Damages-Based Agreements Regulations 2013

Lord Marks of Henley-on-Thames Excerpts

Tuesday 26th February 2013 Grand Committee

[Lord McNally]

Actually, I knew that. As Harold Wilson said when he retired and Jim Callaghan succeeded him, “I have made way for an older man”.

I take the point made by the noble Lord, Lord Phillips, but let me be blunt. I am always suspicious of Ministers who at any time rest too much on a report, no matter how learned. I do not rest the case for the 25% cap on that being Lord Justice Jackson’s original recommendation, although indeed it was. A sharp-eyed lawyer would say that the noble Lord’s quote about Lord Justice Jackson did not endorse the counterview but simply said that it had merit, which is not the same as advocating that the Government change their policy. Even if it were, this is the Government’s policy. It is the right policy because it protects the future earnings and the future cover for victims in these cases. It remains our policy on that merit, and we are willing to defend it on that basis.

I understand the point made by the noble Lord, Lord Beecham, about speed. I pointed out that very little of what we are doing is entirely new. We fully recognise that at this time there is a need for ability, nimbleness and fleetness of foot in all parts of the legal profession, if we are to take advantage of the changes that are going through. We are not persuaded that the timescales we have set are unreasonable, and we will not be deferred from the course that we have set. We have taken account of reasons for delay regarding mesothelioma and privacy, which I quoted. However, these orders will go through to take account of the fact that LASPO comes into effect on 1 April 2013.

Perhaps I might deal with a number of the specific questions that the noble Lord, Lord Beecham, raised. He was very correct to raise the issue of the American experience in DBAs. I also met the organisation that came over to present its case. I left that meeting with some of his concerns about what this might bring into our legal system. The noble Lord’s description of hedge funds for legal claims is something that we are very conscious of. What we have decided so far is to keep the matter under review. That phrase can often hide weasel words and weasel intent, but we want to see just how much this is going to become a factor in our legal system, while making sure that some of the warning signs that the noble Lord has quite legitimately raised are on the radar of Ministers as well. We will keep this matter closely under review.

The noble Lord raised the issue of VAT on the 25% cap. The 25% cap on success fees is as recommended by Lord Justice Jackson. Including VAT on the success fee on lawyers’ fees within the cap will provide further protection for the claimant’s damages and add certainty for the claimant as to the likely deduction from their damages. This approach is also consistent with the existing cap of 35%, inclusive of VAT, on payments to be made from damages in respect of DBAs in employment matters. The noble Lord also asked about the indemnity principle. DBAs are an alternative method of funding and it would be for solicitors to advise their clients on the most appropriate method of funding according to the circumstances of each case. He also mentioned there being one set of regulations. There is one set of regulations covering both civil litigation and employment cases, as recommended by the Civil Justice Council. We have listened to the concerns of the Law Society and others that there should not be too much regulation in respect of civil litigation in these instruments. This is because failure to comply with the provisions in the instruments would make the agreements unenforceable. As I have said, lawyers are properly regulated in any event.

The noble Lord asked whether the cost of ATE insurance is within or outside the 25% cap. This is an expense and is therefore outside the cap. On why DBA regulations do not contain requirements on termination for civil litigation, as in employment cases, the DBA regulations of 2010 made provisions for employment cases which can be taken forward by non-lawyers. Detailed safeguards need to be built in as a result. Civil litigation can be conducted only by lawyers, who are subject to their own professional regulations.

I think that that covers most of the issues. If not, perhaps I might say to the noble Lord that I welcome the thoroughness with which he has examined these regulations and, as I say, if I have not covered the questions in precisely the detail that I should have done I will make sure that a suitable letter is lodged in the Library of the House. I nevertheless think that the timetable that we have set, the consultation that we have undertaken and the changes that we have made after that consultation, with our having listened to the Bar Council, the Law Society and other interested parties, make the regulations fit for purpose. I therefore recommend them to the Committee.

[Lord Marks of Henley-on-Thames]

My Lords, before my noble friend the Minister sits down, I have one question on the point made by the noble Lord, Lord Beecham, about damage-based agreements for defendants. It is my understanding of the regulations that DBAs are not appropriate for defendants, whereas conditional fee agreements are and always can be available to defendants. DBAs depend upon the damages awarded to the client or monies paid by another party to the party entering into the DBA. Clarification on that from my noble friend may be helpful, but it is certainly my understanding.

[Lord McNally]

I am grateful to my noble friend for that question. I am informed that neither the Act nor the regulations enable defendants to use DBAs, not least because a DBA is enforceable only where the agreement makes provision for the payment of the fee from damages awarded. My noble friend asks an extremely pertinent question and I hope that I have given a clear answer.