Clause 24(1)(b) of the Legal Aid, Sentencing and Punishment of Offenders Bill
Outline
1. I am a partner at Pierce Glynn, a legal aid firm in London specialising in public law,
community care and housing law (http://www.pierceglynn.co.uk/). The purpose of this
note is to alert you to the effects of clause 24(1)(b) of the LASPO Bill. Clause
24(1)(b) provides that the statutory charge is to apply to money recovered from
opponents under inter partes costs orders. As explained below, if this provision is
enacted it has the potential to seriously impact upon the future sustainability of many
legal aid providers.
Why this issue is only being raised now
2. We at Pierce Glynn have only just become aware of this provision. We suspect many
other legal aid suppliers will have overlooked it completely. It is a change upon which
there has been no consultation (it was not mentioned in the MOJ legal aid
consultation and response papers), its impact is not factored into any of the MOJ’s
legal aid reform impact assessments, and the Explanatory Notes to the bill incorrectly
state at paragraph 171 that clause 24(1) merely restates the existing position.
The current position
3. There are two important aspects of the current system.
4. First, the statutory charge attaches only to property recovered or preserved by the
funded client in the proceedings or dispute1. Thus if the client recovers damages or
preserves their home as a result of the funded litigation, then any part of the LSC’s
expenditure on the case which is not recovered from the opponent (i.e. by way of
inter partes costs) results in a statutory charge over the property that has been
recovered or preserved2.
5. Second, we and many other civil legal aid suppliers would be unable to sustain our
practices without the income we receive from inter partes costs which are paid at
market rates in successful cases. Such inter partes costs subsidise the otherwise
uneconomic cases in which our solicitors are paid by the LSC at only £50 to £80 per
hour. The system also creates a strong incentive for LSC providers to win cases and
to secure and enforce inter partes costs orders, which is to the benefit of both clients
and the LSC fund.
Section 10(7) of the Access to Justice Act 1999 provides that: “Except so far as regulations
otherwise provide, where services have been funded by the Commission for an individual as part of
the Community Legal Service: (a) sums expended by the Commission in funding the services (except
to the extent that they are recovered under section 11), and (b) other sums payable by the individual
by virtue of regulations under this section, shall constitute a first charge on any property recovered or
preserved by him (whether for himself or any other person) in any proceedings or in any compromise
or settlement of any dispute in connection with which the services were provided.
2 For the LSC’s guidance on the operation of the current statutory charge provisions see:
http://www.legalservices.gov.uk/docs/stat_and_guidance/LSC_09_V1_Part_D.pdf, page 21 onwards.
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Clause 24(1)(b)
6. Clause 24(1)(b) of the LASPO Bill provides that the statutory charge will also attach
to money recovered from opponents under inter partes costs orders3.
7. Changing the operation of the statutory charge in this way will have two main effects:
a. Partial costs order cases: The first and most significant effect will be on those
cases where the Court makes a partial inter partes costs order, for example a
percentage costs order to reflect the funded client’s success on some issues
but not others. Such orders are common, for example in the judicial review
and appellate litigation which makes up the bulk of our practice and in which
multiple grounds of challenge are pursued. At present, a 50% costs order
means that we are able to recover 50% of the costs from the opponent at
market rates, and the remaining 50% from the LSC at legal aid rates.
Whereas the effect of clause 24(1)(b) would be that if we claimed the
remaining 50% from the LSC at legal rates, this would give rise to a statutory
charge over the 50% of the costs which had been recovered from the
opponent at market rates. Consequently, we will be deprived of most if not all
of the benefit of the inter partes order. Indeed a supplier might even end up
being worse off than they would have been if no inter partes order had been
made at all. For example: if the total cost of proceedings at legal aid rates is
£5,000, and if there is a 50% inter partes costs order which at market rates
results in the recovery of £4,500, then were the supplier to apply to recover
the remaining 50% of the costs from the LSC (i.e. £2,500), that would give
rise to a statutory charge of £2,500 over the £4,500. Thus the supplier’s total
income for this case would be £4,500, not £7,000 at present, nor indeed
£5,000 (i.e. the amount the supplier would have been paid if they had lost the
case and no inter partes order had been made).
b. Legal aid only costs: The second effect relates to ‘legal aid only costs’. Legal
aid only costs are those costs incurred in applying for legal aid and liaising
thereafter with the client and the LSC about the funding of the case. Typically,
legal aid only costs are £100 to £400 per case, depending on the amount of
work required to secure funding and to secure subsequent amendments to
legal aid certificate as the case progresses. These costs are never
recoverable from an opponent (i.e. even if there is a 100% inter partes costs
order), but under the current system they are recoverable from the LSC.
Whereas the effect of clause 24(1)(b) would be that in any case where a
supplier recovers inter partes costs, the legal aid only costs would go unpaid
(i.e. because it would be pointless to claim the legal aid costs from the LSC
because doing so would give rise to a statutory charge for the same amount
over the inter partes costs recovered by the supplier).
Clause 24(1) of the Bill provides that: “ Where civil legal services are made available for an
individual under this Part, the amounts described in subsection (2) are to constitute a first charge on
(a) any property recovered or preserved by the individual in proceedings, or in any compromise or
settlement of a dispute, in connection with which the services were provided (whether the property is
recovered or preserved for the individual or another person), and (b) any costs payable to the
individual by another person in connection with such proceedings or such a dispute.
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What can be done
8. I have highlighted this issue to the Legal Aid Practitioner’s Group who are to alert
members to it. LAPG also suggested that I outline our concerns about this to you (I
am sending this note to both Andy Slaughter MP and Lord Bach, and their respective
assistants).
9. Obviously the best outcome would be to secure the removal of clause 24(1)(b), in
particular given that there has been no consultation on this provision or any
assessment of its impact on the supply of legal aid providers and, therefore, access
to justice on an on-going basis in those areas of law which will remain in scope.
10. Alternatively, the worst impacts of this provision could be mitigated if the MOJ were
to provide assurances that the clause 24(3) regulation making power will be
exercised to exempt: (a) legal aid only costs; and (b) the costs incurred where
suppliers have reasonably pursued an issue even though that issue has been
conceded subsequently or rejected by the court (an exemption that would mirror
clause 16 of the LSC’s High Cost Case Contract, as to which see the addendum to
this briefing note).
11. Left as it is, I fear clause 24(1)(b) will tip over the edge many of the civil legal aid
suppliers who might otherwise have managed to carry on notwithstanding all the
other legal aid reforms which are being pushed through by the MOJ at this time.
12. I would be very happy to answer any queries you have about this briefing note or to
assist in any other way. I would be very grateful if you would let me know if you are
able to take up this issue and seek to secure the removal of this clause, or at the very
least to seek assurances from the Secretary of State that appropriate regulations will
be enacted to address the concerns set out above.
13. I can be contacted on 020 7407 0007 or gmitchell@pierceglynn.co.uk.
Gareth Mitchell
27.10.11
Addendum – The “final payment choice” in Civil High Cost Case Contracts
High Cost Case Contracts apply to the small number of cases where legal aid costs
have or are anticipated to exceed £25,000. Clauses 12 to 16 of the LSC’s standard
High Cost Case Contract relate to the “final payment choice”. The final payment
choice requires the provider to choose at the end of a case whether to seek payment
from the opponent or the LSC. The basic rule is that if the provider chooses to seek
payment from the opponent, it cannot seek payment from the LSC. This prevents the
recovery of the legal aid only costs from the LSC in High Cost Cases in which the
provider chooses to seek payment from the opponent; however the effect of this on
suppliers is limited as High Cost Cases make up a very small percentage of civil legal
aid cases. In addition, the effect of the final payment choice in cases where the Court
makes a partial costs order is mitigated by clause 16, set out below. In our
experience the clause 16 is exercised in a significant proportion of cases.
Clause 16: “If you choose to take payment from the other side, you may apply to us
to authorise payment (at the Contract rates and subject to Clause 17) for Contract
work for which, for either of the following reasons, costs are not recoverable from the
other side: one or more of the issues that you reasonably pursued was not, at trial,
covered by an order for costs or was unlikely, at trial, to be covered by an order for
costs (as so, before then, was not covered by an agreement for costs). We will then
authorise payment under this Clause only if (a) we consider that the relevant issue
was reasonably pursued; (b) costs payable by the other side are either taxed by the
court or are agreed by us as well as you; and (c) you provide us with a transcript of
any relevant hearing (to help us decide whether issues were reasonably pursued).”
Clause 17 provides that all claims for payment from the LSC will be subject to
assessment by the LSC.