How unlawful are quashed legal aid regulations?

The High Court recently quashed the Civil Legal Aid (Remuneration) (Amendment) (No.3) Regulations 2014 following the successful challenge by the Public Law Project in R (Ben Hoare Bell and ors) v Lord Chancellor.

Within days, the lord chancellor passed new regulations, the Civil Legal Aid (Remuneration) (Amendment) Regulations 2015, which extended the situations in which payment for legal aid work can be made.

In Ben Hoare Bell, the court found that not all aspects of the 2014 regulations were rationally connected to their stated purpose of ‘incentivising providers to focus more sharply on the proper application of the merits test before applying for judicial review’.

In particular, the court was concerned by three situations which meant, under the regulations, legal aid providers were not paid: where an authority withdraws a decision following a claim being issued but prior to a permission decision; where an oral permission is ordered meaning a provider will incur more cost and therefore be at greater risk; and where the court refuses permission after a rolled-up hearing in which case a provider has prepared for a substantive hearing.

The legacy of the 2014 regulations will not halt at the quashing order made by the court.

The Legal Aid Agency (LAA) has relied upon the 2014 regulations in refusing payment in a raft of cases. The key question now is will the providers who were refused funding be able to rely on the quashing order to seek retrospective payment?

As a matter of logic, and policy, the answer would seem clear. The 2014 regulations are unlawful, and have never been lawful. The quashing order is simply a declaration of that fact. Therefore a decision by the LAA relying on those regulations is, as a matter of principle, also unlawful.

However, the 2014 regulations have existed as a matter of fact. Where a public official makes an unlawful decision or regulations, it is inevitable that third parties will rely upon their actions. To unravel every consequential decision can have a domino effect. This dilemma is not novel and has confronted the courts before – but the court has never reached a clear conclusion on the issue.

The dilemma most recently arose in the judicial review of Haringey Council’s decision to dismiss Sharon Shoesmith, the director of children’s services for Haringey in post at the time of Baby P’s death. Haringey relied upon a direction by the secretary of state appointing someone else to the post. In R (Shoesmith) v Ofsted, Maurice Kay LJ stated: ‘It seems to me that there is an area, admittedly ill-defined… in which the act of a public authority which is done in good faith on the reasonably assumed legal validity of the act of another public authority, is not ipso facto vitiated by a later finding that the earlier act of the other public authority was unlawful.

‘I consider the present case, which involves the termination of an employment relationship, is within that ill-defined area.’

According to professor Christopher Forsyth, it all depends upon the power of the ‘second actor’. Applying the principle to the present situation, the focus is not on whether the lord chancellor acted unlawfully in making the 2014 regulations, but whether the LAA, the second actor, acted within its power in refusing to make payment.

The dilemma has also arisen in the detention of those suffering from mental health illness. In R v Central London County Court ex p London, the county court made an interim order displacing a patient’s mother as his nearest relative on the basis she opposed his admission to hospital. In reliance on this displacement order, the hospital managers admitted the patient.

Although obiter, Stuart-Smith LJ found that any admission by hospital managers, the second actor, would have been lawful even if the county court order was unlawful. Therefore, the hospital managers were not at risk of paying damages for false imprisonment.

Should a firm want to challenge an LAA decision made pursuant to the 2014 regulations, they would have to convince a court that the LAA was unable to lawfully make a decision on the basis of the 2014 regulations, despite the regulations existing as a matter of fact when the decision was made.

It is likely to be relevant that the LAA states its ‘main aim is to commission and administer legal aid services in England and Wales’. It seems unprincipled to allow the LAA to perform its central purpose on the basis of unlawful regulations.

This case is different to Shoesmith and London in which there were specific policy considerations. In London, finding the hospital managers liable would open them to a damages claim. In Shoesmith, it would seem unfair to have imposed on a local authority considerable liability simply because they had relied upon a direction from central government.

In contrast, whilst an adverse finding to the LAA would open up a liability, it is only to the extent providers are lawfully entitled to payment for work they have incurred. Payment of such sums constitutes the central purpose of the LAA.

That said there is no guarantee of success for a legal aid provider. The court’s reaction to a claim against the LAA is hard to predict because, as is common, it is not clear what a second actor’s powers are.

It is probable the LAA will soon release a policy on when payment will be made on cases where it had previously refused payment on the basis of the 2014 regulations. It will need to take into account its own position as a second actor, and, unless very cautious, would be vulnerable to a challenge by an unsatisfied provider.

Leon Glenister is a barrister at Hardwicke. He is also a tutor in administrative law at the University of Cambridge