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Lord Elton: What protection or redress does the noble Lord, Lord Lipsey, suggest for perfectly honest practitioners against vexatiously expensive

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complainants of whom we have already heard--as I know myself--there are a number around in the market?

Lord Lipsey: The person against whom the complaint is made will not get redress under this clause anyway. The redress will go to the ombudsman himself. The ombudsman has made it very clear that he will ruthlessly strike out what appears to be a vexatious complaint at an early stage. It really does not need this provision.

Lord Bach: Before responding to the specific amendments, I want to make a few key points, perhaps, about the ombudsman scheme. In many ways, they echo what the noble Lord, Lord Saatchi, said, when he moved his first amendment.

It is important that I should do so because it may help us to see these interesting amendments in context. As he said, effectively the scheme is intended to provide a quick, cheap and informal mechanism for resolving disputes between authorised firms and consumers. Past experience shows the benefit for firms and consumers in having those arrangements. Traditionally, ombudsman schemes have accepted cases only where the firm and consumer concerned are in a stalemate position; and yet by referring the dispute to an independent third party, the vast majority--over 80 per cent--are resolved between the parties without the ombudsman having to take a decision one way or another.

So questions about who should be bound by the determinations and on what basis they will be reached, and the circumstances in which a complainant could be ordered to pay certain costs, must be seen against a background where those issues do not even arise in the vast majority of cases.

I turn to the amendments. Amendment No. 250ZA would alter the basis on which the ombudsman is to determine complaints. We have considered the matter carefully and we believe it right to require the ombudsman to determine cases on the basis of what is fair and reasonable in all the circumstances. Of course we would expect him to take the matters mentioned in the amendment into account where they were relevant. But we do not believe it is appropriate to be too prescriptive. This is not a court of law.

To ensure transparency, the ombudsman will be required to make a written statement of the reasons for his determination. He will, of course, be required to comply with Article 6 of the European Convention on Human Rights. I say that to the noble Lord, Lord Kingsland, with rather more confidence than the other day. However, it is the very point of an ombudsman scheme that it should be quick and informal. It would not be right to constrain the ombudsman by requiring a purely legalistic focus or a focus on general rules to the exclusion of everything else. Indeed, to do so could mean that he was unable to examine all the matters, such as delay or maladministration, relevant to a complaint. It is right to provide such an accessible and flexible means of consumer redress. Previous schemes have determined cases on the basis of what is fair and

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reasonable, and we do not believe that we should abandon that principle in setting up this new and important scheme.

Amendments Nos. 250A and 250B deal with the question of whether the ombudsman's decisions should be binding on the complainant. We do not believe that they should. In that respect, the new ombudsman scheme will again follow those it replaces. Those schemes are based on the premise that the decision is not binding on the complainant. They provide consumers with an alternative to court action, but they do not deprive them of their legal rights at any stage before they decide to accept the determination. We believe that, in providing for the new scheme, it would be wrong to design it in such a way as to put the complainant in a less favourable position than under the current schemes.

The ombudsman's decisions are of course binding on respondents. The purpose of the scheme is to provide consumers with a free and accessible means of redress where there has been wrongdoing to ensure that individuals without the vast resources and expertise available to some firms are treated fairly in the financial marketplace. A scheme that achieves that aim will underpin consumer confidence in financial markets and services. Were the ombudsman's decisions not binding on respondents, that objective would not be realised. The consumer could find himself, once again, faced with having to decide whether to pursue a case through the courts, which, we know, is frequently a long and expensive process.

Amendment No. 250C has not been spoken to. Amendments Nos. 250D and 251 pull the Government in different directions. On the one hand, Amendment No. 250D, spoken to by the noble Lord, Lord Saatchi, would allow for the ombudsman to make an award of a firm's costs against a consumer. On the other hand, Amendment No. 251, spoken to by the noble Lord, Lord Taverne, and by my noble friend Lord Lipsey would mean that it was not possible for the ombudsman to award any costs at all against a complainant, even where his behaviour had been improper, unreasonable or vexatious. Together, those amendments illustrate that the Bill probably--I emphasise that word--strikes the right balance at the present time.

It would not be right or desirable to provide for the ombudsman to award the respondent's costs against a complainant. The scheme is intended to provide consumers, many of whom in the real world simply do not have the resources to pursue a case through the courts, with a free means of redress. The respondent's costs will be outside the control of the ombudsman. To allow those costs to be awarded against the complainant would risk imposing heavy penalties or the perception--just as importantly--that such penalties might be imposed on complainants, which might discourage them from properly using the scheme. That would run against the grain of what we are trying to achieve.

However, to protect against the possibility that consumers may misuse the scheme, the Bill as presently drafted allows, in limited circumstances, for the

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ombudsman to make an award of the scheme operator's costs against a complainant. That is an important balance which Amendment No. 251 would remove. It is important to remember that the ombudsman will normally be able to award costs against a complainant only when he has acted improperly or unreasonably, or has been responsible for an unreasonable delay. Consumers should be free to complain when they have not been treated fairly. The scheme could provide an accessible, free means of doing so. We agree that if the ombudsman were routinely to award costs when he found against the complainant, that could deter people with a legitimate grievance from seeking the redress to which they are entitled.

We do not believe that any such award would be made except in extreme cases and only after prior warnings had been given to the complainant and--what I am about to say now is also an important rider--only if it has been shown to be necessary in the light of experience for rules to have been made to allow it. Although we shall invite the noble Lord to withdraw Amendment No. 251, I want to make it clear that we want to consider the matter before Report stage. We should like to listen to representations if any noble Lord interested in the amendment wishes to make them.

As I have said, it is important that the provisions allowing for such awards to be made where the complainant's behaviour has been improper or unreasonable remain in the Bill. They provide an important and necessary safeguard against inappropriate use of the scheme. It would not be right for the Bill to allow consumers carte blanche to indulge in unreasonable behaviour. All the amendments would disturb arrangements that have been carefully designed to produce a scheme which safeguards consumers while, we hope, remaining fair to business. Significantly, they are also broadly similar to those under the existing schemes which firms have joined on a voluntary basis in the past. I therefore ask all noble Lords who have put their names to the amendments to consider not pressing them.

Lord Jenkin of Roding: Perhaps I may begin by making the representations for which the Minister has just asked. I have been reminding myself of the evidence given to the Joint Select Committee about the scheme by Mr Andreas Whittam Smith, acting as spokesman for the ombudsman. It so happens that Mr Whittam Smith and I had a passage of arms three or four years ago, where I sought the help of the Press Complaints Commission. It would be entirely wrong for me to take up the Committee's time in describing the circumstances.

Before I went to the Press Complaints Commission, I had clearly to agree that it was a complete alternative to suing the newspaper for libel. Once I had initiated a complaint with the Press Complaints Commission, I was, as I understood the matter, precluded from taking my case to the courts. I considered at some length with my legal adviser as to whether that was the right course

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of action in the circumstances. I was advised that the hassle of the courts would not be worth what I might get out of it.

I then had a long battle with the help of the Press Complaints Commission to get Mr Whittam Smith to issue an apology. I am happy to say that after some months his newspaper published an appropriate apology and that was the end of the matter. I cannot quite understand why it is right that someone who can be quite seriously damaged by a newspaper should have to give the kind of undertaking which complainants to the Press Complaints Commission have to give, whereas someone can go to the ombudsman and, if he does not receive the answer he wants from the ombudsman because under the Bill the ombudsman's decision is not to be regarded as final, he is then free to pursue his complaint in the courts.

It may well be that there are significant differences between the two and, obviously, one must not take the parallel too far. But it has always seemed slightly odd that the complainant, having failed to persuade the provider or authorised person that he has a justified complaint, having then failed to persuade the ombudsman that he has a justified complaint, may then continue to pursue his case through other channels at the cost, it seems, of the authorised person. I certainly believe that the amendment in the name of my noble friend on the Opposition Front Bench is one that requires careful consideration.

On the amendment spoken to by the noble Lord, Lord Taverne, I believe that to be a reasonable provision to retain in the Bill in view of the fairly extreme circumstances that the subsection requires before costs can be awarded against the complainant.

I listened to the noble Lord, Lord Lipsey, with some concern. He fears that this provision will deter genuine claimants. With the greatest respect, I do not recognise the circumstances that he describes. I have never met an authorised person, if I may so describe an insurance broker or some such person, who would even remotely behave in that way. Maybe such people exist, but there needs to be a sanction against the totally unreasonable and vexatious complainant. After all, the courts will act in that way, to the extent of ultimately barring someone from the proceedings in the court. If the Attorney-General is prepared to certify that someone is a vexatious litigant, such a person cannot attend the proceedings.

I am unsure why this limited power to award costs in the circumstances of unreasonable behaviour or unreasonable delay should have a bad effect. Perhaps the noble Lord will take that on board. I believe that the amendment of my noble friend is justified. I would hate to see subsection (4) removed because I believe it is a valuable discipline against unreasonable complainants.

5 p.m.

Lord Lipsey: Does the noble Lord accept that the reason he has not met such people is that he moves in highly respectable financial services circles? I

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commend to him the experience that I have of sitting on the disciplinary committee of the Personal Investment Authority. At the bottom end of the industry he will find people who are not of the character that he represents to the Committee.

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