurance included in their home insurance or other insurance policies that they may have—even car insurance. There is a lot of BTE insurance, and I am simply saying that the Government support Lord Justice Jackson’s view—this point was also made by the right hon. Member for Dwyfor Meirionnydd—that greater use of BTE legal expense insurance should be encouraged. I am aware of some concerns about BTE insurance policies under the current regime, including the fact that they can have restrictions. However, I see no reason why more suitable products will not develop following our changes to the CFA regime.
Mr Slaughter: That appears to be a one-man advertising campaign for the insurance industry. I would say only that the industry does not appear to reciprocate, because every time the Minister prays it in aid on reducing costs, it say that costs will go up.
Mr Djanogly: I think that I have made the point. BTE insurance is widely used and appears in many products. We would encourage insurance companies to amend their products to have wider BTE coverage, and we hope that the demand will be there following our changes.
Ben Gummer (Ipswich) (Con): On the matter of the insurance industry, I wonder whether the Minister would be interested to know of the support of the British Safety Council for the Association of British Insurers’ report on the compensation culture and of the involvement in that council of the hon. Member for Hammersmith.
Mr Djanogly: I am not sure of the involvement of the hon. Member for Hammersmith in the British Safety Council, but I am interested to hear what my hon. Friend has to say. I can see on his list many other sensible-looking companies that also support the ABI’s proposals.
Mr Slaughter: My first job was with the British Safety Council, in 1982. It is located, then as it is now, in Hammersmith Broadway, and I was able to visit the council and discuss the matter only two weeks ago. Its view is considerably more nuanced and complex than the impression given by the hon. Member for Ipswich, but that is what I would expect.
Mr Djanogly: I am not sure why the hon. Gentleman went there. If he went there to be lobbied by the council, clearly it did not succeed; its position is clearly different from his own, as it supports the Association of British Insurers’ position.
A question arose as to whether the Government have considered the impact of abolishing recoverability of CFA success fees and ATE insurance in insolvency proceedings. As with all aspects of the Jackson provisions, we have reviewed many representations on the matter. As I said to the hon. Member for Makerfield at Justice questions earlier today, our current position is not to depart from Lord Justice Jackson’s recommendations on recoverability, with the sole exception that we have outlined on the recoverability of ATE insurance premiums for expert reports in clinical negligence cases, in view of legal aid changes. The Government are aware of the impact of abolishing CFA recoverability in insolvency and related proceedings. As the hon. Member for Hammersmith said, my officials and I are still discussing the specific implications with the relevant Departments.
A further question was about how clinical negligence claims will be funded under the new regime. Such cases make up a small percentage of personal injury claims—about 1%. However, not least given the often difficult circumstances of the claimant, it is important that meritorious cases can be pursued. There are particular worries about the funding of expert reports in clinical negligence cases. Such reports are important to establish whether there is a case for bringing proceedings, but they can be expensive and the Government need to provide a means of funding them to ensure that meritorious claims can be brought by those who cannot readily afford to pay for the reports up front.
We are discussing with the NHS Litigation Authority and other stakeholders how the commissioning of reports can be improved. In addition, the Bill includes a tightly drawn power to allow the recoverability of ATE insurance premiums in clinical negligence cases only. The details will be set out in regulations. As I have said, we are introducing a package of measures to help claimants, particularly in personal injury cases including clinical negligence, and they will include the 10% increase in
As the Committee is aware, we are proposing an exceptional funding scheme to ensure that some clinical negligence cases continue to receive legal aid if the failure to provide it is likely to result in a breach in an individual’s rights to legal aid under the Human Rights Act 1998 or EU law. When considering whether exceptional funding should be granted, we will take account of the ability of clients to present their own case, the complexity of the matter, the importance of the issues at stake and all other relevant circumstances. As a result, the legal aid impact assessment estimates that we will continue to spend £6 million of the £16 million of legal aid that we currently spend on representation in clinical negligence cases.
I am aware that Lord Justice Jackson has argued that legal aid should pay for experts’ reports in clinical negligence cases, rather than having a provision for the recoverability of ATE insurance premiums. The Government have considered that point carefully but we believe that our proposal for recoverable ATE insurance premiums is a better way forward in continuing to make legal aid available. Apart from anything else, legal aid is available only to those who qualify financially, whereas the proposals allowing for recoverability of ATE insurance premiums in clinical negligence cases could provide access to justice for those outside legal aid financial eligibility who might none the less find it difficult to provide funding for potentially costly expert reports.
I recognise the suggestion that the NHSLA costs will increase as one of AJAG’s key arguments, but we do not accept those AJAG figures or the arguments. AJAG is mainly supported by the after the event insurance industry, and it is no surprise that AJAG’s arguments support that industry. The Government share Lord Justice Jackson’s view that ATE insurance premiums add considerably to the cost of litigation. We refute the argument that that will generally increase costs to the NHSLA. It is a matter for market forces, which to an extent can control costs. The Ministry of Justice is however discussing with the NHS Litigation Authority and other stakeholders how the commissioning of reports can be improved in clinical negligence cases so that, for example, joint expert reports can be commissioned wherever possible.
The majority of clinical negligence claims are brought against the NHSLA or Welsh health authorities. The compensation recovery unit benefits are usually paid back to the trust that originally treated the claimant, so the money is recycled back into the NHS budget. We recognise that there will be claims that are not against the NHSLA, such as against doctors, dentists and private hospitals, which might bring in CRU benefits for insurers. However, we understand that those claims are relatively small in number and of relatively small value. The majority of the highest paid claims are against the NHSLA.
Karl Turner: I am grateful to the Minister, who is always generous in giving way. Will he clarify success fees? He suggested that, in all cases, the success fee is 100%. Am I not right in saying that the fee is fixed and it can vary? For example, in road traffic cases, it is fixed
Mr Djanogly: I recognise the figures mentioned by the hon. Gentleman in relation to the road traffic accident portal. I will write to him, if he wishes, about the other figures he has mentioned. The cap is 100% and will remain so.
The concerns of Action against Medical Accidents about taking costs from damages have been raised. I am aware of its concerns about deducting from claimants’ damages to pay for success fees. The 25% cap on the amount of damages that can be taken relates to general damages and specifically excludes damages for future care and loss. That is particularly relevant in clinical negligence, where damages for future care and loss can run into many millions of pounds.
The hon. Member for Hammersmith asked why we are not introducing QOWCS for judicial review claims in general. Responses to our consultation indicated that CFAs are less commonly used outside the area of personal injury and are not frequently used in judicial review proceedings. In addition, ATE insurance is rare in judicial review. In our view, therefore, the abolition of recoverability of CFA success fees would have relatively little impact on judicial review claims, and the key driver for the introduction of QOWCS to reduce the need for and costs of ATE insurance is not present. Although there is already some element of one-way cost shifting in judicial review cases where the claimant is legally aided or obtains a protective costs order, the introduction of QOWCS for all judicial review cases would be a significant change that could distort the market and significantly affect public authorities, which could face large numbers of unmeritorious claims that would have to be defended, at least until the permission stage.
The next question was about how judicial review claims will be funded under the new regime. Under our reforms, people will still be able to bring cases on CFAs in areas where they are currently used, as we are returning the CFA arrangements to their original form. In judicial review proceedings, which raise issues of general public importance, claimants can, in appropriate cases, apply for a protective costs order to limit the amount of the defendant’s costs that they may be required to pay if they lose, and legal aid is also being retained for the vast majority of judicial review cases currently funded. Legal aid recipients will continue to benefit from cost protection.
The hon. Members for Stretford and Urmston and for Kingston upon Hull East and the right hon. Member for Dwyfor Meirionnydd asked how employer liability claims will be funded in future. My points are essentially the same as those on the other claims. Under our reforms, people will still be able to bring liability claim cases on CFAs in areas where they are currently used. We are returning CFA arrangements to their original form. CFAs worked satisfactorily when they were introduced in the mid-1990s.
The hon. Member for Stretford and Urmston asked about mesothelioma cases, an issue that was also raised during Justice questions earlier today. The Government
The hon. Member for Kingston upon Hull East asked how claimants other than those in clinical negligence claims will finance disbursements. Under the current arrangements, the losing claimant’s ATE insurance covers the cost of disbursements as well as the defendant’s costs. If the proposed QOWCS system was introduced on one side of the proposed CFA reform, claimants who lose would generally only be responsible for meeting the cost of disbursement. Claimants could pay the disbursement costs themselves or could take out ATE insurance to cover disbursement costs only and pay the lower premium themselves. Alternatively, the claimant’s solicitor might agree to fund disbursements in exchange for an increased success fee or an increased share of the damages where the claimant uses a damages-based agreement, which we propose to permit for all civil litigation in clause 42. Subject to an overall cap on the amount of damages, that may be taken as a success fee, set at 25% of damages, excluding damages for future care and loss.
On the environmental claims mentioned by the right hon. Member for Dwyfor Meirionnydd, we are looking at issues relating to them under the Aarhus convention, which I believe he mentioned. That is separate to the Bill, but we will be consulting on it shortly.
The hon. Member for Kingston upon Hull East asked why the Government are not taking steps to protect consumers. Our position is that consumers generally stand to benefit from the reforms, as the Association of British Insurers has said that they will lead to a reduction in motor insurance premiums. Under our reforms, people will still be able to bring cases on CFAs in areas where they are currently used. On the point that abolishing culpability-based insurance will reduce access to justice, as I have said before, we believe that we are restoring a fair balance and simple justice by going back to the regime that existed in the past.
The hon. Member for Kingston upon Hull East also asked about experts’ reports. There is a particular issue in relation to experts’ reports in clinical negligence cases that does not apply in other cases. Other cases, such as road traffic accident cases, are more fact-based. In clinical negligence cases, the issue is more one of opinion. For example, to what extent do a surgeon’s actions fall significantly below the appropriate standard of medical care? Clinical negligence experts’ reports can therefore typically be of a different nature to other types of personal injury.
I have attempted to address all the points made by hon. Members. The Government’s position is clear, sustainable and will lead to an end to the mechanics of the current compensation culture. I believe that when these provisions go to the other place they will be well received. On that basis, I ask hon. Members to withdraw their amendments.
Mr Slaughter: I thank the Minister for the measured way in which he has replied to a long debate—at least, it was a long debate from our side. Disappointed but not surprised is the reaction to that. I know that we wish to make some progress, so given the time, let me just say that some of the amendments are probing amendments. There are shifting sands in the Government’s proposals; so much, either because it is in regulations or because it simply is not clear, is not there.
Let us be fair. On the one hand, the Government’s position is that there are abuses and problems with the current way that civil litigation costs work. We say that that is absolutely right and we could sit down together and work out how to tackle them. My right hon. Friend the Member for Blackburn is very perplexed about why that has not been done in some areas. The Government say that they intend to reform the system completely. We are asking whether there are problems attached to that. Those are the problems that we have been indicating today in whole different areas of law.
The Government simply assert—they do not produce evidence; they simply assert—that everything will be all right. I am afraid that we do not have that confidence. In some key areas, we would like to press amendments to a Division. We need to make our views clear. For the record, we will vote on the amendments that relate to clause 41: amendment 198 on employment liability, amendment 202 on industrial disease, amendment 204 on professional negligence, amendment 206 on insolvency and amendment 208 on clinical negligence. We would like to press those five amendments to a Division. I beg to ask leave to withdraw the amendment.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for death or for physical or psychological injury resulting from breach of any duty owed by an employer to an employee.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for physical or psychological disease or illness resulting from any breach of duty or trespass to the person.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a claim for damages for loss resulting from breach of any duty to exercise professional care or skill.’.
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to proceedings which include a money claim for the benefit of the estate or creditors of an insolvent body
‘(2A) The amendments made by subsections (2) and (4) do not apply in relation to clinical negligence proceedings (within the meaning of section 58C).’.—(Mr Slaughter.)
‘( ) In section 120(4) of that Act (regulations and orders subject to parliamentary approval) for “58AA” substitute “58AA(4)”.’.
The amendments are purely technical and put beyond doubt that rules of court that make provision with respect to the assessment of costs as described in new subsection (6A) of section 58AA of the Courts and Legal Services Act 1990 as amended by clause 42 are subject to the standard negative resolution procedure applicable to rules of court generally, under the Civil Procedure Act 1997. An argument might be raised that the current drafting of the clause could be construed as subjecting such court rules to the affirmative resolution procedure by way of section 124 of the 1990 Act.
Mr Slaughter: Perhaps this is the appropriate point to make a brief comment on the clause. I have nothing to say on the amendments—they are technical. We could have a long and interesting debate on contingency fees, but although this is the place, it is probably not the time. I shall limit myself to two sentences.
Contingencies are interesting in this jurisdiction. They already exist in certain respects in what is called non-contentious litigation. The best example of that is, of course, in employment tribunals. I always smile at the mention of employment tribunals being non-contentious because I think I have seen disputes that are more contentious in employment tribunals than in some criminal courts, but so be it and that is that. We do not object to the extension of contingency fees in itself. The problem is the combination of that with the wholesale restrictions on CFAs and how they work, which effectively presents a poor relation for those with meritorious claims they wish to get into court. We certainly feel that this is not—the right legislative pace is perhaps the wrong term; legislation without fault is perhaps more appropriate.
We will not vote against the clause. Notwithstanding the comments made today, I hope that I am wrong and the Minister is right and contingency fees provide an effective mechanism for access to justice, but I have serious doubts about how the Government phrase it.
The Chair: It would be helpful if Committee members indicated which, if any, of clauses 44 to 52 they wished to debate separately. I may, with the leave of the Committee, put a composite question when no separate debate is required.
Mr Slaughter: My comments are simply for the avoidance of doubt. The clause, from the Government’s perspective, tidies up the position in relation to their amendments to the current CFA/ATE system by introducing provisions that apply to trade unions and other member organisations
The amendment is straightforward. Paragraph 3 of schedule 6 has the effect of amending proposed new section 16A of the Prosecution of Offences Act 1985. It follows that when an individual is accused of a crime, and he or she chooses to defray the costs of his or her own legal defence rather than apply for legal aid, and that person is subsequently acquitted, they can reclaim only costs incurred in the magistrates court or the Crown court on appeal. This appears unfair and illogical. The amendment would put the matter right by preserving the power of the court to make a defendant’s costs order in respect of an acquitted defendant’s costs of trial in the Crown court.
Mr Djanogly: Amendment 116 seeks to give the Crown court the power to award legal costs from central funds to individuals, where those legal costs are incurred in proceedings before the court. Legal costs are lawyers’ fees and disbursements, including expert witness costs. The cost to the taxpayer of the amendment would be about £40 million.
The Bill seeks to amend the Prosecution of Offences Act 1985 to provide a new framework for the award of legal costs from central funds. We intend to strike a fair balance between refunding legal costs to acquitted defendants or successful appellants who have paid privately and protecting the taxpayer from picking up the bill for legal costs, which on average are three to four times more expensive than legal aid costs; in some cases, the difference is even more.
Expenditure from central funds has more than doubled in cash terms over the past eight years. Defendant costs orders accounted for £66 million of the £94 million central funds budget last year, and the current rate of expenditure is unsustainable. We do not believe that
Our policy is that where legal aid is available to all individuals, such as in Crown courts, there will be no provision for legal costs to be paid from central funds. Where legal aid is not available to all individuals, such as in magistrates courts, legal costs from central funds will be available. It is intended that these costs will be capped at legal aid rates or thereabouts.
“it is wrong. If a person wishes to be represented privately or has to be, then they are entitled at the end of criminal proceedings in which they are acquitted to recover their reasonable costs in exactly the same way as they would be able to do in civil proceedings”
Mr Djanogly: We have changed our mind towards what the then Government were thinking. There are reasons why we have come round to that. First, we realise that we simply cannot afford the luxury of a system that pays legal costs at rates three to four times higher than legal aid rates. Secondly, we cannot afford to fund the dream team defence when someone wealthy has engaged top lawyers to defend relatively minor cases at rates many times higher than legal aid. Legal aid rates are reasonable and sustainable. They are the norm in most criminal cases. Thirdly, following the central funds’ judicial review of the previous Government’s policy, the Government have set out a new legal framework in the Bill for central funds. This has enabled us to take a fresh look at central funds.
Finally, acquitted defendants in Scotland who pay privately do not receive any of their costs back. Not everyone will be eligible for legal aid. Our central funds proposals ensure that where legal aid is not available to individuals, costs from central funds are available, capped at legal aid rates or thereabouts. So legal aid is available to all individuals in trial proceedings in the Crown court. Although some individuals, depending upon their financial means, will have to pay contributions towards their legal aid costs, should they be acquitted, their contribution will be refunded with interest. An individual who is legally aided and acquitted would pay nothing. We do not think that there is any need to make provision to pay the legal costs of those who choose to pay
Mr Llwyd: I am still a little uneasy about the Minister’s response. In my experience, defendant costs orders were always very carefully overseen by Crown court associates to ensure that they were not exorbitant. It seems to me that in a fair system when somebody is faced with defending their reputation—even their liberty— and they choose to instruct solicitors and barristers on their behalf in the Crown court, they should, if successful, be entitled to their costs, although they should be reviewed to make sure that they are not exorbitant. I was not aiming at providing a dream team, as the Minister says; I am just looking at the ordinary Crown court trial where an individual would not qualify for legal aid because his or her income is above that. It does not have to be a king’s ransom to be above the limit for legal aid. I am still a little uneasy, but the point has been made and the response has been given, and I am content to leave it there. I beg to ask leave to withdraw the amendment.
This technical amendment corrects a reference to new section 33B of the Courts-Martial (Appeals) Act 1968. Schedule 7 amends section 33 of that Act and provides that the appeal court may order payment of such sums as the court considers reasonably sufficient to compensate any person who properly attends to give evidence. The current draft of the Bill provides that this is subject to regulations made under section 33B. It should state that this is subject to regulations made under section 33B(1)(d). The reason for that is that section 33B(1)(d) specifically provides that the Lord Chancellor’s regulations may make provision for an amount that the court does not consider reasonably sufficient to compensate the person concerned.