Legal Aid, Sentencing and Punishment of Offenders Bill

My Lords, I speak rather earlier than I might have expected. I congratulate the noble Lord, Lord Thomas of Gresford, on the lucid way in which he has presented a very complex argument on very complex issues. I do not entirely agree with everything that he said, but the Opposition and I have considerable sympathy for a good deal of it. This House is familiar with Henry VIII clauses, but in the year of the World Shakespeare Festival this Bill could perhaps best be described as a Henry VI Bill, since it is in three parts. This is Part 2—and in Part 2 of ““Henry VI””, there is the famous phrase: "““The first thing we do, let's kill all the lawyers””." I cannot recall whether that was part of the coalition agreement or the extent to which it would in any event receive approval from a majority of your Lordships. However, it is necessary for me to give an opposition view of the generality of the case and then speak more particularly about the amendments tabled in my name and the name of my noble friend Lord Bach. I want to be clear that the Opposition agree that costs in litigation are an issue and have to be dealt with. Equally, we dislike the claims management industry and the commercial referral fees charged by companies seeking to promote litigation. We would go a long way with the Government in restricting the scope of conditional fee agreements, success fees and the like in relation to road traffic accident cases, most of which are settled and with relatively modest damages. I would extend that to slip and trip cases as well, which are much the same category. We agree with the noble Lord and indeed with Lord Justice Jackson in promoting qualified one-way cost shifting for all cases and not just for personal injury claims, as the Bill proposes. However, there is a concern about ““after the event”” insurance, particularly if QOCS were to be limited. In passing, the noble Lord, Lord Thomas, referred to positions where there is no incentive on claimants to settle, but of course insurers like to have it both ways. They charge, it appears inflated, premiums for ““after the event”” insurance but then seem to want to shift the cost on to claimants. In exactly the same way, they complain about whiplash injury claims but sell details of possible claimants to claims management or claims referral companies, so one’s sympathy with the insurance industry is tempered by the experience of what it actually does. There are, however, principles that need to be borne in mind. The overriding principle should be that successful claimants should not see the compensation on their loss eroded by meeting the costs of the insurance, or indeed the success fee in the event of a successful claim. The noble Lord did not deal with the myth of the compensation culture—perhaps he does not have to—but it is a myth, as the noble Lord, Lord Young, made clear in his own recent report to the Government. The fact is that there has been something like a 14 per cent reduction in civil claims cases in the past year and a four-year downward trend in the number of claims brought, but the principle must surely be to maintain access to justice for people of modest means. That was the whole theory behind the changes made under the Access to Justice Act and the introduction of conditional fee agreements. The Access to Justice Action Group surveyed 69,000 cases in the light of the Government’s proposals and concluded that around a third of those would not be brought if the legislation were to go forward in its present form. Given that we are seeing savage reductions in legal aid, so that the very poorest in any case would be in great difficulties, we are perhaps now seeing a returned-to category of what might be called the legally squeezed middle. Interestingly the same survey showed that around 50 per cent of those who would in effect be expected to bear success fees, and if necessary the cost of ““after the event”” insurance, would be around the higher rate tax threshold of around £40,000-odd a year—not an inordinately affluent group of people. That conflicts with the original concept. As it happens, I remember discussing the proposals to take personal injury cases out of legal aid with the noble and learned Lord, Lord Woolf, a professional colleague, after he had spoken at a meeting in Newcastle, his home town. He was full of assurances that all would be well in the volume of work that would be promoted for solicitors and that the system would work very effectively. We are seeing that that is perhaps no longer the case. There are other consequences, which have yet to be measured fully, that are adverse to the public purse. If good cases are not brought that would have resulted in a recovery of damages, at least two parts of government in the context of personal injuries claims could lose out: the National Health Service for the non-recovery of the costs of treatment—there is an estimate of around £93 million a year for that—and the compensation recovery unit of the Department for Work and Pensions, which, under the current benefits system, reclaims from defendants benefits that have been paid where a claimant has been entitled to those benefits as a result of injuries. Those factors need to be borne in mind. As the noble and learned Lord has pointed out, the Bill makes success fees irrecoverable from defendants, and in personal injury cases limits the success fee to 25 per cent of general damages, to be uplifted in theory to compensate for that potential deduction by some 10 per cent. Amendments have been tabled that deal with this aspect, but it is perhaps as well to make it clear now that a 10 per cent increase would be an increase on a level of damages that in any case involving personal injuries is regarded as too low. As long ago as 1999, a report indicated that general damages for personal injuries ought to be increased by some 50 per cent. Action was not taken by either the courts or indeed the then Government to secure that change. We are facing a perverse effect of these changes. Successful claimants lose because they will not cover the cost of ““after the event”” insurance and the success fee will be taken out of their damages. The principle of English law has hitherto been that the person should be put in the condition that he would have been but for the negligence, in the case of personal injury claims—or other failures, in the context of other types of claim—of another party. That rather disappears under this proposal. In fact, it does disappear. Equally, successful defendants lose because they will not be covered by ““after the event”” insurance from claimants. Alternatively, they will be faced with qualified one-way cost shifting and so cannot recover costs either. The people who gain—paradoxically, it might be thought—are the unsuccessful defendants: people who lose their cases. Unsuccessful defendants do not have to pay a success fee or, obviously, the cost of insurance. Unsuccessful plaintiffs gain under the qualified one-way costs system. In my submission, it is a perverse outcome of the cases that those who fail are protected while those who succeed see a substantial cost falling on them. We argue that costs would be better controlled through better case management and the proper assessment of costs, including a determination of the relevant level of the success fee. It might be possible to prescribe the levels applying to cases in regulations, but in all events the courts should be robust in assessing what is a legitimate success fee. The noble Lord rather dismissed the notion of pooling risk, which would allow for the swings and roundabouts of lawyers undertaking cases with less than 100 per cent probability of success—perhaps substantially less than that. It is the basis of the whole of the Woolf reforms that that risk should be accepted. There will undoubtedly be cases involving very little risk. I repeat that you can take RTA and trip and slip cases out of the equation, which leaves you with a core of inevitably rather more difficult cases where certainty is by no means apparent. However, I suggest that it is for the courts to make the appropriate adjustment when looking at the success fees. There is a danger that we will see the ““after the event”” market decline, and unless there is a substantial move to one way costs shifting across the board there is a real risk of fewer people gaining access to justice. That is the basis on which the Opposition approach these matters. I will now—I hope to the relief of the Committee—speak briefly to the amendments. I agree with many of the noble Lord’s amendments, particularly the amendment to Clause 53 and Amendment 137D, although we would like to see that measure extended to all types of claims, not just to those that he listed, although they are significant. Equally, we agree that clinical negligence should be left out of Clause 45, as proposed in Amendment 144A. We agree with Amendment 144B but not with Amendment 144C. Amendment 148A concerns splitting the ““after the event”” premium. If that is to be retained either under the Bill or in practice—there are doubts about whether it would survive in practice—that might be a fallback position to explore. Had the noble Lord, Lord Martin, been here, I would certainly have supported his Amendment 127, which would make it clear that success fees would not include the payment by one party of a success fee payable by another party under a conditional fee agreement. I think that is designed to protect, for example, trade unions supporting their members. I come briefly to the amendments in my name and that of my noble friend. Amendment 131 deals with the position where a defendant has been unreasonable and where the success fee would be permitted in that event—a success fee to be payable by the defendant would be provided for. That seems to be perfectly straightforward. Amendment 133 would allow success fees for appealed cases. By definition these are not straightforward matters. If an appeal goes forward, there are surely issues to be determined, and there must be a risk in such appeals. Clause 43 looks at the up-rating of general damages, particularly in personal injury cases. This needs a moment of explanation, and perhaps I can exemplify what the position would be if an award of general damages of £10,000 were to be made. The uplift at 10 per cent would increase the total award to £11,000, but a success fee of 25 per cent in a personal injury case would reduce the amount payable to the claimant to £7,750. The first amendment is, in effect, the Government’s position. To be frank, I am not quite sure why we have tabled it. However, Amendment 137C would restore the £10,000 damages, because it would increase the general damage figure to £13,330, and a 25 per cent fee would reduce the general damage figure back to £10,000. Hence the uplift in respect of general damages only—not special damages—with a net loss to date, would at least shelter the successful claimant from a large reduction in his recovered costs. Our amendments to Clause 45 raise the issue of the recoverability of costs in clinical negligence cases. They would allow the recoverability of premiums for ATE insurance in such cases, even after QOCS was introduced. The problem with clinical negligence cases is the cost of the experts’ reports; hence these amendments seek to cover those. In our amendments to Clause 53, under the heading ““Offers to settle””, we seek a mandatory uplift, which would encourage parties, particularly defendants, to settle. Very often, the delay in cases is the result of defendants unnecessarily prolonging matters. I have to say that that is often a feature of clinical negligence claims. Hospital authorities and others can take a long time to come to terms. Amendments 190 and 192 put the emphasis on qualified one-way cost shifting, because they deal with the fact that there is no scheme at the moment. The Government are still considering one, and it would be interesting to know from one or other of the noble Lords opposite—I take it that the noble and learned Lord, Lord Wallace of Tankerness, will reply—how far those discussions have got, where they are heading and what kind of scheme we may be facing. If we are going to agree on a scheme that we can support, we need to know what it would actually involve before any of these changes, which will be critically dependent on a robust scheme, are made. Equally, Amendment 193 would delay commencement until the general damages uplift and an effective system of disbursements for unsuccessful claims are dealt with by the Government or the courts. We have set out the three issues that need to be determined: an increase of 25 per cent in personal injury damages, an effective system of qualified one-way cost shifting, and an effective system to meet the disbursements. These are procedural matters. Subsequent groups of opposition amendments will deal with the following: injury cases in group 2, non-injury cases in group 3, and judicial review and public authority liability in group 4.