Legal Aid, Sentencing and Punishment of Offenders Bill

My Lords, I shall speak to Amendments 166A and 166B, standing in my name on the Marshalled List, and to declare my interest as a partner for 44 years in the international commercial legal firm DAC Beachcroft LLP, and the other interests contained in the register. This gives me an opportunity to respond to one or two comments in the earlier debate. In this important group of amendments we need to focus on the underlying problem of legal costs as much as on the problem of referral fees. As my noble friend Lord Clement-Jones just reminded us, the Government are implementing another of the main recommendations of Lord Justice Jackson’s review of civil litigation costs. Perhaps I should mention here my personal pride that one of my partners, Andrew Parker, was an assessor to Lord Justice Jackson's review. The intention so clearly expressed is firmly to reduce disproportionate legal costs in our system. As I was able to say on Second Reading, and I make no apologies for repeating it, Sir Rupert Jackson was able to produce a report which balanced all the special pleading of the various vested interests and came up with recommendations which were firmly in the public interest. It is that balance which we have to keep in view throughout the passage of the Bill in this House, particularly on these clauses. I fully support the Government's proposal to ban referral fees, and these amendments in my name are intended simply to clear up some points of relatively fine detail in the drafting because any ban implemented must work effectively and not allow easy ways around the ban. We are already aware that there is quite an industry out there now, which will be thinking of innovative ways of defeating the intention of both the Government and Lord Justice Jackson. Amendment 166A makes a minor change to Clause 54(4)(a) by inserting, "““which consist of or include damages””," so that the paragraph would be: "““the legal services relate to a claim or potential claim for damages which consist of or include damages for personal injuries or death””." The point is that many injury claims include claims for other items such as motor repairs or hire charges. In my view, the current wording imposes the ban on payments for only the injury element, so we could get the unfortunate situation where the same referral fee is instead paid for the repair or hire claim, neatly sidestepping the Government's intentions. Better surely to pick up the whole of any claim where there is an injury element, as my wording is intended to do. Amendment 166B inserts, "““whether received by the person referring prescribed legal business or not””," into Clause 54(8). I fear there is a gap in the drafting which will be exploited by those business models in which the referral is made by a regulated person, but the payment for that referral is made back to an unregulated subsidiary. This amendment is intended to stop that. I understand entirely that the payment for that referral could be banned, but it is vital in my view that where both payment and receipt can be caught, that should be done. It is not just about balance or fairness, but about removing the incentives from the system. Speaking for one moment about incentives, this is as much about legal costs as about the rather distasteful practice of buying and selling people's injuries as some sort of commodity. Essentially the payment of referral fees demonstrates that, despite efforts to contain legal costs in low-value claims, solicitors acting for claimants can still afford to pay out over half their fees to a third party whose only role is to buy and sell on the details of an injured person. I shall remind the Committee of some figures. This is not just about motor claims, but they illustrate the point clearly. We now have a system in which a solicitor can conduct a routine motor claim for personal injury, in which liability is not disputed, and be paid £1,200 profit costs by the defendant or the defendant’s insurer. We hear that out of that sum of £1,200, many solicitors are apparently content to pay up to £850 to a middleman—namely, a claims farmer. What do the claims farmers then go out and do? They go and pester more people to bring claims to them, so that they can farm more lots at £850 a time. This is what is driving the compensation culture today, in which it is now becoming evident that we have the weakest necks in Europe. It is not just about whiplash and road accidents; this is a real issue for those businesses and households struggling to pay insurance bills. In conclusion, what this demonstrates beyond any reasonable doubt is that the claimants’ solicitors are being paid too much. In debates on this Bill in the House of Commons the Minister, Mr Djanogly, committed to consult on reducing that £1,200 fee but was unable then to give any commitment about timing or about the critical question of how much the reduction ought to be. The Government have also previously made it clear that they intend to extend the reduced fixed fees into employers’ liability and public liability claims. I look forward to hearing my noble friend the Minister clarify the Government's intentions and I hope that we will hear about plans for such extension, which is sorely needed to contain costs for business, for hospitals and for other public authorities, et cetera. Only by removing the cost from the system can the Government achieve their objective of bringing down insurance premiums. Any ban will immediately be the subject of attempts to work around it, however watertight the drafting. The key to making Clauses 54 to 58 work is not just to get the drafting right, but to remove the incentive for referral and profit share by removing the excess from the system. While I am of course merely speaking to my amendments, I urge noble Lords to join me in calling for an £850 reduction to the fixed fees, because that would stop at source this practice of trading people’s claims.