Litigation Funding Agreements (Enforceability) Bill [HL] Debate

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Department: Scotland Office
Lord Trevethin and Oaksey Portrait Lord Trevethin and Oaksey (CB)
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My Lords, it is a pleasure to follow the noble Lord. I make precisely the same declaration of interest as did the noble Lord, Lord Wolfson. I occasionally advise funders and I quite frequently act in cases in which one party is funded and the other party is aggrieved by the existence of litigation funding.

I do not think anyone has spoken directly against the Bill, so I need not say too much, if anything, directly in support of it. I will just make one or two observations about the Bill and then, if I may, I will travel briefly off-piste and pick up some points made by the noble Lord, Lord Meston, about the DBA Regulations.

The reality, as a number of noble Lords have pointed out, is that there is no prospect of anything resembling a functioning legal aid system coming back into place. What follows from that is that there are very serious problems with access to justice in this country. Litigation funding unquestionably has its part to play.

In her very interesting—and, with respect, powerful—dissenting judgment in the Supreme Court PACCAR case, Lady Rose quoted an American judge:

“The realistic alternative to a class action is not 17m individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30”.

One could substitute $3,000 or even $30,000 for that sum; that is the reality. Without access to litigation funding, class actions or group actions—litigation of that type, which will sometimes be highly meritorious—simply cannot be brought.

One can test whether the practical consequences of the PACCAR decision are benign or malign by considering what probably would have happened if that decision had been handed down by the Supreme Court shortly before the litigation funders supporting Mr Bates and the other postmasters were going to take their case to trial, and shortly before a final decision had to be taken on the funding of that litigation. Almost certainly, the funders would have withdrawn. The Post Office, as one knows from what one has read about the history of that litigation and other matters, would have seized on that and sought to take advantage from it. Almost certainly, the proceedings would have been aborted. Mr Justice Fraser would never have handed down his masterful judgment and, to use the phrase of the noble Lord, Lord Arbuthnot, the doors would not have been blown off and the injustices which have horrified the country might have remained concealed. That suggests, I think, that the consequences of the PACCAR decision are not benign, and the Government are right to act in the way that they have.

I do not want to say any more about the merits of the Bill. I will make two points which involve travelling slightly off-piste. They build on what has already been said by the noble Lords, Lord Meston and Lord Sandhurst, about the 2013 DBA Regulations which were at the centre of the Supreme Court’s reasoning in the PACCAR case. Those regulations were put in place very shortly after the reforms founded on Sir Rupert Jackson’s report were enacted. Sir Rupert, in making significant changes to the conditional fee regime, strongly recommended that damages-based agreements should generally become lawful in this country. That recommendation was an important part of his overall approach to the reform of litigation in this country.

However, everyone, including the Ministry of Justice and just about every judge who has ever had to read the regulations, recognises that the 2013 regulations were badly drafted. In particular, they leave a very undesirable uncertainty about whether hybrid agreements involving an element of a damages-based agreement and an element of a more orthodox funding scheme are permissible. They leave a great deal of uncertainty as to what happens to the lawyers’ entitlement to remuneration if the client terminates the agreement in the course of the relevant litigation.

That is why the ministry instigated a review of the position, which led to the preparation of significantly better draft regulations by a group including Nick Bacon KC, a colleague of mine, who is a master in this field. There is no doubt that those draft regulations would represent a major improvement. If those draft regulations from 2019 had been put in place back then, we would not be having the current debate and there would be no PACCAR problem. Nick Bacon and his team spotted the difficulty that underlies the decision of the Supreme Court in PACCAR and drafted the new regulations to remove the relevant ambiguity and took litigation funding agreements outwith the scope of the DBA Regulations.

I am sorry to be mean to the Minister but, like the other Members of the House who spoke on the point, I would be very grateful if he were able to provide any further information or assurance as to the speed with which the ministry and the Government will move in the direction of reforming the DBA Regulations, as indicated.

My final point is a broader point about the way the Bill and the underlying regulations are structured. In this area, as in others, they operate in a completely binary way. They say that this agreement—a conditional fee agreement or a damages-based agreement—is either enforceable, if all the boxes and regulations have been ticked, or it is unenforceable. There is no middle ground whatever. There is nothing resembling the jurisdiction in the consumer credit legislation, which gives the court a power to hold that a consumer credit agreement is enforceable notwithstanding that there has been some technical non-compliance with the relevant regulations. Something of that sort would work well here because where there is the completely binary structure of enforceable or wholly unenforceable, there is trouble ahead: the stakes are raised much too high.

With this sort of structure, a party who shows that the relevant agreement is unenforceable stands to gain massively. A finding of that nature will close down the litigation and lead to a saving of millions, many of millions or hundreds of millions of pounds. You get very expensive, time-consuming, recondite satellite litigation which goes all the way to the Supreme Court and filters back down through the court system, causing judges to wrestle with difficult points. It is possible that all or most of that could be avoided if the scheme was structured so as to give the court the power to say, “Yes, this DBA or CFA is technically non-compliant with the regulations, but no detriment or prejudice has been caused and therefore we, the court, declare the relevant agreement to be enforceable”. That would be a better way forward.