Litigation Funding Agreements (Enforceability) Bill [HL]

Lord Mendelsohn Excerpts

2nd reading
Monday 15th April 2024 Lords Chamber

[Lord Mendelsohn (Lab)]

My Lords, I feel like an amuse-bouche before such a distinguished group of lawyers who have yet to speak. I will raise a very small number of points which come from my experience in business and investment and which I think are relevant, but I of course defer to the greater legal understanding of others on these points.

First, we should be very proud of the legal services industry that we have here and its quality and importance. We should retain it as a central objective for any Government and for whatever we do. Secondly, access to justice is absolutely key and an essential principle. We have to do more to provide it across the country, whether in civil or even criminal matters. Access to justice is a real foundation, but we feel that there is probably a lot more for us all to do. Making sure that members of the public have access to those things is important, and the promise of litigation funding is a key part of that.

There are four points that are very important in the context of this debate. We have heard some of them previously, when looking at other times when we have used the courts or lawyers to seek justice for other people, whether it was for vibration white finger or other things. That always comes down to the question of whether the fees, costs, contingencies or arrangements are too onerous on the people most in need of being the beneficiaries of whatever compensation or arrangements come at the end. That remains a huge issue for us—and it is very hard to dodge that, looking at the number of funding arrangements from the LFAs and wondering whether things such as the multiple of capital versus the percentage of fees can achieve those outcomes.

Even in the Horizon matter, we are looking at the level of what is gained by those who are trying to access justice. I think that some of us feel that those issues remain, so those people still lack a sense of justice because of the sums and arrangements that were come to. The retrospective arrangements in this Bill mean that everything will be retained as it should have been, and I suspect that there will many cases where the onerous terms that had to be accepted by the litigants should be looked at in some way.

The second point is that this is a business model. As someone who has looked at the public quoted company—which is being approached to put money into these companies and which has been looked at recently—and the secondaries market in this area, I know that there are some major issues with how this is developing. That is common with any sector or business activities that develop; there are consequences to creating such businesses. There are also some unintended consequences: when we look at these sorts of prospectuses over the period in which they can be tracked, we can see an increase in the costs of law. So, while we are looking at increasing access to justice because of the costs of law, they are actually accelerators of costs in litigation.

So, for a variety of reasons, there are unintended consequences, but these are complex models. Even with funds that say they turn down 96% of the people who come before them, what struck me most is that this is a market that is mainly dominated by those who can afford it and who have money. It does not extend access to justice in the way we are thinking or the way in which the Government have presented it. They have shown no evidence to this effect.

It is a good way of de-risking legal exposure in litigation—whether by passing it off to an LFA or by getting the LFA and the lawyers to do conditional fee agreements that also place that risk in other places. The people accessing these funds and these arrangements are not those from whom the Minister says the foundation of this piece of legislation has come. Other people and entities can use it to de-risk their litigation. This is not to say it does not have that purpose—and, by the way, I do not have a problem with people de-risking their legal exposure by using these arrangements. That is perfectly fine.

Thirdly, we must not say we are doing this only in order to widen access to justice. It does not. It has not done so in quite the way we had hoped, even, for example, in the context of important cases such as Horizon. We have to think about what we do in order to make that happen.

In evaluating this Bill, it is important to consider the real issues, consequences and impacts. We have to focus on making sure that we properly identify which elements extend access to justice. In that regard, the Government are to be applauded for deciding to institute a review of the wider sector and its growth. This is very important. I am not entirely convinced that the CJC is the right vehicle for this, because it is about the development of an economic market with economic activity, actors and consequences. This is currently outside its scope, which I am keen should be extended. I look forward to the Minister’s further comments on that in due course.

Finally, I have no problem with rich people using litigation funding. I just have a real problem with us not being able to get access to justice for people who do not have it. In the review, we should be much clearer about the sorts of things that can be done to achieve this objective. This is not just about LFAs. Rollover agreements will not achieve it. If we truly believe in extending access to justice, we should think about supporting other funding mechanisms. If they have sufficient public benefit, perhaps they could be extended into other areas such as the charitable and philanthropic domain. In the context of this debate, let us take this as it really is: a massively growing, active economic market that will achieve many things, but will not exclusively achieve access to justice. We should consider how we do that.