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Selected Cases and Summaries of Completed Investigations - April to September 2000
Volume 3 - 3rd REPORT - SESSION 2000-2001
Chapter 1
LEGAL SERVICES COMMISSION
9. Case No. C.1262/00
Failure to supply accurate information about a legal aid debt
Summary
Mrs A complained that between January 1997 and September 1999 the Legal Aid Board had failed to send her statements about a legal aid debt that she was repaying by monthly standing order, and that they had then given her conflicting information about the amount of debt outstanding. The Ombudsman found that failure by the Legal Aid Board to re-enter their record of the debt on their computer accounting system following a change of address by Mrs A had meant that Mrs A had ceased to receive statements. Furthermore, the record of interest accruing on the debt had thereby been lost, so that when the Legal Aid Board eventually issued the missing statements, they substantially understated the true amount owing. To make matters worse, defects in the performance of calculations and the issue of statements by a new computer system meant that the payments Mrs A had been making were not accurately deducted. The result was that in September and October 1999 Mrs A received a thoroughly bewildering series of inaccurate and contradictory statements. In November the Legal Aid Board told Mrs A's solicitors that a payment of £9,609.54 would discharge the debt; Mrs A paid that sum but in March 2000 the Legal Aid Board told her that she owed a further £9,037.59. The Chief Executive apologised for the poor service Mrs A had received and described measures which should help to prevent a recurrence of such difficulties. The Legal Aid Board clarified the position with regard to the outstanding debt and confirmed that they did not intend to take further action to recover the shortfall.
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Full text
1. Mrs A complained that between January 1997 and September 1999 the Legal Aid Board had failed to send her statements about a legal aid debt that she was repaying by monthly standing order, and that they had then given her conflicting information about the amount of the debt outstanding.
2. My investigation began in February 2000 once the Ombudsman had obtained comments from the Chief Executive of the Legal Aid Board after the referral of the complaint by the Member. I have not put into this report every detail investigated by the Ombudsman's staff but I am satisfied that no matter of significance has been overlooked. Since Mrs A's complaint the Legal Aid Board have been replaced by the Legal Services Commission and the legal aid fund has been replaced by the community legal services fund. For convenience I refer to the Legal Aid Board and the legal aid fund throughout this report.
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Statutory and administrative background
3. At the time relevant to Mrs A's complaint, section 6(2) of the Legal Aid Act 1988 provided that the Legal Aid Board should pay from the legal aid fund such sums as were due in respect of remuneration and expenses properly incurred in connection with the provision of advice, assistance, mediation or representation. The court might determine, by a process known as taxation, how much the conducting solicitor should receive for the work undertaken. Regulation 119 of the Civil Legal Aid (General) Regulations 1989 provided that, where an assisted person had a financial interest in the taxation, the solicitor had to provide him or her with a copy of the bill of costs and inform him or her of the steps which could be taken to protect that interest. On receipt from the solicitor of the bill and a report on the case the Legal Aid Board paid the solicitor out of the legal aid fund in accordance with the costs as taxed.
4. Under section 16(6) of the Legal Aid Act 1988, where an assisted person recovered or preserved property as a result of proceedings covered by a legal aid certificate the Legal Aid Board were required to impose a charge, known as the statutory charge, on the property in order to recover the costs paid out of the legal aid fund which were not met by the assisted person's opponent. The statutory charge had usually to be enforced immediately, but enforcement might be deferred where property recovered or preserved in matrimonial proceedings was to be used to provide a home for the assisted person and his or her dependants, provided the equity in the property would be adequate security for the charge. To qualify for deferment, the assisted person had to agree to the Legal Aid Board registering a charge against the property and to interest accruing from the date of registration. It was the Legal Aid Board's practice to apply to the Land Registry for registration of the charge on property recovered or preserved immediately upon becoming aware that a charge had arisen, so as to protect their claim to money due to the legal aid fund.
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5. If an order for costs was made against an assisted person's opponent, such costs might go towards reducing the amount of the statutory charge, but only to the extent that they were actually received. The Legal Aid Board might take proceedings to enforce an order for costs against the opponent; an assisted person might only take such proceedings with the consent of the Legal Aid Board. In practice the assisted person's solicitor might apply to the Legal Aid Board for the legal aid certificate to be amended to cover enforcement proceedings, or the legal aid certificate might be discharged and the Legal Aid Board's Debt Recovery Unit might themselves take action to recover payment under the order, or instruct the original, or other, solicitors to carry out enforcement.
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The Legal Aid Board's reply to the complaint
6. In his comments to the Ombudsman, the Chief Executive of the Legal Aid Board set out the events relevant to the complaint, commented on the Legal Aid Board's actions, and apologised for the shortcomings identified. An edited version of the Chief Executive's comments is an Annex to this report. My examination of the Legal Aid Board's papers has confirmed that it is an accurate account of events.
Further developments
7. On 10 March 2000 the Legal Aid Board's Policy and Legal Department wrote to Mrs A apologising for having sent her a series of confusing and inaccurate statements of the amount she owed them and for the confusion and distress she had suffered. They told her that in the course of investigating her complaint the Land Charges Department had recalculated the debt. They had discovered that the record of the interest accruing on the debt had been lost in 1997 following her move to her present address, because the record of the charge on her previous home had been removed and no record of the charge on her new home had been entered. The payments she had made subsequently towards the debt had been credited to the principal sum, instead of being set against the interest. As a result, her liability greatly exceeded the amount she had been told. They enclosed a table showing their recalculation of the debt. That gave a redemption figure of £18,618.69. They said that they understood how unwelcome that information must be to her and that in the circumstances she might wish to argue that she should not have to pay the outstanding sum. However, the Legal Aid Board had no power to waive the statutory charge or the interest that accrued on it.
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8. On 15 March one of the Ombudsman's staff spoke to Mrs A. When asked about the offer she had made to her former husband based on figures the Legal Aid Board had given her (annex paragraph 9A.10), she said that nothing had come of that as her former husband had refused to accept any offer. She said that she had been shocked to learn from the Legal Aid Board's letter of 10 March 2000 that she still owed them £9,037.59. When asked if in view of the Legal Aid Board's letter to her solicitors of 3 September 1996 (annex paragraph 9A.11) she had had any idea that she still owed the Legal Aid Board money, she said that she had tried to work out the amount she owed and made payments to try to keep the interest down, and had thought that the whole amount had been reducing. She had looked at the figure of nearly £20,000 and had decided to pay an amount to reduce it. If she had been sent statements she would have realised that £125 a month would not have reduced anything, and would have assessed whether to have a bigger mortgage or to apply for jobs with a higher salary. It had always been her intention to pay back the Legal Aid Board. Mrs A added that she had planned to use the £125 a month she had been paying towards the debt to help her daughter, who intended to take up a place at university following a "gap" year; now she could no longer afford to do that. Having worked full-time for ten years following her divorce, she did not expect still to be having such difficulties. Her health was suffering and she was concerned about the effect on her elderly parents. A dentist had told her that she was grinding her teeth due to stress. She had been exhausted by the matter and felt that it was time that the Legal Aid Board honoured the numerous letters they had sent her and wiped the slate clean. She was also concerned that others might have suffered similarly as a result of the Legal Aid Board's maladministration.
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Findings
9. The Legal Aid Board were not in a position to tell Mrs A how much she owed them until they received her solicitors' taxed bill. The solicitors sent that bill to the Legal Aid Board on 30 September 1993 (annex paragraph 9A.7). By then, Mrs A should have been aware of the amount of the bill; and she was also aware that a charge had been registered against her home on which she had agreed to pay interest from the date of registration. However, it was not until a year later that the Legal Aid Board calculated the precise amount owed, including interest, and notified Mrs A of that (annex paragraph 9A.9). That was unsatisfactory. In the meantime, in response to a request from Mrs A for a redemption figure for the charge, the Legal Aid Board told her on 6 May 1994 that the deficiency to the legal aid fund stood at £13,793 (that is, the amount of the solicitors' bill) (annex paragraph 9A.8). That was an inadequate reply; the Legal Aid Board should at least have given the rate of interest and the date from which it was accruing. As matters turned out, Mrs A's reliance on the incomplete information given in May 1994 did not have any financial consequences (paragraph 9.8 above). I note that the Legal Aid Board apologised to Mrs A when she pointed out that shortcoming to them (annex, paragraph 9A.10).
10. In January 1997 Mrs A began to pay £125 a month towards the debt. She should from then on have received from the Legal Aid Board monthly statements of the amount outstanding. Instead, she received one statement showing that she owed £19,884.04 at 16 January 1997 (annex paragraph 9A.12). At that stage, the Legal Aid Board were awaiting a new charge certificate from Mrs A's solicitors following her recent change of address and had not updated their accounting computer system to show the new address. The January statement bore the old address, but reached her because it was sent under cover of another letter which bore the new address. The February statement went to the old address and was returned to the Legal Aid Board on 4 March (annex paragraph 9A.13). It seems that the Legal Aid Board then removed the record of the charge on the old address from the system but failed to enter the charge on the new address. The reason for that failure is not clear. It had two results: firstly, that Mrs A ceased to receive statements; and secondly, that the record of interest accruing on the debt was lost, so Mrs A's monthly payments were credited to the principal sum.
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11. In August 1999 Mrs A queried the absence of statements (annex paragraph 9A.15). The Legal Aid Board then acted to restore the record of the charge and issue the missing statements, but they failed to recognise that in so doing they had not restored the record of interest. To make matters worse, a separate and more widespread defect in the performance of calculations and the issue of statements by the new computer system which the Legal Aid Board had by then introduced meant that the payments Mrs A had been making were not accurately deducted even from the principal sum. The result was a thoroughly bewildering series of inaccurate and contradictory statements, all of which very substantially understated the true amount owing. In November Mrs A's solicitors requested a redemption figure; they were given £9,609.54 (annex paragraph 9A.18), whereas they should have been given £18,618.69. I strongly criticise the Legal Aid Board for the failings which led to Mrs A being kept uninformed about the level of her debt for more than two years, then being seriously misinformed on the point. The outcome was that having paid the full amount requested by the Legal Aid Board, Mrs A still owed £9,037.59 (annex paragraph 9A.19). That was a highly unsatisfactory state of affairs. I now pass on to Mrs A through this report the Chief Executive's apologies for the poor service she received.
12. The Legal Aid Board have written to Mrs A explaining what went wrong and enclosing a corrected calculation of her debt (paragraph 9.7 above). The approach that the Ombudsman considers correct is that a person who has suffered injustice as a result of maladministration should as far as possible be put back in the position in which he or she would have been had the maladministration not occurred. If the Legal Aid Board had handled Mrs A's case correctly from the outset she would have been required to pay the principal sum of £13,734.54 and such interest as accrued on it depending on the speed with which it was paid off. The lack of statements from the Legal Aid Board between January 1997 and September 1999 may have influenced Mrs A's management of the debt. However, Mrs A had received a statement in January 1997 showing the principal sum and the rate at which interest was accruing, and the agreement she signed on 24 June 1991 had specified that any payments made would be applied first to the interest (annex paragraph 9A.4). I therefore do not attribute to maladministration by the Legal Aid Board such decisions as Mrs A made in relation to the debt between January 1997 and September 1999. As to the misleading information that she and her solicitors were given in September, October and November 1999, Mrs A has not indicated any financial loss to her resulting from the arrangements made on the basis of the Legal Aid Board's misinformation. However, the Legal Aid Board told me that they had been considering the equitability of seeking to recover the outstanding balance of the debt in the circumstances, and had asked Mrs A whether she was prepared to make any proposals to settle the debt. Having heard from Mrs A that she had no such proposals, they did not intend to take further action to recover the shortfall.
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13. Mrs A's concern that others might have suffered similarly as a result of the Legal Aid Board's maladministration has proved, in the light of the defects in the Legal Aid Board's computer system which the Chief Executive has acknowledged (annex paragraph 9A.20), to have been well founded. I asked the Chief Executive how the remedial action the Legal Aid Board were taking to cure those defects was progressing, and when he expected that action to be successfully concluded. The Chief Executive replied that the manager of the Land Charges Department had arranged for older cases, where anomalies were identified on the new computer system, to be referred to a senior caseworker. A system for sending out annual statements of former assisted persons' statutory charge liability was at the testing stage. In relation to the issue of inaccurate statements (annex paragraph 9A.20, final point), the data cleanse exercise was almost complete.
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Conclusion
14. Mrs A received a persistently poor service from the Legal Aid Board in the matter of repayment of her legal aid debt. The Chief Executive has apologised for that and described measures which should help to prevent a recurrence of the difficulties experienced by Mrs A. The position with regard to the debt has now been clarified and the Legal Aid Board have confirmed that they do not intend to take further action to recover the shortfall. I regard that as a satisfactory response to Mrs A's justified complaint.
Annex A - The Chief Executive's comments on the complaint
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