Legal aid advice: statutory charge and separate proceedings
So far, on the subject of legal aid and the legal aid statutory charge, this series has looked at (1) HRA damages and legal aid: a Pyrrhic exercise; and (2) legal aid statutory charge and care proceedings. The next question is: what are the duties of the solicitor and of barristers towards the legal aid fund? And, especially, is there any question of lawyers abusing the fund if they take separate proceedings to recover Human Rights Act 1998 (‘HRA’) damages and the charge cannot thereby operate on those damages?
A legal aid lawyer’s job is not unlike that of a tax specialist accountant. It is legitimate for an accountant to help clients to minimise their tax: that is tax avoidance. Tax evasion (eg declaring a false income), by contrast, is illegal. It is the same for lawyers. Lawyers may not, as Lord Denning MR put it in Manley v Law Society  1 WLR 335, CA, ‘manipulate the destination [of damages or property] so as to avoid the statutory charge’ (348E). His successor Lord Donaldson MR in Watkinson v Legal Aid Board  1 WLR 419,  2 FLR 26, CA told solicitors that they should not apply for a certificate to be amended if they could equally well apply for a fresh certificate, and thereby avoid the charge for their clients. The question here is what is manipulation (ie Manley evasion), and what legitimate (ie Watkinson good practice).
Duty to the legal aid fund; duty to the Treasury
So it is with tax advice: it is not for the accountant to arrange for a client to pay as much tax as possible, any more than a legal aid lawyer must cause his/her client needlessly to forego money for the benefit of the legal aid fund; but neither accountant nor lawyer can advise their client illegally to evade payment where it is legitimately due to the Treasury.
Manley was followed by Clark v Clark (No 2)  1 FLR 179, where Booth J commented on the duty of a solicitor to act independently of counsel; and in so doing she stressed the three duties of a legal aid lawyer: to the court, to the client and to the legal aid fund:
As a general rule, a solicitor is entitled to rely upon the advice of counsel properly instructed, and in doing so he will be absolved from a personal liability for the costs of his actions. But, as May LJ observed in Davy-Chiesman v Davy-Chiesman  Fam. 48 at p.64, this does not operate so as to give the solicitor an immunity in every case. He expressed it thus:
‘A solicitor is highly trained and rightly expected to be experienced in his particular legal fields. He is under a duty at all times to exercise that degree of care, to both client and the court, that can be expected of a reasonably prudent solicitor. He is not entitled to rely blindly and with no mind of his own on counsel’s views.’
In my judgment, those words apply as much to the duty of care owed by a solicitor to the … the Legal Aid Fund as to his client and to the court.
Manley v Law Society
In his inimitable prose, Lord Denning MR described the facts of the case:
Some 10 years ago the plaintiff invented an “echo sounder” by which large ships could tell if they were getting into shallow water. He got the Marconi International Marine Co. Ltd. interested in it. They agreed to exploit it if it came up to their requirements. But it failed to come up to their requirements. So they refused to go on with it. He alleged that they were guilty of a breach of contract. He claimed damages, huge damages, because of the loss of profit that he said he would have made. He also claimed to be reimbursed the money he had spent in developing his echo sounder. It came to £30,000 or more. He borrowed it from the banks and had charged his house as security for it.
The plaintiff had no money of his own to bring an action. So he applied for legal aid and got it…. He started an action in 1972 against Marconi.
Eventually the action was settled. Marconi was ready to pay £40,000 to get rid of it altogether, rather than incur the expense of fighting the case over 30 days against a legally aided plaintiff. The lawyers came to an arrangement where a fund in the joint names of Dr Manley’s and of Marconi’s solicitors would buy his debts and no money would go through the hands of Dr Manley. There was nothing on which the charge could bite and Dr Manley’s debts would be cleared. The Law Society was asked to approve this deal, but could not give a clear answer in the short time available. That was not the way to look at the compromise said Lord Denning MR (with whom Ormrod and O’Connor LJJ agreed):
… The court should always look for the truth of the transaction. It should not let itself be deceived by the stratagems of lawyers, or accountants. It should not allow them to pull the wool over its eyes. It should not allow them to dress up a transaction in clothes that do not belong to it.
Now the plain truth of this transaction is that the £40,000 was to be used to pay off the plaintiff’s debts. Kennedys were to supply particulars of his debts…. To my mind, once we pull aside the curtain of words, and the supposed rights, the truth is that this £40,000 was to be used to pay off the plaintiff’s debts at his request. It is, therefore, the subject of the statutory charge in favour of the legal aid fund. When money is paid to a party, or at his request to his creditors, it is plainly “recovered … for him” within Legal Aid Act 1974 9 (6).
The legal aid fund received what there was to cover the costs charged to it by Dr Manley’s lawyers (around £17,000) and he had what was left to pay his debts which had by then worked out at £48,000.
Solicitors must not ‘blindly’ follow counsel
In Clarke (No 2) (above) complex enforcement proceedings were issued by sequestration (the husband was in the US). This was on counsel’s advice. At a point in the proceedings counsel advised a course which would deprive the Legal Aid Board of capital, and therefore of fuel for the charge, where some cash was coming in from the husband’s assets. The Legal Aid Board was kept informed by the solicitor, but there came a time when he must rely on his own high training and experience (see quote from Davy-Chiesman above). Booth J explained this:
But the scheme to rewrite the sequestration order was of a very different nature. Once it had been mooted, it should have been very clear to the solicitor that the result it was intended to achieve conflicted directly with the duty which he himself owed to the Law Society and to the Legal Aid Fund…
The duty to the fund was personal to the solicitor; and s/he cannot ‘blindly’ follow counsel:
That duty constituted a personal obligation upon him, as the wife’s nominated solicitor, to protect the Legal Aid Fund. Whatever the advice of counsel, he remained responsible at all times to the Law Society. He was bound to report what it was proposed to do on her behalf, as indeed he did. In my judgment, his duty to the Law Society continued so long as he remained the nominated solicitor on the wife’s legal aid certificate and the certificate was not revoked or discharged. Where, as here, the action which was proposed, and which was followed, placed the solicitor as a legally assisted party’s solicitor in a position which directly conflicted with a duty of care he owed to the Legal Aid Fund, it would have required the clearest authorisation from the Law Society if he were to be absolved from that duty. No reliance upon counsel, however compelling the advice, could have absolved him from that duty.
The full passage from May LJ in Davy-Chiesman v Davy-Chiesman  Fam 48 at 63-64,  1 WLR 291 (which was reported in the Times reports under the headline: ‘Solicitors should not blindly follow counsel’) is:
… a solicitor is in general entitled to rely on the advice of counsel properly instructed. However, this does not operate so as to give a solicitor an immunity in every such case. A solicitor is highly trained and rightly expected to be experienced in his particular legal fields. He is under a duty at all times to exercise that degree of care, to both client and the court, that can be expected of a reasonably prudent solicitor. He is not entitled to rely blindly and with no mind of his own on counsel’s views. Thus if, despite counsel’s advice that the circumstances postulated by regulation 68(1) [for reporting to the Law Society] do not obtain, he (the solicitor) remains of the view that they do, then he continues under a duty to report that view.
Separate legal aid certificates: the solicitor’s lien
So where does that leave the solicitor who sees that HRA damages, if claimed in care proceedings, will be merely swallowed up by the costs in the legally aided case? The ‘victory’ will be worthless, literally; and the only people to gain will be the lawyers for their efforts in transferring a few thousand pounds from a local authority to the legal aid fund.
The first thing is to imagine is that, as the solicitor, you are acting for the client on a non-legal aid (ie private) basis. This would not be in care proceedings, since legal aid is always available for that. However, imagine a case in which an unmarried client (Mary) is not financially eligible for legal aid, but instructs you to take domestic violence proceedings. After two court hearings in the Family Court the case is concluded and an order for costs assessed at £4,500 is made against her former cohabitant (Frank). Your costs are £5,000. You have a bill for £1,000 for contact discussions and advice over this, alongside a mediated contact agreement. Your total unpaid costs are £6,000.
Separately you act for Mary on a further retainer to claim a share in the couple’s former home. It is in Frank’s sole name, but he agreed that Mary should have a half share (a constructive trust). She estimates to be worth £80,000. She pays you £2,500 on account to cover £1,500 for the short-fall on the earlier work (if Frank pays) and £1,000 on account of constructive trust proceedings. You have to issue proceedings under Civil Procedure Rules 1998 in the county court claiming a declaration. Ultimately the case is settled on terms that Frank will pay Mary £60,000 and £8,000 towards her costs. For the civil proceedings your costs are now £12,500). You are owed £16,000 by Mary (you’ve been soft with her knowing she will receive the money from the house) of which £12,500 is owed by Frank.
You ask Mary for a charge on her agreed share, which share Frank has agreed to express as a charge on his house till he pays; or she can enforce. You want a charge on her charge. She is evasive about signing a charge. Solicitors Act 1974 s 73 says:
73 Charging orders
(1) … Any court in which a solicitor has been employed to prosecute or defend any suit, matter or proceedings may at any time –
(a)declare the solicitor entitled to a charge on any property recovered or preserved through his instrumentality for his assessed costs in relation to that suit, matter or proceeding;…
Only assessed costs can be charged, and the court must declare the availability of the charge; but otherwise the terminology is – in effect – exactly the same as the charge under Legal Aid Sentencing and Punishment of Offenders Act 2012 s 25(1). So you apply in the constructive trust proceedings (CPR 1998 Part 23) for assessment of your bill to Mary (now approaching a total of £17,000 net of the £2,500 she has paid). The judge assesses the amount you claim and you enter a charge against Mary’s charge.
But – and this is the main point of the story in relation to separate legal aid – do you imagine the court will allow you to assess and charge the unpaid domestic violence costs against property recovered in the trust case? I am as sure as I can be, not. It is a separate retainer, and wholly separate proceedings. I would expect a costs judge to say you are limited to detailed assessment on the costs which arose in the constructive trust proceedings (£12,500 and to declare accordingly under Solicitors Act 1974 s 73) – that is, where property was recovered or preserved with your help (your ‘instrumentality’). And it is that same point which applies, I believe, to ‘separate’ care and HRA proceedings?
Legal aid statutory charge: solicitor’s lien
Many questions which crop up in legal aid statutory charge cases can be answered by seeing it – subject to statutory exemptions under Civil Legal Aid (Procedure) Regulations 2012 – as much the same as the Solicitors Act 1974 s 73 solicitor’s lien. This works both ways.
In Manley, for example, as soon as you ask the question: would a solicitor or barrister settle a case on terms that they knew that everyone – except them – was to be paid. Of course not. Looked at that way the Manley settlement terms were bound to fail. But in Mary’s case, in the opposite direction, her solicitor could not expect the costs judge to say, ‘there, there, you didn’t get enough costs on account, so I’ll give you a charge for whatever is due from that claimant (ie Mary) to your firm’. The judge would assess your bill for the work which applies under the CPR 1998 proceedings, and leave you to sue for the rest and charge that as well when you’ve gone through the separate charging order process for those costs.
Imagine that the HRA damages claim are the domestic violence proceedings, and the care proceedings are the constructive trust proceedings. They are separate; or in my opinion – see Legal aid statutory charge and care proceedings – they should be. You get paid, all being well, by the local authority on the HRA case; though if there is any shortfall on your costs in the HRA proceedings the legal aid charge will, of course, apply to the damages for that short-fall. The care proceedings are a separate retainer. Legal aid costs and a charge for those proceedings on the HRA damages should have nothing to do with one another, in my opinion.