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The judicial review of regulations on funding judicial review


Ben Hoare Bell Solicitors & Ors, R (On the Application Of) v The Lord Chancellor [2015] EWHC 523 (Admin)

The legal aid funding regulations for judicial reviews, in effect from April 2014, were the subject of this judicial review. To cut to the chase, the Lord Chancellor lost, but no remedy decided yet. (Disclaimer, I submitted a witness statement in support of the Claimants in this case, on the impact on homeless judicial reviews in particular. So you are warned of any possible partiality.)

As readers will no doubt be well aware, the effect of the regulations was that solicitors and counsel on a legal aid funded JR would receive no payment for the period between issue and permission, unless permission was granted. There is a discretion on the part of the LAA to pay those costs if a case ended before permission, but that had to be applied for (and was wholly a discretion).

The Claimants (Ben Hoare Bell Solicitors, Deighton Pierce Glynn Solicitors, Mackintosh Law, Public Law Solicitors and Shelter) put forward three arguments for the unlawfulness of the regulations:
1) The regs were made were ultra vires
2) The regs were “inconsistent with and undermines” the legal aid scheme as provided for in LASPO.
3) The “chilling effect” on access to the High Court.

On 1. the Court had severe concerns about the vires of the Regulations.

The structure of the statutory scheme is to secure the provision of services and provide for the payment of remuneration for eligible legal services, which have been certified by the Director to satisfy the merits criteria. We have had concerns as to whether such a scheme can lawfully authorise the creation of a category of work or a stage of work for which the provider will not be remunerated unless he or she is successful, with the result that the provider bears the entire risk, even where the provider has acted with all reasonable skill. It is understandable that, in making eligibility decisions, the Director will rely on the assessment of the practitioner who would be providing the legally aided services. But it is the Director who has the statutory responsibility under sections 11 and 12 of LASPO for making this decision, and shifting the risk in the way that regulation 5A shifts it, appears to remove any incentive on the Director to do anything in relation to the merits criteria other than leave it to the provider. It would, however, be an unlawful delegation of statutory power for the Director to rely entirely on the provider.

However, subject to the ‘meeting purpose’ test in ground 2 and the ‘chilling effect’ ground 3, the regs were strictly vires

regulation 5A does not, in itself, have the same effect as removing work on an application for permission to apply for judicial review from the provision of legal aid. It will only have this effect if providers either withdraw from judicial review work or apply a stricter test than the 50% or more prospects of ultimate success required by the Merits Regulations. In other words, it will only have this effect if the claimants’ “chilling effect” is made out.

That said, “The strict vires are provided by section 2(3) of LASPO for the regulations to provide that some services in certain circumstances will not be remunerated. […] But that does not mean that the statute provides a general authority for regulations which tie remuneration to success. Tying remuneration to success is different from defining what services and what costs will not qualify for remuneration or reimbursement in any event”. A warning shot for the Lord Chancellor in dealing with this decision.

We’ll deal with ground 3 next – the ‘chilling effect’.

The Court didn’t need to find on this ground, but did comment on it.

The problem here was the high threshold of evidence set out in R (Unison) v Lord Chancellor [2014] EWHC 218 (Admin), reported at [2014] ICR 498R (Tabbakh) v Staffordshire and West Midlands Probation Trust [2014] EWCA Civ 827, and the second Unison case, R (Unison) v Lord Chancellor (No. 2) [2014] EWHC 4198 (Admin). These

While this threshold requirement would have meant, had the Court had to decide, that it would have found that the threshold for the ‘chilling effect’ ground was not (yet) met, the Court observed:

The evidence in this case is stronger than that in the first Unison case because it is direct evidence from the providers who will be at risk. The response on behalf of the Lord Chancellor focuses on the fact that there is little evidence of claims being turned away or of identifying meritorious individuals who have been unable to persuade a solicitor to take them on. To some extent, this defence requires the claimants to prove a negative or to wait until a significant number of individuals with claims which appear meritorious, but who have not been able to obtain legal representation, have been identified. That is only likely to occur long after the time limit for a judicial review challenging the regulations has expired unless some flexibility is shown with regard to the time limit in such cases. In the first Unison case, in the light of the Lord Chancellor’s position about the evidence required for such challenges and the prematurity of the claim in that case, the Court appeared to favour such flexibility: [2014] EWHC 218 (Admin) at [46]. It may have been these factors which led Mr Eadie to state during the hearing in these proceedings that the position would be kept under review, as the Lord Chancellor had undertaken in the Unison case. No such undertaking had previously been given. The 23% decline in applications for legal aid in such cases and the 15% drop in the number of certificates granted, together with the evidence from so many experienced practitioners, is a matter of great concern and suggests that such a review is necessary.

And so to ground 2, the ‘Padfield’ argument that the regs were inconsistent with the purpose of LASPO, or, as the Court put it, whether “all aspects of regulation 5A can be seen as rationally connected to the purpose of incentivising providers to focus more sharply on the proper application of the merits test before applying for judicial review”.

On the ‘standard’ scenario – claim, permission, then full hearing – this might just be the case. However, the regulations failed to address the possible variations in both the ordering of proceedings and actions by parties which would affect the claim, before permission was granted.

Our focus is on the situation where, after the proceedings have been issued by a provider who has undertaken a proper scrutiny of the case beforehand, something occurs, not readily foreseeable and beyond the control of that provider, which materially weakens the claim or which makes continuing with the application for permission materially more expensive than properly anticipated before proceedings were issued, or contrary to the provider’s duty to the court. An oral permission hearing or a “rolled-up” hearing may be ordered by the Court. The summary grounds of defence may raise issues which are far more complex than pre-action correspondence revealed. A claimant and his or her legal advisers are under a duty to reassess a claim in the light of information that has emerged after it was issued, whether in the Acknowledgement of Service or otherwise, and not to pursue if it is no longer viable.[21] These risks in the abstract are not part of a proper consideration of the merits test. Nor, though general risks in judicial review, are they predictable readily in specific cases, yet the amount of remuneration at risk before the permission decision would go well beyond that which is a proportionate incentive to focus sharply on the merits of the claim.

Three scenarios illustrate where the event that changes the risk profile of the case is an action by the court, the defendant or a third party, rather than the Claimant.

i) The defendant withdraws the decision challenged – [A common scenario in homeless gatekeeping or interim accommodation pending review JRs].

The provider may well know that defendants withdraw the decision under challenge in a non-trivial number of cases. But the effect of this is that if the permission stage is never reached, payment is discretionary, and if it is reached and permission is refused, payment is unlawful. The withdrawal of a decision may well be notified for the first time in the Acknowledgment of Service with a request, commonly from the Secretary of State for the Home Department, that permission now be refused because the challenge is academic, a request which is properly to be granted by the Court. The risk to any remuneration at all posed by this scenario cannot logically be factored in at the merits stage as a factor tending against the issue of proceedings, because the prospect of withdrawal of the decision would enhance the appraisal of the merits.

ii) The Court orders an oral hearing of the permission application other than dealing with it on the papers. Often due to the Defendant’s failure to file an acknowledgement of service (the Home Office being identified as a particular offender here). This would lead to a substantial increase in the ‘at risk’ costs, outside the control of the claimant’s solicitors.

iii) A ‘rolled up hearing’ is ordered. Again, a decision by the Court over which the claimant’s solicitors have no control and leading to a very substantial increase in at risk costs, such rolled up hearings were often at the request of government departments.

The MoJ consultation response comes in for a bit of slapping here, as does the Lord Chancellor.

In the February 2014 document, Judicial Review – Proposals for further reform: the government response, summarised in Appendix 3, §§9 – 20, it is stated […] that to decide that “rolled-up” hearings should not be at risk of no remuneration if permission is refused “could incentivise their use where they are not warranted and…could undermine the permission filter”. This point may have validity if a claimant has requested a “rolled-up” hearing. But, as seen from the examples we have given, that is not the position in many cases where such a hearing is ordered. The defendant or an interested party may request such a hearing in order to preserve their positions on a delay point. The court may order such a hearing for the other reasons given. […]

It does not appear from either the consultation paper or the evidence filed on behalf of the Lord Chancellor that there was awareness of the way “rolled-up” hearings are used. They are the result of a Court order and not a party’s choice. Defendants, including government departments, are at least as likely, for reasons of urgency or to preserve their position on a delay point, to request them. A fear of an over-use by the Court of rolled-up hearings is neither warranted nor a lawful basis for the application of regulation 5A to the situation where permission is not given after such a hearing.

The Regs failed to differentiate these situation from the ‘standard scenario’ and failed to deal with the substantial risk to claimants’ solicitors (and counsel) that would result from these scenarios but which had nothing at all to do with ‘focussing attention on the merits test’.

As a result, “there is no rational or proportionate connection between the effect of regulation 5A and the purpose for which the Lord Chancellor has stated he introduced it”. Nor was the discretionary LAA payment scheme enough to cure this defect.

As to costs, the first consultation paper, Transforming Legal Aid, (see Mr Holmes’ statement, §21 and Appendix 3, §4) saw the ability to recover costs from the other party as the safeguard to the provider and apparently the indication of a meritorious case. The position changed in the light of the responses. The evidence of Mr Holmes (§27) is that “the aim of the discretionary payment mechanism is to ensure that work carried out on applications in meritorious cases which issued but did not reach the point of a decision on permission, and where costs cannot be recovered from the other side, will continue to be paid”. It, however, appears from regulations 5A(1)(b)(i), Mr Holmes’ statement (paragraph §27(a) and (b)), and Mr Eadie’s submissions, that the perception remains that generally meritorious cases which settle are ones in which costs will generally be recovered from the defendant. This is seen from the way that regulation 5A(1)(b)(i) focuses on the reasons why costs were not obtained. But the experience of those representing claimants is that often the real obstacle to settling a case is the unwillingness of the defendant to pay costs. Defendants, including government departments, rightly or wrongly, resist costs with considerable determination. The questions that arise are often not susceptible of easy “black and white” answers, but involve assessing where in the spectrum of shades of grey the case falls. The determination of the answer is sometimes intensely fact-specific, and sometimes dependant on fine analysis of a complex legal scene.

[The side swipe here is unmistakable. Government departments that resist costs where they are merited are in no position to take the view that meritorious withdrawn cases would obtain costs from the Defendant.]

And then:

The other two criteria [for discretionary payment to be considered] highlighted in regulation 5A(1)(b) are the extent to which, and the reason why, the legally aided person obtained the outcome sought, and the strength of the application for permission at the time it was filed, based on the law and on the facts which the provider knew or ought to have known at that time. These factors, in particular the second and third, are appropriate indications of the meritoriousness of a claim, but they are only indications. Where the reason that the case did not reach the point of a decision on permission is something that occurs beyond the control of the provider, it is again difficult to see the rational connection between the effect of this part of the regulation and the stated purpose of incentivising rigour before issuing proceedings.

The Court goes on to note that the claimant’s solicitor cannot withdraw or terminate funding once the claim has begun, save for certain irrelevant circumstances. So if the situation on a case changed considerably in one of the three ways above, the Claimant’s solicitors would be under an obligation to both their client and the LAA to continue, even if the prospects had changed for reasons outside their knowledge or control.

The conclusion:

The reason given for introducing regulation 5A was to incentivise providers to focus more on the proper application of the merits test before applying for judicial review. […] the scope of regulation 5A extends beyond the circumstances which can be seen as rationally connected to the stated purpose given for its introduction. To that extent it is inconsistent with the purposes of the scheme in LASPO, and this application succeeds. We will hear submissions on the relief required, if it is at issue.

There is no news yet on any decision on relief. More when we get it.

The MoJ have been quoted as saying

“We are clear [that] hardworking taxpayers’ money should not be spent on judicial reviews that are not given permission to proceed.

“We are therefore pleased this judgment confirms the principle of our reform is lawful. We will now carefully consider the technical aspects raised by the court and our next steps.”

Charitably, I’ll say that I am not convinced that they have read the right judgment.

Congratulations to all the Claimants, who had put very significant effort and risk to their practices into a difficult claim. For what it is worth, a copy of my statement is here.


Giles Peaker is a solicitor and partner in the Housing and Public Law team at Anthony Gold Solicitors in South London. You can find him on Linkedin and on Twitter. Known as NL round these parts.

1 Comment

  1. Paul Hawkins

    Dear Lord Chancellor,

    I’m a hardworking taxpayer, and I would quite like to see at least some of my money being spent on enabled those less fortunate than myself to challenge people in positions of power (like your good self) where it appears that their decisions may have been flawed.

    Yours sincerely,

    Paul Hawkins



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