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Baroness Goudie: My Lords, I welcome the Government's agreement to protect those tenants who would like to be able to take legal action under that section of the Act.

Lord Mishcon: My Lords, has the noble and learned Lord set a precedent in this House so far as he knows for recommending the acceptance of an amendment which in fact he does not accept?

The Lord Chancellor: My Lords, I rather think that it is a record, yes.

Lord Ackner: My Lords, reference has been made to Amendment No. 56. I think that it is at that stage that I come in with Amendment No. 56A. I am most grateful to my noble and learned friend the Lord Chancellor for the careful and detailed way in which he dealt with the problem he has identified; namely, that employment tribunal litigation is clearly non-contentious business in the ordinary, everyday sense of the word, and for it to be treated otherwise is clearly absurd.

I raised my amendment in order to discover why it was necessary to include subsection (5) while one thought about the problem. Why not leave it out and get on with analysing and identifying that which should be dealt with? Surely the matter is made worse by including something which the noble and learned Lord does not accept is appropriate while he looks at the wider field. For that reason I have raised my amendment.

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9.30 p.m.

Lord Goodhart: My Lords, as regards my Amendment No. 56B, I am grateful to the noble and learned Lord the Lord Chancellor for accepting the idea behind it; that is, the problem created by Section 82 of the Environmental Protection Act. Secondly, I thank him for the ingenious way in which he proposes to deal with it. I am almost entirely happy with that. I say "almost" because I should have preferred to deal with the problem by the method proposed in my Amendment No. 142C; that legal aid should be available. However, it would be churlish to press the point and I shall not move Amendment No. 142C. I shall accept the proposal of the noble and learned Lord the Lord Chancellor and support the amendment when it is brought back in a new and perfected form.

As regards the problem presented by Amendment No. 56, it is, as the noble and learned Lord, Lord Ackner, pointed out, very odd that appearances in the employment tribunal are treated as being non-contentious litigation on the part of solicitors. I have two strong objections to the situation which will exist when Amendment No. 56B is accepted. One might be regarded as a trade union point, but it is none the worse for that. It is that there will not then be a level playing field between the Bar and the solicitors. Solicitors will be entitled to charge contingent or conditional fees for work in employment tribunals, whereas members of the Bar will be permitted to charge only conditional fees. If it turns out that contingent fees are more popular than conditional fees, that might put the Bar at a serious disadvantage. This is a matter of considerable importance owing to the substantially increased jurisdiction of the employment tribunals to award compensation. It is far greater than it was a year ago.

The second point is that we strongly object to the principle of contingent fees. I hope that the noble and learned Lord the Lord Chancellor will find it appropriate to prohibit solicitors from using contingent fees, as opposed to conditional fees, in employment tribunal cases. Having said that, the noble and learned Lord, Lord Ackner, presented Motion No. 56A in a way which indicated that he was not seriously intending to press it to a Division. If he did so, we would be unable to support it because I believe that it throws the baby out with the bath water.

When it comes to non-contentious fees, such as fees for advising during the course of a take-over bid, I certainly would see no objection to contingent fees being charged. They are charged by merchant banks, for example, in that sort of situation. It does not seem to add any serious problem if solicitors are entitled to do the same. It does not present anything like the conflicts of interest that are presented if contingent fees are allowed in contentious business. Therefore, I would be unable to support the amendment moved by the noble and learned Lord, Lord Ackner, even though I agree with the spirit behind it.

Lord Kingsland: My Lords, we support both the noble and learned Lord, Lord Ackner, and the noble Lord, Lord Goodhart. We are therefore extremely

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grateful to the noble and learned Lord the Lord Chancellor for the sympathetic way in which he has reacted to both. I would only add that when the noble and learned Lord has completed his analysis of the relative merits of contingency fees and conditional fees in the context of employment tribunals, I hope that whatever solution he decides upon will have consequential effects for fairness of competition between the two professions.

On Question, Motion agreed to.

COMMONS AMENDMENTS

54

Clause 29, page 18, line 33, leave out ("enhanced fees") and insert ("a success fee")


55

Page 19, line 4, leave out ("enhanced fees") and insert ("a success fee")

The Lord Chancellor: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 54 and 55. They have been spoken to with Amendment No. 53.

Moved, That the House do agree with the Commons in their Amendments Nos. 54 and 55.--(The Lord Chancellor.)

On Question, Motion agreed to.

COMMONS AMENDMENT

56

Clause 29, Page 19, line 14, at end insert--


("(5) If a conditional fee agreement is an agreement to which section 57 of the Solicitors Act 1974 (non-contentious business agreements between solicitor and client) applies, subsection (1) shall not make it unenforceable.")

[Motion No. 56A not moved.]

AMENDMENT TO COMMONS AMENDMENT No. 56

56B

Line 4, after ("applies") insert ("or is an agreement which is enforceable at common law").

Lord Goodhart: My Lords, I beg to move Amendment No. 56B as an amendment to Commons Amendment No. 56. This has been spoken to by the noble and learned Lord, Lord Chancellor.

Moved, That Amendment No. 56B, as an amendment to Commons Amendment No. 56, be agreed to.--(Lord Goodhart.)

On Question, Amendment No. 56B agreed to.

Commons Amendment No. 56, as amended, agreed to.

COMMONS AMENDMENTS

57

Clause 29, page 19, line 39, leave out ("enhanced fees") and insert ("a success fee")


58

Page 19, line 41, leave out ("58(4)") and insert ("58 and this section (and in the definitions of "advocacy services" and "litigation services" as they apply for their purposes)")


59

Page 19, line 43, at end insert (", whether commenced or contemplated.")


60

Page 20, line 4, leave out from beginning to ("any") in line 7 and insert ("A costs order made in any proceedings may, subject in the case of court proceedings to rules of court, include provision requiring the payment of")

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61

Page 20, line 8, leave out ("the payment of enhanced fees") and insert ("a success fee")


62

Page 20, line 11, leave out ("taxing") and insert ("assessment")


63

Page 20, line 13, leave out ("the payment of enhanced fees") and insert ("a success fee")

The Lord Chancellor: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 57 to 63.

Moved, That the House do agree with the Commons in their Amendments Nos. 57 to 63.--(The Lord Chancellor.)

On Question, Motion agreed to.

COMMONS AMENDMENT

65

After Clause 29, insert the following new clause--

LITIGATION FUNDING AGREEMENTS

(". In the Courts and Legal Services Act 1990, after section 58A (inserted by section 29 above) insert--
"Litigation funding agreements.
58B.--(1) A litigation funding agreement which satisfies all of the conditions applicable to it by virtue of this section shall not be unenforceable by reason only of its being a litigation funding agreement.
(2) For the purposes of this section a litigation funding agreement is an agreement under which--
(a) a person ("the funder") agrees to fund (in whole or in part) the provision of advocacy or litigation services (by someone other than the funder) to another person ("the litigant"); and
(b) the litigant agrees to pay a sum to the funder in specified circumstances.
(3) The following conditions are applicable to a litigation funding agreement--
(a) the funder must be a person, or person of a description, prescribed by the Lord Chancellor;
(b) the agreement must be in writing;
(c) the agreement must not relate to proceedings which by virtue of section 58A(1) and (2) cannot be the subject of an enforceable conditional fee agreement or to proceedings of any such description as may be prescribed by the Lord Chancellor;
(d) the agreement must comply with such requirements (if any) as may be so prescribed;
(e) the sum to be paid by the litigant must consist of any costs payable to him in respect of the proceedings to which the agreement relates together with an amount calculated by reference to the funder's anticipated expenditure in funding the provision of the services; and
(f) that amount must not exceed such percentage of that anticipated expenditure as may be prescribed by the Lord Chancellor in relation to proceedings of the description to which the agreement relates.
(4) Regulations under subsection (3)(a) may require a person to be approved by the Lord Chancellor or by a prescribed person.

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(5) The requirements which the Lord Chancellor may prescribe under subsection (3)(d)--
(a) include requirements for the funder to have provided prescribed information to the litigant before the agreement is made; and
(b) may be different for different descriptions of litigation funding agreements.
(6) In this section (and in the definitions of "advocacy services" and "litigation services" as they apply for its purposes) "proceedings" includes any sort of proceedings for resolving disputes (and not just proceedings in a court), whether commenced or contemplated.
(7) Before making regulations under this section, the Lord Chancellor shall consult--
(a) the designated judges;
(b) the General Council of the Bar;
(c) the Law Society; and
(d) such other bodies as he considers appropriate.
(8) A costs order made in any proceedings may, subject in the case of court proceedings to rules of court, include provision requiring the payment of any amount payable under a litigation funding agreement.
(9) Rules of court may make provision with respect to the assessment of any costs which include fees payable under a litigation funding agreement."").

Lord Falconer of Thoroton: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 65. With the leave of the House I shall speak also to Amendments Nos. 68 to 69A. These amendments seek to facilitate different ways of funding legal services. Amendment No. 65 gives effect to an undertaking given by the noble and learned Lord the Lord Chancellor to the noble Lord, Lord Goodhart, during the passage of the Bill through this House to provide a statutory basis for a third person to fund litigation from a fund financed by additional fees payable in successful cases supported by the fund. The new clause is needed to ensure that such arrangements are properly regulated and that they do not fall foul of the common law doctrine of champerty, which was intended to prevent third parties encouraging legal actions for a share of the proceeds.

Amendment No. 68 seeks to allow organisations that provide legal services to their members to recover what is effectively a self-insurance premium. There are many membership organisations, trade unions and motoring organisations, for example, which provide legal services to their members as a benefit of membership. Members who have a sufficiently strong case may use lawyers retained by the membership organisation at no cost. The organisation also undertakes to indemnify the member against any liability they may incur to meet his or her opponents' costs should the claim be unsuccessful. Membership organisations are nearly always sufficiently large that rather than incurring the cost of commercial insurance premiums (which includes the administrative costs of the insurer and an element of profit) they meet the costs directly in the cases that their members lose. While a membership organisation could take advantage

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of Clause 29 by taking out an insurance policy for each member assisted--and, if successful, recover the premium in costs from the other side--in practice, this is not a sensible arrangement. As I have already said, most membership organisations can meet the liabilities from their own funds without incurring additional unnecessary costs securing commercial insurance.

Therefore, the new clause inserted by Amendment No. 68 puts in place a scheme by which prescribed bodies who meet prescribed requirements can recover, as part of the costs awarded to a member with a successful case, a sum towards the provision made to protect members against the risk of having to meet opponents' costs. The clause also allows for regulations prescribing the maximum amount that can be recovered in this way. We intend not to put membership organisations in a preferential position but to allow them to continue to offer their services as effectively as possible. Amendment No. 69 inserts a new clause to allow rules of court regulating costs between the parties to limit the operation of the indemnity principle.

The new clause reflects proposals made by the noble Lords, Lord Kingsland and Lord Phillips of Sudbury. In response, my noble and learned friend the Lord Chancellor said that the indemnity was so central to the existing system of costs that detailed consideration would be necessary. He undertook to carry out a consultation exercise before deciding whether rules of court would be required to retain the beneficial aspects of the indemnity principle.

My noble and learned friend the Lord Chancellor published a consultation paper on this subject in May. It proposes that successful litigants should be able to recover from their opponents all costs actually and reasonably incurred, without imposing the further test of whether they would be legally liable to their lawyers for those costs if they were not recovered from the other side.

Finally, Amendment No. 69A provides a better structure for the Bill. I commend the amendments to the House.

Moved, That the House do agree with the Commons in their Amendment No. 65.--(Lord Falconer of Thoroton.)


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