Lord Hodgson of Astley Abbotts
Main Page: Lord Hodgson of Astley Abbotts (Conservative - Life peer)Consumer Rights Bill
Lord Hodgson of Astley Abbotts Excerpts
Lord Hodgson of Astley Abbotts (Con)
My Lords, I was not sufficiently fast on my feet, but when he comes to reply to this debate, perhaps the noble and learned Lord, Lord Hope of Craighead, could make it clear whether the delicate implication of his amendment is that the Competition Appeal Tribunal is judicially underpowered for its tasks at present or, in particular, in the future.
Lord Hope of Craighead
My Lords, I will reply to that very briefly. I thought that I made it clear that the amendment is really provoked by the expanding jurisdiction in Schedule 8. The present position copes satisfactorily—it is not the ideal situation—but the expanded jurisdiction will greatly increase the workload of the tribunal and its visibility, because it is going to deal with private litigation as well as the regulatory authorities. It is that particular feature that is concerning the Lord Chief Justice and, I dare say, his equivalents north of the border and in Northern Ireland. I do not want to criticise anybody on the tribunal at the present time; I am trying to look forward to the expanded jurisdiction and see that it is served as well as possible.
“Review of operation of Schedule 8
(1) The Secretary of State must, before the end of the period of five years beginning with the day on which this Act is passed, appoint a person to review generally the operation of Schedule 8 to this Act.
(2) The review must address, in particular, the following matters—
(a) the number and outcome of cases brought under the Schedule,(b) the amount paid as a result of these cases to consumers, professional advisers and third party funders, and(c) the extent to which consumers overall have benefitted from the operation of the Schedule.(3) After the person appointed under subsection (1) has completed his review, he must compile a report of his conclusions.
(4) The Secretary of State must lay before Parliament a copy of the report made under subsection (3).”
Lord Hodgson of Astley Abbotts
My Lords, Amendment 41C also seeks to insert a new clause after Clause 80, but does so with a rather different objective from that of the noble and learned Lords who have just spoken.
The proposed new clause is titled, “Review of operation of Schedule 8”, which is fairly self-explanatory. Before going any further, I must take this opportunity to thank my noble friend Lady Noakes for having moved amendments on my behalf to this part of the Bill. I tabled them some months ago for discussion in Committee but unfortunately malign fate intervened to ensure that I was abroad on the day that they came to be discussed.
Reading the record of the Committee’s deliberations, there were a number of questions still in my mind. As a result, I tabled the amendment we are debating tonight. I also thank my noble friend Lord Eccles for having joined me in taking up the cudgels. He has his own characteristically insightful amendments, which we will come to in a moment and to which I have put my name. Finally, I thank the Minister and her officials for the courtesy and kindness in meetings that they have afforded both my noble friend and me. With those thanks, to horse.
It is easy to characterise amendments to Clause 8 as anti-consumer. Indeed, reading the remarks of the noble Baroness, Lady Hayter, in Committee, I felt that that was somewhat her default option. However, for me and my noble friend Lord Eccles, the reason for tabling the amendments is not—I repeat, not—anti-consumer; rather they aim to improve the chances that consumers will receive the compensation justly due to them, and it will not flow in large measure to third-party funders, professional advisers and the like.
I was grateful to the Minister for the meeting at which my noble friend Lord Eccles and I explained this, and attempted to explain how the Competition Appeal Tribunal—the CAT—would, in our view, find itself in the front line of legal wrangling of a type and range which, by reason of its past experience, it was ill fitted to handle. I confess that I returned from that meeting with my noble friend somewhat depressed at the outcome. I returned to my office to reflect on what could be said that would cause my noble friend and the noble Baroness, Lady Hayter of Kentish Town, better to understand the potential ramifications of the Pandora’s box they are so casually preparing to open.
While awaiting inspiration to strike, I leafed through the Financial Times—and there it was, on page 8. It is a full page advertisement in very large type:
“We won over $28 billion in judgments and settlements in the past two years”.
We have,
“650+ lawyers worldwide—all devoted exclusively to litigation, arbitration and white collar matters. Get us on your side”.
Equally characteristically, in very small type down the bottom, which one does not read so easily:
“Attorney advertising. Prior results do not guarantee a similar outcome”.
That is the sort of 500-pound legal gorilla that the CAT is going to have to deal with. One does not win $28 billion-worth of damages by saying, “After you, please, Claude. After you, please, George”. Your weapon of choice will be the legal equivalent of a knee in the groin.
Lest any noble Lords think I struck lucky, I refer the House to an article the next day in the Times. These cases will undoubtedly require, find and use expert witnesses. The article states:
“A High Court judge last week called for a cap on legal fees … Mr Justice Mostyn said that the fees in a case in which lawyers and experts were paid a total of £920,000 during a dispute over assets worth £2.9 million was “madness”. A key factor was the use of experts: six reports by forensic accountants were filed, as well as a joint expert statement at a cost of £154,000. In eight months since April, a ‘staggering’—
that was the judge’s word—
“further £700,000 was spent”.
These are the sorts of things that lie ahead for the Competition Appeal Tribunal. That is my thinking in wishing to see the Government implement the amendments we are discussing, to ensure that the 500- pound legal gorillas do not run off with all the money.
Having said that, I accept that there has to be a little worm of doubt in my apple of certainty. Maybe my fears are wrong: just suppose, despite all my concerns, the new system works well and delivers the right outcomes for consumers. I am not able to foretell. Equally, I hope my noble friend on the Front Bench will accept that she, too, has to have a little worm of doubt in her apple of certainty. I hope the noble Baroness, Lady Hayter of Kentish Town, who I know to be an individual of discernment and sound judgment, can accept that she, too, cannot be certain. Only the passage of time, with its attendant experiences, can answer this question.
That is why I have tabled the amendment—so we can see what really happened in real life and not in our potentially fevered imaginations tonight. My amendment requires the Secretary of State, before the end of five years, to appoint a reviewer of the operations of Schedule 8. The reviewer can roam widely but he must answer three key questions. The first is a description of the cases brought under the schedule and the outcomes to them, so that we can form an overall strategic view of how the schedule has worked.
Secondly and most importantly, he has to split the proceeds paid between consumers, professional advisers and third-party funders. This will enable us to see the level of benefit to consumers. If, for example, consumers receive 90% of the total, it would be one thing. If, as I fear, they receive less than 50%, it will be another. Finally, a report on the general operation of the schedule, and how it benefits consumers, would open the way for some recalibration of legislation in the light of experience.
As this piece of legislation has such potentially huge implications as we move from an opt-in regime with, to date, only one body authorised to bring proceedings—Which?—to an opt-out regime where anybody is free to have a go, there is a need for a degree of formality. My amendment requires the Secretary of State to lay a report before Parliament, which will ensure the appropriate level of debate, scrutiny and follow-up.
To conclude, this is an amendment by which nobody loses. The only winners are truth and accuracy. I fear that my noble friend will be told to resist. There will be the usual guff about creating precedents. I argue that this change in our law is unprecedented and that the potential implications deserve a serious, formal, forensic follow-up and analysis. My noble friend will no doubt be told that her department will carry out a thorough review of the outcomes. Quite possibly. However, a review by an outsider, poking his or her nose disobligingly into various corners, is likely to be far more effective. We would also avoid the risk, if the results of the review are unwelcome and disobliging, that the press release, if any, may by some strange alchemy appear at 4.30 on a Friday afternoon.
I do not suggest that my amendment meets the exacting standards for parliamentary draftsmen. All I am asking my noble friend to do today is to accept that there has to be some uncertainty in all our arguments—mine and hers—and that she will, in consequence, take the amendment away for one final look before Third Reading. I conclude by saying to my noble friend, to paraphrase the famous phrase, that if she has nothing to hide, she has nothing to fear from my amendment. I beg to move.
Baroness Neville-Rolfe
My Lords, I am delighted to see my noble friend Lord Hodgson back with us. We missed him on the day when the amendments were finally reached, but my noble friend Lady Noakes introduced his amendments with great clarity and verve. We had a good debate and we now have several different amendments, some of which we will be discussing in a minute. I am grateful for the efforts that my noble friends Lord Hodgson and Lord Eccles have made to explain their thinking to me in person. We have tried hard to meet their concerns. Having talked to my colleagues in the Government, I am now able to respond positively.
Although this amendment would require a review of the schedule, I believe that its driving force is to examine the effect of opt-out collective actions. I should say that the Government are happy with our proposals and believe that the existing opt-in regime is prohibitive, with only one collective case in 10 years involving 130 claimants. Therefore, the changes in the Bill are important. I do not share the pessimistic view about US-style claims, mainly because of the safeguards that we have written into the Bill, which we will no doubt come on to on the next amendment. However, I wanted to say that we have had a very good discussion, we have listened and we are happy to agree to a review after five years which covers the ground set out in the amendment. Following a further discussion that I had with my noble friend this morning, we will also commit to a ministerial Statement on the review here in Parliament. I am afraid that we cannot put the review in the Bill, as that would have ramifications for other possible reviews elsewhere in the Bill, but I can commit to a review, and I know that the Confederation of British Industry, which I met on Thursday because of its concerns about this part of the Bill, is content with that.
Of course, Schedule 8 does not just introduce an opt-out collective actions regime. It reforms the entire private actions regime for the benefit of both businesses and consumers. I think we are all agreed that consumers come first here. Therefore, the Government believe that it would be appropriate for the review of the impact of Schedule 8 to examine the whole range of reforms. The review would take into account both opt-in and opt-out collective actions, the fast track regime, the number of cases under the CMA redress power, collective settlement cases and, of course, the provisions outlined by my noble friend in his amendment. In those circumstances, I hope that my noble friend will feel able to withdraw his amendment.
Lord Hodgson of Astley Abbotts
My Lords, I am extremely grateful to my noble friend for her response. Of course I would like the provision in the Bill, because that gives it real permanence, but I spot two-thirds, three-quarters or, perhaps, only 5% of a loaf, and I will certainly grab it. In the circumstances, I beg leave to withdraw my amendment.
Lord Hodgson of Astley Abbotts
My Lords, I shall speak also to Amendments 41M and 41N. We are still concerned with the implications of Schedule 8, and here we get to the vulgar question of the distribution of the money. This group of amendments is designed to ensure that professional advisers benefit financially only commensurately with the take-up by consumers.
As presently drafted, proposed new Section 47C(5) requires that,
“any damages not claimed by”—
consumers—
“within a specified period must be paid to the charity … prescribed by … the Lord Chancellor”.
So far, so good, but subsection (5) is subject to subsection (6), which allows the tribunal to order that these unclaimed damages,
“be paid to the representative in respect of all or part of the costs … incurred”,
which will presumably include legal and other fees. This surely cannot be right or just. Let us take the case of an opt-out class that assumes that 100,000 consumers were affected. Let us assume that only 20,000 consumers claimed. Under the Bill as drafted, the professional advisers could be paid 100% of their fees, even though only 20% of the affected consumers received any compensation. Amendment 41L would remove the let-out available to the CAT in subsection (5) and Amendment 41M would require that costs be paid out only in strict ratio to the payments to consumers.
My amendment has another useful by-product. Under opt-out class actions, no one can tell precisely how many consumers have been affected because they do not have to reveal themselves. Presumably the representative of a class and the CAT will agree an estimate of the likely number. In the Bill, however, there is no incentive—perhaps even the reverse—for the representative to seek out and provide compensation to those consumers affected. It must surely be important for the representative to have to make a genuine effort to find the disgruntled consumers, and Amendment 41M would give a direct incentive so to do. If we do not do this, we risk replicating what have become known in the US as “coupon settlements”, under which advisers take 100% of their fees and offer affected consumers the sum awarded, say $20, in the form of a reduction on their next purchase in the store affected. Many consumers do not claim; even fewer who have claimed ever use the coupon.
Amendment 41N would merely replicate the provision in respect of new Section 49A where a collective proceedings order has been made. This seems equally important because, as I understand it, this involves a case where parties have agreed a settlement without going through the difficulties, expense and time involved in proceedings and then go to the CAT for approval of the deal they have struck. There must be a real danger that in the course of negotiating the settlement the professional advisers will suggest that a useful part of the settlement could be that their fees are paid in full. A defendant may then be inclined to accept that requirement in an attempt to ensure a speedy settlement.
This group of amendments, like the others which we have been discussing tonight, are designed to put consumers and not professional advisers at the centre of our deliberations. They give the tribunal some additional statutory protection against the pressures that will, I fear, be brought to bear on them. I beg to move.
Lord Hunt of Wirral
My Lords, I strongly support my noble friend for all the reasons I outlined a little earlier. His Amendments 41L to 41N seek to promote the interests of the consumers above those of others and should therefore be warmly welcomed. If the representative person and the lawyers and funders working with them are incentivised to find enough of the consumers to make the compensation process worth while, that must be the right way forward. Surely the worst thing we could do is create a system that is intended to provide greater benefit to consumers and succeeds in taking money from the guilty parties, but then fails to pass it on to the consumers themselves. The case is so strongly made, and I support it wholeheartedly.
Lord Hodgson of Astley Abbotts
My Lords, there is no half a loaf on this lot, that is for sure. This is not even a small slice. I listened carefully to what my noble friend had to say. She repeated some parts of the Bill, which my noble friend Lord Eccles had already said we are not entirely happy with, to be quite candid. She also said quite a lot quite quickly. I would not like to pretend I could take in the full implications, so I will read that very carefully.
One of the issues she did not address was: what incentive will we have under the new regime for the representatives to find the people and pay them? If they can possibly be paid their fees without finding the consumers, why will they bother? I honestly do not think that we have had a satisfactory answer to that point. We need to find a way to deal with the people who are putting those accused to a great deal of time, trouble and expense, and then do not take the trouble to make sure that they are paying out to the affected parties. We have a gap in the rules here and in the way we are approaching this. I hope that my noble friend will think carefully about that. I will certainly want to before we get to Third Reading next week or whenever. In the mean time, I beg leave to withdraw the amendment.