Clause 22 - Employment tribunals
Employment Bill
10:00 am

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I beg to move amendment No. 7, in page 32, line 1, leave out 'may' and insert 'shall'.

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Mr Joe Benton (Bootle, Labour)

With this we may discuss amendment No 18, in clause 23, page 32, line 32, leave out 'may' and insert 'shall'.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I look forward to moving on to the substance of what we are here today to discuss.

Clause 22 replaces section 13 of the Employment Tribunals Act 1996. I hope that the debate on this group of amendments will be relatively quick. They deal with an issue that arises under both clause 22 in relation to employment tribunals and clause 23 in relation to employment appeal tribunals. For that reason, the two amendments have been grouped together.

The amendments will be familiar to the cognoscenti; they would remove a ''may'' and insert a ''shall''. We do not wish to make primary legislation more prescriptive, but we want to explore the strength of the Government's intention to implement the regulations for which the clause provides. I seek an assurance from the Minister that the regulations will include—not ''may'' include—provision for the award of costs and expenses. I suspect that the award of costs, expenses and allowances will be the subject of substantive debate as we consider this part of the Bill. We need to know that this will not be one of those permissive clauses that the Government then decline to use for one reason or another; that there will be regulations allowing for the award of costs, expenses and allowances.

If the Minister is able to say that the regulations will include provision for the award of costs and expenses, I will be happy to withdraw amendment No. 7. I can accept that the conventional language of the Bill is permissive rather than prescriptive so long as the Minister writes it into the record that the Government intend to include such provision.

In relation to amendment No. 18, the situation is a little more complex. My understanding—I am sure that hon. Members who have studied the matter will leap up to correct me if I have made an error—is that the wording in clause 22 that is to replace section 13 of the 1996 Act always contained a general power for the regulations to permit the awarding of costs. Therefore, we are removing section 13 and replacing it with wording that is of very similar construction and has the same effect.

The wording proposed in clause 23 does the same thing as the wording proposed in clause 22, but the wording in section 34 of the 1996 Act is somewhat different. Section 34 provides that the rules of procedure may include provision for ordering an award of costs or expenses where

''the proceedings were unnecessary, improper or vexatious''

or where

''there has been unreasonable delay or other unreasonable conduct in bringing or conducting the proceedings.''

That is to be swept away. Instead of limiting the circumstances in which costs or expenses can be awarded—as the 1996 Act does—at employment appeal tribunals, clause 23 will create symmetry with employment tribunals, which will have a general power to award costs and expenses.

The Minister may tell us that the regulations will reintroduce some of the restriction that the Bill is removing, but that is bizarre. We delete a provision in primary legislation that imposes a restriction; we replace it with a provision in primary legislation that does not impose that restriction; and we then look to secondary legislation to reimpose it. I cannot advocate leaving more provisions to secondary legislation. We all know that we do not have adequate time or facility to scrutinise statutory instruments properly in this place. Another subject is being removed from proper parliamentary scrutiny and placed in statutory instruments, which are inevitably debated in a cursory fashion.

Will the Minister confirm that provision will be made for the award of costs and expenses in both employment and employment appeal tribunals? Will he explain the practical effect of removing the restriction in section 34 of the Employment Tribunals Act 1996? Does he intend to reimpose the restriction through regulations and, if so, why is it necessary to remove it from primary legislation? Will he allow the Committee fully to understand the intention behind the two clauses?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

There are many ''mays'' and ''shalls'' ahead. I was pleased to hear the hon. Gentleman; we may not have quite as many debates as I originally feared.

Amendments Nos. 7 and 18 are being taken together. To give the hon. Gentleman the assurance that he seeks, we have already said that costs and expenses will be included in cost awards. We are using the language of the Bill. The Act that we are amending uses the word ''may'' and the Bill is littered with it; it would be strange if we suddenly changed to ''shall''. We intend to use the new powers in the clause, and I see no compelling reason to accept amendment No. 7 and change wording that has been consistent over the years. Nothing is to be gained from creating a requirement when we previously had a discretion.

The same arguments apply to amendment No. 18. Clause 23 makes sensible changes so that the cost rules in the employment appeal tribunal are brought into line with those for employment tribunals. At the moment there is a difference between the two. The clause covers the power to make rules on wasted costs in EAT proceedings, and we intend to use that power. The circumstances in which costs can be awarded in employment tribunals and employment appeal tribunals are already similar in practice. However, we are introducing new powers for employment tribunals and EATs, so the legislation should be consistent. Clause 23 achieves just that, so I ask the hon. Gentleman to withdraw the amendment. If he does not, I shall invite the Committee to reject it.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Will the Minister explain how the regulations will be framed? Will awarding costs be a general power at the discretion of the tribunal or appeal tribunal, or will the circumstances for awarding them be limited?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

We are not changing the circumstances in which costs are awarded. They are awarded now when claims demonstrate that vexatious, abusive, unreasonable and disruptive behaviour has occurred. At the suggestion of the judiciary in July, we replaced the old frivolous behaviour clause with a misconceived behaviour clause. The same basis of cost awards applies, and we do not propose to change it, though some later amendments suggest that we do. We will resist them because the current basis is fair.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful for the Minister's clarification and beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I beg to move amendment No. 9, in page 32, line 5, leave out 'may' and insert 'shall'.

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Mr Joe Benton (Bootle, Labour)

With this we may take amendment No. 20, in clause 23, page 32, line 34, leave out 'may' and insert 'shall'.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Once again, the same issue arises in that the clauses are framed to give discretion over whether the regulations will provide for the disallowance of costs or expenses of a representative, for the ability to order a representative of a party, to meet costs or expenses of a third party or to order a representative to meet the costs of any allowances payable by the Secretary of State. As the amendment paper demonstrates, members of the Committee want to scrutinise in some detail the provisions that will become subsection (1A) of new section 13 and subsection (2) of new section 34 of the Employment Tribunals Act 1996.

We should be clear from the outset whether the Government are toying with this idea, or have firmly resolved to introduce regulations that will confer a power to deal with abusive representatives. If the Minister can make it crystal clear on the record that the regulations will deal with abusive representatives, I will withdraw the amendment. He could also help the Committee by clarifying the criteria for abuse: how high is the threshold? We must understand the degree of misconduct that the Government intend to punish—it is, effectively, a punishment—in this way. Will the provisions deal only with the grossest abuse and misconduct, or could they apply to representatives who pursue matters when their professional judgment should tell them that further pursuit is misconceived and a waste of the tribunal's time? Will the Minister make clear whether we are talking about gross abuse or about cases that waste time and cause costs to other parties, and that the representative should have known better than to pursue? How do the Government propose to address similar abuse by litigants in person who are not represented? The clause deals exclusively with representatives of parties to tribunal proceedings.

10:15 am
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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I assure the hon. Member for Runnymede and Weybridge that we intend to use the powers that the clause will give us. The clause amends section 13 of the Employment Tribunals Act 1996, which uses ''may'' throughout, so it would be odd to change suddenly to using ''shall''. The arguments might be similar for other amendments. The hon. Gentleman asked for the assurance, and I have given it.

All sides unanimously supported the proposal in ''Routes to Resolution'' that where a paid representative pursues a vexatious, misconceived claim, the responsibility to pay costs should be on them, not the applicant. When it comes to judging that, any significant misconduct is included in the list of powers for the tribunal, and it is for the tribunal to decide the level of misconduct. There are horror stories about misconceived cases that have been taken forward, including cases in which the applicant did not have even the required years of employment to take a case forward. It is not for us to set in concrete the level of misconduct, but we will consult widely on the regulations.

The hon. Gentleman asked about litigants who are not represented. We already have the power to penalise on unreasonable conduct, so that parties who are not represented can have cost awards made against them.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

From the Minister's comments, it appears that litigants who are represented by a paid representative could be penalised, or see their representative penalised, if their behaviour was vexatious. Those who appear in person could also be penalised. Does that leave a gap in the middle for those who are represented by unpaid representatives, and does that give the Minister cause for concern?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

No, it does not. I know that the hon. Gentleman has tabled amendments to change that situation. Citizens advice bureaux, trade unions and not-for-profit organisations are in a different category from those that represent litigants on the basis of receiving a profit from pursuing vexatious cases. There is no inconsistency, and we will not apply the measure to not-for-profit organisations.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I can understand the Minister's logic if he views the award or disallowance as a penalty on the representative. However, there is another side to it. The award is a means of recompensing a third party who has been put to unnecessary expense as a result of the behaviour of the representative. Is it reasonable for the ability of a third party to recover his costs from a representative to vary according to whether that representative is paid or unpaid? The effect on the party who has suffered unnecessary costs will surely be the same.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I do not accept that point. The cost award is still made in those circumstances. The employment and employment appeals tribunals will still have the power, thanks to the clause, to make cost awards in the circumstances set out in the legislation, which will be in only a tiny minority of cases anyway. However, the award is against the party, not against the representative.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Having heard the Minister's comments, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I beg to move amendment No. 1, in page 32, line 16, at end insert—

'( ) In making an order under this section the tribunal shall take into account the circumstances of the party and their representative and in particular whether the representative is or may be paid for their services and any other relevant circumstances.'

Amendment No. 1 examines whether tribunals should have the power to require representatives to pay costs, which is an important issue. I support the intention of the clause, but I am concerned that distinctions between those who charge for their services and those who do not will be difficult to justify and hard to maintain.

What new funding arrangements will be developed around the regulations? Such arrangements could be designed to comply with the wording of the regulations but could also subvert their purpose. For example, if regulations sought to prevent charges against trade union representatives, it might be difficult to exclude from charges other types of representatives who are paid directly. A group of employers could form an association and pay an annual fee that secured representation as needed. How would the distinction be drawn between such indirect payment for services and the membership fees of union members?

Contingency fees of a no win, no fee nature are permitted by employment tribunals. The representative receives a proportion of the award if the claim is successful. In such circumstances, the representative does not charge for his or her services if the case is lost. The regulations will have to determine how representatives using such payment mechanisms and others not yet conceived will be treated.

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Mr Mark Prisk (Hertford and Stortford, Conservative)

Organisations such as the Institute of Directors and the Law Society have expressed concern about that. I would welcome the Minister's comments on an issue that affects small businesses. If a small business man or woman pays a membership fee to a federation for services that specifically include legal support, is there not a discrepancy between paid and unpaid? They are paying a fee, part of which is for legal services that may be required at some time.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

That is a welcome and relevant addition to my comments. Many organisations that need such services combine in that way. It is preferable that any discretionary award of costs directly against representatives who behave inappropriately should rest with a tribunal that can take account of the circumstances. We must ensure that those who cannot benefit from legal advice or representation are not disadvantaged and that individual circumstances are taken into account. We accept the intention of the clause but would like the Minister to clarify the amendment further.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The Law Society drafted the amendment, so I suppose that the hon. Gentleman can be forgiven for not checking it. As the debate proceeds, however, he may discover that that was a serious mistake. On a minor point, the amendment refers to orders made under ''this section''. The hon. Member for Weston-super-Mare may have in mind orders made under ''this subsection'', because otherwise the amendment would embrace orders made, for example, in relation to the provision for taxing and settling costs or expenses in subsection (1B). Will he indicate that he intended the amendment to refer to an order under ''this subsection'', and not ''this section''?

Substantively, the aim is to probe the Government's intention to discriminate between types of representatives. There will be other opportunities to consider the problem further, when we discuss other groups of amendments and amendment No. 14, which I and my hon. Friend the Member for Wealden (Mr. Hendry) tabled.

While the hon. Member for Weston-super-Mare reflected on the Minister's closing remarks in our last debate, it occurred to me that it is unnecessary, perhaps even perverse and detrimental to the interests of individuals who might instigate proceedings at a tribunal, to introduce this type of discrimination. I must ask myself why. Who is behind the intended discrimination? The only obvious beneficiaries would be the representatives of trade unions who appear on behalf of their members. They will, almost uniquely, be invulnerable to an award of costs, expenses, or a disallowance as a result of their behaviour in the tribunal.

As I understand the Minister, that means that it is tough luck not on the other party in the tribunal, but on the person whom they represent, because the tribunal will still have the power to award costs and expenses where an unpaid representative has behaved vexatiously or abusively. However, it will not be the representative or his wealthy trade union who will have to meet those costs, but the litigant, if I understand the Minister correctly. Will he clarify that?

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Ms Helen Jones (Warrington North, Labour)

Surely the hon. Gentleman is aware that in several cases applicants to tribunals are represented neither by qualified legal representatives nor by trade union officers, but quite often by people who work for organisations such as citizens advice bureaux. Does he seriously suggest that we should impose a power to make costs against volunteers who work for a CAB?

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The hon. Lady raises an interesting point, and I would be interested to hear the Minister's view on whether there should be any qualification for the ability to appear as a representative in tribunal proceedings. There is something unfortunate about the idea that anyone can appear as a representative, and that if they are not paid to do so, their incompetence in conducting themselves could result in the person whom they are supposed to be helping discovering that he is footing a hefty bill for costs and expenses as a result of a tribunal award.

The hon. Lady's point is interesting for another reason. She has rightly pointed out another class of unpaid representative: volunteers who work for a CAB. Common sense might dictate that such a volunteer is in a different category from a union representative who is a trained, and possibly full-time, paid employee. Do the Government intend that professionally involved people, irrespective of whether they are paid by the person whom they represent, should be included in the class of representatives who could be vulnerable under the clause?

That includes trade union representatives, officials of trade associations and employer bodies. Although those people may not be paid directly, they have many of the attributes of a solicitor representing a client at a tribunal, so they ought to know better than to behave abusively or vexatiously.

10:30 am
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Ms Helen Jones (Warrington North, Labour)

I must take the hon. Gentleman up on that point. Surely he is aware that the role of trade union representative encompasses many people with different sorts of experience? Whatever their merits, they are not qualified solicitors.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I appreciate that trade union representatives will not usually be qualified solicitors, but I would be interested to hear the Minister's reasons for excluding from jeopardy those regularly engaged in tribunal proceedings. The Minister could argue that a novice might have a stab at it out of the goodness of his heart—a case of the blind leading the blind where a well-intentioned person sought to represent someone and made such a complete hash of it that the tribunal was infuriated by their conduct. That person is in a different category from one who regularly participates in such proceedings.

The hon. Member for Warrington, North (Helen Jones) shrugs that notion off. She should remember that we are not debating the award of costs, but whether it is the representative or the applicant who bears them. A trade union member who accepts his union's offer to represent him at a tribunal should not be placed in financial jeopardy because the official is incompetent. The Minister would not allow an award of costs against such a representative, although he would allow that if the representative were a solicitor.

Committee members may tell me, if the Minister cannot, whether the idea of attacking representatives directly and forcing them to meet the costs of their conduct is a novel departure in English law. My understanding of our legal system is that the client sits in the background and the barrister conducts the case. Even if that takes six times as long as the client thinks it ought to, he still has to pay the bill. Are there other examples where the legal representative is forced to meet awards of costs? Has the Minister discussed that with the Lord Chancellor's Department? The process could be the thin end of a wedge that will ultimately result in the courts awarding costs against the representative of a party to proceedings.

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Mr Rob Marris (Wolverhampton South West, Labour)

Perhaps I can assist the hon. Gentleman. First, I declare an interest: I am a member of the Transport & General Workers Union, which, as I said on Second Reading, gave moneys to my constituency Labour party before the general election was called. The hon. Gentleman's remarks may have referred to me but I have no formal links with any law firm; I was paid up until 7 June, when I got my P45. I have many friends in Thompsons Solicitors, a leading legal aid trade union firm, where I worked for 13 years.

The civil and criminal courts can make a wasted costs order, so the proposal is not the thin end of a wedge.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful to the hon. Gentleman. I hope that he will contribute to later debates exploring how the incidence of such an order is determined and how to hit the people whom we intend should be hit, and not anyone else.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The amendment is flawed, as the hon. Member for Runnymede and Weybridge said, and unnecessary. It forces tribunals to take account of the circumstances of the party when making a costs award against them, and of the representative, especially whether he is paid, when making a wasted costs order.

Case law has established in virtually all cases that tribunals take into account a party's means before making a costs order. I asked, as a matter of interest, for examples of tribunals that did not take the trouble to discover the resources of the person against whom they had made a cost order. In one case, an applicant brought a case against her husband but failed to appear before the tribunal, having travelled to India and claimed illness. The tribunal found that the case had been brought not to seek redress for an employment-related issue, but to use the tribunal as a weapon in her matrimonial difficulties. In her absence, the woman was found to have acted vexatiously; we guess—we are not absolutely sure—that the tribunal did not discover the resources, but simply issued a costs award because it was such an outrageous misuse of an employment tribunal.

The hon. Member for Weston-super-Mare raised a major issue, which I shall put in context: of 130,000 applications to employment tribunals last year, 247 had a costs award. Costs awards are not for cases that are wrong, but for the small category that are completely misconceived. The vast majority of people who go to employment tribunals believe that they have a case; whether they do is decided through the system. Only a tiny proportion—about 2 to 4 per cent.—of initial claims could be described as vexatious.

The hon. Member for Runnymede and Weybridge asked whose interests were being served; it seemed to him that it was trade union interests. As published in our response to ''Routes to Resolution'', which was almost unanimously approved of, the Trades Union Congress supported the measure, which it said would deal with unscrupulous time wasters; the Confederation of British Industry said that it recognised that extensive costly delays can sometimes be caused by unscrupulous representatives; the Employment Lawyers Association described it as desirable and workable, and one tribunal chairman, in a heartfelt letter, said that the

''power to make orders for wasted costs directly against representatives who charge for their services would have the almost universal support of the tribunal judiciary''.

In all the responses, the argument, ''Why not extend it to CAB and trade unions?'' was not used. That is because the people who deal with such cases, day in and day out, understand the important difference. My hon. Friends the Members for Warrington, North and for Wolverhampton, South-West (Rob Marris) show that we on the Labour Benches have considerable experience in these cases. In any of the 247 wasted costs awards in the past year that involved trade unions I would be surprised if the trade union representative did not say at an early stage, ''Do not pursue this case in an employment tribunal.''

The difference is that members pay a subscription to a trade union, as you and I do, Mr. Benton, and that is one of the services that they receive. Irrespective of having been told that there is no case to pursue, trade unionists sometimes say to their trade unions, ''I am a member of this union, I pay my subs, I want your assistance. You are there to be my advocate.'' That is different from what happens in organisations that have a financial incentive to take the cases on. Trade union representatives' earnings do not depend on the cases they pursue to employment tribunals; trade unions are very keen to weed out weak and vexatious cases because of the financial burden involved.

The hon. Member for Weston-super-Mare raised a most important point about employers' associations, which would be in the same position as trade unions, citizens advice bureaux and the not-for-profit sector if, as part of their members' subscriptions, those organisations represented small business people as respondents.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

The Minister mentioned 247 cases. Does he know how many were employer or trade union led?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

No, I do not, but a third of those costs awards were awarded not against the applicant but against the respondents, because their case was so poor: for example, they did not pay the national minimum wage or the right redundancy payments, or they had such an outrageous defence that the case did not stand up, or they failed to turn up to put their defence to the court. It is a misconception that the costs awards are always against the applicant to an employment tribunal. We have no details of how many cases involved employers' organisations.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The Minister makes a clear case for it being unlikely that many, if any, trade union representatives would find themselves in jeopardy. That is my point: because they are experienced and have a back-up, they are professionals in this system. It is not good law to exclude a class of people from potential jeopardy if they misconduct themselves on the basis that evidence shows that they are not very likely to do so.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The organisations representing those involved did not advance the same argument as the hon. Gentleman. His argument is not valid because there is a huge disparity in the resources of paid representatives and those who do not charge for their services or who are non-profit making.

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Mr Mark Prisk (Hertford and Stortford, Conservative)

It would be peculiar if a small business man or an individual employee who took on a legal representative directly was treated differently from someone who was represented by a lawyer appointed by an organisation to which he subscribed, even if it was the same lawyer. Does the Minister recognise that peculiarity?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I do not. We want to return to the original basis of an employment tribunal, to which Leggatt referred, which was not legalistic. As I said on Second Reading, that may be an impossible dream, because, without wishing to offend my lawyer colleagues, once the lawyers get a grip on something it is difficult to loosen it.

I do not accept the hon. Gentleman's point because if we are talking about small businesses as respondents, they would welcome the move because they do not want to end up with vexatious cases, which involve time and trouble. If we are considering them in the position of aggrieved party, or having costs awarded against them, and including legal fees, that is an absolutely fair basis because they may well have been persuaded by the paid representative to defend a case that was vexatious and had no chance of success. A different clause prevents the paid representative from clawing costs back from the small business person, so I think that we have dealt with the point fairly.

If we include unpaid representatives there will be real danger that volunteers will be discouraged from offering their services. Alternatively, the behaviour of a rogue individual could impact harshly on a resource-free advice centre. Only 19 per cent. of employment tribunal applicants are professionals, and 25 per cent. are unemployed. It would be wrong of the Government to harm their opportunity to be properly defended.

10:45 am
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Mr Tony Lloyd (Manchester Central, Labour)

My hon. Friend has made the point that I was about to make. It is not common practice to have a paid advocate before the tribunal. What, however, would happen to, for example, the citizens advice bureau or law centre advocate whose services are provided entirely free to the client if they were told that they might end up having to foot the costs if things went awry?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

My hon. Friend makes an important point. I guess that that would seriously diminish their opportunity to offer advice in the future. It would affect not just trade unions but other free centres of advice. It would be an unwarranted penalty, and I do not think that that would be fair.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I should like to pick up on the intervention made by my hon. Friend the Member for Hertford and Stortford (Mr. Prisk). When the Minister talks about a representative being a paid representative, is he talking about a representative who is paid by the person whom he is representing or does he include a representative who is paid for being there, but not paid directly by the person whom he is representing? I am thinking particularly of a lawyer who is engaged by a trade body or professional association to represent an employer. In many respects, he will be in the same position as a lawyer engaged directly by the respondent. Does the Minister intend to include or exclude such a person as a paid representative?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

We intend to exclude them on the same basis as trade union officers who might be paid by trade unions but are not paid a specific fee for representing a person in court. We are talking about people who have a financial incentive to pursue a case.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

Will the Minister consider the point about contingency fees, for which being remunerated was relevant to the category into which people would fall?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I am sorry, I missed that point. Perhaps the hon. Gentleman could intervene again.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I said originally that there was an issue with regard to the contingency fee form of payment. The arrangement means that if the claim is successful, the person represented gets the money.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

If the hon. Gentleman is talking about no win, no fee arrangements, which are creeping disturbingly into the employment tribunal system, we will look to take back from the representative only any money gained as a result of representing the case. We will have to cover that important point in regulations, but we have not yet made a final decision.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful to the Minister for that, and I am grateful to the hon. Member for Weston-super-Mare for raising such an important point. Surely it is precisely the lawyer pursuing a no win, no fee case who is the target of what the Minister seeks to do here.

Is the Minister saying that such a person will be vulnerable for the costs of his misconduct only if his client is successful and he receives a fee? If so, there is a big hole in the system that the Minister is putting in place, because the client will suffer the consequences if his advocate is unsuccessful and loses the case. There will be no fee and consequently he will fall into the category of trade union and citizens advice bureau representatives, rather than that of paid lawyer. [Interruption.]

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

Inspiration has struck me. The hon. Gentleman makes an important point and I think that there is no difference among Committee members on discouraging no-win, no-fee ambulance chasers—for want of a better term. On wasted costs, both parties' costs could be included. I am also persuaded that we should include contingency fees, which will be in the consultation details.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I thank the Minister for that response and particularly the last point. I think that that will be addressed. I hope that we have rehearsed the issue sufficiently, but we shall debate another amendment on a similar issue. We must take account of the situation of those representing business and of those from the trade union side. Subject to the correct procedures, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Rob Marris (Wolverhampton South West, Labour)

On a point of order, Mr. Benton. A Committee member said that the Law Society had suggested that amendment. In these delicate times, I should declare that I am a member of the Law Society.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I beg to move amendment No. 6, in page 32, line 16, at end insert—

'( ) The Regulations made under subsection (1A) shall provide that a tribunal may make an order described in paragraphs (a) to (c) if, in the opinion of the tribunal, the representative concerned has acted vexatiously, abusively, disruptively or otherwise unreasonably.'.

The amendment's purpose is to examine the reasons for a tribunal awarding costs. Those reasons are contained in a statutory instrument under the Employment Tribunals Act 1996. Clearly specifying in the Bill the circumstances in which a tribunal can award costs would provide an extra safeguard. It is not adequate that the specifications are contained merely in secondary legislation. Of course, we have made the point, as we have in many other Committees, that statutory instruments such as regulations are not a satisfactory way of dealing with matters, and we shall return to that frequently.

Those bringing a claim, those defending a claim and those representing either party need clarification that costs will be awarded only when a party has acted in particular ways. Awarding costs in that manner will provide an excellent way of deterring unscrupulous applicants from using the tribunal process without good reason.

However, we must ensure that everyone who wishes to bring a claim with good reason is given every opportunity and encouragement to do so. We must not risk deterring applicants on low incomes or with few resources, who might fear that the way in which their case was conducted could result in their having to pay costs to the other party. Of course, it is very difficult for people to conduct cases. I have seen cases in which people win their point, but go on endlessly until they lose the case. They do not realise that they have won the point and go on to irritate the tribunals or judge involved.

Someone who can pay for professional representation will probably be in a better position to present a comprehensive case than someone with little or no access to representation. It is therefore imperative to outline in the Bill the circumstances in which costs can be awarded. That would ensure that costs were awarded according to the motives behind an individual's reason for bringing a case rather than the strength of the presentation. Colleagues will have other points to make, but I rest my case for now.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I agree with the sentiments expressed by the hon. Member for Weston-super-Mare, but he is seeking to build into the Bill something that is best placed in regulations. The amendment is unnecessary: the subsection already permits the Secretary of State to make regulations to allow tribunals to make orders for wasted costs. Regulations are the right and proper place for the details. We agree that changes may be necessary in future, but if the provision is written into the Bill it will be fixed and we will lose the flexibility of effecting change through regulations. The regulations will be effected through the affirmative resolution procedure. I see no value in building the provisions into the Bill. I agree with the sentiment, but regulations, not the Bill, are the best means of achieving it.

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Mr Brian Cotter (Weston-Super-Mare, Liberal Democrat)

I am happy to accept the Minister's answer. We may return to the issue later. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I beg to move amendment No. 11, in page 32, line 16, at end insert—

'(d) to prevent a representative of a party to proceedings before it who is subject to an order under subsections (b) or (c) above from recovering any such costs or expenses or allowances (as the case may be) from the person represented.'.

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Mr Joe Benton (Bootle, Labour)

With this we may take the following amendments:

No. 13, in page 32, line 16, at end insert—

'(de) to ensure that the cost of any disallowance ordered under paragraph (a) above is met by the representative and not the person represented.'.

No. 22, in clause 23, page 32, line 41, at end insert—

'(de) to ensure that the cost of any disallowance ordered under paragraph (a) above is met by the representative and not the person represented.'.

No. 23, in clause 23, page 32, line 41, at end insert—

'(c) to prevent a representative of a party to proceedings before it who is subject to an order under paragraph (b) above from recovering such costs or expenses from the person represented.'.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The purpose of this group of amendments is to probe the Government's intentions on orders against representatives and the mechanics of how the provisions will work. I also hope to explore, together with other members of the Committee, the consequences for charging regimes. The hon. Member for Weston-super-Mare has already alluded to the possibility that practice will amend itself to fit around the regulations—and, perhaps in some cases, subvert them.

Amendment No. 11 would allow the regulations to provide powers for the employment tribunal to ensure that costs awarded against a representative are not recovered from the person represented. If they were, that would undermine the purpose of the Bill. Amendment No. 22 would achieve the same purpose in relation to employment appeal tribunals, and amendment No. 13 relates to paragraph (a) of new subsection (1A), where the tribunal orders a disallowance of all or part of the costs or expenses of a representative. The amendment may be inelegantly phrased—I acknowledge that before the Minister picks me up for inadequate drafting—but it is designed to probe how the Minister will ensure in practice that the penalty is borne by the representative.

How far will the tribunal be able to probe the private contractual arrangements between a party and his representative? How will the Government ensure in practice that persons represented are not forced to sign away the benefits introduced by the regulations? Have the Government assessed the impact on fees and the availability of legal advice? If representatives are exposed to additional jeopardy and potential costs, they may try to protect themselves by making different arrangements with clients, charging higher fees or being unprepared to undertake certain categories of work. What evaluation has the Department of Trade and Industry conducted of that?

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Mr Rob Marris (Wolverhampton South West, Labour)

Amendments Nos. 13 and 22 would amend the parallel provisions of new section 13(1A)(a) and new section 34(2)(a) on the employment and employment appeal tribunals. I suggest to the hon. Member for Runnymede and Weybridge that the amendments are misconceived. A tribunal or appeal tribunal may disallow costs on the basis that a representative's conduct in proceedings wasted time. However, if that representative were following instructions on how to conduct those proceedings on behalf of the, probably losing, party, it is possible—and not rare—that costs would be disallowed, but it would not be the paid representative's fault. That is different from the situation covered by new section 13(1A)(b) and new section 34(2)(b).

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I understand the hon. Gentleman's comments, but I am not sure why it is different. How can he be sure that in situations covered by paragraph (b) the solicitor is not merely following his client's instructions, which I imagine that he is bound to do?

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Mr Rob Marris (Wolverhampton South West, Labour)

I cannot be sure, but I am sure that, if the Minister's power to make regulations approved by Parliament is fettered in the way suggested by amendments Nos. 13 and 22, that could have unintended consequences. I do not think that those consequences are what the hon. Member for Runnymede and Weybridge would want in the scenario that I outlined.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

The intention is not to fetter the Minister but to create additional classes of procedure regulations and allow the Minister to tell us how he intends to achieve what he wants with regulations. The amendments were not intended to reduce the Minister's scope to regulate.

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Mr Rob Marris (Wolverhampton South West, Labour)

In that case, I do not think that that needs to be in the Bill. It would send the wrong messages and possibly encourage applicants or respondents to ask their paid advocates, whether barristers or solicitors in England and Wales, to conduct proceedings in a way that delayed the tribunal—hon. Members on both sides of the House do not want tribunals or EATs delayed—on the basis that they then might not have to pay their own representative's bill.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

The amendments have been grouped, but I will deal with them separately and leave aside their inelegant wording. I agree with my hon. Friend the Member for Wolverhampton, South-West that they are unnecessary.

New section 13(1A), as inserted by clause 22, authorises an employment tribunal to order a representative of a party to meet the costs or expenses incurred by a party, or any allowances paid to a party by reason of the representative's conduct of proceedings. Amendment No. 11 would prevent representatives from recovering such costs, expenses or allowances from the person whom they represent. That is unnecessary, because new subsection (1A)(a) already allows the Secretary of State to make regulations that enable tribunals to prevent representatives from recovering costs from their clients.

In the extremely unlikely event that a representative sought to recover costs from his client that he had to pay to another party under a wasted costs order, the tribunal could be asked to make an order under new section 13(1A)(a) disallowing those costs. A separate paragraph is not needed, but I share the hon. Gentleman's concerns about representatives' actions during proceedings. The Government's position is set out in ''Routes to Resolution'' and we will consult on the draft regulations.

Amendment No. 13 would allow the tribunal to make an order under new section 13(1A)(a) to prevent representatives from recovering costs from clients, ensuring that costs payable to the other party were not passed on. Again, the amendment is unnecessary. Any doubt about the scope for unscrupulous representatives to avoid wasted cost provisions will be dealt with by regulations drafted under new section 13(1)(a). If a representative's costs are disallowed so that he cannot recover them from his client he, by definition, will suffer the disallowance. The amendment adds nothing to the provisions.

I agree with the hon. Gentleman's intention to ensure that costs incurred by a representative are not transferred to an unfortunate client. However, clause 22 already ensures that, so the amendment is unnecessary and I ask the hon. Gentleman to withdraw it. Amendment No. 22 is unnecessary for the same reasons. The provisions for dealing with errant EAT representatives are the same as those for employment tribunals. The EAT may order a representative who has misbehaved not to recover fees from a client. The representative will meet the cost of a disallowance, so the amendment adds nothing to the clause.

In line with employment tribunal provisions, new section 34(2A) authorises an EAT to order a representative to meet costs for expenses incurred by a party. Amendment No. 23 is designed to prevent representatives from recovering such costs from a client, but the Bill already allows the Secretary of State to make regulations enabling tribunals to prevent that. In the extremely unlikely event that a representative sought to recover costs from a client under a wasted costs order, the EAT would make an order disallowing the costs.

The hon. Member for Runnymede and Weybridge made important points about the effects on the legal profession and policing the system. In the previous debate, my hon. Friend the Member for Wolverhampton, South-West pointed out that the civil courts provide a precedent, although only 247 cases have occurred. I suppose that the legal representatives had indemnity insurance, but premiums will increase if they continue to pursue such cases. That sort of self-regulation is necessary and healthy. Tribunals will go into the contractual arrangements between representatives and parties, but they will not be permitted to examine privileged documents—an arrangement similar to that between lawyer and client in courts. However, they will have to conduct a thorough investigation into representatives' behaviour, and give them an opportunity to put their case. We will deal with those important issues again in the regulations.

I hope that I have given the hon. Gentleman enough comfort to enable him to withdraw his unnecessary amendments. I believe that he also regards them as unnecessary, as they were designed only to tease out the Government's position. I ask the Committee to defeat the amendments if he will not withdraw them.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I make no apology for unnecessary amendments. The purpose of many amendments is to allow the Minister an opportunity to clarify precisely the Government's intention, and I am grateful to him for doing so.

It is not as immediately apparent to me as it is, perhaps, to those on the Committee who have legal training that new subsection (1A)(a) in clause 22(1) deals with the disallowance of costs or expenses between the representative and the person represented rather than between the representative and third parties. However, the Minister's clarification of subsection (1A)(a) captures entirely the spirit of the amendment.

The issue that the hon. Member for Wolverhampton, South-West raised a few minutes ago is still dangling. Clearly, the intention of the measure is to catch lawyers or other representatives who abuse the tribunal process for their own purposes. However, representatives may be faithfully carrying out the instructions of clients who insist on pursuing a certain line. The essence of our judicial and quasi-judicial system is that a person who believes that they have a case is entitled to test it before an impartial tribunal, however mad the rest of us may think that it is. Indeed, the Human Rights Act 1998 requires that.

I am concerned about what would happen to a representative who had properly said to his client, ''I think you're nuts, you have no chance of winning the case'' but is then told by the client that they passionately believe in the merit of the case and want it prosecuted to the full. The representative should be able to ask the client to indemnify him against any award that is made by the tribunal. I hope that the regulations will deal with that issue. The tribunal should be aware of such situations and should not be forced into disallowing costs or making an award against a representative because of his conduct if it is clear that the client was pulling the strings.

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Mr Rob Marris (Wolverhampton South West, Labour)

I may be able to assist. If a professional adviser pursues a hopeless case on behalf of a client in a professional manner, costs might be disallowed under paragraph (a). Pursuing a hopeless case in an unprofessional manner might lead to costs being disallowed under paragraph (b).

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful to the hon. Gentleman for his useful contribution. However, costs disallowed under paragraph (a) for pursuing a hopeless case professionally would still be inequitable if the representative were merely carrying out his client's instructions.

The Minister made the point that the tribunal normally would not have access to privileged documentation; therefore, it would be in the dark about the instructions that had been given by the person represented to the representative. We must address the issue, in order to ensure that the system works fairly in dealing with a mischief, recognise without unfairly catching a representative who is doing his best to follow his client's perhaps bizarre instructions.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

That is an important point, but if a professional has properly advised a client and the client still pursues the case, the professional has not behaved disreputably. There are no grounds for a cost order. That is the Government's position, and it is the same in the civil courts. I mentioned that there would have to be a thorough investigation in which the individual had the right to put their case. One assumes that the advice given to the client would be part of that case. In that event, a cost order would not be proper.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Can the solicitor disclose his client's instructions to the tribunal? Would that not be privileged?

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

I cannot answer that question, but I know that that is how the civil courts operate, and that is the proper benchmark for us to use. The hon. Gentleman raises an important point. However, I think that he would agree that we should tackle the issue in our discussion of the regulations, not the amendments. We must ensure that professionals who have given sound advice and have still been told to pursue the case are not hit by cost orders. There is no difference between us on that issue. That is not our intention. That is why our proposals were so widely supported in the responses to our consultation document ''Routes to Resolution''.

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Ms Helen Jones (Warrington North, Labour)

As my hon. Friend the Member for Wolverhampton, South-West said, there is a difference between pursuing a hopeless case on the instructions of a client and pursuing it vexatiously. Any legal representative instructed by a client to behave improperly would be under a duty to advise the client that their behaviour was improper and, if the client persisted, to advise them to seek representation elsewhere. Legal representatives have a duty of legal conduct. For that reason, the situation that the hon. Gentleman suggests is not likely to arise or be influenced by the failure to disclose correspondence with the client. The representative has a clear legal duty of correct professional conduct in every case.

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Mr Alan Johnson (Minister of State (Employment and the Regions), Department of Trade and Industry; Kingston upon Hull West and Hessle, Labour)

That is an important point, but to be fair to the hon. Member for Runnymede and Weybridge, he was not talking about a case in which behaviour was disruptive or abusive, but about a case that had no chance of success. In that sense, the hon. Gentleman is right: one cannot immediately point out the fault, as one can in the case of disruptive behaviour.

Tribunals have the discretion to award costs and to take all circumstances into account, and I believe that they would err on the side of caution. My fear is that a general indemnity would arise so that professionals could get around the problem in ways that neither the hon. Gentleman nor I would want because they would undermine the clause.

We will seriously consider the issues and will ensure that the regulations provide for costs to be awarded against professionals who are genuinely guilty of misconduct and not against those whose sound advice is ignored by the applicant.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I am grateful to the Minister for clarifying the issues. We all appear to understand what we want to do, but the legal jargon and the legal system get in the way. We should allow the tribunal to decide who is guilty and who should pay. However, that may not always be easy to achieve because of the relationship between the client and the legal representative. In seeking to ensure that there is equity between the representative and the person represented with regard to the awarding of costs, we must not lose sight of the fact that there must also be equity for a third party. We do not want to create a situation in which a third party suffered because costs were not awarded, because it would have been inequitable to order costs against a representative, as they had acted under instructions.

I am grateful to the Minister for acknowledging that serious issues are involved. They are very technical, and I acknowledge that they will apply in only a small number of cases. However, it is important to ensure that the regulations deal adequately with those issues. I am grateful for the Minister's assurance that he will take today's debate into account, and I look forward to seeing the regulations in due course. In the meantime, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I beg to move amendment No. 12, in page 32, line 16, at end insert—

'(dd) to make an order prohibiting a representative of a party to proceedings before it from representing parties before Employment Tribunals or Employment Appeals Tribunals for a specified period of time by reason of the representative's conduct of the proceedings.'.

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Mr Joe Benton (Bootle, Labour)

With this we may discuss amendment No. 21, in clause 23, page 32, line 41, at end insert—

'(dd) to make an order prohibiting a representative of a party to proceedings before it from representing parties before Employment Tribunals or Employment Appeals Tribunals for a specified period of time by reason of the representative's conduct of the proceedings.'.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

Amendment No. 12 deals with clause 22 and amendment No. 21 deals with the mirror-image issue in clause 23. Both address the problem—I shall call it that for the moment—of representatives who are not paid for their services. In earlier debates, we discussed the possibility of breaking down the distinction between paid and unpaid representatives. However, the Minister has made it clear that the Government intend to maintain that distinction, and we must accept their decision.

The amendments would give the tribunal an additional power. As well as being able to award costs and expenses against paid representatives, it would have the power effectively to disbar any representative, paid or unpaid, who was conducting themselves in a manner specified in regulations—probably a vexatious, inappropriate or abusive manner. The tribunal could say to that person, whether they were a CAB adviser, trade union rep or lawyer, ''You will not appear before employment tribunals or employment appeals tribunals for a specified period of time as a result of your conduct in this case.''

If the Minister is serious about rooting out abuse of procedure by representatives, that would be a sensible approach. It is not prescriptive. We are talking about an additional power to make regulations that would confer an additional power on the tribunal. It would add to the armoury to ensure that representatives who abused procedure could not do so repeatedly, holding up the tribunal and creating unnecessary stress in the system.

I hope that the Minister will seriously consider my suggestion. Even if he has to say that the drafting is not perfect, I should be interested to hear what he has to say about the substance of the idea behind the amendment.

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Mr Rob Marris (Wolverhampton South West, Labour)

Has the hon. Member for Runnymede and Weybridge sought advice from the Bar Council or the Law Society of England and Wales? The amendment would undermine the self-regulating nature of the professions that they represent. If a barrister or solicitor acted in the way outlined by the hon. Gentleman, a tribunal would be minded to make a banning order. Barristers and solicitors are professionals in the old-fashioned sense of the word. They are a self-regulating profession, in contrast to Engineering Employers Federation representatives, CAB representatives or trade union officers. In those circumstances, such conduct would and should be reported by the tribunal chairman to those professional bodies.

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Mr Rob Marris (Wolverhampton South West, Labour)

I am about to finish. I am simply asking whether the hon. Gentleman has run the amendment by the Bar Council or the Law Society.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

It is a convention that when a Member asks another Member a question, they allow them to intervene to answer it.

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Mr Philip Hammond (Runnymede and Weybridge, Conservative)

I have not sought advice from the Bar Council or the Law Society. I very much believe in the principle of professional self-regulation. The hon. Gentleman has made a good point, but he will recognise that the amendment is intended to address a wider group than simply barristers and solicitors. He may—

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till Tuesday 11 December at half-past Ten o'clock.