Clause 41 - Conditional fee agreements: success fees

Part of Legal Aid, Sentencing and Punishmentof Offenders bill – in a Public Bill Committee at 12:15 pm on 13th September 2011.

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Photo of Andrew Slaughter Andrew Slaughter Shadow Minister (Justice) 12:15 pm, 13th September 2011

Trafigura, if I may refer to the amendments tabled by my hon. Friend the Member for Stretford and Urmston in that way, has thrown up some interesting issues, but only raised the curtain on some of the points that need to be addressed in relation to part 2, on both personal injury and CFA and ATE generally.

To be clear, there are a number of areas of law that we want to discuss in some detail. I hope that is acceptable to the Committee. In each case there is a pair of amendments, one referring to clause 41 and one to clause 43, relating to where the Government’s proposals  are so unclear or faulted that it would be wrong to proceed in repealing success fees and ATE as they wish and replacing them, if at all, with damage-based agreements.

We will debate those points in the round, and I will speak now to the amendments in my name. There are some in the names of my hon. Friends the Members for Kingston upon Hull East and for Stretford and Urmston. I will not address those; I do not want to steal their thunder. If anything needs to be added, I will do that later this afternoon. I am sure, however, that that is unlikely to be necessary. As I indicated on the previous set of amendments, I will preface speaking to each amendment with the common theme going across them. I will not make a long speech about part 2 in the round, because it is not appropriate, but there are some common themes to link up. I will use the various amendments, as we reach them, to illustrate some of the problems that we have with the Government’s approach.

First, so that the Minister is clear that we will not always be critical of him or his stance, the intention of part 2 is perfectly sound, and it is one with which we have a great deal of sympathy. Were it better drafted and more of a scalpel than a sledgehammer, he might find us supporting it. The origins are the wake of the Woolf reforms, which were highly successful reforms of the civil justice system. They came in just when I thought I had understood and learned the old rules and all the precedents, details and footnotes. I was priding myself on that, and then they all went away. Notwithstanding that and the fears that the Bar would become redundant, because everyone would understand the new CPR so clearly that lawyers would no longer be necessary, that proved, as the Minister would say, not to be the case.

Woolf has transformed civil litigation in this country. It has been hugely successful. It has simplified matters, it has given clarity and it has sped up court processes. As Lord Woolf himself said, however, it has not been as successful as he or others wished in reducing costs in the civil justice system. It is in everyone’s interest that costs are reduced. Why would anyone wish costs to be more than absolutely necessary? As an end in itself, there should not be unjust enrichment by lawyers or anyone else in the system. There should not be inefficiencies. It is not just an end in itself; it is also about discouragement to litigation or an undue penalty on those who are litigated against if costs are excessive. If the Minister says, “I am bringing forward part 2 to control costs, whether it be through malpractice and profiteering, or whether it be simply through reducing them,” we can all sign up to that.

After hearing the Minister speak on the matter many times, I consider that he believes that reducing costs is an end in itself and that that can get in the way of the merits of cases and the fact that sometimes there has to be litigation, which sometimes involves high costs, often because of the misconduct of one of the parties and not always the claimant. While welcoming the general approach and intention of the Bill, we argue first that the methods it uses are imperfect per se or are introduced at the wrong time in the wrong way and, secondly, that there will be unintended consequences of what are laudable aims. There is a principle of unintended consequences. Turning what is always a difficult to be balanced system  of law for parties with disparate means into one that is no longer a level playing field is unfair, especially on those of limited means.

To illustrate that point, we have set out in the amendments eight to 10 separate areas of law, each with different problems. It is not an exhaustive list. Last night, I was looking at amendments on environmental law that we have not tabled because we could go on endlessly finding other anomalies and exceptions. However, environmental law is an important area, and I suspect that it is about to become much more important because of the Government’s intention to chuck the planning regime out the window and allow a free-for-all for developers. That could be another area where there should be more provision to allow cases to go to court.

Some of our amendments are related to personal injury. Clinical negligence is interesting because it is one of the few areas where the Government have made a concession in ATE premiums—we will explore exactly how far that goes—yet the Government will not extend such a concession to related areas of law, such as industrial injury and the multi-party actions that we have discussed. We will also debate non-personal injury areas of law, which are caught in exactly the same way, but do not have the same concession and safeguards. For example, they are not subject to QOWCS. The Minister said that he wants to talk about the pros and cons of QOWCS, but at least that will give some protection although we believe it to be imperfect protection. Why, for example, should there be that degree of protection in clinical negligence or personal injury, but not in professional negligence? Why should someone taking a professional negligence claim against a solicitor have less protection than someone taking a clinical negligence case against a surgeon or a hospital? There is no logic in that.

The Government present themselves—the Minister has done so this morning—as business friendly, even to the extent of showing a reckless disregard of the interests of vulnerable people in the developing world. The hon. Gentleman sets out as his stall that that is what the Government seek to be, yet the provisions under part 2 of the Bill will have a catastrophic effect on insolvency claims. Most of the wronged parties are likely to be businesses, many of which will be small and medium enterprises. Small businesses themselves often make use of no win, no fee against suppliers or other organisations that they do not have the financial clout to take to court. Perhaps those organisations are a bit like the multinational companies and rely on that. If CFAs are not available, and there is the risk of having to pay the other side’s costs at the end of the procedure, claims simply will not exist.

We will also talk about media law and privacy law, which could not be more topical. I do not know whether most of the claims brought against the News of the World and other media organisations over privacy matters are funded through no win, no fee agreements, but a substantial number are. For reasons I will give when I reach that part of the Bill, it seems very unlikely that people will still be able to bring such claims in that way. We are therefore handing more power to another big player—the big media corporations, the media conglomerates and the Murdochs of this world. If they did not have enough power already, they are having one of their few vulnerabilities taken away.

The Minister started his argument by mentioning the phrase “compensation culture”. He believes that this part of the Bill is designed to address that culture. In that—he has probably heard me say this before—he relies on what Lord Young’s report said. Of course, Lord Young’s report said that the compensation culture is “perception rather than reality”, but that never seems to stop the Minister endlessly repeating the phrase.

I agree with the Minister that abuses have grown up, particularly in the personal injury system—or racket, one might say—and those abuses need to be tackled. One such abuse, which has perhaps had the most attention recently, is referral fees. It has had the most attention because of the very effective campaign run by my right hon. Friend the Member for Blackburn (Mr Straw). The Minister will hear more from him at oral questions today; indeed, my right hon. Friend will also introduce a very timely ten-minute rule Bill on this subject on the Floor of the House this afternoon, and I hope we will all be able to be there, although we may not, given the timing.

We can, therefore, all agree about referral fees. However, the clear briefings given by the Ministry of Justice up until two or three months ago said that nothing would be done about them. Following the campaign by my right hon. Friend, however, there was a volte-face, and the Government are now going to ban them. We know that because the Minister issued a written ministerial statement last Thursday in which he said he would ban them. In the press statement accompanying it, he said he did not know how he was going to do that, and he certainly gave no indication of when he was going to do it. I would be happy to hear—either now or when the Minister responds—when we will have an amendment, or how he intends to deal with referral fees.