Criminal Justice and Courts Bill

Lord Hunt of Wirral Excerpts

Wednesday 22nd October 2014 Lords Chamber

Moved by

[Lord Hunt of Wirral]

128: Clause 49, page 48, line 11, after “claim” insert “which consists of or includes a claim”

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[Lord Hunt of Wirral (Con)]

My Lords, I am moved to move this amendment, inserting the words,

“which consists of or includes a claim”,

so that Clause 49 would read,

“proceedings on a claim which consists of or includes a claim for damages in respect of personal injury”,

because immediately after Committee, when we had a very good debate on what is now Clause 49, a number of people on all sides of the House expressed to me concern that quite often a claim for personal injury is accompanied by another claim, such as a claim for credit hire, that is often found to be bogus, made up, exaggerated or just plucked out of the air. Also, so far as whiplash injuries were concerned, a number of colleagues were concerned about the allegation that we had become the whiplash capital of the world, and wanted to create a deterrent to someone who had damaged their vehicle through a shunt or an accident, had recovered the repairs to their vehicle but then, as a result of a text message or some other marketing effort, decided to bring a claim for whiplash. It was put to me that thousands of such claims were being made that really were promoted by claims management companies without any substantial reason for the claim being made in the first place.

So I have tried here to extend the remit of the sanction for fundamental dishonesty to cover not only injury claims but claims presented where the injury itself is used as a means by which a dishonest claim—for example, a claim for credit hire—is made. I do this by aligning the wording in Clause 49 with that in, for example, Rule 44.13 of the Civil Procedure Rules 1998, which spells out the scope and intention of qualified one-way cost shifting. I hope that noble Lords will understand that I do not really need to repeat in detail the Civil Procedure Rules; suffice to say that I am aligning the amendment in accordance with that rule. Its wording is also aligned with Section 11 of the Limitation Act 1980. Again, for the record, I say that it is Section 11.

The amendment would capture vehicle repair costs paid before a dishonest injury claim was presented, but I believe that its greater impact would be in the arena of credit hire claims where genuine injury claims are frequently used as a means to present a dishonest, either fabricated or exaggerated, claim for hire. I could cite a whole series of relevant cases but I am not sure that noble Lords wish me to go into too much detail. There are a number of them where claims management companies, one in particular, presented 36 claims, 35 of which subsequently proved to be completely fabricated and, when challenged, were withdrawn. One claim was pursued but dismissed at first instance. As a result of that dismissal there was an appeal to the Court of Appeal, which said, “I think there should be a retrial”. The retrial began but, after evidence-in-chief, the claim was suddenly withdrawn so no claim for damages was maintained. Of course one can only speculate about why it was withdrawn. I refer to the case of Basharat Hussain v Adil Hussain v AVIVA UK Insurance Ltd, a reported case that is an example of exactly what I am hoping this amendment will stop—fabricated claims associated with an injury claim being made. I am sure that there would be all sorts of problems, but I hope that my noble friend will agree at least to give this a little further thought so that we can ensure that Section 49 is effective.

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[Lord Hunt of Wirral]

My Lords, I first remind the House of my interests as declared in the register. Secondly, I thank my noble friend the Minister for his very careful consideration of all the points which have been raised, and for his recognition that these are genuine attempts to eradicate a practice which has arisen and which must be stopped. I will of course very carefully consider all the points he has made, and in the mean time I beg leave to withdraw my amendment.

Amendment 128 withdrawn.

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[Lord Faulks]

My Lords, I am grateful once again to my noble friend Lord Hunt of Wirral for raising this issue in Committee. During that debate, I indicated that we would consider his amendment further. There has been widespread support for the ban on offering inducements to bring personal injury claims in Clauses 50 to 52, but I am concerned to make this as effective as possible. Having reflected over the summer—I have been given a great deal on which to reflect over the course of the Bill—I agree with my noble friend that we should seek to prevent regulated persons avoiding the ban by offering an inducement through third parties.

The noble Lord’s amendment was prompted by a concern that it is now increasingly common for solicitors to operate as part of larger groups of companies, or to have subsidiary or linked companies offering services alongside them. Those subsidiary or linked companies are not always regulated, and it would be relatively easy for, say, a solicitor simply to route an inducement through an unregulated company, thus avoiding the ban.

For the avoidance of doubt, I add that we do not wish to regulate third parties, only to prevent regulated persons from avoiding the ban by offering an inducement via an unregulated subsidiary or a linked business or individual. I believe that this amendment is a proportionate means of making the necessary ban on inducements more effective, and I beg to move.

[Lord Hunt of Wirral]

I am very grateful to my noble friend the Minister.

[Lord Beecham]

I am afraid I cannot beat the brevity of that. I would like a little guidance from the Minister about the nature of the regulation. Can he give any indication of how effective whatever the regulatory body is—I confess that I do not know which it is—in overseeing this practice? I am entirely with the Government in wishing to ensure that such practices are limited as much as possible, for precisely the reasons that were mentioned by the noble Lord, Lord Hunt, and with which we all concur: the promulgation of false claims, which is wrong in itself and, of course, a drain on the economy generally. I am not clear what the regulatory system currently is, or how effective it is. While supporting the Government’s intentions in the amendment, it would be helpful to have an impression of that.

Criminal Justice and Courts Bill

Lord Hunt of Wirral Excerpts

Wednesday 23rd July 2014 Lords Chamber

Moved by

[Lord Hunt of Wirral]

63FD: Clause 45, page 46, line 17, leave out “fundamentally”

[Lord Hunt of Wirral (Con)]

My Lords, I declare my interest as a practising solicitor and partner in the international law firm DAC Beachcroft and as chairman of the British Insurance Brokers’ Association, and I have other interests recorded in the register.

The “have a go” culture has infected our civil compensation system for far too long. Claimants—and it is always claimants—see that there is no real penalty for trying on either that they have been injured at all or a deliberate exaggeration of the symptoms that they have suffered. The advertising by claims farmers and solicitors has undoubtedly played a part in this. The adverts for personal injury and for financial mis-selling continue to give the impression of free money. The starkest example that I can immediately recall was a full-page advert last November showing simply a bundle of £50 notes done up in Christmas ribbon. We all recall those original adverts saying, “Where there’s blame, there’s a claim, and it won’t cost you a penny”.

That is why I welcome Clause 45 as part of the Government’s initiative to tackle this. I certainly support its introduction. Measures are, of course, already available to tackle the completely fabricated claim, but I fully support the idea that a claimant with a genuine claim who then dishonestly exaggerates it should put their whole case at risk. That, after all, is what would happen if one was unwise enough to put in a consciously exaggerated claim to one’s own insurance company. Why should it be any different if one proceeds with the same intent against another person’s insurance company?

I would like to hear more from the Minister on the choice of the phrase, “fundamentally dishonest”. I recognise that my noble friend has great experience of the English language, and I should declare an interest as having been for six years chairman of the English-Speaking Union, but, with due respect for his grasp of the English language, it seems to me that dishonesty is one of those absolute concepts: either you are dishonest or you are not, in the same way that you cannot refer to something as “very unique” or to someone as “slightly pregnant”. I know that a similar phrase was used in the Civil Procedure Rules following the seminal—perhaps I should now call it the “fundamentally seminal”—review by Lord Justice Jackson of civil legal costs, but I am not aware that it has been tested or scrutinised by the Appeal Courts as yet. I would welcome clarification from the Minister about the thinking behind the choice of this phrase.

I have received, no doubt like other noble Lords, material from those representing claimant personal injury lawyers who have expressed concern that this measure might go too far. I cannot agree with that. If a claim is brought which contains a dishonest element—and dishonest always means that there is proof of a deliberate intent to deceive—then that behaviour should rightly put the whole claim at risk. The effect of this clause is clearly a deterrent one which, as I have already explained, I strongly welcome.

It might be helpful to point out to noble Lords that Clause 45 is not unique—not even slightly unique—because an analogous provision can be found in Ireland, in Section 26 of its Civil Liability and Courts Act 2004. There, any plaintiff, as they are still called in Ireland, who knowingly gives false or misleading evidence will find their claim dismissed in total. The test is simply one of dishonesty rather than fundamental dishonesty. If there is a fear that the power in Clause 45 would be abused by overzealous defendants, the experience of more than 10 years in Ireland proves otherwise: the courts are alert to any attempts to abuse a provision that is expected to apply in only a small number of cases, and of course if the clause truly has a deterrent effect, it should mean fewer cases coming to court in the first place.

Let me finish by illustrating the concern over “fundamentally dishonest” with a stark example that was recently brought to my attention. It was a case tried in Stoke-on-Trent County Court earlier this year. Mr Steven Cotton is a 31 year-old heating engineer who now lives in Swadlincote, Derbyshire. In December 2008, he sustained an injury to his neck and shoulder while at work. It was frankly a modest injury and he was able to go back to work the following month, in January 2009, before a disciplinary matter at work intervened. At that point, he decided to bring a claim against his employers and to include in that claim an allegation of a lower-back injury. Matters progressed and, just a few months before trial, he put in a claim schedule for in excess of £1 million, despite his solicitors, Woolliscrofts in Stoke, being aware of video surveillance evidence showing Mr Cotton as being much less disabled than he was making out. I understand that the insurers facing this claim, AXA Insurance, were not impressed. They rightly defended the case to trial and the judge agreed that Mr Cotton had invented the lower-back injury as a deliberate exaggeration of his genuine neck and shoulder injury. The judge awarded Mr Cotton just over £18,000 for the genuine injury, which was less than 2% of the amount that he had falsely claimed, plus some of his solicitor’s costs. One might think that this degree of exaggeration would be enough to knock out the entire claim but, sadly, it was not so. On the one hand, Mr Cotton’s case is a classic example of why the clause is badly needed. On the other hand, it raises a question in my mind as to whether the addition of a second injury to an already genuine injury would be seen by the courts as fundamentally dishonest. The court in Stoke stopped short of declaring that Mr Cotton’s lower back injury was not a genuine medical condition, despite the surveillance evidence. I have a real fear that Mr Cotton might still be awarded damages after the new clause comes in when all right-thinking people would agree that someone whose claim had already been knocked out to the extent of 98% not being allowed should not receive a penny.

I turn to the second amendment in my name: Amendment 63FE. To me, the meaning of subsection (5) of Clause 45 is unclear. Subsections (2) and (4), for example, impose obligations on the court to follow a particular line of conduct by use of the word “must”. In contrast, subsection (5) is different in tone and appears to offer more leeway. I hate once again to split linguistic hairs with the Minister, but I would like some clarification on whether subsection (5) is really intended to be a discretionary “may”. I reassure noble Lords that there is some substance behind the point I seek to make. Subsection (5) appears to limit the legal costs consequences of a claim being dismissed in its entirety under the clause by restricting the costs award that could be made to the defendant to a sum net of the damages that would have been awarded to the claimant if he had pursued an honest claim. I wonder whether there is even a risk that subsection (5) simply undoes the good work of the rest of the clause. The dishonest claimant who is found out ends up paying his opponent’s cost but is able to offset the money he has forfeited by his dishonesty. To return to the example of Mr Cotton, he would still, in effect, get credit for the £18,000 awarded for his genuine injury. Does that not encourage the likes of Mr Cotton to have a go at the expense of insurers, which is where I was when I started? I beg to move.

[Lord Marks of Henley-on-Thames]

My Lords, I rise to speak to Amendments 63FDA to 63FFA. I do so with some diffidence because, in part, I disagree with my noble friend Lord Hunt. After the humorous and intelligent way in which he introduced his amendment, and given that I agree with a great deal of the sentiment he expresses, I am concerned about the extent to which I disagree with him.

I agree with my noble friend that there has been a culture of “going for it”. There has been an outbreak of “compensation-itis” that we no doubt acquired, in part, from the United States and which has bitten particularly deep into the culture of people who have had motoring accidents. I greatly agree that something needs to be done. The question is whether the clause does what needs to be done in the way it needs to be done.

As my noble friend explained, Clause 45 deals with claims for damages in personal injury cases where the claimant is guilty of fundamental dishonesty in the prosecution of his claim. Clause 45(2) provides that,

“The court must dismiss the primary claim”—

that is, the claim for damages—

“unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed”.

The question I seek to pose is how far subsection (2) would leave judges free to do justice.

In my view, the subsection works against the interests of justice, or certainly risks doing so, in two ways. The first is by imposing a presumption in favour of dismissal, subject to a modest saving provision that, frankly, is difficult to understand. I am not sure I agree with my noble friend Lord Hunt that the word “fundamentally” adds nothing, but I certainly am of the view that the saving subsection,

“unless it is satisfied that the claimant would suffer substantial injustice if the claim were dismissed”,

is very difficult to understand. On one view of justice, and the view of justice which appears to be intended by the proponents of the clause, if there is dishonesty, it is not unjust for the whole claim to go. If that is the meaning, how does the saving provision come in at all? If, on the other hand, it means that the interests of justice seem broadly to require the claimant still to get some of his damages, does that amount to a duty to dismiss or is it merely a power to dismiss, which is what my amendments are directed to?

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Subject to the possible improvement of the drafting in relation to subsection (5), we believe that this clause adopts a fair, measured and proportionate approach to a difficult problem. We believe that it will send a strong message to deter dishonest behaviour and give a greater incentive to defendants and insurers to investigate and challenge dubious claims. One of the problems is that defendants are often not incentivised to investigate claims properly and pay them out far too easily. I therefore hope that the noble Lords will be prepared not to press their amendments, and I beg to move that Clause 45 stand part of the Bill.

[Lord Hunt of Wirral]

My Lords, I thank my noble friend the Minister, in particular for his generous tribute to the way in which I introduced the amendment. However, I am gravely disappointed by the reaction of the noble Lord, Lord Beecham, whom I have always felt to be my noble friend, in seeking to categorise me in some way. Perhaps I should have declared an interest as a solicitor for many years for the Transport and General Workers’ Union, acting in many claims. Perhaps I should have declared an interest as acting for the child most seriously damaged by the thalidomide drug, in a lengthy court action against Distillers. Perhaps it is all my fault that he should have categorised me in the way that he did—but I regret it.

As to my noble friend Lord Marks, I think that we are more or less in agreement, and I thank him for what he said. All I would say is that I do not think that we should have just a discretionary power because, as my noble friend the Minister just said, we all surely want to combine to send a strong message from this House that dishonesty must never pay. That is the purpose behind this.

I say to the noble Lord, Lord Beecham, whom I still regard as my noble friend, that he ought to have a word with Mr Jack Straw, who has been fighting hard on behalf of genuine claimants and seeking to eradicate this tendency to exaggerate claims and to make us the whiplash capital of Europe.

I think that the Government are taking a step in the right direction. I am very grateful to the Minister for agreeing to look at certain aspects again. In the light of that, I beg leave to withdraw the amendment.

[Lord Beecham]

My Lords, I have clearly upset the noble Lord. It certainly was not my intention to do so. We have a very long association, going back to the time when we were involved in the inner city partnership in Newcastle. We have always got on very well. I intended no imputation whatever upon the noble Lord. I do think that the insurance industry, as an industry, has been overpersuasive with the present Administration, in particular with the Conservative Party.

However, that is no reflection on the noble Lord. I made it clear that he has behaved with complete propriety, as he always has. I am sorry if I have upset him; I can say no more than that. I apologise if that has been the effect—it was certainly not intended. I look forward to engaging in civilised conflict with him from time to time over this and other measures in the spirit that we have enjoyed hitherto. I certainly would not like him to leave the Chamber tonight feeling that I have cast any slur or imputation upon him. He is widely recognised as extremely able and a man who has devoted a great part of his life to public service. I would not wish in any way to detract from his record or his sincerity.

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Tabled by

[Lord Hunt of Wirral]

64A: After Clause 45, line 24, after “party” insert “, or
(e) whether the benefit is offered by the regulated person or by a third party”

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[Lord Hunt of Wirral]

In view of my noble friend’s comments, I do not wish to speak to this amendment but will return to the matter on Report.

Amendment 64A (to Amendment 64) not moved.

Criminal Justice and Courts Bill

Lord Hunt of Wirral Excerpts

Monday 30th June 2014 Lords Chamber

[Lord Hunt of Wirral (Con)]

My Lords, first I declare my interests as set out in the register, in particular as a practising solicitor and partner for the last 46 years in an international commercial law firm, DAC Beachcroft. I am also very proud to be vice-chairman of Justice. I am relieved and pleased to see in her place the chair, the noble Baroness, Lady Kennedy of The Shaws. I know that she will deal with some of the points, in particular those just raised by the noble Baroness, Lady Campbell of Surbiton, because Justice is concerned that the Bill raises significant issues in its proposals for the change to criminal and civil law regarding access to justice. I think we all want time to reflect on what the noble Baroness said about Clauses 64, 65 and 66, and we look forward to hearing the Minister’s reply.

I wish to concentrate on two areas, referred to by the noble Lord, Lord Beecham, from the opposition Benches. I would first like ask him why he looked at me so critically when he said “cavalier”. I am not quite sure why he did this. I could respond by saying that it takes a Roundhead to spot a Cavalier, but I would not dream of doing so.

[Lord Beecham]

The noble Lord makes precisely the remark I was about to make. I was not conscious of looking at the noble Lord. A cat, of course, may look at a king. I hope I may look at the noble Lord occasionally.

[Lord Hunt of Wirral]

I am relieved, mainly because I always pride myself on being a master of the single entendre, so I am happy I did not go down that route.

I formally welcome the Bill as an opportunity continually to revise the law. In many respects this House points out, as the noble and learned Lord, Lord Lloyd of Berwick, did once again, that we must be very careful about passing new laws and new provisions, but we must always reflect on how we can improve the existing law while always avoiding the law of unintended consequences. I suppose I could slightly misquote Socrates by saying that good people do not need laws; bad people will always find a way around them. Therefore, we must proceed with caution, particularly when we create new offences.

If I could I will also add my own experience of speaking from the opposition Bench on the Compensation Act 2006, when the regulation of claims management was first brought in. Kevin Rousell has done a magnificent job with limited resources in running that unit. It was always agreed from this Bench by the then Minister, the noble Baroness, Lady Ashton, that the claims management unit within the Ministry of Justice would act as a sort of temporary regulator and eventually the Legal Services Board would take on the responsibility for proper regulation. I know that some of my noble friends have elsewhere urged that it should be the FCA that takes on responsibility, but I think we have to deal with proper and effective regulation of claims management companies.

The claims farmers allege that I have a vendetta against them—and I plead guilty, because I think that some of them are responsible for the most outrageous practices. The noble Lord, Lord Marks, referred to the element of fundamental dishonesty, to which I shall return in a moment. When we get these phone calls and text messages when we have not had an accident, let alone a whiplash injury, urging us to bring a claim and being assured that we can get money and that it will not cost us a penny, I really think that we have to take further measures to regulate the sector.

The Bill is significant and far-reaching, and I want to concentrate first on Clauses 17 and 18. Once again we had a gap in the law. As one of my colleagues pointed out, in effect this is legislation to fill an odd gap, whereby a carer could wilfully neglect or ill treat an incapable patient and be criminally prosecuted for it but commit the same act in relation to a capable patient and have no obvious route to criminal sanction. That was the gap. We are now moving in another direction, where we must be careful about the law of unintended consequences. This new offence—in particular, the addition of a provider level, which is in effect a corporate offence—is a significant addition, augmenting the Care Quality Commission’s regulatory breach channels of sanction and duplicating the Health and Safety Executive’s regulatory sanctions against corporate bodies and directors. So we have to think through how we make sure that we avoid doing exactly the opposite of what is intended.

I urge on my noble friend the Minister the need for clear advice to the sector and the police. In particular, how is it decided that the differences between these three offences, or perhaps even four offences in some cases, should be clearly laid down? How is it to be decided which cases go into which investigative process? A provider could face three or four investigative threats arising from a single event. How well formed is that necessary clarity? I agree with my noble friend that we have to do something; we cannot allow the situation to develop whereby people who are guilty of very serious acts are able to escape unpunished. Equally, we must heed those in the professional organisations who point out that there has to be a need for the Crown Prosecution Service to develop clear guidelines as to the circumstances in which prosecution will follow, to quote the BMA,

“to provide care workers with the assurances they need to encourage incident reporting”.

It is an area on which I hope we will focus when we go into Committee.

I move on to the other part of the Bill that appeared for the first time at the last moment in the other place. Clause 45 is called, “Personal injury claims: cases of fundamental dishonesty”. It is very difficult to disagree that when someone has been fundamentally dishonest they should not be punished in some way. As with claims farmers, we have seen far too much of this dishonesty, so to stop someone who has a valid claim from exaggerating any part of it, which is the deterrent effect of what is proposed, is an admirable intention. But what does it mean to be fundamentally dishonest? What is the difference between dishonesty and fundamental dishonesty? Is it a civil standard of proof? To impose a criminal standard of proof would make it extremely difficult to bring any defence on this basis.

We also have the situation, which I have known in my career as a practising solicitor, where quite often an overzealous claimant lawyer will include all sorts of areas of claim for which the claimant probably never had it in mind to sue and perhaps will link subsequent injuries to the original accident, when they were clearly due to something that happened afterwards and independently. How are we going to deal with a genuine injury that has nothing at all to do with the incident that has given rise to the claim?

I do not say for a moment that we are opening up Pandora’s box, because I strongly support the view that we have to eradicate dishonesty from civil claims. However, we have to proceed carefully and with caution, and there may be a need for clarification and further amendment.

I say this as someone who practises in this area: we do often see genuine claims. However, as many noble Lords pointed out in previous debates, we are seeing far too many exaggerated claims and claims that have no real fundamental basis for litigation. Therefore I particularly want for all those concerned in this area a clear message that dishonesty is not to be tolerated. If that message can be strong enough, we will have achieved something.

Finally, as far as the National Health Service is concerned, we are seeing very substantial claims for future care, some of which dwarf the rest of the claim and which are far bigger and more extensive than I ever experienced when dealing with matters like this, where I often found that the person who was injured was far better off in a hospital that dealt with similar cases—whether it was a broken neck from jumping into a swimming pool or something of that nature—and being alongside people with a similar injury, rather than being allowed to develop a whole hospital around their home.

We have to be mindful of the Chief Medical Officer’s report, Making Amends. It was a long time ago, but at the time we all welcomed it when he said that it was necessary to review again Section 2 of the Law Reform (Personal Injuries) Act 1948. I think that time is now upon us. I also urge my noble friend the Minister to consider, as he looks at personal injury claims of this nature generally, introducing some form of capping, so that much needed money, particularly in the National Health Service, is not diverted into dealing with very substantial claims for future care but is far better directed to the necessary rehabilitation that so many of us have supported for so long.

Defamation Bill

Lord Hunt of Wirral Excerpts

Tuesday 5th February 2013 Lords Chamber

[Baroness Afshar]

My Lords, I will interject on behalf of communities that, for lack of resources, have not been able to resist wholesale defamation. I speak about Islamophobia and the way in which it was fuelled because certain young men did something that was considered evil by the total Islamic community. However, for weeks we had “Muslims” as a category identified as terrorists and potential murderers. I would certainly have been willing to take them to court if I had had the resources. Undermining minority rights is simply not acceptable. Therefore, I support the amendments in this group.

[Lord Hunt of Wirral]

My Lords, I did not want to pre-empt any other Back-Bench contributions. I declare my interest as the independent chair of the Press Complaints Commission, and my other interests that are set out in the Register.

When we debated the Leveson report on 11 January, I reported to the House that I was confident that I could deliver a fresh start and a new body with teeth,

“with comprehensive sign-up right across the newspaper and magazine industry by the middle of this year”.—[Official Report, 11/1/13; col. 386.]

To those who are worried about perceived delay, that is still my intention—and I will deliver on my pledge.

I confess that I have a great deal of sympathy with many of the contributions made so far today. Those of us who have turned every page of Lord Justice Leveson’s report will remember that on 25 November, on the day of publication, I welcomed the report and said that I would now ensure that the new regulatory body would be Leveson-compliant. That is my position today. However, I sense and feel the frustration that it was as long ago as July 2011 when the leaders of all three main political parties said that the PCC must go, a new body must be set up and a new regulatory system established, and that it is now two months since the Leveson report was published.

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[Lord Puttnam]

I would make one point to the noble Lord, because I think that he is picking unnecessarily at what I said. He was clear that he believes himself to be an independent chair. He is not an independent chair. He is an appointed chair, appointed on the basis of his rejection of statutory regulation. That is the position that he comes from. He is an extremely persuasive speaker, but it is very important that he does not claim independence. He is not in any sense recognised by the House as independent on this issue.

[Lord Hunt of Wirral]

I just point out that when I applied for this post, I asked a noble and learned judge what independence meant, because I was concerned about the fact that I would be appointed by the industry. My noble and learned colleague from the judiciary said, “Don’t worry about that. The House of Lords will judge whether you are independent or not”. So I place myself in the hands of my noble colleagues. You will have to decide. I think that the test is whether someone is of independent mind. I think that it is essential that whatever structure is created, the majority of people who administer and are responsible for the new system are people of independent mind.

There is no straightforward definition of that. The point that I made in my submission to the inquiry was that the Republic of Ireland had a voluntary self-regulatory system established some years earlier. It was only after it had proved itself that it was incorporated into the Defamation Act in 2009. That matters, because what Lord Justice Leveson called for was a body that was clearly proven to be independent-run.

[Baroness Jay of Paddington]

My Lords, I hesitate to get into the detail of this and do not wish to weary the House, but surely the point made by the noble Lord a few minutes ago about what I said about Ireland is that the legal recognition of the system—indeed operated by the industry—is precisely what he is asking for and what Lord Justice Leveson was asking for. Presumably, had the Irish community and the Irish Government felt that it was adequate, there would have been no need for the legal underpinning. It was to reinforce the industry-owned arrangements that the legal underpinning was established.

[Lord Hunt of Wirral]

The noble Baroness is quite right. I have spoken many times to Professor Horgan and to the Irish press council. Much of what I am seeking to introduce in the new Leveson-compliant body will follow the lessons learnt in the Republic of Ireland. All that I was seeking to point out to Lord Justice Leveson was that as soon as you go down any statutory route, which requires a Bill—I added this after I had made my comment about the Defamation Bill—you would be opening Pandora’s box. I suppose that the proof of that is the revised Marshalled List of amendments, because we are now getting into quite complicated territory.

I think that the way forward is, yes, to hear from the Government what has been happening in these three areas—

[Lord Lester of Herne Hill]

My Lords, I am sorry to interrupt my noble friend, but—

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[Lord Hunt of Wirral]

Not at all, and I am very grateful to the noble Lord for enabling me to clarify the position. The noble Lord, Lord Puttnam, was quite right to say that I referred to a possible amendment to the Bill. However, I was talking not about this Pandora’s box but about the recognition of a code, just as we recognise codes in the Data Protection Act. We recognise codes in statute and I can see that there is a place for that.

In conclusion, where do we go from here? It is very important that this House should not start imposing detailed, prescriptive clauses that are not in Lord Justice Leveson’s report. His wish was to see an independent regulatory body established.

I will just mention that it will not have escaped the notice of the House that another important debate is taking place at this very moment in another place. The two debates may seem to have nothing at all in common, except of course that they have the same Secretary of State, but I believe they are both important because both have significance far beyond their obvious and immediate import. Both debates are about the proper role of the state. In both cases, the world is watching to see what sort of country we want to be. Will we assert our belief as free citizens and organisations taking greater responsibility for our own lives and actions, and our support for freedom, diversity and fair and equal treatment before the law?

I ask your Lordships to consider those key points because the alternative is that the state should have an even greater role, both compulsive and compulsory, in arbitrating over what is an acceptable form of expression and what is not. Before I had the honour of joining your Lordships’ House, I was in another place for 21 years and I learnt at first hand how frustrating it was when the will of this House conflicted with that of the other place. However, I quickly learnt to respect the judgment and special qualities of this House. Time and time again, this House has demonstrated the virtues of experience, tempering partisanship and hotheadedness that sometimes characterise another place with the calm consideration and wisdom that reign here. I just hope that noble Lords will follow the same path today because freedom of expression is too important, too precious and too hard won to be legislated upon in haste or in anger. I want to hear from the Minister as to the way forward that the three political parties wish to take. A solution is well within our grasp; let us get ahead, but not this way.

[Lord Elton]

My Lords, before we come to the Front Bench speeches, may I ask for some help for lay Members of the House and point to an opportunity? An enormous amount rides upon my noble friend’s very convincing and confident undertaking to deliver an acceptable and effective solution by the middle of this year. Many others have had that ambition and failed; there is a danger that he may fail. It seems we would then have a situation where nothing can be done for a very long time. The Minister would be giving a great help to the House if, between now and making his speech, he could get clearance for an undertaking that if a satisfactory solution is not arrived at by the end of this year, or indeed by its middle, then legislative time should be brought in so that we can have a statutory system instead—and not wait to extend the 67 years into three quarters of a century.

Defamation Bill

Lord Hunt of Wirral Excerpts

Monday 17th December 2012 Grand Committee

Moved by

[Lord Hunt of Wirral]

3A: Clause 1, page 1, line 4, at end insert—
“( ) For the avoidance of doubt, a claimant includes representatives of a person who has deceased.
( ) Where a claimant is a representative of a person who has deceased, a statement is only defamatory if its publication is so gross as to cause serious harm to individuals or a breach of the peace.”

[Lord Hunt of Wirral]

My Lords, as I move this amendment I would like to highlight the fact that it is currently impossible to bring a defamation case in which the defamed person is deceased. I readily understand that this issue affects a wide range of people. I was not proposing to deal with the Hillsborough tragedy, but with the terrible circumstances which afflicted James and Margaret Watson. In presenting this argument, I am greatly assisted by my noble friend Lord Martin of Springburn, who, like me, has visited the Watson family’s home and heard at first hand the tragedies which affected them. A number of people before the Leveson inquiry have argued that anyone who is defamed can always have recourse to the law, and therefore that those grievously affected by misreporting or misrepresentation of the facts of a particular case can always take civil defamation action. However, the Watson family feel very strongly that of course that does not apply in the circumstances of their case.

I anticipate that many people will know about this terrible tragedy. Without going into too much detail, on 10 April 1991 the Watsons’ daughter Diane—who was a conscientious, well-liked and much respected pupil at her school—was murdered, having been assaulted by the murderess the previous day. There was then what the Watson family regard as some serious misreporting of what had occurred, which in particular tarnished the reputation of their daughter in a way that caused them and their son, Alan, serious distress. Alan expressed his justifiable anger at the way his sister’s good name and reputation were unjustly damaged. It was being said by the murderess that the reason the murder was committed was that she had been bullied by the Watsons’ daughter. But Lord Justice McCluskey found very clearly that there was no evidence whatever to support that; Diane was a model pupil and not a bully. I have personally seen a letter in the Watsons’ flat from Lord Justice McCluskey, making it clear that that was his finding. Sadly, it was not observed. I realise that much of this case must result in a regulatory structure of the press which ensures that such misreporting can never take place again in the future.

--- Later in debate ---

[Lord Hunt of Wirral]

My Lords, I thank my noble friend the Minister very much indeed for his response. He said that he would lob the issue back to me, and of course tomorrow we will be taking note of Lord Justice Leveson’s report on the culture, practices and ethics of the press. I will certainly seek to follow his suggestions.

I should declare an interest as a practising solicitor and a partner in my firm, DAC Beachcroft, which is a national commercial law firm. Having been a partner there for 44 years, I have seen some tragedies in my time, but I do not think anything has quite moved me in the way that I was moved in Margaret Watson’s sitting room, as she went through all that had happened to her. Of course, my noble friend Lord Lester of Herne Hill is quite right; hard cases make bad law, but this does not make it any easier to explain why the law is this way in this case.

I do know that Margaret Watson told me how deeply she appreciated Helen Goodman’s speech, although she did not like the idea of a time limit. I say to the noble Baroness, Lady Bakewell, that I understand what she said, and in many ways there are issues that we must address, but perhaps she will excuse my not spending time dealing with them now. I thought that a ray of light came from the speech of the noble and learned Lord, Lord Scott of Foscote—as has been the case with many of his judgments—when he reminded us about the breach of peace. My noble friend Lord Faulks mentioned the question of an injunction. There may therefore be ways in which a situation like this could at least be prevented from happening again. As was pointed out by the noble Lord, Lord Browne of Ladyton, it was absolutely appalling for that terrible report to appear again on the day of the funeral of the Watsons’ other child, their son, and we must turn our minds to ways in which we can stop this from ever happening again. As he often does, the noble Lord, Lord Lester of Herne Hill, gave us a history lesson; the cases that took place in 1991 and 1948 highlighted issues which we have to bear in mind. However, this does not meet the concerns of the family of James and Margaret Watson. There are some ideas which this debate has raised which I would like to consider further, and find out if there is some way of preventing this situation at least from being repeated again and again. The judgment of the trial judge was that all the terrible things said about the Watsons’ daughter were not only absolutely incorrect, but also vile and dreadful to have been repeated in such a way. This letter of explanation was put into a picture frame by the Watson family.

I will consult with the noble Lord, Lord Martin of Springburn, and perhaps seek to return to this issue and deal with it in a different way. My noble friend Lord Faulks is quite right to say that there is a significant hurdle here which has to be overcome. Yet the Minister has put some persuasive arguments as to why if I return to this I should bear in mind some of the issues that he has mentioned that are not at the moment dealt with by the amendment. In the mean time, I beg leave to withdraw the amendment.

Amendment 3A withdrawn.

Legal Aid, Sentencing and Punishment of Offenders Bill

Lord Hunt of Wirral Excerpts

Tuesday 27th March 2012 Lords Chamber

[Lord McNally]

My Lords, I committed on Report to bring back at Third Reading amendments to address issues raised by my noble friend Lord Hunt of Wirral in respect of Clause 57. Amendment 29 addresses situations where the referral fee for an ancillary claim, such as for damage to a motor vehicle involved in a road traffic accident, in addition to a personal injury claim, may be inflated to include a payment for a referral fee for the personal injury claim. Amendment 30 makes it clear in the Bill that the payment of referral fees to a third party, whether or not they are regulated, will not avoid the prohibition on the payment of referral fees. This gives both practitioners and regulators a clear marker and removes doubt as to the effect of the clause. We do not wish to place additional burdens on regulators and these amendments will remove the potential for confusion on what is and what is not covered by the ban.

I wish to put on record my thanks to my noble friend for tabling his amendments, which have enabled the Government to strengthen and clarify the ban on referral fees in personal injury cases. I beg to move.

[Lord Hunt of Wirral]

My Lords, I thank the Minister and declare my interest as a partner in the international commercial law firm, DAC Beachcroft LLP, and my other interests in the register.

I warmly applaud the coalition Government’s intention to ban referral fees in personal injury cases. The amendments establish greater clarity around the operation of the ban on referral fees to ensure that there must be no side-stepping of the intention to ban them. I thank him warmly for bringing forward these amendments at Third Reading.

Legal Aid, Sentencing and Punishment of Offenders Bill

Lord Hunt of Wirral Excerpts

Wednesday 14th March 2012 Lords Chamber

[Lord Beecham]

My Lords, this amendment deals with referral fees. The Bill provides rules against referral fees and defines the nature of regulated persons, who are effectively prohibited from receiving a payment for referring prescribed legal business to another person. Under Clause 54(4), the legal services in question relate to,

“a claim or potential claim for damages for personal injury or death”,

or where,

“the business is of a description specified in regulations made by the Lord Chancellor”.

I do not know quite what is envisaged by the latter provision, but it is clear that the aim is to inhibit the referral of personal injury claims in return for payment. The regulated person, who for these purposes would presumably be acting on behalf of an injured person, would also be in breach of the subsection if he arranged for another person to provide services to the injured party and was paid or had been paid for making the arrangement.

A number of issues arise from this. The first is that the payment need not necessarily be financial; it could also involve, for example, the provision of another service. It might fall within the scope of the clause—I am not sure whether this was intended—if an organisation referred a client to a solicitor and, as part of their service, the solicitor prepared a will for that client or gave legal advice on another matter that was not related to the personal injury or other category that the Lord Chancellor might specify.

The purpose of Amendment 142E is to make it clear that a person would not be in breach of this subsection if the body to which the payment is made—that is, the person referring the client—is a not-for-profit organisation. There are of course organisations, such as charities and the like, which refer their members or others to solicitors and perhaps other professionals, and receive payment in return. In particular, I understand that a number of medical charities do this. I suppose that at one time organisations such as the Automobile Association, or other motoring organisations that are no longer membership organisations in the traditional sense, might have done likewise. Since they are not-for-profit organisations, it does not seem appropriate that this bar should be in place.

The situation is not analogous to that which the noble Lord, Lord Thomas, dealt with in terms of third-party funding, about which he is absolutely right to be exercised. Therefore, it should not be caught within the prohibition that is envisaged here. It could certainly do considerable harm to organisations and, for that matter, limit the benefit to clients of being referred. As I said, they might be referred on the basis of free advice or advice at a reduced cost, which would presumably appeal to the Government—quite rightly since they are talking about reductions in cost.

Therefore, I hope that the noble Lord will look again at this situation, perhaps with a view to coming back to it at Third Reading if he cannot accede to this measure tonight. There are other amendments before us in this group and there is to be a further amendment which will be taken next Tuesday, so we are not quite in the position of closing the door yet—not before Third Reading in any event. In these circumstances, I beg to move Amendment 142E.

[Lord Hunt of Wirral]

My Lords, in speaking to Amendments 146A and 148A, I wish to say how strongly I support in principle the Government’s proposal to ban referral fees. I declare my interest as a partner in DAC Beachcroft, the international commercial law firm. My amendments are intended simply to clear up some possible loopholes. Having just heard the comments of the noble Lord, Lord Beecham, I caution how important it is to have a blanket ban because any ban that is implemented has to work. However watertight the ban is—my amendments are intended to help the Government achieve that objective—it is critical that we also remove the incentive for referral and profit share by removing the excessive legal costs from the system. There are many vested interests here and a lot of money is at stake—too much money in my view.

At present, solicitors acting for claimants can still afford to pay out more than half of their fees to a third party whose only role is to buy and sell on the details of an injured person. That cannot be right. Amendment 146A would make a minor change to Clause 54(4) by inserting,

“which consist of or include damages”.

I raised in Committee the spectre of the current wording permitting the payment of a referral fee for some non-injury element of an injury claim, completely bypassing the Government’s intentions. I look forward to hearing my noble friend the Minister’s comments on that.

Amendment 148A would insert,

“whether received by the person referring prescribed legal business or not”,

into Clause 54(8). I highlighted in Committee this gap in the drafting which could be exploited simply by the way in which payment is routed. Again, I await my noble friend the Minister’s answer.

Finally, I would also be very interested to hear whether my noble friend can give this House a commitment about just how much of the excess cost can now be taken out of the system altogether, which is, frankly, a more effective remedy than tightening up the drafting.

[Lord Martin of Springburn]

My Lords, I wish to speak to Amendment 146 in my name. In doing so, I declare an interest as I have been a member of the Unite union for a long time. I am not having a go at the media on this matter but, often when trade unions are mentioned in the media, reference is made to trade union leaders. Not much is known about the activities of the lay officials and junior officers of a trade union. Tonight we have spoken about asbestos victims. A trade union would probably be the first port of call for a person who felt that they were suffering from the effects of asbestos inhalation. Apart from the serious matter of asbestos inhalation, your Lordships may be aware that even a National Health Service kitchen can be a very dangerous place for workers. They can fall, be scalded or be cut by the knives that they are using. After any injury such as that or any other injury relating to a person’s work, the first port of call is to the local trade union office, and an investigation is made before the matter is referred to a lawyer. Any of us who has run an office knows that photocopiers, heating, lighting and cleaning all cost money. It means that there should at least be some compensation for the trade union that is prepared to try to help that member before the member goes to a solicitor.

Legal Aid, Sentencing and Punishment of Offenders Bill

Lord Hunt of Wirral Excerpts

Wednesday 1st February 2012 Lords Chamber

[Lord Clement-Jones]

My Lords, in moving Amendment 165, I shall speak to Amendments 167 and 168. We are still on Clauses 54 and 55, but we are dealing under these amendments with a rather different set of considerations. Both my noble friend the Minister and the noble Lord, Lord Bach, have mentioned the report from the noble Lord, Lord Young of Graffham, Common Sense, Common Safety. He was explicit in stating:

“The problem of the compensation culture prevalent in society today is, however, one of perception rather than reality”.

I suspect that a major reason for the public’s perception that a compensation culture exists has been driven by the actions of ambulance-chasing claims management companies. The existence of referral fees is another major cause of that perception. I very much support the Government’s attempt to solve the problem with Part 2 of the Bill, but legislation designed to end their influence must be watertight. In recent years, it is clear that there have been differing views on how to achieve this. Insurers allege that referral fees are directly responsible for the enormous increase in motor insurance premiums; others allege that insurers themselves have profited from receipt of referral fees for several years by selling details of their customers to panel solicitors or claims management companies. As we have heard from a number of noble Lords, Lord Justice Jackson in his review of legal costs, which reported in 2010, recommended that referral fees in personal injury cases should be banned. Others, however, such as the Association of Personal Injury Lawyers, fear that a ban will simply drive fears underground.

The insurance industry does not agree that transparency is sufficient and has welcomed the proposed ban. So too has the Law Society, of which I am a member, but it wants it extended beyond personal injury cases. Others, such as the right honourable Jack Straw, want to go further and make it a criminal offence—not just a matter of regulation—to solicit, offer or pay referral fees in road traffic accident claims. He proposed an amendment to the Bill to that effect last November. The Justice Select Committee, under the chairmanship of my right honourable friend Sir Alan Beith, believes that it should be punishable with a custodial sentence. This has been rightly resisted by the Government on the basis that circumstances could be very varied and complex and best dealt with by the regulator. I believe that the current provision strikes the right balance.

There are a number of issues, however, that arise in the course of consideration of the ban. First, the Legal Services Board highlighted the difficulty of defining referral fees. The Motor Accident Solicitors Society, in its evidence to the Transport Select Committee, highlighted the importance of a definition being wide enough to cover all potential commission fees, administrative costs, transfers and any other payments that may be disguised.

Secondly, the purpose of a ban on referral fees is to reduce insurance premiums in future. But how is that to be judged? The benefits derived from a ban may not necessarily be passed on to consumers. Indeed the impact assessment of the proposed ban admits that, overall, claimants might lose out from a ban on referral fees on personal injury cases, with individuals expected to be affected more than business. However, lawyers are apparently likely to incur no net additional costs.

Thirdly, are any other sectors in contemplation that could be activated by Clause 54(4)(b)? Last October, the House of Commons Justice Committee, to which I referred earlier, called for that ban to be extended for other types of case. My right honourable friend Sir Alan Beith, chair of the committee, said that it was “disappointing” that the Government had chosen to limit its enforcement capacity for the most serious cases of abuse of personal information. He added:

“It is likely that Ministers will have to return both to this issue and to the issue of referral fees in areas other than personal injury, where they are taking welcome action”.

It is important, however, that the ban extends to the full range of malpractices. They include nuisance marketing in personal injury, specifically advertising in hospitals, cold calling and spam texts; third-party capture, which was debated earlier; financial incentives to claim; selling of contact and case details of personal injury victims without their consent; auctioning claims to the highest bidder; and marketing that is not accompanied by a service to filter out spurious claims. This is the reason for Amendment 165. The amendment would ban nuisance marketing, which fuels perceptions of a compensation culture and impacts on the ability of genuine accident victims to obtain redress. It would have the benefit of driving the really unscrupulous operators out of the market.

Health Minister Mr Simon Burns recently told English NHS hospitals that it was not acceptable to display adverts for law firms that encouraged no-win no-fee compensation claims. Surely, however, any conflict with the Compensation Act 2006, which allows businesses to operate in NHS trusts with the approval of the facility’s management, must be resolved through primary legislation.

However, there must be clear exceptions. National Accident Helpline exists as a national brand for the marketing activities of more than 100 leading solicitors’ firms around the country. They have told us that this scale of marketing allows tens of thousands of people who would otherwise find it very difficult to access legal support to obtain legal representation and pursue legitimate claims, and that they—the NAH—strictly filter those who respond to marketing. Every year, it tells more than 150,000 people who contact it that they do not have a claim. The NAH contends that if such legitimate marketing, already regulated by the ASA and others, were to be banned, thousands of genuine accident victims would be left without legal representation. That is the reason for Amendment 167.

The ban on purely commercial referral fees must exclude provision of legitimate marketing services that enable innocent injury victims easily to access the requisite legal representation. The ban should also exclude other services under a scheme, such as sales, marketing, product development, vetting of clients, upholding solicitor standards and debt control. Amendment 168 would remove Clause 55(9), which is potentially very damaging to the ability of accident victims to obtain high-quality legal representation.

Some believe that the ban could also be read as banning or capping the legitimate costs of genuine, high-value services. These include the provision of necessary medical reports for clients, quality assurance for solicitor firms, sales and product development. To ban or limit those commercial activities would drastically restrict the ability of legal firms to offer the best advice to genuine claimants. My noble friend the Minister will, I hope, be able to give assurances that any cap excludes these legitimate services such as I have mentioned. I beg to move.

[Lord Hunt of Wirral]

My Lords, I shall speak to Amendments 166A and 166B, standing in my name on the Marshalled List, and to declare my interest as a partner for 44 years in the international commercial legal firm DAC Beachcroft LLP, and the other interests contained in the register.

This gives me an opportunity to respond to one or two comments in the earlier debate. In this important group of amendments we need to focus on the underlying problem of legal costs as much as on the problem of referral fees. As my noble friend Lord Clement-Jones just reminded us, the Government are implementing another of the main recommendations of Lord Justice Jackson’s review of civil litigation costs. Perhaps I should mention here my personal pride that one of my partners, Andrew Parker, was an assessor to Lord Justice Jackson's review.

Legal Aid, Sentencing and Punishment of Offenders Bill

Lord Hunt of Wirral Excerpts

Monday 21st November 2011 Lords Chamber

[Lord Hunt of Wirral]

My Lords, I declare my interest as a partner in the international commercial law firm DAC Beachcroft LLP and the other interests that I declare in the register. However, I would like to return to the speech of my noble friend Lord Thomas of Gresford, with whom I have previously worked. How right he is to criticise the changes that were introduced to the no-win no-fee system which made it exceedingly complicated but also benefited a number of groups, to which I will refer in a moment.

I also worked closely with him on the Legal Services Bill, to emphasise the need for access to justice. In that context, I want to refer to the recommendations of Lord Justice Jackson and to declare an interest in my pride at having been one of his original assessors. Lord Justice Jackson was set an almost impossible task by the Master of the Rolls. I recall that he was asked to find the best way of tackling the present unacceptable level of litigation costs and promoting access to justice at proportionate cost. I doubt whether anyone else could have produced a report which would have been received by the Master of the Rolls with the comments that it was,

“clear and comprehensive in its coverage, thorough and fair in its discussions and imaginative and realistic in its proposals”.

I strongly support those recommendations, but remind your Lordships that Sir Rupert started with a blank sheet of paper. He then spent four months gathering evidence and a further three months in consultation, before examining that evidence, balancing all the special pleading that was introduced by various vested interests, and coming up with recommendations which were firmly in the public interest. It is that balance which we must insist we keep in view throughout the passage of the Bill in this House.

What Sir Rupert Jackson said—and I remind the noble and learned Lord, Lord Davidson, of this—was to advocate the return of the no-win no-fee system that was originally introduced in 1995. I take this opportunity to praise the work of my noble and learned friend Lord Mackay of Clashfern, who as Lord Chancellor steered those reforms into law.

This is now very much his view of how litigation should be funded, and I thought, until the noble and learned Lord spoke from the opposition Front Bench, that it was based firmly on his Scottish roots. The system which the noble and learned Lord, the then Lord Chancellor, introduced and which Sir Rupert now advocates, is still no-win no-fee. It worked perfectly well, both for the severely injured and for those with lesser injuries. It also worked in other areas of law, such as human rights litigation and insolvency. It was never intended to be like the US style of contingency fees. Although Sir Rupert advocates the introduction of contingency fees, that certainly does not mean that we are introducing a US-style litigation culture as a consequence.

I do not think that there is anything in the idea of the client contributing towards the costs incurred on their behalf that would be against the established principles of our English legal system. Historically, there has always tended to be a difference between the cost which any litigant could recover at law from the opposing party and the total cost that they were liable to pay their own solicitor. Of course, there is a great debate about whether we have a compensation culture in this country, but Sir Rupert clearly thought that our legal costs culture had gone too far and, for my part, I strongly agree with him.

I shall give one example, which has been given in another place by Mr Straw and was referred to by the Lord Chancellor. At present, over 570,000 people present claims for whiplash. That is up 32 per cent in the past three years. That is the equivalent of one person every minute of every hour of every day. The number of such claims notified increased by 72 per cent between 2002 and 2010 against a background of a reduction of 16 per cent in the number of car accidents notified to the police in the past three years. Criticisms have been voiced of Part 2 and Sir Rupert Jackson’s work. Referring for a moment to the Transport Committee in another place, when dealing with referral fees, it made it quite clear that the system had gone wrong because substantial fees were now being paid to,

“insurance firms, vehicle repairers, rescue truck drivers, credit hire firms, claims and accident management firms, law firms and medical experts”.

How on earth can anybody be complacent about a system that has brought that about?

All I would say to my noble friends is that we have to listen critically to any claims from any vested interests here, but let us concentrate on the hard facts as, indeed, Sir Rupert did in his excellent report.

Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2011

Lord Hunt of Wirral Excerpts

Tuesday 5th July 2011 Grand Committee

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, as the Committee will be aware, the Rehabilitation of Offenders Act 1974 exists to support the resettlement of offenders into society where they have demonstrated that they have put their criminal behaviour behind them. After a prolonged period of time, therefore, the Act declares convictions spent and an ex-offender need no longer declare them. When they apply for jobs, or seek insurance, they need not disclose this information and subsequently not suffer the potential discrimination as a result of it.

There must of course be exceptions to this rule. Where, for example, someone is applying to work with children or with vulnerable adults, it is appropriate that the employer knows the full history of the individual. The exceptions order to the Act is the means by which this is achieved.

The exceptions order lists certain activities that are exempt from the Act. This means that where an individual is applying for a job within a specified activity or is involved in specified proceedings, their full criminal record history is available to the employer. If an individual has a conviction that has been declared spent, the prospective employer will then see it. We must be careful not to jeopardise the operation of the Rehabilitation of Offenders Act, so the activities listed on the exceptions order are only those that present an opportunity for people involved to cause harm to the public or the work concerned is of a sensitive nature, which might include children, the finance sector or national security.

This careful balance between allowing offenders to lead law-abiding lives by removing barriers and maintaining public protection needs to keep pace with the present. The exceptions order must therefore remain up to date with developments elsewhere. The order presented today is an illustration of the Government seeking to maintain this balance in line with the developments occurring in the financial and legal sectors.

Noble Lords will know that wide proposals for reform of the Rehabilitation of Offenders Act are being considered by the Government. Today is not the day to debate these, and I cannot make further announcements at this stage.

The current exceptions order enables the Financial Services Authority to take spent convictions into account when authorising a person to carry out regulated activities under the Financial Services and Markets Act 2000. This amendment will enable the Financial Services Authority to take spent convictions into account when authorising a new category of business—payments institutions.

Payments institutions were brought within the scope of regulation by the Financial Services Authority in 2009. They provide payment services, for example enabling cash to be placed in or withdrawn from a payment account, and range from large credit card companies to sole traders offering to send money abroad for a small fee. Money remitters, for example, transfer large amounts of money to and from overseas, with many specialising in remitting funds to specific accounts, such as in India, Pakistan or Poland, on behalf of immigrant communities. In many cases these customers are financially disadvantaged people, who have limited access to the banking system.

There have been a number of failures of business in the money remittance industry, and the failures have uncovered an element of mismanagement, financial impropriety or fraud. It is therefore important that the Financial Services Authority can assess those responsible for management of these businesses before authorising them to carry on business. This amendment will therefore bring payments institutions within the exceptions order so that the Financial Services Authority can take into account the full background of those responsible for the management of these bodies.

The second amendment relates to the introduction of alternative business structures, which will allow lawyers and non-lawyers to work together to provide legal and non-legal services. These bodies will be licensed and regulated by licensing authorities. Two new roles—head of legal practice and head of finance administration—are being introduced and will be responsible for an alternative business structure’s compliance with their licence. Licensing authorities must be satisfied that individuals applying to be heads of legal practice and heads of finance administration are fit and proper persons for appointment. In particular, not only will persons in these roles be responsible for compliance with the body’s licence, they could have access to vulnerable clients, client money and personal or sensitive client information. Making this amendment means that licensing authorities can seek information on previous convictions and cautions from applicants seeking to take up the role of head of legal practice and head of finance and administration. This will ensure that they are fit and proper for appointment.

I am aware that a further request has recently been made by the Legal Services Board for non-lawyer owners and managers of alternative business structures to be added to the exceptions order. At this early stage, no decision has been made. We will of course give careful consideration to this request, and this process is under way.

The final amendment is one of wording only. There is currently an entry on the exceptions order relating to “actuary”. The term is currently defined in the exceptions order as,

“a member of the Institute of Actuaries or a member or student of the Faculty of Actuaries”.

On 1 August 2010, these two bodies merged to become the Institute and Faculty of Actuaries. In order to continue to give effect to the applicable exception the definition is to be updated to reflect this change.

I hope that I will have the agreement of all noble Lords that the exceptions order is an important means of protecting the public. The instrument presented today responds to the latest analysis of risks. It therefore ensures that legislation is up to date and effective in its aim, while maintaining the vital balance towards the resettlement of offenders that the Rehabilitation of Offenders Act seeks to achieve. I beg to move.

[Lord Hunt of Wirral]

My Lords, I declare an interest in the global firm of solicitors, Beachcroft LLP, where I have been a partner since 1969, and as vice-chairman of Justice. I say that with trepidation in the presence of the emeritus chairman of Justice—my noble friend Lord Goodhart—because Justice must deserve a great deal of credit for the original rehabilitation of offenders legislation.

However, I need help from my noble friend the Minister on giving a commitment—a commitment that was given by the party opposite when it had responsibility. I also gave personal commitments when I was leading for the Opposition from the Front Bench and made it clear, right at the outset, that a single set of regulatory standards would be required for alternative business structures.

The Minister has received a fascinating brief from his officials to explain the mistake in singling out “head of legal practice” or “head of finance and administration”. I warmly commend the officials for having thought up this reason, but it was two years ago that we made it clear that it is the owners and managers of the alternative business structures who must be the people in the spotlight. It may well be that they will need under them a head of legal practice or finance and administration, but at the end of the day the key role played by the owner/investor/manager of the alternative business structures must mean that they should be subject to the same authorisation rules as solicitors in regard to disclosing criminal offences. Why? Because we must ensure, as both Front Benches agreed we had to, that convicted criminals are not able to become owners and managers of legal practices.

It is not just that a request has only just been received from the Legal Services Board, because it was in June 2009 that the Solicitors Regulation Authority made it clear that a single set of regulatory standards would be required. Why on earth this is not included now I just do not know, because what it means is that someone who has served a sentence for a serious crime such as money laundering does not have to disclose this when applying to be an owner or investor in an alternative business structure firm.

I suppose that my noble friend can immediately move to give me assistance by promising that there will be a further order to rectify this omission, which will then make it clear that the exemption of course also applies to owners and managers of ABS firms, as well as to the heads of legal practice and finance and administration within those firms.

[Lord Dholakia]

My Lords, I thank my noble friend the Minister for the explanation that he offered on the order. My noble friend Lord Thomas of Gresford has commented on some aspects of the order, particularly in relation to the Legal Services Act 2007 (Appeals from Licensing Authority Decisions) Order 2011. I intend to build on that. However, let me make a confession first. My noble friend Lord Hunt just wanted a minute from me, but in that minute he has stolen half my thunder. But I can build on what he said—and certainly the Minister might look sympathetically at why we are making this request.

As one who is promoting the Rehabilitation of Offenders (Amendment) Bill, I am aware that this order is adding additional exceptions to the Rehabilitation of Offenders Act, which does not include external owners. The matter was brought to the attention of the Ministry of Justice by the Solicitors Regulation Authority, which said that a single set of regulatory standards will be required, based on the existing ones for solicitors and traditional law firms and on the assumption that all potential owners of alternative business structures will have to disclose all previous criminal convictions. It would be very helpful to know from my noble friend the Minister why the Government have not included external owners in the list of exceptions. The Solicitors Regulation Authority is clear that it will not be able to subject external owners and managers to the same standard of fitness and propriety checks as apply to solicitors. I am told that the SRA conducted a public consultation and no objections were raised about alternative business structure owners and managers.

Will the Minister now intervene to ensure that the liberalisation of the market can occur with appropriate public protection? My Private Member’s Bill includes exceptions in serious cases, and that is right; it is how it should be, if we are to build the confidence of the public in the structures that we promote. The crux of the matter is to establish a strict regulatory regime so that serious criminals cannot take control of legal practices. This is where changes are necessary.

There is a clear divide between what the Ministry of Justice is proposing and what is required by the SRA of the Law Society. It would be helpful to have the Minister’s reasons for this order. It poses difficulties for the SRA, whose task it is to establish standards, and it is the SRA’s view that it cannot license ABS until these exceptions are in place.