Community legal service funding - Legal Services Commission

Legal Services Commission v Loomba; Legal Services Commission v Ulasi; Legal Services Commission v Carter and others: Queen's Bench Division (Mr Justice Cranston): 17 January 2012

Payment on account in relation to legal aid work was introduced to assist cash flow for legal aid lawyers. There was a recognition that, whereas private client work could be charged on a pay as you go basis, legal aid payment might not be recoverable into some considerable time after a certificate had been issued, often long after the case had been concluded.

Payment on account was initially confined to disbursements, but in 1983 extended to profit costs and counsel's fees. With the coming into effect of the Legal Aid Act 1988 the scheme was placed on a legislative footing. Under the Civil Legal Aid (General) Regulations 1989 (the regulations), SI 1989/339, solicitors with conduct of a case for which a legal aid certificate had been issued were able to apply for a payment on account of profit costs and disbursements under regulations 100(1) and 101(1). Once the work had been undertaken for which payment on account under regulation 100 had been made, regulation 100(7) imposed a duty on solicitors to submit their costs for detailed assessment or assessment under regulation 105.

In 2002, regulation 102B was introduced to the regulations. It conferred on the Legal Services Commission a general power to recover moneys, including payment on account, to which solicitors were not entitled. Concern grew within the Legal Aid Board that solicitors were not properly accounting to it for payments made to them on account. In 2001, the Commission stated that where payments on account had been made 18 months previously, but no final bill received, firms would need to respond to a questionnaire.

Recoupment would eventually occur, it was explained, in the event of no response being received after a reminder letter. There would then be a 'nil assessment', described as followed: '[The Commission] will discharge the certificate and/or close the case by entering a zero value bill that will automatically recoup the payments made on account.' The instant proceedings involved three claims listed together as test cases. All three claims concerned moneys which the claimant Commission asserted were owing to it by solicitors as a result of legal aid payments to them on account of work being undertaken for clients in civil cases. The Commission contended that the claims were authorised by law. The defendant solicitors contended that there was now legislative authorisation for the Commission's actions.

The Commission conceded that there was no express power under the act to nil assess and thereby recoup payments on account. However, it claimed the power to nil assess under both sections 4(1)(b) of the act. Section 4 conferred wide powers on the Board, including a wide incidental power in sub-section (1)(b) to do anything 'which is calculated to facilitate or is incidental or conducive to the discharge of its functions.' In its submission that power could be used where a solicitor had received agreed inter partes costs and either reported, or it was to be inferred, that there would be no further claim on the fund. It also claimed to be entitled to nil assess where a solicitor had failed to respond to a demand by the Commission under regulation 70(1) report because, for example, the firm had been closed and not notified of a new contact address. Consideration was given to the Civil Legal Aid (General) Regulations 1989, SI 1989/339.

The court ruled: To nil assess in the circumstances of the defendants would be to facilitate the discharge of the Commission's functions or would be incidental to that. That followed because the Commission was bound by section 6(2) of the act to pay out of the legal aid fund only sums properly due. Under section 15(7)(b) payments properly due were those authorised by the regulations. A payment on account was a payment on account of an ultimate liability, and if the ultimate liability turned out to be less than the payment on account, or if the solicitor received payment of his or her ultimate liability from another source, the amount was repayable.

If a solicitor could defer indefinitely ascertainment of the ultimate liability, the result would be that he could keep the payment on account. That would frustrate the clear purpose of the regulations in permitting payments on account which was to assist lawyers' cash flow. It clearly was facilitative of, and incidental and conducive to, the functions of the Commission in administering the fund to be able to ensure that, where payments on account had been made, they were recouped if the solicitors had expressly, or by conduct, evinced an intention not to submit a claim for their final costs for assessment.

Accordingly, section 4(1)(b) had to be read as enabling the Commission to assess the final costs at nil. Nothing in the contemporaneous regulations cast any doubt on the Commission's power under section 4(1)(b) of the act to recoup payments on account made to a solicitor by making a nil assessment on the firm's supplier account in such circumstances. Section 4(1)(b) was wide enough to enable the Commission to initiate and carry out an assessment where it was necessary to do so in order to prevent solicitors from retaining sums to which they were not entitled (see [50], [56] of the judgment). R (on the application of Machi) v Legal Services Commission [2001] All ER (D) 340 (Dec) considered; Oliver Fisher (a firm) v Legal Services Commission [2002] All ER (D) 140 (May) considered.

Jeremy Morgan QC and Rachel Sleeman (instructed by CKFT Solicitors) for the claimant; Peter Susman QC (instructed by Bindmans LLP) for the first defendant; Peter Susman QC (instructed by Ngozi Blessing Ulasi) for the second defendant; Peter Susman QC (instructed by Howell-Jones) for the third defendant.