Community Legal Service (Cost Protection) (Amendment No. 2) Regulations 2001

– in the House of Lords at 7:42 pm on 29th November 2001.

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Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, the regulations are made under Sections 11(3) and 11(4)(d) of the Access to Justice Act 1999. They enable the Lord Chancellor to make regulations that limit the circumstances in which costs may be enforced against a person receiving funded services or which define the liability of the Legal Services Commission to meet the costs of the opponent of a person receiving funded services. Such regulations are subject to parliamentary approval under the affirmative resolution procedure. It might be helpful if I start by explaining to the House why we are amending the regulations.

The change is part of a larger package of reform of the financial conditions for funding in civil cases, which will also come into effect in December. We had recognised that that there was a need to make the financial conditions for funding fairer and more consistent, ensuring that they better reflected priority needs and the client's ability to contribute towards the cost of his or her funding. However, we also recognised the need to make sure that the financial conditions are as fair as possible between funded litigants and their unfunded opponents.

To that end, we recognised the difficulties encountered by privately paying opponents of publicly funded litigants in recovering their costs. It is often the case that people still have to pay their own costs, despite winning their case against a funded client. A funded client's liability for costs is limited to the amount, if any, that it is reasonable for him to pay, having regard to all the circumstances of the case, including the means and conduct of both parties. Funded clients, by definition, have very limited resources available to them. Consequently, if costs are awarded against a funded client, they are usually ordered,

Xnot to be enforced without the leave of court", and their liability is determined at nil. At any time in the next six years the successful unassisted party can apply to vary the order if new information comes to light on the funded client's circumstances. That order will amend the conditions that must be satisfied in order for an order to be made against the Legal Services Commission for the payment of costs incurred by a party who has not received funded services.

We appreciate the distress suffered by successful unassisted defendants who cannot recover costs from their publicly funded opponent. Defendants have no choice about becoming involved in legal actions, so it is right that they should be given some help with meeting costs that they have had no choice but to incur.

If costs cannot be recovered from a funded client, it is possible for privately paying defendants to recover their costs from the Legal Services Commission. At present, in order to do so, the funded client must have begun the proceedings and the winner—the privately paying defendant—must show that he or she would suffer severe financial hardship if the commission does not meet the cost.

The awarding of costs and the decision about whether severe financial hardship would be suffered is for the courts and not for the commission. By introducing the amended regulations, we will give the courts the power to order the commission to pay the costs of a successful unassisted defendant, who would otherwise suffer financial hardship. That involves relaxing the current test of severe financial hardship. We believe that that will strike the right balance between the interests of private litigants and those funded clients who are by definition among the poorest in society.

The changes mean that there will be significant assistance for those people on the lowest incomes. When resources allow, we propose to increase eligibility limits for those services further, bringing them to the same level as those for legal representation, which will mean that a further 2 million people will become eligible. I commend the draft regulations to the House. I beg to move.

Moved, That the draft regulations laid before the House on 30th October be approved [8th Report from the Joint Committee].—(Baroness Scotland of Asthal.)

Photo of Lord Goodhart Lord Goodhart Liberal Democrat

My Lords, my practice at the Bar has been almost entirely in the civil field, and I am well aware of the problems caused to private litigants when the party on the other side—whether the claimant or defendant—is legally aided. That meant that there has not been a level playing field and that people who win still end up having to pay their costs. There is no doubt that there has to some extent been a form of institutionalised abuse of the system by those who are acting for legally aided clients and who are aware of the strengths that their position gives them. I therefore in principle welcome changes that make it easier to recover costs from the commission.

Of the three proposed alterations I welcome without hesitation the proposal in regulation 4(1) which will remove the strict time limit within which the request for the payment of costs from the commission has to be made. I am also entirely supportive of the proposal that the standard required under regulation 5(3)(c) should be downgraded from Xsevere financial hardship" to Xfinancial hardship". I accept that such an order should not be made unless hardship can be shown.

The one point about which I am not happy is the restriction to non-funded parties who are individuals. It is obviously right that no order should be made relating to the payment of costs to a large corporation. However, there are many small businesses that are incorporated and, if proceedings were brought against them by a legally aided party, that might cause very severe hardship or the business might go into bankruptcy. I am sorry that there has been a total removal of the right of corporate bodies, however small, to recover costs from the client.

Photo of Lord Kingsland Lord Kingsland Conservative

My Lords, I entirely share the views expressed by the noble Lord, Lord Goodhart, on these initiatives.

Photo of Baroness Scotland of Asthal Baroness Scotland of Asthal Parliamentary Secretary, Lord Chancellor's Department, Parliamentary Secretary (Lord Chancellor's Department)

My Lords, I thank both noble Lords for the assent that they have given to these regulations. I say to the noble Lord, Lord Goodhart, that it was necessary for us to strike a balance. We believe that we have achieved the correct balance, but we take seriously all the comments that he has made.

On Question, Motion agreed to.