Legal Aid, Sentencing and Punishment of Offenders Bill

Lord Davies of Stamford Excerpts

Wednesday 1st February 2012 Lords Chamber

I concede that if in a commercial case a company wanted to give away a third or four-10ths of its damages to a funding firm of this sort, it could do so but, so far as other areas of the law are concerned, the barriers should remain up. I beg to move.

[Lord Davies of Stamford]

My Lords, I was not intending to intervene in this part of the debate, but I was absolutely fascinated by what the noble Lord, Lord Thomas, said. He has done a great service to the House and to the country by bringing forward this matter for parliamentary debate. I am going to disagree with what he actually said, but had he not taken the initiative, we would all have been the poorer. We would not have had to focus on this important subject in the way that we will now need to do.

My concern is quite simple. We are in the process in this Bill of restricting access to legal aid. We thereby reduce the scope for businesses or individuals, whether in a tort action or some other kind of action, to pursue their civil rights in court. I take it for granted that an individual who does not qualify for legal aid but is at the other end of the income spectrum, where he or she can easily afford the costs of pursuing cases and the risks of potentially paying defendants’ costs as well, will prefer to do that and would not want to go into any artificial risk-sharing arrangement with a third party or with lawyers by means of contingency fees or conditional fees. Those lucky enough to retain access to legal aid despite this Government’s restrictions on its access, who are perhaps in the bottom 5 per cent of the population in terms of income or capital levels, and the top 5 per cent of the population who are rich enough to consider litigating and hiring solicitors and barristers will continue to have access to civil justice. But there is an enormous problem for the 90 per cent of the population who will be between those two extremes. We should be concerned about them.

I know that lawyers always like to say that any individual who acts as a litigant in person is making a fundamental mistake—the old lawyers’ joke is that such a person has a fool for a client—and one can understand why lawyers like to put that about. Those people who may feel confident in taking a case forward themselves would probably rightly prefer to do so rather than go into some sort of risk-sharing arrangement with somebody else. Any such risk-sharing or cost-sharing arrangements involve a potential conflict of interest.

There is a conflict of interest in the case of hiring a lawyer on a conditional or contingency fee basis. Clearly, there may come a point when the lawyer himself does not think it worth pursuing the case because it is not a good risk from his point of view but his client wishes to continue to do so. There is that conflict, which the noble Lord, Lord Thomas, discussed with regard to other third-party funding in the case of classical contingent or conditional fee arrangements. But if we now say that such arrangements are not possible and we wish to make it a matter of law that certain types of third-party funding shall not be allowed, we further restrict access to justice.

I put it to the noble Lord and to the House that cases where one is brain damaged, has had a bad accident or suffered medical negligence have great resonance with all of us because they are horrible situations for anyone to find themselves in. Like other noble Lords who have served in the House of Commons, I have come across many cases of that kind. Clearly, any arrangement under which somebody else has a share in any potential damages seems at first sight to be obnoxious. But if the alternative is that one cannot get justice at all because one does not fall into the bottom 5 per cent or the top 5 per cent of the population as I have described, we are in an even worse position.

I accept that the amendment was conceived with the best possible motives and on the basis of considerable familiarity with civil justice, but the effect would be to exclude certain people from any chance of pursuing a case at all because they do not feel able to pursue the case as a litigant in person and they do not have the funds required to arrange a conventional civil action hiring lawyers in the classic fashion. Maybe no lawyer is willing to take them on on a contingency or conditional fee basis, because lawyers do not take a sufficiently optimistic view of the risks involved or the return involved in relation to the risk in particular case. However, some third-party entrepreneur or investor may be willing to do so. The noble Lord does not want to exclude such third-party funders in commercial cases, but he would exclude them in personal cases in a large number of circumstances. The House should think carefully before we exclude or shut off anybody from access to civil justice by any means. The important thing is that there should be full disclosure of the risks and full explanation by those who will undertake to invest in a case as to what the conditions are.

It may well be that there will be points along the line at which there will be a difference between the investor and the litigant as to whether it is worth pursuing the case. That can arise in the case of a commercial third-party investor, or of a friend or family member who is prepared to support a friend or relation in a case. When it comes to the question of a settlement offer, they may take a different view. It is in the interest of everybody that there should be a clear contractual basis, agreed at the outset, as to what happens in those circumstances. I do not think we should exclude anyone from coming to an arrangement that happens, with full disclosure and understanding on both sides, maybe in less than desirable circumstances, to best meet the needs of the case.

--- Later in debate ---

[Lord McNally]

My Lords, this has been an interesting and useful debate and I am grateful to my noble friend for outlining the matter with his usual thoroughness. Third-party litigation funding has developed and—to use the phrase deployed by the noble Lord, Lord Boswell—there is a welling up of disquiet about it. The noble Lord, Lord Davies of Stamford, takes what I would describe as the Robin Hood approach to this matter and views it rather optimistically as a way for the rich to help the poor. The noble Lord, Lord Boswell, was a little more sceptical about that scenario and drew on his American experience of how the process works. I think that people are a little worried when investors and investment opportunities are mentioned—the noble Lord, Lord Davies, mentioned that matter—when we are talking about the law.

I was delighted to hear the noble and learned Lord, Lord Mackay of Clashfern, mention Lord Simon of Glaisdale, who I remember speaking from the Cross Benches. You used to see the colour draining from a Minister’s face as he realised that Lord Simon of Glaisdale had thoroughly read and filleted the relevant Bill and knew exactly the contradiction in the government amendment that he was about to dissect. I experience that same feeling of foreboding whenever the noble and learned Lord, Lord Mackay, rises to speak. The noble and learned Lord said that Lord Justice Jackson could not be criticised for his brevity. All I can say to him is that Lord Justice Jackson is not alone among lawyers in that failing. I look at no one in this House in saying that.

Like other noble Lords, however, I take on board the noble and learned Lord’s point about the need to exercise caution in this matter. I think that the noble Lord, Lord Beecham, caught the mood of the House when he referred to the concept of legal hedge funds being established and cases being bundled up as investment opportunities as something that gives rise to rightful concern.

The code of conduct was drawn up with the specific requirement that the matter would be revisited if and when third-party funding expanded. It is a question of whether it has now expanded to a point where the matter should be revisited. As the noble Lord, Lord Thomas, explained, the Civil Justice Council published a voluntary code of conduct for litigation funders on 23 November. It was drawn up with the co-operation of the Association of Litigation Funders.

What I can say is that some serious points have been made during this debate, to which I have listened extremely carefully. My right honourable and learned friend the Lord Chancellor would like further time to reflect on these matters. They are serious, and some serious and worthwhile advice has been given. I see that the noble Lord, Lord Davies, is about to leap to his feet, and perhaps I may say that there was good and useful advice on both sides of the argument. I ask my noble friend to withdraw his amendment so that the Lord Chancellor can reflect on this issue. I shall not sit down if the noble Lord, Lord Davies, wishes to intervene.

[Lord Davies of Stamford]

The noble Lord is extremely kind. Does he agree that the best way of looking at this situation is to try to find the least undesirable possibility, or a less undesirable possibility, of a whole lot of very undesirable possibilities? Those are the only possibilities that exist. It would be lovely if legal aid was universally available for civil justice, and there were people in the 1940s who thought that that might happen. Sir Hartley Shawcross was saying at the time that he thought that legal aid could be turned into a kind of National Health Service equivalent for civil justice. We know that that is not financially conceivable.

The Government are engaged in further cutting back access to legal aid. I disapprove of that because it is an undesirable objective. We introduced conditional fees. I remember having a conversation with the noble and learned Lord, Lord Mackay, after I introduced an access to civil justice Bill in the House of Commons. He asked me not to take it any further because he was thinking of introducing conditional fees as a government initiative. I agreed with that at the time. He said that the Bill had certain inadequacies and did not cover all cases. However, when we introduced contingency fees, a lot of perversities were attached. I concede that, at first sight, investment in a tort case just as a commercial transaction seems unedifying and unattractive. However, I put it to the noble Lord that all these solutions are undesirable. The most undesirable solution of all might be further to restrict access to civil justice for whole categories of potentially meritorious cases.

[Lord McNally]

My Lords, I am sure that that postscript will be studied by the Lord Chancellor, and he will carefully study this debate. As I was saying in my concluding remarks, I thank my noble friend Lord Thomas for introducing this subject and noble Lords for expressing a variety of views on it. The Lord Chancellor would like further time to reflect and I ask my noble friend to withdraw the amendment.