Damages-Based Agreements Regulations 2013

Lord Phillips of Sudbury Excerpts

Tuesday 26th February 2013 Grand Committee

[Lord McNally]

My Lords, both these instruments, which are important elements of our reform, come into effect on 1 April 2013. The reforms overall are intended to make civil costs more proportionate. They also include particular provisions to protect claimants and damages, as I have set out. These instruments have been subject to consultation, and we have improved the drafting as a result. I believe they are proportionate and appropriate. I therefore commend the draft instruments to the Committee.

[Lord Phillips of Sudbury]

I have only one simple point to make. It is a question to the Minister regarding the Conditional Fee Agreements Order, particularly the 25% cap, which does not apply to any future losses. In proposing this legislation, the Minister rested his case heavily on proposals made by Lord Justice Jackson in his review. Is the Minister aware of a lecture Lord Justice Jackson gave on 29 February last year? In this lecture, he made a point, which appears in the footnote, stating:

“The Personal Injuries Bar Association (PIBA) and the Bar Council have recently sent to me forceful submissions that the 25% cap should apply to ALL damages, as it did before April 2000. I can see the sense of allowing that dispensation in appropriate cases provided that the success fee is only payable by the client as it was pre-April 2000”.

That seems reasonable and it seems doubly reasonable given that the author of these proposals, Lord Justice Jackson, himself had second thoughts which he expressed in public last year. I am wondering, therefore, why the limitation to past losses survives into this statutory instrument and whether the Minister could take this away and follow the latest thinking of Lord Justice Jackson, which is supported by the Bar Council and, I suspect, the Law Society.

[Lord Beecham]

My Lords, I always like to be consistent and it certainly would be inconsistent of me not to begin with a complaint about the process here. These regulations come to us some five weeks before they are to take effect. The Bar Council has drawn attention to this, rightly stressing that a major change in the law, particularly in relation to DBAs, is being introduced with very little time before they come into effect for people to work out how they are going to be applied.

As the Minister has said, it has always been permissible for damages-based agreements to be implemented in non-contentious matters in tribunals. As he has also said, these were extended by regulations to employment cases. That opened the way to the revival of what used to be called “champerty” in previous times, which of course was unlawful. We are now legalising it under the new nomenclature of damages-based agreements and I can see that there is a case for doing that. Nevertheless, significant issues and questions arise from the Government’s proposal.

Reverting to the timescale, it should be pointed out that other changes affecting contentious litigation are in hand. These include changes to the Road Traffic Act portal and small claims limits in cases, including, potentially, personal injury cases. With all that happening, one might have thought that it would be sensible to bring all the changes together and to do it at a time which allows the parties and the professions to prepare adequately. I hope that the Minister will look again at the timetabling with a view to deferring implementation of whatever regulations finally emerge for six months until October of this year. I am particularly indebted to those who have briefed me, and no doubt other Members of your Lordships’ House and perhaps of this Committee, in relation to these matters, including the Association of Personal Injury Lawyers, the Bar Council, the Law Society and, especially, Professor Rachael Mulheron.

A number of issues arise and I hope that the Minister will be patient while I list them. If he is not able to reply to them all today—he may well not be—I hope that he will take these matters back and consider them. I was going to raise the question of the cap, which was raised by the noble Lord, Lord Phillips. I, too, identified the change of mind by Lord Justice Jackson, to which the noble Lord referred. It is notable of course that the 25% cap in terms of damages-based agreements applies only to personal injury cases. It is a 35% cap in employment cases, which can equally be quite substantial, although not, I guess, running into the millions of pounds of the exceptional cases of clinical evidence and the like to which the Minister referred. Nevertheless, it certainly can be comparable with many ordinary personal injury cases. In those cases, the cap is 35% including future loss, so there is a serious question about the composition of the figure against which the percentage is to be calculated.

--- Later in debate ---

Some of the same arguments apply to conditional fee agreements—again, the issue of damages for the purposes of the calculation of a success fee, not including future loss, the question of VAT and the like. In my submission, it would also be sensible to look at these two sets of regulations together to see whether they can be improved in order to fill the quite evident gaps that exist, which cannot help the new system to bed in. The risk is that if there are problems of this kind, the Government’s purpose in promoting DBAs, or indeed the new regime of CFAs, as an alternative to legal aid will not succeed because the professions will not undertake the risks or, alternatively, it will not be the professions that run the show but commercial organisations with very little regard necessarily to the proprieties with which litigation has been, and should be, conducted in this country. I urge the Government to think again, look again at the Civil Justice Council’s recommendations and see whether changes can be made at this stage before implementation to make what is a pretty defective-looking set of regulations workable.

[Lord Phillips of Sudbury]

Before the noble Lord, Lord Beecham, sits down, does he agree that in his own extremely eloquent exposition on these two statutory instruments, and indeed in my own offering, there was a notable absence of reference to the basis upon which I suspect he, and certainly I, put forward our points—that is, access to justice? The majority sitting in this Grand Committee are lawyers, and we take it so much for granted that what we are seeking to amend in these regulations is exclusively for the benefit of improving access to justice. I invite him to concur with me that anyone reading Hansard who saw no reference to that in the course of our two offerings should know that this underpins everything that we have said.

[Lord Beecham]

I am grateful to the noble Lord for making explicit what was certainly implicit in what he and I were saying. Access to justice is certainly the core argument here. I should perhaps also have declared an interest in that from time to time as we have discussed these matters I have put in time as a now unpaid consultant with the firm of solicitors in which I was formerly a partner.