Legal Aid, Sentencing and Punishment of Offenders Bill

My Lords, there has been widespread condemnation outside the House, and unanimous condemnation inside it, of the activities of parasitic claims farmers and claims management companies that engage in the process of securing referral fees simply to generate profit. A major objection to the activities of those concerns is that they foster the myth of the compensation culture. People who see advertisements on the streets or in newspapers which invite claims may get the impression that hordes of people are succumbing to the temptation to make wholly bogus claims. In the field of whiplash claims, it is acknowledged that there is some truth in that perception. However, in general terms, as the noble Lord, Lord Young of Graffham, pointed out in his report, there is no substance to the suggestion that there is a widespread compensation culture. The amendment deals with the position of not-for-profit organisations. We are entirely at one with the Government in seeking to ban referral fees made to commercial organisations simply for the purpose of making profits. However, some organisations—be they charities or membership organisations—receive referral fees from firms of solicitors and perhaps from others whom they appoint to panels on the basis of their expertise and record of service, and whose contributions help those organisations carry out their main purpose. That might be service to members or, in the case of charities, the furtherance of the charitable objectives of the organisation. For example, among the charitable organisations are the Spinal Injuries Association, Headway and Action against Medical Accidents. There are others, too, which receive referral fees and use the proceeds to benefit those whom their organisation was set up to help. Other membership organisations and trade unions do likewise. When we debated amendments of a similar nature last week, the Minister referred to the main—and understandable—objective of the Government, which is to restrict the cost of litigation. We share that objective. In the case of referral fees, it is perfectly achievable. It does not constitute a cost to the system. If a referral fee is effectively charged to the client, of course that is a cost to the client, and that ought to be avoided. On general costs, costs payable by a losing party to another are either agreed or assessed by the court. Obviously, the court can base its assessment of costs on what the normal tariff would be. I have appeared before the courts many times in 35 years of practice as a solicitor—endeavouring to justify the very modest costs that my firm sought—to explain and justify those fees. In fact, a kind of tariff is applied locally by the courts. In any event, if this were thought to be a danger in the system, it would be possible to allow the courts to deal with any such referral fee, to require it to be disclosed and to make it an irrecoverable disbursement from the paying party. So the question of additional costs can be satisfactorily dealt with. In last week's debate, the noble Baroness, Lady Deech, made some interesting points, one of which was incorrect. She said that the referral fees received by some trade unions find their way into the coffers of the political party with which I and others in this House are associated. That is not the case. Payments by trade unions to political parties of any colour come out of the political fund, not the general fund. The noble Lord, Lord McNally, who was once more closely involved with these matters than he is now, confirmed that. However, the noble Baroness also referred, understandably, to the situation that arose in respect of compensation claims by miners regarding pneumoconiosis —a whole raft of cases over many years. Many law firms and others spent considerable time and money researching these cases and it was a very long time before they were settled and a scheme developed. The abuse in that case was actually rather different from what we are now debating. It was not so much the question of referral fees; it was the fact that some firms of solicitors—happily, not many—not only were paid by the Government under the compensation scheme but had the effrontery to deduct some payments from their clients. That was absolutely outrageous and many of the firms involved were severely disciplined, and rightly so, by the Law Society. But that is a separate issue from that which this amendment and the whole topic of referral fees address. There is a world of difference between the use of referral fees by claims management companies and the like—simply to generate profit and at the same time perhaps to promote invalid claims on the off-chance that some of them may succeed—and that by other organisations genuinely endeavouring to assist their members and receiving funds which in turn are used for the benefit of the members or the non-commercial purposes, charitable or otherwise, of the organisation. I beg to move.