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Lord Renton: My Lords, to a great extent I agree with the noble Lord, Lord Goodhart, in his attempt to ensure the costs awarded after conditional fee decisions have been made.

I think it is only right to remind your Lordships that, apart from the circumstances of conditional fee agreements, costs in civil actions have always been at the discretion of the court and the taxing master. It is right that that should be so because there is a multitude of different factors that the court, and rather less the taxing master, are entitled to take into consideration.

I much admire the effort of the noble Lord, Lord Goodhart. However, what I have suggested is summed up in Amendment No. 154 in the new subsection (2) which states:

I repeat: "all the circumstances". That is the great variety to which I referred. I suggest with all humility and respect that instead of accepting the amendments, at Third Reading the noble and learned Lord the Lord Chancellor should have a provision written into new Section 58A which makes it clear that even in conditional fee cases the court will have that full discretion which otherwise prevails.

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6.45 p.m.

Lord Hunt of Wirral: My Lords, the noble and learned Lord the Lord Chancellor will know from our debate on conditional fee agreements that I welcome them in principle. I find myself in agreement with the comments of the the noble Lords, Lord Goodhart and Lord Renton.

The noble and learned Lord the Lord Chancellor may recall that I pointed out that for public bodies and public companies facing a number of actions the arrangement in effect asked for them to pay for the cases they had won through payment not only of the success fee but also of the insurance premium in those cases they lose. The noble Lord, Lord Goodhart, has introduced a further element; I share his concern. It is to some extent mitigated by the validity of the arguments adduced by the noble Lord, Lord Renton. Perhaps we should find some way of returning to the court the discretion that the court has always had to intervene in cases where it is just for the court to do so.

I speak to Amendments Nos. 149 and 153 which concern yet one further element which has caused concern to the Forum of Insurance Lawyers. Hitherto, parties to an action have usually known how the claim is funded. At the outset, a notice of civil aid through the legal aid certificate is exhibited to the court, and notice of its existence is served on the other party. I am concerned that we are now dealing with a range of possible funding mechanisms. A person facing a claim will not know how the claim is being funded. My amendments provide that notice is given, in particular where a conditional fee agreement exists.

The funding could be through legal expenses insurance, in some cases through legal aid, conditional fee agreement, trade union assistance, or private means. It could be a range of factors. The sort of person to whom the noble Lord, Lord Goodhart, has referred who faces a claim, needs that information in order to assess his chances of recovering costs. Public bodies, public companies and private individuals need that information. My comments apply to Amendments Nos. 149 and 153.

Lord Clinton-Davis: My Lords, in the course of these debates, it is rare to find myself at variance with the noble Lord, Lord Hunt. However, I have some reservations on this issue, and they are as follows. One would have to give advance notice to the opponent of the level of success fee. Who would benefit from that? It would be the insurers.

My preferred course would be to engage in more consultation on the issue before adopting the course proposed by the noble Lord. The issue may be better dealt with by rules of court or regulations. I hope that my noble and learned friend will respond to that point.

Lord Ackner: My Lords, in many ways we are in an odd position. For many decades, the conditional fee arrangement was unenforceable as it was considered contrary to public policy. All of a sudden a halo has been placed around this form of activity and if one indulges in it one receives a bonus, which is quite contrary to principle.

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If conditional fees were not available, and if (as I am sure would be the case) I could not afford the litigation upon which I am about to embark and I raise a large loan from my bank in order to fund it, no one would have thought for a moment that if I won the case I could include the interest which I pay on the loan. I suppose the classicist would say that res inter alia acta, it has nothing to do with the essential principles of damages and costs. That is why I resist the suggestion that there should be a presumption in favour of the premium and the uplift being repaid. That is why I put my name to Amendment No. 154, which seems to be supported by the noble Lord, Lord Renton. It provides that the court retains a discretion and, in deciding how to exercise it, has regard to the matters set out in the amendment. Accordingly, I would support that as a way of dealing with the problem.

The Lord Chancellor: My Lords, the amendments bring onto the face of the Bill considerations that the court should have in mind in determining the liability for any success fee and insurance premium that a person using a conditional fee agreement should recover from his opponent.

Amendments Nos. 148 and 150 to Clause 27 impose on the court a number of considerations before it can make the success fee recoverable, including such things as the hardship towards the person liable to pay the costs and the extent to which the case could have been funded without using conditional fees. Amendments Nos. 152 and 154 to Clause 28 impose similar constraints on a court before it can make the insurance premium recoverable.

As I said in Committee, I consider that these matters, to the extent to which they need to be dealt with at all, are matters far better suited to be dealt with in rules of court. I continue to be very concerned that they would, in effect, establish satellite litigation while arguments were made about whether, for example, a person could have afforded to take a case without using conditional fees or an insurance premium and about considerations that had led the court to its conclusion.

I am afraid that there is an issue of principle between myself and the noble Lord, Lord Goodhart. He would like the presumption to be the other way around and to provide that the insurance premium and the success fee should not be added to the defendant's liability unless there were specific justification for doing so. He says that it is unfair to the losing party.

The noble and learned Lord, Lord Ackner, comes to a similar view from a different standpoint. He says that conditional fee agreements used to be stigmatised as unlawful, but all of a sudden a halo has been put around them. Of course, the noble and learned Lord will be the first to know that Parliament sometimes has to step in and remedy the deficiencies of the common law and Parliament is sovereign. The noble and learned Lord asks, "What if there were no conditional fee agreements and I had to go to the bank and be put in funds to bring litigation forward? I would not in the ordinary way recover the interest I had to pay on the loan". Of course he is right. He says that that would be reason to res inter alia acta. Another way of looking at it might be to say,

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"The problem arises from the impecuniosity of the plaintiff and that should not be visited on the defendant. But it is possible for Parliament to take a different view and that is what we invite Parliament to do. The costs of the insurance premium and the uplift are costs that he had to incur in order to gain access to justice and they are costs incurred as a result of a wrong which has been done to him by the defendant".

For my own part, I do not see it as in any way unfair to defendants who have wronged plaintiffs to be liable for the full costs which the plaintiffs have had to incur in order to secure redress.

I believe that the simpler course would be to allow the normal rules on costs to apply. That is a presumption that costs will follow the event of the judgment, but--and I agree with the noble Lord, Lord Renton--with a discretion to the court to vary this in appropriate circumstances.

Amendments Nos. 149 and 153 in the name of the noble Lord, Lord Hunt, also seek to place provisions in the statute with which I can have sympathy in general terms, but which I believe are more adequately dealt with in rules of court. He seeks to amend the proposed Section 58A(6) so as to prevent the success fee being recoverable unless notice has been given as prescribed by rules of court and to amend Clause 28 in a similar way in respect of the recovery of the insurance premium.

If it assists the noble Lord, I am quite sure that it will be necessary to specify in the rules of court not only that a notice that a conditional fee agreement is being used and backed up by an insurance premium must be given to an opponent, but also when that must be given and when a person using a conditional fee will be required to set out in a notice to his opponent the success fee that is being claimed and the amount of the premium incurred. That is why the provisions of subsection (6) and Clause 28 are expressed so that recovery is subject to rules of court. For those reasons, I do not believe that the additional words he seeks to include are necessary.

I am prepared to consider further the concerns which lie behind the amendments contained in the group when drafting the necessary rules of court. As I have made plain, there is simply a difference of principle and judgment between myself and the noble Lord, Lord Goodhart. I abstain from speaking to Amendment No. 155 because the noble Lord, Lord Kingsland, has not spoken to it in this group. For those reasons, I invite the noble Lord to withdraw the amendment.

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