THE DEBATE ON COURT FEES IN THE HOUSE OF LORDS: WELL WORTH READING
Every litigator should read the debate on court fees that was held in the House of Lords. There are some trenchant criticisms of the MO(i)J which was responded to by “cant”. I have highlighted passages of interest but this is one of those cases where everything said in opposition to the increase was accurate, brilliant and telling.
Motion to Approve
The Minister of State, Ministry of Justice (Lord Faulks) (Con): My Lords, the purpose of this draft order is to introduce enhanced fees to commence certain proceedings for the recovery of money in the courts of England and Wales. Enhanced fees are fees that are set above the costs of the proceedings to which they relate. The order prescribes a fee of 5% of the value of the claim for all claims with a value of £10,000 or more, up to a maximum of £10,000. It also provides for a discount of 10% for applications initiated electronically.
The order also fixes three fees that are already currently above cost: the fee for an application for a divorce; the fee to fix a hearing of a case allocated to the fast track; and the fee for a multi-track hearing. These fees have come to be at a level above cost due to the adoption of a new mechanism for modelling the way that cases progress through the courts, and a new methodology for apportioning costs to those cases. These were first used to prescribe the court fee changes introduced on 22 April last year.
I reassure noble Lords that these fees are not being increased. But we made it clear, when we responded to the consultation on fee increases to achieve cost recovery, that we could see no justification for reducing any fee in the current financial climate. These fees are therefore being remade at their current levels explicitly using the enhanced fee power. The normal rule for public services is that fee income should cover the full cost of delivering those services. For many years, the civil and family courts have operated on that basis.
Section 180 of the Anti-social Behaviour, Crime and Policing Act 2014 provides the Lord Chancellor with a power to prescribe fees above cost. In December 2013, we set out our proposals for using this power in a consultation paper, and on 16 January we published the government response setting out the fee increases that we intended to take forward. The order gives effect to those fee increases.
Why are the Government taking this action and why is it necessary? The principal reason for bringing forward this order is financial: to ensure that the courts are properly funded. The courts fulfil a crucial function in our society. They ensure access to justice for those who need it. This is vital to an effective democracy, helping to maintain social order and an effective and functioning economy. It is critical that these principles are preserved, so that people who need it have ready access to the courts.
A strong economy is a pre-requisite for effective and affordable public services. Noble Lords will be well aware of the state of public finances that this Government inherited, with a growing budget deficit, increased public sector debt and an economy in recession. We made economic recovery our first priority. That required some difficult choices. The action that we have taken is working, and the recovery is now well under way. But further reductions in spending are essential if we are to eliminate the deficit and reduce overall levels of public debt.
There can be no exceptions for the courts. The challenge, as with many other public services, is to do more with less. The Government will invest £375 million over the next five years in the courts on much-needed modernisation. This investment is expected to release long-term, sustainable savings worth over £100 million per annum. There is, however, only so much that can be done through cost-efficiency measures alone. In the current climate, we must also look to those who use the courts to contribute more towards the running of the courts, where they can afford to do so.
We consulted on our proposals and we have taken the time to consider the responses very carefully. The consultation produced some very strong views. We listened and we have decided not to take forward some of our original plans. We are not increasing the fee for a divorce, nor are we taking forward either of the proposals for raising fees for commercial proceedings. This has not, however, changed the financial imperative, and we have set out our further proposals for raising fee income from possession claims and from general applications in civil proceedings.
The measures in this order will, we estimate, generate an additional £120 million per annum in additional income, with every pound collected retained by the courts. That is a matter specifically provided by Section 180 of the Anti-social Behaviour, Crime and Policing Act. Fee increases will never be welcome or popular. But I am sure that those who choose to litigate in our courts will continue to recognise the outstanding levels of service and excellent value for money we offer. I therefore commend this draft order to the House and I beg to move.
“incredibly proud of our legal heritage”.
Today, we are debating an order that he has brought forward which will do incredible damage to the legal heritage because it will impede access to justice. As the Minister mentioned, this order will substantially increase the fees that claimants must pay when they start legal proceedings. If you want to sue for between £10,000 and £200,000, you will need to pay an upfront fee of 5% of your claim. To claim £200,000, you will need to find £10,000. That is a 576% increase on the current fee of £1,515.
The Minister is of course correct to say that Parliament approved Section 180 of the Anti-social Behaviour, Crime and Policing Act 2014, which authorises the Lord Chancellor to prescribe fees above the cost of providing the court service to litigants. That is the power that Mr Grayling is now exercising. But is it a fair, reasonable or proportionate exercise of that power? Plainly not. For litigants to have to pay such substantial sums in advance of bringing a legal claim will inevitably, in practice, deny access to the court for many traders, small businesses and people suing for personal injuries.
The Government have suggested that court fees will be a small fraction of the legal expenses which a claimant will incur, but many claimants will not have to pay their legal expenses at the outset of proceedings. They will not have such a substantial sum of money available at the outset of the case, or they may be able to pay these court fees only by doing without competent legal representation. The deterrent effect on litigation will, I think, make it most unlikely that the increased charges will produce the anticipated £120 million which the Government hope to produce by this order.
The Minister mentioned the consultation and the strong views in response. On 19 December 2014, the Lord Chief Justice of England and Wales, the noble and learned Lord, Lord Thomas, responded to the consultation on behalf of the senior judiciary—that is,himself; the Master of the Rolls, Lord Dyson; the President of the Queen’s Bench Division; the President of the Family Division; the Chancellor of the High Court; and the deputy head of civil justice. They all know a thing or two about access to justice and litigation. They explained their “deep concerns” about this dramatic increase in court fees. I cannot recall seeing a letter from the senior judiciary expressed in such scathing terms in response to a consultation about a proposed government policy. The noble and learned Lord, Lord Thomas, said that the Government’s impact assessment for these proposals,
“makes some very sweeping and, in our view, unduly complacent assumptions about the likely effect on the volume of court claims issued and access to justice of the proposed fee increases”.
“the research evidence base for these proposals is far too insubstantial for reforms and increases of this level”.
“there are fears that the increase in fees could trigger commercial work moving elsewhere”.
On behalf of the Law Society, the Bar Council and other legal bodies, the solicitors Kingsley Napley have sent the Lord Chancellor a letter before claim threatening judicial review proceedings, and rightly so. Section 180 does not alter the Lord Chancellor’s legal duty under Section 92 of the Courts Act 2003 to,
“have regard to the principle that access to the courts must not be denied”.
“perverted the law, violated the constitution and oppressed the innocent”.
Mr Grayling’s period of office has been notable only for his attempts to restrict judicial review and human rights; his failure to protect the judiciary against criticism from his colleagues; and the reduction in legal aid to a bare minimum provision. Yesterday, Mr Grayling lost yet another judicial review claim, this one overturning the regulations which authorise legal aid for judicial review cases only after permission has been granted to bring the proceedings. Now for his finale before the general election Mr Grayling is undermining basic access to justice in the courts, by seeking to make money from small businesses which simply want to enforce their contractual rights and from victims of personal injury seeking to obtain compensation from the wrongdoers. That is not a legal heritage of which anyone could be proud.
If you wrap yourself in Magna Carta, as Mr Grayling sought to do last week at the Global Law Summit, you are inevitably and rightly going to invite scorn and ridicule if you then throw cold water over an important part of our legal heritage. I beg to move.
Lord Beecham (Lab): My Lords, last Thursday, my noble friend Lord Howarth asked a Question about the subject of the Order and the Motion of Regret that we are debating tonight. In my follow-up question, I asked why, in the light of the 80% decline in the number of employment tribunal cases since the imposition of charges—quite contrary to the Government’s predictions—we should accept the Government’s assurances that there would be little or no effect on access to justice from this measure. The Minister’s reply, apart from the mantra which all Ministers are programmed to repeat about the Government’s so-called “long-term economic plan”, was interesting. He conceded that:
“there has been a significant decline in the number of claims brought”.—[
, 26/2/15; col.1763.]
Perhaps he could tell us just how much money it was predicted would be raised by those fees, and how much has actually been raised. Then perhaps he could explain why increases in fees of up to some 600% in the civil courts, which could not conceivably be described as “relatively modest”, will have little or no effect on the number of cases brought there.
“the research so far undertaken”,
“clearly inadequate to assess the … consequences … on the ability of parties to afford access to the courts and on their willingness to do so”.
I should note and welcome in parenthesis that, as the Minister has pointed out, the Government did at least change their position on family law and commercial cases. However, the response contains one paragraph that merits a Nobel prize for circularity. Paragraph 46 recognises that,
“some respondents were concerned that the fees bore little resemblance to the cost of proceedings. However, under the powers contained section 180 of the
Anti-social Behaviour, Crime and Policing Act 2014
, court fees are not limited by the cost of proceedings”.
“could lead to difficulties in some people being able to access the courts”.
Who, upon what evidence, supports that view? Not the Lord Chief Justice, on behalf of the senior judiciary, who, in his letter of 19 December, which the noble Lord, Lord Pannick, has already mentioned, refers to the two exercises purporting to constitute research into the proposals and which are reflected in what passes for the impact assessment. He draws particular attention to the effect on SMEs and litigants in person. The Lord Chief Justice reiterated that the 2013 research was based on only “18 telephone interviews”—presumably carried out in similar fashion to the cold calls with which we are increasingly and irritatingly familiar. The latest research involved 31 users, of whom all of 12 related to claims for more than £10,000, which is the level at which the fees are levied at 5%, which amounts, as we have heard, to £10,000 for large claims of £200,000. That represents an exponential increase of something around 600%.
“a disproportionately adverse effect on some groups e.g. small and medium enterprises, low income individuals … thereby undermining equality before the law”.
As we heard from the noble Lord, Lord Pannick, an application has been made for a judicial review of the order by nine institutional claimants, equally expressing their great concerns. Eleven different professional organisations draw particular attention to the potential impact on individuals with clinical negligence or personal injury claims; on small unincorporated businesses, where they forecast a drop of 35% in claims; and on SME companies—that is, limited companies—a drop of 49% in claims. They also draw attention to the possible impact on actions for recovery and insolvency cases, which could, ironically, rebound indirectly on the taxpayer.
The leading solicitors firm Fieldfisher, which acts in high-value, usually personal injury and medical negligence claims, supplied an interesting perspective on the implications of the order. I ought to declare an avuncular interest, as my nephew is a tax partner in that firm. It points out that whereas after the Woolf reforms solicitors usually funded disbursements, including court fees, that cost would rise to millions of pounds per annum. Few people could afford a £10,000 payment and most solicitors will be unable to fund their clients’ actions. They point to fears of a negative impact on mesothelioma claims, where speed is of the essence. They conclude that the proposal,
“tips the balance further in favour of the Government and corporate interests in whose interests it is to delay, frustrate and deter access to justice and access to compensation. It encourages Defendants to make early low offers before proper investigation of the case and to continue to unreasonably deny liability”—
their split infinitive, not mine. This comes not from a niche, left-wing human rights firm of the kind so abhorrent to the Lord Chancellor, but from one of the City’s leading firms, which proclaims itself,
“more than just a European law firm, specialising in providing commercial solutions across industries and sectors”.
Members may also have had sight of three letters sent to the Law Society by three different people seeking to recover, for them, substantial sums and facing under these proposals fee costs of £5,000 in two cases, and between £2,600 and £3,200 in the third, which they simply cannot afford precisely because of the losses incurred which are the subject of their claims. One also has to ask what consideration has been given to the possibility of claimants resorting to alternative methods of dispute resolution at a potentially lower cost to them, with a consequent impact on the income for the Courts Service?
There may be a case for full cost recovery. The Minister, in opening, referred to that as if it were the main point at issue, but of course it is not. The real issue here is the fact that the Government are going for more than full cost recovery. It is perhaps arguable that there may be some categories of cases where that might be justified, but might the Government be contemplating other such approaches by analogy, for example in relation to criminal cases or to damages in road traffic and personal injury cases, where defendants can already be required to meet the cost of NHS treatment afforded to the claimant? If more than full cost recovery is legitimate in the court area, might it not be argued that to help with the growing cost of the National Health Service and the demands for extra funding, more than full cost recovery from those who injure people who therefore have to undergo NHS treatment should be levied in those areas? Will the Government disavow any such intention, or is it perhaps in their mind to expand this principle of more than full cost recovery to other areas than those that are the subject of these regulations?
Tonight we will doubtless hear from noble and learned Lords, although not too many—there are only about a couple now present in the Chamber—and we look forward to it. They have a lifetime’s experience of the operations of the courts and a profound attachment to access to justice. We have already heard from one distinguished practitioner, and I dare say we will hear from two more before the evening ends, also troubled by the potential implications of this ill thought out measure. It is not too late for the Government to pause, reflect upon and reconsider these proposals, even if the order is affirmed today, as undoubtedly it will be. It would surely be appropriate to do so in any event when such a controversial measure comes so close to the end of a Parliament.
I urge the Government, before implementing the order, to commission further work in conjunction with the Civil Justice Council to examine in greater detail the implications of their proposals as presently cast and the impact that is likely to ensue, and to listen with care to the advice of those whose wisdom and experience should guide any decisions with the potential significantly to impact on access to justice, the very cornerstone of our legal system.
Lord Brown of Eaton-under-Heywood (CB): My Lords, one problem with a Bill that stretches to 186 clauses and 11 schedules and occupies 232 pages of the Queen’s printer’s copy is that, at least by the time that Clause 180 is reached, this House’s scrutiny powers begin to wane. Thus it was that, last year, by passing Section 180 of the Anti-social Behaviour, Crime and Policing Act, the Lord Chancellor was empowered to prescribe by statutory instrument, subject to affirmative resolution, court fees exceeding the cost of doing that for which the fee is charged—enhanced fees, as they are called. That Section 180 power must be reasonably, sensitively and fastidiously used. It is bad enough that the courts should be required to be self-financing at all. The justice system properly exists for the benefit of society and the economy as a whole. There has long been objection to the basic principle of full cost recovery.
To put that aside, the order for enhanced fees goes altogether further. In a real sense, it is selling justice—apparently contrary to Magna Carta, although now sanctioned by Section 180. Small wonder that it is characterised by some as a tax-like payment rather than a realistic charge for the use of the courts. Under Section 180(6), the enhanced fees,
“must be used to finance an efficient and effective system of courts and tribunals”.
That is small comfort to those who pay enhanced fees. Why, they will not unnaturally ask, should they be subsidising the family courts or whatever other proceedings are brought which do not attract the enhanced fee liability?
That is the first, fundamental, principled objection to the order. It is an objection not just in abstract constitutional terms, but because it must inevitably carry with it reputational consequences. Frankly, it sullies the overall image of British justice, no part of which should be open to criticism as a profit-making enterprise.
The second main objection is in two linked parts. First, to some extent at least, enhanced fees are bound to deter prospective claimants from litigating their claims. The second, necessarily linked, part of the objection is that, to the extent that claims are deterred, enhanced fees will fail in their central objective of raising money. The greater the number of claims deterred, the smaller the additional sum raised by the increases.
I add four footnotes to that objection. First, as explained in the Civil Justice Council’s response in December and the Lord Chief Justice’s letter written on behalf of all the heads of division, those dramatic increases, which, as we have heard, are in some instances over 600%, have to be paid up front and in full and are likely to impact disproportionately on SMEs and litigants in person. Of course, as the Minister observed in an answer at Question Time last week to the noble and learned Lord, Lord Mackay of Clashfern, the heads of division were indeed consulted, but even after modifications were made they continued to voice “deep concerns” about the proposals.
Secondly, as explained in a detailed briefing paper from the Law Society, the Bar Council and various other professional bodies, clinical negligence and personal injury cases, to which the noble Lord, Lord Beecham, referred, are likely to be adversely affected.
Thirdly, contrary to the Government’s bland statement that they are confident that the concerns expressed about the risk of damage to our legal services, and London’s reputation as the leading commercial dispute resolution centre, are misplaced—a bland assurance seen in their January 2015 response to the consultation and in Appendix 2 to the House of Lords Secondary Legislation Scrutiny Committee report—in fact 61% of the 158 people who responded on this issue to the BIICL research which was especially commissioned by the Ministry of Justice suggested that the proposed increase in fees could have a detrimental effect on the English litigation market, with 44 of those consulted considering this to be “highly likely”.
Wisely, following the consultation, the Government abandoned their initial proposal, which was to raise yet higher enhanced fees of up to £20,000 for the issue of the higher value commercial claims in the Rolls Building, on the basis that this would be likely to kill or, at any rate, severely lame the golden goose that has paid the vast sums which this litigation has earned the nation—billions of pounds-worth, a lot of it foreign currency. It must surely follow from that abandonment that even £10,000 is likely at least to deter some foreign claimants from litigating their claims here or to drive people, if not actually to abandon their claims, at any rate to resort to arbitration or mediation, as the noble Lord, Lord Beecham, also suggested.
With regard to my fourth footnote—I say this in fairness to the Government—unlike certain others, I do not see the employment tribunal fees experience as a directly helpful analogy. No doubt the introduction of those fees, whereas before there were none, has discouraged a number of meritorious claims but I suspect that it has discouraged at least as many unmeritorious claims—speculative claims, which used regularly to be brought and then bought off or settled because, frankly, that was a cheaper option for the defendant employers than successfully resisting them and then being left to bear their own costs, which were quite likely to be very substantially more.
A third and final reason for objecting to these increases is that they are not only intrinsically unfair when levied at this level but, in addition, produce curious and unfair anomalies. An obvious one is that all claims not specifically limited are now to attract the maximum full fee of £10,000. It is true that the Civil Justice Council said that it could see no logical justification for distinguishing between specified and unspecified money claims, and as far as it goes that is right. However, as the Lord Chief Justice’s letter points out, in personal injury cases, for example, it may well be quite impossible to value the claim when it is issued. Similarly, in many of the Rolls Building commercial cases, damages may be a subsidiary consideration. The principal relief being sought may well being an injunction or some other remedy—perhaps an account or something of that character.
My final point is that the Government are now proposing yet further enhanced fees, with a view to raising a further £55 million annually. They propose to do this—it is the subject of the January 2015 consultation document—by raising fees in possession cases and upon applications of one sort or another being made in ordinary civil proceedings. Again, there are compelling arguments against those, summarised in the Civil Justice Council’s response in February to the latest consultation round, but it is not necessary to go into them today.
Today’s Motion is of course one of regret rather than a fatal Motion. For whatever reason, Labour has apparently not been prepared to go that far. However, it will, I hope, help at least to persuade the Government that enough is enough and that really there must be no more use of this enhanced fee power. I suggest that the order is not merely to be regretted but to be deplored.
Lord Marks of Henley-on-Thames (LD): My Lords, I regret that I find it difficult to understand what has made the Ministry of Justice persist with these changes in the face of the well reasoned and overwhelmingly hostile reaction to them. The ministry’s impact assessment was based upon express assumptions, described as “key”, that,
“fee changes will not affect court case volumes”;
“there are no detrimental impacts on court case outcomes nor on access to justice from any increase in court fees”;
“there are … no impacts on the legal services used to pursue or defend claims”.
It was those assumptions to which the senior judiciary referred in their letter dated 19 December 2014, to which reference has already been made, which led the Lord Chief Justice to describe the proposals as,
“very sweeping and, in our view, unduly complacent”.
For judges not inclined to overstatement, that is trenchant criticism indeed. The letter was based upon the draft impact statement, which the senior judiciary had seen. Notwithstanding that criticism, the assumptions nevertheless found their way into the final impact statement when it was made on 16 January this year.
When the noble Lord, Lord Howarth, asked a Question of the Minister last Thursday, my noble and learned friend Lord Mackay questioned why these measures had not been introduced with the consent of the heads of division. Cynics, and anyone who had read the letter of 19 December, could be forgiven for the view that the reason why such consent was not sought was that it clearly would have been withheld for the very reason that the assumptions made by the department were unsustainable.
It was not only the Law Society and the Bar Council that prepared a briefing on these proposals. Other professional bodies as disparate as the Association of Personal Injury Lawyers, the Forum of Insurance Lawyers —who, of course, are usually on the other side—the Association of Business Recovery Professionals, and COMBAR, the Commercial Bar Association, joined them in referring to the evidence from individual law firms, to which the noble Lord, Lord Beecham, referred, that:
“Over 200 individual examples provided by law firms show that the total value of cases brought by individuals would be likely to fall by around one-third (35 per cent) under higher court fees. For small and medium-sized companies it would halve (a 49 per cent decrease). This suggests that increased court fees could have a significant impact on access to justice for both individuals and businesses, as fewer could afford to pay the higher rates”—
Even the worst case considered in the Government’s so-called “sensitivity analysis” in their impact statement, which was predicated on their own assumptions turning out to be wrong, posited only a maximum 10% fall in demand. Thus the Government’s assumptions on which the introduction of these new charges is based are flatly contradicted by the evidence obtained by the professional bodies from those most likely to be able to make accurate estimates. I agree with what has been said; it is overwhelmingly likely that these proposals for massive increases in the upfront costs of bringing money claims will deter claimants with good claims from bringing them forward. Like the noble and learned Lord, Lord Brown of Eaton-under-Heywood, I believe that it is a fundamental duty of government to provide citizens with affordable access to the courts to enforce their legal rights, and that these charges will therefore have an adverse effect on access to justice is difficult—indeed, impossible—to deny.
Small and medium-sized companies will be deterred from bringing claims to recover sums due to them because they are unable to afford the substantial upfront fees, often when that inability is brought about by the very debtors that they would wish to pursue. Individuals will be unable to afford to bring claims that they would have otherwise brought, particularly in personal injury cases. A further problem that has been mentioned and which I should have thought was obvious is that the proposals that involve charging the maximum fee to any claimant who cannot specify the value of his claim are completely unfair to personal injury claimants, who often cannot specify the value of their claim when they bring it. Moreover, any decrease in claims numbers will make it far more difficult for small solicitors firms in particular to survive in the current difficult, largely post-legal aid climate, in which they are already struggling.
It also follows from the evidence of a likely drop in claims numbers that the extent of the direct benefit to the Exchequer from these so-called enhanced court fees is likely to turn out to have been substantially overestimated at £120 million. However, that is not the only commercial consequence of getting this wrong; a decrease in claims numbers would have a serious knock-on effect for the revenue of businesses and professionals, of which the Exchequer would ultimately have taken its share.
The Kingsley Napley letter of claim from the Law Society, the Bar Council and seven other professional bodies to which reference has been made challenges the lawfulness of the draft regulations. The letter asserts forcefully that the proposed fees are outside the scope allowed by the enabling provision, which, as has been pointed out, is Section 180 of the Anti-social Behaviour, Crime and Policing Act. That provision permits the Lord Chancellor to raise fees beyond the cost of services only,
“to finance an efficient and effective system of courts and tribunals”,
whereas these fees are not required for the provision of the courts services because they are already self-financing. The letter also argues that the enabling provision should be construed strictly, particularly having regard to the constitutional prohibition in Magna Carta on selling justice. Secondly, the letter argues that the Secretary of State’s reasoning was irrational; and, thirdly, that there were very real flaws in the consultation process. The letter seeks the revocation by the Secretary of State of the Lord Chancellor’s decision to introduce these fees and threatens judicial review if the changes proceed.
I invite my noble friend the Minister to say to what extent he and his department have yet considered this letter of claim. On reflection, does he not now concede that it is time to think again before the real damage is done before fighting judicial review and attempting to press on with these increases?
Lord Scott of Foscote (CB): My Lords, I had prepared a speech in support of the amendment of my noble friend Lord Pannick. However, having regard to the speeches that your Lordships have already heard from not only the noble Lord, Lord Pannick, but from the noble Lords, Lord Beecham and Lord Marks, and the noble and learned Lord, Lord Brown of Eaton-under-Heywood, I will confine myself to asking four questions of the Minister.
First, does the Minister agree that respect for the rule of law by at least the majority of those living in this country is an essential requirement if this country is to continue to rank as a civilised country in which it is a pleasure and a privilege to live? Secondly, does he also agree that those who for reasons of lack of necessary funds are denied access to justice in our courts cannot expect to have or to retain respect for the rule of law? Thirdly, if the Minister agrees with those two previous questions, which seem to me self-evident, how can he justify increasing the cost of litigation to a level that will deny access to justice to a large number of people? The fourth question arises out of the terms of Section 92(3) of the Courts Act 2003, which states that in setting fee levels,
“the Lord Chancellor must have regard to the principle that access to the courts must not be denied”.
Does the Minister accept that principle? If he does, as I am sure is the case, how does he justify a fee of as much as £10,000 for the commencement of a civil action? If he does not accept that principle, how does he justify his retention as a Minister in the office of the Lord Chancellor?
Lord Phillips of Sudbury (LD): My Lords, I thank the noble Lord, Lord Pannick, for tabling this amendment, which I believe is very important—although I note that only those who are speaking are present tonight. I declare an interest as the founder and president of the Citizenship Foundation, a national charity which seeks to prepare young people in our schools for the life they are to lead beyond them by giving them a broad and very basic understanding of the laws of our land. I am also a co-founder of the Legal Action Group, which is to this day a tower of strength in seeking to advance and protect legal aid. The group is fairly desperate about this order, I have to say.
I accept that it is extremely difficult for my noble friend to have to move the Motion on this order tonight. I know him to be as concerned about equal justice as anybody. I also readily accept that the Government have a lousy task in seeking to balance the national books in a way that does not cause mayhem all round. But having said all that, like others I believe that if ever the word “fundamental” is justified, it is justified in regard to protection of the rule of law and equal justice. I maintain that we cannot claim to be a proud democracy which upholds the rule of law when we know that so many of our fellow countrymen cannot access the laws that we in Parliament legislate for them. Knowing that as we do—there is no lack of evidence on that—it strikes me as being almost a case of defrauding the public for us to go on as we do, enacting legislation for which we make all sorts of claims while knowing that so many of our countrymen will not get near to exercising those rights. That is why all of us have spoken so passionately. We all know that the law is now so voluminous, hypercomplex and intrusive that to pretend that poor or middling citizens do not have need of access to lawyers and the courts is just cloud-cuckoo-land. Indeed, quite a bit of research has been done recently into citizens’ need for legal services and access to justice. That comes up with a figure of about one-third of the population being in that bracket.
I must also agree with the noble and learned Lord, Lord Brown of Eaton-under-Heywood, who very pertinently observed that we must all have been asleep when Clause 180 of the then Anti-social Behaviour, Crime and Policing Bill was enacted. This was an astonishing clause and I do not think that anyone in this House really had a go at it. Yet how can one conceivably agree to a principle that we make a profit out of justice? How can that have gone through this place? Indeed, I wonder whether it is a provision that could withstand oversight of the courts on human rights grounds, quite apart from those being advanced on behalf of the Law Society; I am very happy to see that my professional body is doing that.
“the Lord Chancellor must have regard to … the financial position of the courts … and … the competitiveness of the legal services market”.
Subsection (6) says that the surplus made from increased fees—those parts of them that are intended to generate a profit—must go, as my noble friend Lord Marks said, to improving the efficiency and effectiveness of the system of our courts and tribunals. There is nothing to do with the justice of the system. At no point is there any reference to justice. It makes me wonder whether there might be some defect there in terms of basic law. I may have to reinstruct the noble Lord, Lord Pannick, as I used to about 40 years ago. I hope he will give me the same jolly opinion.
Reference has already been made to Magna Carta by a number of speakers. I do not propose to make further reference to it, but we must accept that the cuts in legal aid made last year have knocked one-quarter off the legal aid budget, I believe. The ones that we are dealing with now will affect huge numbers of claims. The scale of the problem is that there are currently 235,000 claims for possession every year; 370,000 money claims via the court are potentially caught by this order; and there are 160,000 general applications in other proceedings.
One aspect of the Government’s impact assessment really caught my eye. Other noble Lords have made reference to it, but not to this set of facts. In one of the consultation documents we learn that the consultation took place in December and January—over Christmas and the new year. Is that not well designed to have a maximum response? The first question in the questionnaire is:
How many people do noble Lords suppose answered that first, key question? Seventy-six. It is verging on the scandalous to undertake the measures in this order on the basis of 76 respondents. And how many of them thought that the equality issue was adequately dealt with? Less than half. So you have 30-odd people and organisations approving of the central measure which is the subject of this order tonight.
The scale of the problem has to be measured also in terms of what is happening to the legal profession. Some noble Lords were present at the launch this afternoon of the second part of the Low commission’s work. As your Lordships will well remember, the commission produced a vital measure last year. It shows that 20 years ago there were 10,000 solicitors’ firms offering legal aid. That figure is now down to under 2,000. Meanwhile, the population has risen as have the use of the legal system and the need of people to have access to justice. Twenty years ago there were 721 CABs, many of them having several locations. Today there are 338 with only 21 of them offering specialist advice. What has happened to law centres? Their numbers have gone down and down. All that has to be taken into account.
I shall just wear my pro bono hat: I got from the solicitors’ pro bono group, LawWorks, the fact that the consequences of the cuts in legal aid last year—let alone the fee rises contemplated by this order—are exactly as you would have predicted. There has been a huge increase in recourse to pro bono help, particularly in welfare where the figure has doubled in the space of a year. Employment tribunals have already increased their fees and we have heard tonight about the impact there. There are 175 law clinics, some operated by universities; I am now talking about the pro bono clinics. They are under assault from all quarters. LawWorks is handling 20,000 cases a year and the figure is rising rapidly. All this points in one direction and one direction only.
I must say a word before sitting down about the profit-making aspect of Section 180 because that operates in a regressive way. We have heard that there can be a fee of £10,000 for claims of £200,000 and more, but the fee does not rise above £200,000. If you have a claim for £200 million it is the same fee as for a £200,000 claim. It is wonderfully regressive and quite what it does for the commerciality of our system I know not.
I want to make one last point and that is that equal justice is to the body politic what equal health treatment is to the human body. Would there not be an uproar if we started to do anything remotely comparable with the provisions in this order to the NHS, where equality of treatment is unassuageable? So I speak with all others in hoping that, difficult though it may be, the Government may find some way of not proceeding with these measures.
Lord Howarth of Newport (Lab): My Lords, I add my thanks to the noble Lord, Lord Pannick, for tabling this amendment. I also thank him and other noble Lords for speaking in criticism of this statutory instrument. Their speeches have been principled, lucid and compelling.
It appears that I may be the only non-lawyer to participate in this debate, and I hope it will not be regarded as superfluous or intrusive if I speak simply as a citizen. To me, access to justice is fundamental to the very nature of British citizenship. The rule of law and equality before the law are, or should be, bedrocks of our constitution and our liberal society. The essential principle, which we must preserve, is that no one should be prevented from bringing a reasonable case to court for lack of financial means. This order violates that principle. The imposition of a 5% fee on claims ranging from £10,000 to £200,000 is, as noble Lords have noted, a potential increase of the order of 600%. To be required to pay £10,000 upfront as the entry fee to get into court will in practical terms be impossible for many small and medium-sized enterprises, as it will be impossible for individuals who seek to recover debts due to them or to get personal injury compensation or compensation for clinical negligence.
“These proposals will significantly reduce the ability of individuals and small businesses with legitimate claims to peruse these through the courts … These increases represent a significant barrier to access to justice … Increasing fees to fund court infrastructure risks ‘pricing out’ those on low and medium-level incomes, leaving access to justice in the hands of a wealthy few”.
The Ministry of Justice’s assessment of the impact of this measure is scandalously inadequate, and not for the first time. We vigorously criticised the impact assessment associated with the LASPO Bill because it was simply not good enough. In the case of the impact assessment for this measure, the Regulatory Policy Committee said in January 2014 of an earlier articulation of the impact assessment, in terms, that the impact assessment is not fit for purpose. The impact assessment that was published alongside this order in January this year is equally unfit for purpose. The criticisms do not appear to have been heeded. For example, in the section that covers key assumptions, sensitivities and risks, the impact assessment says:
“It has been assumed that fee changes will not affect court case volumes … It has been assumed that there are no detrimental impacts on court case outcomes nor on access to justice from any increase in court fees. It has been assumed that there are to be no impacts on the legal services used to pursue or defend claims”.
“do not routinely collect information on people and organisations involved in court proceedings and we are not therefore able to calculate the impact that the fee increases are likely to have on these organisations”.
“Some proceedings to which these fees relate will be initiated by small businesses. We do not have detailed information on the characteristics of those who bring money claims before the courts; how many of these proceedings may be initiated by, or against small businesses; and the types and value of claim they typically make. We do not therefore know what the impact of these fee increases is likely to be on small businesses”.
“we must also look to those who use the courts to contribute more towards their running where they can afford to do so”.—[
, Commons, First Delegated Legislation Committee, 23/2/15; col. 3.]
The problem is that they do not know whether potential users of the courts will in these new circumstances be able to afford to do so. I understand that there are no fee remissions for SMEs. To legislate in avowed ignorance of the impact of the legislation on those who may seek to avail themselves of legal remedy is reckless. It is breathtakingly irresponsible. The policy is also based on an improper premise that the costs of public services should be fully funded by their users. Again, the Parliamentary Under-Secretary told the House of Commons:
Of course, it is the Government’s intention and it is part of what is provided for in this order that they should go beyond covering full costs; they should in certain cases exceed full costs. I quote from Paragraph 7.2 of the Explanatory Memorandum:
Whatever may be the case in certain areas of government, there is plainly not an expectation that the cost of public services should be covered by fees charged to their users. Obviously it is not the case in the National Health Service or where schools are concerned and whatever may have been the tradition and the practice in the justice system I suggest that this cannot be a paramount principle. A paramount principle is to ensure access to justice. I believe that the overwhelming majority of our fellow citizens accept that there is a social contract. They may not use that language but they understand and accept that they must pay the taxes needed to ensure that there is equal access to justice.
There has been too much cant in too many pronouncements from Ministers at the Ministry of Justice. I immediately except from that charge the noble Lord, Lord Faulks. He may be briefed to utter cant but he would never originate cant. However, I am afraid to say that his colleague in the House of Commons has been less fastidious. He said in the ministerial foreword to the response to the consultation that was published in January 2015:
“I am proud that we live in a country which operates under the rule of law, and where we have such a strong tradition of access to justice … It is vital that these principles and qualities are preserved so that people can continue to have ready access to the courts when they need it”.
The Lord Chancellor himself, Mr Grayling, at the Global Law Summit, to which reference has already been made, said that we continue to innovate and develop our policy at the Ministry of Justice but always consistent with the principles of Magna Carta. It simply is not so. The Parliamentary Under-Secretary, in talking about the financial context of this policy, again in the response to the consultation, talked about having reduced spending on legal aid so the scheme is more affordable. This is the Alice in Wonderland logic the ministry employs. By more affordable of course he means for the taxpayer, not for the citizen who needs to have recourse to the justice system. He boasted that,
“we have reduced staffing levels in our headquarters functions, and in the headquarters of our agencies”.
This is a locus classicus of incompetent and bad government. The truth of the matter is that the Ministry of Justice has allowed itself to be bullied by the Treasury, and this has been going on for a very long time. I remember speaking 20 years ago in the House of Commons on regulations concerning legal aid in Scotland—the Advice and Assistance (Financial Conditions) (Scotland) Regulations 1995. Perhaps I may quote myself very briefly:
“If we are all to enjoy the rule of law and to be equal under it, it must follow that, when a citizen has a reasonable case to make, she should have access to the remedies that the law provides regardless of personal means. Of course frivolous and vexatious cases should be screened out, and of course informal procedures should be used when they lead to speedy justice. The procedures of the courts should be as economical as possible. Subject to those conditions, my hon. Friend the Minister should note that I do not mind how much income tax—or any other kind of tax—I have to pay to ensure that that principle is preserved”.—[Official Report, Commons, Third Standing Committee on Statutory Instruments, &c., 26/4/95; cols. 7-8.]
The Ministry lacks conviction, and that is the reason it lacks courage. This Government have broken that social contract. They have violated Magna Carta. They do sell, deny and delay justice. They have taken away civil legal aid from people in poverty who seek to challenge the refusal to them of social security benefits. They have sought to restrict the scope for citizens to seek judicial review where they believe there has been executive abuse, and they are now, through this measure, seeking to sell access to the courts at prices that small and medium-sized enterprises and individuals in crisis cannot afford. It is unjust and, I believe, unconstitutional.
I want to be able to be proud of being a citizen of this country. A measure such as this adds to the growing perception that, for our rulers, money is the only value that counts, that government is for the rich and for the powerful, that the law serves the rich and that justice for the poor and the rule of law are marginal. I am ashamed to be a citizen of a country in which such a measure is introduced and I very much share the regret expressed by the noble Lord, Lord Pannick.
Lord Faulks: My Lords, I am grateful to all noble Lords for their contributions to this debate, passionate as they have been. All noble Lords who have taken part—I hope that noble Lords will forgive me if I
include myself—are passionate about access to justice and about the rule of law. I hope that in that sentence I have answered two of the questions posed by the noble and learned Lord, Lord Scott of Foscote. Of course, I very much include the noble Lord, Lord Howarth, who, although not a lawyer, has a long history of involvement in access to justice and stressing its importance in our constitution.
I think it would also be accepted by all those who have taken part that we need a properly funded court system. I said in opening this debate that we are investing more than £375 million over the next five years but that we consider that those who use the courts should make a significant contribution to the cost. The Opposition in the House of Commons did not disagree with the aspiration of full cost recovery, or, and I quote Mr Andy Slaughter, that,
“in some cases the fees should be more than full cost recovery”.—[
, Commons, First Delegated Legislation Committee, 23/2/15; col. 4.]
Of course, I accept that no litigant will welcome increased costs and I also acknowledge that no litigation solicitor will be applauding increased costs either. I acknowledge that concerns about access to justice are entirely legitimate and should be very much a part of any movement in this direction.
The statutory instrument can perhaps be safely divided into those smallish claims—90% or so—where there is no increase in the fees, and the very large claims, which I will come to later. I think that it is fair to say that the main focus of the debate has been on the middle-size claims—those perhaps brought by SMEs or by those seeking damages for personal injuries or clinical negligence. The question is whether the court fees, as a proportion of the sum claimed are such as to be a deterrent and would prevent people having access to justice. It is true that in percentage terms there is potentially a significant increase. For example, as a proportion of £150,000, court fees are now £7,500; they were £1,315. In percentage terms that is significant. But, of course, the original fees until this statutory instrument was introduced, should it proceed, were very modest.
It is also worth bearing in mind that litigation is very much an optional activity. Anybody who is deciding whether or not to sue will have all sorts of factors that they bear in mind. There are plenty of reasons for not bringing proceedings, one of which is uncertainty of outcome. Anyone advising a claimant will probably need to satisfy that claimant that there is at the very least a better than even—probably a 75%—chance of success before they commence proceedings. Another relevant factor is the solvency of the defendant or the likelihood of recovery. All those are matters that will inhibit somebody in deciding whether or not to sue. Of course, there is also the factor of the cost and extent of their lawyers’ fees.
What is important is that the court fees generated here would be recoverable from any defendant in the event of a successful claim. They are a disbursement and cannot be challenged. The same could not be said for solicitors’ or barristers’ fees, which are always potentially subject to challenge. If a claimant has a sound claim and if satisfied about the solvency—of course, one can never be sure about these things—of the defendant, these sums will be recoverable. That is relevant, first, to the question of access to justice, whether an individual will seek access to justice, and also as to whether a solicitor will feel able, as is often the case in personal injury or clinical negligence cases, to provide assistance with the upfront costs on the basis that they will be recovered in the fullness of time.
Of course, there are fee remission provisions. No noble Lord has mentioned those, but they may be provided. Where there is a household income for couples without children of less than £1,085 per calendar month, there will be full remission—more with children—and there are also provisions for partial waiver. Capital will be taken into account, but this excludes the principal dwelling-house and compensation payments and pensions. The waivers are more generous for those over 61. In suggesting that access to justice will be denied, one should bear in mind all those factors.
When dealing with the top end of claims, the original consultation, as has been said, suggested a higher figure—twice the figure of £10,000. After consultation the Government changed their mind about that and listened to the consultation. The arguments about recoverability apply likewise. But, of course, the larger the claim, the less significant the court fees will be as a proportion of the prospective expenditure.
The quality of our judicial system, of which my noble friend Lord Phillips is rightly proud, is very high, and I am sorry that the noble Lord, Lord Howarth, at least in terms of access to justice, feels so little faith in it. Certainly I do not understand him to be criticising our judges in any way. The quality of justice is, of course, a significant attraction to litigants and will, I suggest, continue to be an attraction. The Government bear in mind the possibility, where there is a choice of jurisdiction, of New York, Singapore or Dubai, but are satisfied, having consulted widely, that this is a reasonable and proportionate increase for these large claims.
Mention has been made of arbitration, and even mediation. Where arbitration is an option, it has to be borne in mind that you have to pay for the arbitrator’s services. Here, were a case to go the entire distance, the judge is provided, as it were, as part of that court fee. In those rare cases where a case goes to trial, frankly, the fee for the use of court premises, court infrastructure and the services of a high-quality judge is very good value indeed. Then there is the 90% below £10,000, where there is no difference. Those are the smaller claims. Those with smaller pockets, perhaps, will have to pay no more than they already pay. How do we get to 90%? The information comes from Her Majesty’s Courts and Tribunals Service, which states that 90% of claims are for less than £10,000. That is currently the case and the basis on which we reach that figure.
The noble Lord, Lord Beecham, mentioned employment tribunal fees, as indeed he did at Questions last week. We estimate that the employment tribunal fees will generate about £10 million per annum, and our current forecast is that income is broadly in line with expectations. I share the view of the noble and learned Lord, Lord Brown of Eaton-under-Heywood, on the fees for employment tribunals.
The question of personal injury claims was raised by the noble Lord, Lord Beecham, and other noble Lords. Conditional fee arrangements have been changed as a result of the LASPO Act, but “after the event” insurance still exists and the “after the event” insurance market still exists. In appropriate cases where an insurer thinks that a claim has merit, it enables court fees to be incurred, which are, as I said earlier, recoverable from the other side.
The noble and learned Lord, Lord Brown, asked why we considered the possibility of making higher fees for commercial claims. We did, and we considered the responses and reduced the figure because we bear in mind that a balance has to be struck between trying to recover some of the money that we think is expended and attracting potential litigants. We did not seek judicial consent; that is a matter for the Government. The question that I was asked during Oral Questions by the noble and learned Lord, Lord Mackay, was about whether the judges had been consulted. He also suggested that he had experienced the possibility of them being judicially reviewed in connection with this. I think noble Lords might agree that, ultimately, the Government are accountable for these matters, and it would be somewhat invidious for judges to have to decide things. They are, of course, entitled to have their opinions taken into account and they have expressed them, as a number of noble Lords have said, in pretty firm terms.
It was said, I think by my noble friend Lord Phillips, that there is no mention of justice in Section 180 of the Anti-social Behaviour, Crime and Policing Act; but he will have seen from the statutory instrument that Section 92 of the Courts Act refers specifically to considering access to justice.
A number of arguments that if this reaches court might come before the court in the judicial review were raised. It is inappropriate for me to answer them in detail. Suffice it to say that I am entirely aware of the principles. I and the Government are satisfied in so far as we can be that there will still be access to justice. Although I know that in view of his fourth question the noble and learned Lord, Lord Scott of Foscote, would like me to resign now from the Government, I gracefully decline that invitation for the moment.
Of course, we do not know precisely what the long- term effect of these fees will be and it would be idle to pretend that we do. One has to make an estimate based on considering all those factors. It is unlikely, if one thinks about it, that a consultation suggesting that you increase the fees will be broadly welcomed by anyone, but it is worth mentioning the question of how courts are funded and whether they should be funded by taxation. Under these plans, the courts and tribunals will continue to be funded mainly through taxation, with less than 40% of funding derived from fee income, so there is still a significant element of that, which deals to some extent with the point about there being access to justice regardless of the crude calculation of its cost, because I entirely accept that to be the case.
said that his party if in government would review the matter at an early stage. If our estimates are wrong it would be necessary to review them, but for the moment the Government feel that, notwithstanding the trenchant criticism that has been offered of the Order, this represents a sensible and proportionate way of recovering some of the costs of access to justice.
The noble Lord, Lord Pannick, expressed himself with his usual clarity and economy and once again did not spare the Lord Chancellor from his criticisms. We are coming to the end of this Parliament. It was Frank Sinatra who, in his valedictory song, said that he had some regrets but too few to mention. The noble Lord, Lord Pannick, has had rather more regrets over the Government’s policies. Indeed, I have had to respond to many of his Motions of Regret. Before I had the privilege of standing at the Dispatch Box, my predecessor did as well. The noble Lord has certainly held the Government to account and has been a forceful critic of the Government. As far as these fees are concerned, I hope that my response has done something to mollify his regret, and I ask him, having considered the matter, to withdraw his amendment.
“the Lord Chancellor must have regard to the principle that access to the courts must not be denied”.
I thought the Minister said that that had found its way into the actual Order. I have been looking at this and of course I am sure I shall be corrected, but an awful lot of provisions are referred to there but rather oddly not Section 92(3). One might have thought that it would be, because the second paragraph in the recital says that he has had regard to matters referred to in Section 180(3) of the 2014 Act. That is actually where one would have hoped and expected it to appear. I do not know that he makes any reference to having had regard to that provision, which the earlier statute required him to have regard to. As I said, I am open to correction, and apologetic in raising this point today.
Lord Faulks: I am grateful to the noble and learned Lord. He is quite right: the recital refers to the fact that there is an exercise of the power conferred by Section 92(1) and (2) of the Courts Act and the consultation in accordance with Section 92(5) and (6). There is no explicit reference to Section 92(3). However, in purporting to exercise those powers, it would be said, although not specifically recited, that he was exercising them in accordance with the remainder of that section.
Lord Pannick: I am very grateful to all noble Lords who have spoken—and spoken passionately—in this debate. The Minister said that the order contains sensible and proportionate provisions. As your Lordships have heard tonight, these proposals are going to do inevitable and substantial damage to access to justice. It is simply perverse for the Government to dispute that many small businesses and many personal injury claimants are going to be unable to pay an up-front £10,000 fee as the price of access to the courts.
The noble Lord’s and the Government’s argument comes to this. Funds are needed to pay for the court system, but there is no point in having a civil court system if ordinary people are to be charged an entry fee which they cannot afford to bring basic claims for breach of contract and personal injuries. The Minister described litigation—I wrote this down, because it was a very striking phrase—as an “optional activity”, like a skiing holiday or a visit to a three-starred Michelin restaurant. As the Minister well knows from his experience as a very successful barrister, for many people—those suing for debts or to recover compensation for personal injury—litigation is often a necessity to keep your business alive or to maintain any quality of life. The Minister is absolutely right that there are already many impediments to access to justice. That is surely no justification—no excuse—for the state to erect further high barriers.
The fee remission provisions to which the Minister, perhaps somewhat desperately, referred are not going to assist other than in exceptional cases. Nor is it any answer that court fees can be recovered from the other side if the claim succeeds. Claimants need to find the fee up front.
The Minister referred to my earlier Motions of Regret with a reference to Frank Sinatra. To change the music somewhat, “Je ne regrette rien”. Happily, the courts have done more than regret. In a series of cases they have quashed Mr Grayling’s regulations which we have regretted in this House. My regret—my astonishment—that the Government should bring forward an order of this nature is mitigated only by my optimism that the courts will inevitably add this order to the long list of Mr Grayling’s regulations which have been declared unlawful in the past three years. With thanks to all noble Lords, I beg leave to withdraw the amendment.