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Lord Falconer of Thoroton moved Amendment No. 45:

The noble and learned Lord said: My Lords, noble Lords will be glad to hear that this is a technical drafting amendment. I am grateful to the noble and learned Lord,

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Lord Mackay of Clashfern, (who unfortunately cannot be in his place today) for identifying a possible problem with the current wording.

Clause 7(3)(e) empowers the legal services commission to secure services as part of the community legal service by making grants or loans directly to the individuals concerned to enable them to purchase the necessary services themselves. The amendment deletes the words in parentheses "(or groups of individuals)". Those words are unnecessary and potentially confusing. Removing them would in no way detract from the commission's ability to fund multi-party or group actions if the case were strong and important enough to merit it, although in practice I think it unlikely that the commission would choose to do so under the power in Clause 7(3)(e).

At present, legal aid in a multi-party case is available only to those plaintiffs who qualify financially under the normal test. It is the Government's intention to replicate that position for the community legal service under Clause 8(1). In the longer term, it might be possible to relax that position by waiving the upper eligibility limit under Clause 8(2) for other plaintiffs in a multi-party case. But we would of course expect such litigants to be liable for substantial contributions under Clause 10.

The problem is that Clauses 8 and 10 refer simply to individuals. The additional words "or groups of individuals" in Clause 7(3)(e) may carry the misleading implication that funding is provided to the group per se, rather than to the individuals who constitute the group. In reality it can only be to the individuals that the funding is provided, as shown by the fact that the rules about eligibility and contributions apply to each individually. I beg to move.

On Question, amendment agreed to.

The Lord Chancellor moved Amendment No. 46:

    Page 5, line 3, at end insert--

    ("(3A) The Lord Chancellor may by order require the Commission to discharge the function in subsection (3) in accordance with the order.").

On Question, amendment agreed to.

[Amendment No. 47 not moved.]

Lord Falconer of Thoroton moved Amendment No. 48:

    Page 5, line 6, leave out ("in different areas") and insert ("in relation to different areas or communities").

On Question, amendment agreed to.

Lord Goodhart moved Amendment No. 49:

    Page 5, line 8, after ("not") insert ("(except as provided by subsection (6A))").

The noble Lord said: My Lords, in moving this amendment, which stands in the name of the noble Lord, Lord Kingsland, and myself, I wish to speak also to Amendment No. 53.

This is the first of a group of amendments attacking paragraph 3(a) of Schedule 2, which excludes all personal injury cases from public funding except cases of clinical negligence. If the Bill is enacted as it now

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stands, the only way round that exclusion will be for the Lord Chancellor to give directions under Clause 7(7) authorising the commission to fund personal injury actions which are otherwise excluded.

For the first, but not the last, time in the Report stage of the debate on this Bill, this raises the issue of the vision of the noble and learned Lord the Lord Chancellor of conditional fee agreements--CFAs--as a panacea. I emphatically disagree with that view.

CFAs do indeed have a role to play in the system. They provide access to justice for those with a claim for damages who do not qualify for legal aid on financial grounds but cannot afford the risk of litigation at their own expense. Indeed, I agree that where CFAs are available and workable, claimants should use them rather than put taxpayers' money at risk.

But we are simply not yet ready to scrap legal aid for personal injury cases. CFAs are in many respects unproven and may turn out to be unworkable over a large part of the spectrum of personal injury cases. The fact is that CFAs are so far of proven value in road accident cases. That is largely for a special reason; namely, that the police investigate every road accident which causes injury. That usually establishes causation and identifies the person at fault. That leaves very little to be argued about in court.

But, indeed, there are many cases where CFAs are unsuitable. Let us look at them. As the Government have accepted in the case of clinical negligence, CFAs are unsuitable where substantial costs of investigation have to be incurred before the commencement of proceedings. It is not only clinical negligence cases which involve such costs. What about product liability cases or industrial diseases such as the miners' white finger cases which were brought recently and resulted in large awards? What about damage to health by emissions from a nearby factory? All of those will require substantial investigatory costs before proceedings can be commenced. None of them is clinical negligence.

Solicitors will be extremely reluctant to carry heavy pre-commencement costs themselves. One might ask: what about cases involving expensive trials; for example, trials involving experts on both sides? Again, solicitors may well be unwilling to bear the costs themselves and in such a case insurance against payment of the other party's costs may be impossible to obtain or very expensive. Are CFAs appropriate where the claimant is a child or someone who lacks mental capacity?

The viability of CFAs in cases involving substantial up-front costs is far from clear. The KPMG report for the Lord Chancellor says one thing; Professor Shapland's report for the Law Society says another. Investigations and research are still continuing. The availability of insurance at acceptable premiums in non-road accident cases is extremely uncertain. Premiums for accident-at-work cases have already doubled those originally set. So we are risking hardship to injured people by excluding the right to public funding for personal injury cases. And we are doing it to save a negligible amount of money.

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The net cost of legal aid in personal injury cases to the Exchequer in each of the three years from 1994 to 1997 was less than £2 million, ignoring VAT on fees which comes back to the Exchequer within three months.

Various solutions are offered by this group of amendments. The first would be to leave funding available in principle for personal injury work but to rule that the applicant would have to show that CFA was not available or not likely to be available. Secondly, there is a possibility of listing in Schedule 2 categories of PI cases where funding should remain available. The noble Lord, Lord Clinton-Davis, tabled an amendment in Committee listing no less than 15 categories where funding should be retained. That is an illustration of the wide range of cases in which it is unlikely that CFAs will provide an adequate alternative. The third solution is the more limited amendment, set out in Amendments Nos. 49 and 53, which prevent paragraph 3 coming into effect as regards personal injury until the commission is satisfied that CFAs or some other kind of funding provide an adequate replacement. Why does not the noble and learned Lord the Lord Chancellor accept that implementation of paragraph 3 in relation to personal injury work should be delayed until we know whether CFAs will work?

On 3rd November, the noble and learned Lord's deputy, Mr. Geoffrey Hoon, in another place, said in answer to a Parliamentary Question:

    "We have made it clear that legal aid will not be withdrawn from anyone in our society unless and until there are effective alternatives and effective access to justice. The extension and development of conditional fees will allow that to take place in due course, but we have made it clear that we want to see an extension of legal expenses insurance. We believe that that is appropriate for the great majority of people. Equally, we have made it clear that no one will lose out unless and until there is effective access to justice for them".--[Official Report, Commons, 3/11/98; col. 676.] In the period of a little more than three months since Mr. Hoon gave that answer, I see no reason to suppose that we have made such enormously rapid strides that we are now in a position to say that, yes, CFAs are the definitive answer. I ask the noble and learned Lord the Lord Chancellor to honour the undertaking given by Mr. Hoon in another place. I beg to move.

10 p.m.

Lord Archer of Sandwell: My Lords, this is a vexed problem and a genuine problem. It is not a piece of Luddism by a bunch of dinosaurs. Perhaps we can establish that at the outset of the debate.

A number of noble Lords have at various stages in our deliberations explored possible solutions to the problem. The Bill provides that the services set out in Schedule 2 shall not be funded as part of the community legal service, subject to my noble and learned friend's power to give directions to the contrary. One of the services which is not to be funded is help in proceedings for negligence other than clinical negligence. My noble and learned friend explained that those proceedings will be funded on a conditional fee basis or on such other basis as may be devised.

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I ventured to raise the question in Committee as to how much money is likely to be saved, since I believe that in the large majority of personal injury cases the plaintiff's costs are ultimately met by the defendants, either after a settlement or a decision in the plaintiff's favour. I seem to remember my noble and learned friend making almost precisely that point in a speech to the Bar Conference in 1996. I am indebted to the Personal Injury Bar Association for the information that in 1996-97 more than 502 million damages were recovered at a net cost to public funds of £1,418,000, much of which was offset because it saved social security benefits. Now there's value for money!

Leaving that point aside, what troubles some of us--it certainly troubles the Law Society, the Bar Council, the Legal Action Group and the noble Lord, Lord Goodhart--is whether all potential plaintiffs will find solicitors and counsel prepared to act on that basis given, in certain cases, the amount of time entailed, the disbursements involved and the unpredictability of the outcome. We are also concerned as to whether contingency insurance against liability to pay costs will always be available or available at affordable premiums.

My noble and learned friend is an optimist in these matters and in Committee (at col. 568) he expressed confidence that conditional fee agreements would normally be available and that in exceptional cases he would exercise his direction-making power to make appropriate provision. He added that in what he believed was the highly unlikely event of a hiccup in the market--in fairness that is my paraphrasing, not his words--he would intervene by direction.

Finally, as I recollect, he said that if necessary he would make provision in individual cases, though that would entail an amendment to Clause 7(7). Taking him at his word, I sought to implement his suggestion by tabling an amendment, but he stalled me earlier in our deliberations today by tabling it himself. For that we are all duly grateful. I hope my noble and learned friend will forgive me if I am not totally persuaded to share his optimism. I am not stating the opposite; I simply confess to a strain of agnosticism and I am fortified by the fact that it is obviously shared by all the organisations I mentioned and a large number of your Lordships.

If it were to transpire that there were problems, the difficulties which may trigger my noble and learned friend's intervention would become apparent only after an appreciable number of people were shown to have been denied justice, after all the frustration and the despair and heart ache. It seems to me quite unprovocative to table an amendment, as a number of noble Lords sought to do, which says that the prohibition in Schedule 2 shall not apply in a case where it appears that adequate arrangements for alternative funding are not available. If my noble and learned friend is justified in his optimism nothing is lost and it will not cost the public purse anything.

I appreciate that it would impose an administrative burden to require the commission to satisfy itself in every case that alternative funding is available. That is why, in Amendment No. 50, I sought to reverse the

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burden, to remove the prohibition, only where the applicant can show that after making diligent inquiries he has not been able to obtain advice and assistance. I am being more accommodating than even the noble Lord, Lord Goodhart, and, I believe, more accommodating than the present position of the Bar Council. It may transpire that my noble and learned friend is completely right in his predictions. If so, the fund will be no worse off. If he is wrong, at least he will not have been disastrously wrong.

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