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Home > Publications > Selected cases — Parliamentary > Selected Cases and Summaries of Completed Investigations - October 1998 - March 1999 > C.1389/97 - Full text
Sixth Report Session 1998-99
Volume 2
OCTOBER 1998 - MARCH 1999
The full report of selected cases
Summary of selected cases
LEGAL AID BOARD
Mishandling of the recovery of costs awarded in legal proceedings
7.1 Mrs Y complained that an area office of the Legal Aid Board (LAB) had, without informing her, paid costs to her previous solicitors and registered a statutory charge against her home on which interest had accrued, even though another LAB area office had granted her legal aid to sue those solicitors for negligence; and that, meanwhile, LAB had failed to pursue effectively payment of that part of the costs for which her opponent was liable.
7.2 My investigation began in March 1998 once the Ombudsman had obtained comments from the Chief Executive of LAB 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. The actions of private solicitors are outside the Ombudsman's jurisdiction and I refer to them in this report only to place in context the actions of LAB.
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Legal and administrative background
7.3 Section 6(2)(a) of the Legal Aid Act 1988 provides that LAB shall pay from the legal aid fund such sums as are due in respect of remuneration and expenses properly incurred in connection with the provision of advice, assistance, mediation or representation. The court may 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 provides that, where an assisted person has a financial interest in the taxation, the solicitor must provide him or her with a copy of the bill of costs and inform him or her of the steps which can be taken to protect that interest. The solicitor must endorse the bill to the effect that the assisted person has such an interest and has been informed as required. On receipt from the solicitor of the bill and a report on the case LAB pay the solicitor out of the legal aid fund in accordance with the costs as taxed. Regulation 102 of the 1989 Regulations allows LAB to defer payment of costs where the solicitor has failed to comply with the regulations and as a result there has been a loss to the legal aid fund.
7.4 Under section 16(6) of the 1988 Act, where an assisted person recovers property as a result of proceedings covered by a legal aid certificate, LAB are 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 are not met by the assisted person's opponent. (In matrimonial proceedings, the first £2,500 of any property recovered is exempt from the statutory charge.) If an order for costs is made against an assisted person's opponent, such costs may go towards reducing the amount of the statutory charge but only to the extent that they are actually recovered. Where such costs remain unpaid LAB may take steps to enforce payment.
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7.5 The statutory charge must usually be enforced immediately, but enforcement may be deferred where property recovered in matrimonial proceedings is to be used to provide a home for the assisted person and his or her dependants, provided the equity in the new home will be adequate security for the charge. To qualify for deferment, the assisted person must agree to LAB registering a charge against the new home and to interest accruing from the date of registration. LAB use a standard form, form CLA37, to obtain such agreement. It is LAB's practice to apply to the Land Registry for registration of the charge on property recovered immediately upon becoming aware that a charge has arisen, so as to protect their claim to money due to the legal aid fund.
Investigation
7.6
1991-1993
On 12 June 1991 the first area office granted Mrs Y legal aid for matrimonial proceedings. On 14 September 1992 the court made an order under which her opponent was to transfer to her his share in the former matrimonial home and his interest in several insurance policies; he was also ordered to pay her costs limited to £4,000. On 16 October Mrs Y's solicitors (whom I call solicitors A) sent the first area office a copy of the order, which they said they were applying to have registered in the magistrates' court. On 2 March 1993 solicitors A wrote to the first area office asking for Mrs Y's legal aid certificate to be discharged on the basis that the proceedings had been concluded. On 5 March the office replied asking for details of how the proceedings had been concluded and a copy of any final order. On 22 April Mrs Y's legal aid certificate was discharged. On 12 May the second area office granted Mrs Y legal aid for proceedings for damages for negligence against solicitors A. On 16 November solicitors A's costs were taxed in the county court; Mrs Y attended the hearing and made representations, following which the costs were reduced. On 12 December the court certified that the costs had been taxed at £14,640.06, which included inter partes costs of £5,270.19.
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7.7
1994
On 25 January 1994 solicitors A submitted their report on the case and bill of costs to the first area office. On 8 February the office returned the claim requesting further supporting documents, including a sealed copy of the court's certificate of taxation, a completed "costs 1" questionnaire (which asks for details of costs awarded) and a completed form CLA36 (which asks for details of property recovered in the proceedings). On 18 March solicitors A wrote to the office saying that they had sent Mrs Y a form CLA37 for completion (paragraph 7.5) but she had not returned it; they asked if they could proceed with their claim without completion of that form. On 31 March the office confirmed that they could do so. On 13 April solicitors A resubmitted their report and bill together with copies of the certificate of taxation of 12 December 1993, the court order of 14 September 1992 and a form CLA36 completed to show that Mrs Y had recovered property valued at £102,500; the maximum chargeable legal aid costs were £14,640.06 and costs of £5,270.19 were recoverable from the opponent. On 15 April the office replied that they had authorised payment of the claim and that LAB's financial controller would take over recovery action in respect of the costs order; they asked solicitors A to complete a costs questionnaire and to obtain from Mrs Y a completed form CLA37. They also asked for further details concerning the property recovered by Mrs Y in the proceedings. On 22 April the office applied for registration of a charge against Mrs Y's home. On 25 April a charge, subsequently quantified as £14,581.02 (solicitors A's costs as taxed less £59.04 taxation fee) was registered and LAB began to charge Mrs Y interest at a rate of eight per cent. On 26 April Mrs Y wrote to the second area office in support of the continuance of legal aid for her proceedings against solicitors A. She explained that she was seeking compensation for negligence whereby she had been deprived of the opportunity to appeal against her opponent's commutation of a pension, which had reduced the amount of income available to the court in their award to her. She said that LAB had already committed to £13,500 in bills to solicitors A, which would take the form of a charge on her home. On 16 September, following the conclusion on 19 July of further correspondence to clarify the extent of the property recovered by Mrs Y in the matrimonial proceedings, the first area office wrote to solicitors A saying that steps had been taken to register a charge and asking them to obtain from Mrs Y a completed form CLA37.
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7.8
1995
On 25 January 1995 the first area office sent solicitors A a reminder that they needed form CLA37 in order to postpone enforcement of the statutory charge. On 2 February solicitors A replied that they no longer acted for Mrs Y, and provided details of her new solicitors (whom I call solicitors B). On 8 March the first area office wrote to solicitors A requesting a completed costs questionnaire. On 12 April they wrote to solicitors A recognising that they no longer acted for Mrs Y but asking whether she had access to the surrender value of the insurance policies obtained in the proceedings, as that would affect whether the statutory charge could be postponed. On 26 September solicitors B wrote to the second area office about the proceedings against solicitors A. They said that they were obtaining counsel's advice on the merits and quantum and were aware that solicitors A's costs had been taxed in the region of £14,000. They sought advice concerning the potential effect of the statutory charge upon money which Mrs Y argued she would have recovered had solicitors A not been negligent. On 2 October the second area office replied that such money, less the £2,500 exemption, would have had to be paid to LAB to satisfy the statutory charge. On 17 October solicitors A replied to the first area office's letter of 12 April saying that they no longer had access to Mrs Y's papers and referring the office to solicitors B. On 23 November the first area office wrote to Mrs Y saying that a charge had been registered against her home; they repeated their query of 12 April about the insurance policies and asked her to complete a form CLA37, which they had enclosed, so that they could continue to postpone enforcement of the charge. On 5 December solicitors B replied on her behalf. They explained that they were acting for Mrs Y in negligence proceedings against solicitors A under a legal aid certificate granted by the second area office; the proceedings were at the stage where witness statements were to be exchanged, whereupon counsel would give a further opinion on merits and quantum. If the opinion was favourable a hearing in the New Year was anticipated. They said that Mrs Y had been reluctant to sign the form CLA37 sent to her by solicitors A in February 1994 because solicitors A had offered her no explanation of the effect of doing so, and she had been unaware of the first area office's subsequent correspondence with solicitors A on the matter. They anticipated that if the current proceedings were successful the costs liability to solicitors A would be greatly reduced or extinguished. They asked the office to defer taking action regarding the statutory charge pending the outcome of the proceedings.
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7.9
1996
On 29 January 1996 the first area office replied to solicitors B saying that it would be necessary for Mrs Y to complete form CLA37; if solicitors A's costs were reduced by the negligence proceedings, any refund would be sent to Mrs Y. On 5 February solicitors B wrote to the first area office saying that they were completing form CLA37 for Mrs Y's signature but believed that the amount charged against Mrs Y's home could not be fully known until the negligence proceedings were complete, so any action to enforce the charge would be premature. On 15 February the area office replied confirming that they still required the form. On 23 May Mrs Y telephoned LAB's Debt Recovery Department (DRD). According to their note of the call, Mrs Y explained that she had a statutory charge on her home for costs of just under £15,000 which she wanted to clear so that she did not have to pay any more interest. She wanted DRD to pursue the costs awarded against her opponent and would send them a copy of the order. DRD raised a file for Mrs Y and asked the first area office to forward a copy of the costs questionnaire and court order so that they could pursue recovery. On 26 May Mrs Y wrote to the second area office in support of the continuance of her legal aid certificate in respect of the negligence proceedings. She said that there was a good chance that solicitors A would offer an out of court settlement. She said that she found it inconceivable that LAB had paid solicitors A's bill without querying why it was so high, and that it had not been explained to her that the costs would be charged against her home. She said that solicitors A had done nothing about the costs awarded against her opponent, which with interest were running at more than £5,000, and she asked why that had not been deducted from the sum owing to LAB. On 27 May Mrs Y wrote to DRD enclosing a copy of the court order of 14 September 1992. She said that there were additional costs which her opponent had failed to pay, giving a final figure of more than £5,000. Solicitors A had made no effort to recover the money even though throughout the hearing it had been obvious that her opponent would not pay if he could avoid doing so. She said that her opponent was in full-time employment and receiving a substantial pension. On 30 May the first area office wrote to solicitors B asking for a completed form CLA37 and costs questionnaire.
7.10 On 18 June Mrs Y provided DRD with the address and employment details of her opponent and asked to be kept informed of progress regarding recovery of the costs. DRD prepared a letter to send to the opponent requesting payment of £4,000 but on 25 June decided not to send it pending receipt of the costs questionnaire. On 16 July they decided that as they had received a copy of the court order they could proceed without the questionnaire; they wrote to Mrs Y's opponent requesting payment of £4,000 within 14 days. On 21 August the first area office sent solicitors B a reminder about their letter of 30 May. On 4 September Mrs Y's opponent telephoned DRD and promised to send them £1,000 within two weeks and to complete income and expenditure forms confirming proposals for payment of the balance. DRD agreed to suspend action for a month. On 5 September solicitors B replied to the first area office's letter of 21 August asking that action in respect of the statutory charge be deferred until completion of the negligence proceedings, a final hearing for which had been set for 5 November, and until a reasonable effort had been made to recover the costs owed by Mrs Y's opponent. They said that Mrs Y had told them that the latter issue was being pursued by DRD. On 9 September the office replied that they could not await completion of the negligence proceedings; if DRD recovered costs from Mrs Y's opponent they would be refunded to her or the charge removed. On 12 September DRD sent Mrs Y's opponent income and expenditure forms for completion. On 17 September the first area office sent Mrs Y a form CLA37 saying that failure to complete it within 21 days might result in the matter being referred to DRD. Mrs Y signed the form on 1 October and the first area office received it back on 14 October. On 16 October solicitors B replied to the office's letter of 9 September saying that they had concluded the negligence proceedings, under which Mrs Y had recovered £8,250 plus costs. They sought confirmation that that sum would not be subject to the statutory charge in respect of the matrimonial proceedings. On 25 October Mrs Y received a statement from LAB showing that her debt to the legal aid fund was £17,505.20 and that interest was accruing at the rate of £3.19 a day. On 1 November the first area office confirmed to solicitors B that the statutory charge in respect of the matrimonial proceedings would not apply to the £8,250 recovered in the negligence proceedings.
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7.11 On 5 November Mrs Y asked DRD to inform her of the recovery action taken against her opponent and to suspend such action while her solicitors made enquiries into his financial circumstances. On 7 November DRD sent her copies of their letters to her opponent. On 26 November Mrs Y wrote to the first area office complaining that they had paid solicitors A's bill without informing or consulting her, despite the proceedings which they had known she was taking against solicitors A for negligence; she said that had she been a private client she would have withheld payment until completion of those proceedings. If LAB had not paid the bill, and if they had enforced the costs owed by her opponent, she would owe them only £2,331.02 (that is, the costs of £14,581.02 less £4,000 owed by her opponent and £8,250 obtained in the negligence proceedings). On 4 December the first area office replied explaining that once they received a taxation certificate they were obliged to pay the costs, and could not have refrained from doing so simply because Mrs Y had begun proceedings against the solicitors concerned. They said that LAB could not issue a statement of an assisted person's indebtedness to the legal aid fund until they received a completed form CLA37. Regarding the order for costs against her opponent, they said that LAB would not normally enforce a costs order in a case where the statutory charge arose except with the agreement of the assisted person; that was because any additional costs incurred in pursuing enforcement would, if such action was unsuccessful, be added to the charge. They asked Mrs Y to tell them whether she still wished LAB to pursue the costs order, and if so to give them as much information as possible about her opponent's whereabouts and financial circumstances, which they would pass to DRD for urgent action.
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7.12
1997
On 10 January 1997 Mrs Y replied to the first area office's letter of 4 December; she complained that they had not told her of the payment of costs to solicitors A and that it was unreasonable to expect her to sign a form CLA37 without first telling her the extent of the charge. She asked them to confirm the amount owed by her opponent in respect of costs, which she believed to be £5,270.90. On 22 January the first area office replied that solicitors A had been obliged to provide her with a copy of their bill before taxation to give her the opportunity to make representations to the judge. They said that completion of form CLA37 had not in itself rendered her liable for any payment to LAB but had simply allowed them to postpone repayment of the sum for which she was already liable by virtue of section 16(6) of the 1988 Act (paragraph 7.4), and of which she had received notification in the form of service on her of the solicitors' bill. Regarding the costs owed by her opponent, they said that those costs as taxed amounted to £5,270.90 but that that did not override the order of 14 September 1992 which limited any such liability to £4,000; it was unlikely that she could claim interest in respect of the costs as that was normally possible only in respect of an order issued in the High Court. They asked again whether she wished LAB to take action for recovery of those costs, bearing in mind that such action, if unsuccessful, would add to her liability under the statutory charge. On 17 February Mrs Y telephoned DRD asking them urgently to pursue recovery of the costs owed by her opponent. She said that her opponent was self-employed and receiving a pension in the region of £9,000 a year. She expressed concern that she was being charged interest on the costs owed while her opponent was not. She faxed DRD several documents indicating her opponent's means and a letter from his solicitors acknowledging that he owed £5,270.90. DRD noted that they had filed the fax "to be dealt with on review". On 5 March Mrs Y telephoned DRD to chase up the matter. On 11 March DRD telephoned her and asked for copies of any orders for costs against her opponent other than the one of 14 September 1992. That day Mrs Y sent DRD copies of several such orders. On 26 March DRD replied saying that the documents she had supplied showed that her opponent's costs had been limited to £4,000 by the order of 14 September 1992 but had subsequently been taxed at £5,270.19. They said that at the time of the taxation her opponent should have been served with an order for payment of the latter figure; they asked Mrs Y to obtain for them a copy of that order from the court. On 3 April Mrs Y informed DRD that she had contacted the court to obtain a copy of the relevant order. On 6 May, in reply to their request of 26 March, Mrs Y faxed DRD a copy of an order dated 8 March 1994 for her opponent to pay costs of £5,270.19. On 10 May DRD wrote to the opponent asking for payment of that sum within seven days. On 20 June they wrote again warning that they would begin proceedings to enforce the order unless payment was made within 14 days. On 17 July DRD spoke to Mrs Y and it was agreed that they would threaten to take bankruptcy proceedings; they wrote to the opponent asking that he either pay in full or by instalments of £100 per month, starting within seven days, failing which they would issue proceedings against him which might lead to bankruptcy. On 7 August Mrs Y spoke to DRD and suggested two alternative firms of solicitors for them to approach regarding proceedings against her opponent. On 3 September DRD wrote to one of those firms saying that Mrs Y had asked them to issue a statutory demand; they asked how much the solicitors would charge for that. On 24 September the solicitors replied agreeing that the issue of a statutory demand was appropriate and quoting their charge for that.
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7.13 On 7 October the court drew a consent order settling several matters pursuant to Mrs Y's matrimonial proceedings. That order included an undertaking by her opponent to pay LAB the £4,000 ordered against him on 14 September 1992, with accrued interest; £5,500 was to be paid by 6 December and the balance by 6 April 1998. On 10 October Mrs Y informed DRD of the order; they noted that she had promised to send them a copy, on receipt of which she wanted them to write to her opponent threatening bankruptcy proceedings. On 8 December the solicitors who had acted for Mrs Y in obtaining the latest order (whom I call solicitors C) applied to the second area office for an extension of the legal aid certificate under which they had done so, in order to pursue enforcement. They wrote to Mrs Y's opponent saying that unless he confirmed by 12 December that he had paid £5,500 they would commence enforcement proceedings. On 9 December the opponent sent LAB a cheque for £4,000; he asked for LAB's assurance that that settled his debt to them. On 12 December the second area office rejected solicitors C's application for an extension to their certificate pending an explanation of how they proposed to pursue enforcement of the order. On 15 December DRD telephoned Mrs Y saying that they had received the cheque from her opponent and were returning it; they asked her for a copy of the order of 7 October. Solicitors C faxed them a copy. DRD returned the opponent's cheque to him with a copy of the order saying that they were unable to accept the payment in settlement of his debt and would take bankruptcy proceedings unless he paid £5,500 immediately. They telephoned solicitors C to enquire why they were pursuing the debt at the same time as DRD, and noted that the solicitor concerned was out of the office until 17 December. (According to a statement provided to the Ombudsman's staff by the officer in DRD involved, the purpose of his telephone call to Mrs Y on 15 December had been to obtain her instructions rather than simply to inform her that the opponent's cheque was being returned. He had explained that the cheque had been sent in full and final settlement and that if it was accepted on that basis Mrs Y would not get the balance owed. Mrs Y had been very firm that she did not wish the cheque to be accepted; she had not asked for time to consider her position or consult her solicitors. According to a statement provided to the Ombudsman's staff by Mrs Y, the officer had simply told her that he was sending the cheque back as it was not for the full amount. Mrs Y thought she had said that DRD should keep the cheque and ask for the balance; the officer had said that he did not think that that would be possible. She had agreed to go along with whatever he thought was the best course of action. He had not advised her to seek advice from her solicitors, nor had he made clear that she was being asked to make a decision upon which DRD would act.) On 17 December DRD spoke again to solicitors C and told them of the action they had taken regarding the opponent's cheque. Solicitors C explained that the matter of the opponent's outstanding costs had been brought up during the latest proceedings and that they had applied to have the legal aid certificate extended to include enforcement of the order. They said that they would take no further action until they heard further from DRD. On 22 December DRD spoke again to solicitors C, who said that they had discussed the position with Mrs Y on 19 December and she was now reluctant to pursue bankruptcy proceedings. On 30 December solicitors C wrote to the second area office saying that they believed Mrs Y's opponent was sheltering assets in his new wife's name, and was merely unwilling to settle his liability; they proposed to apply for a committal order for breach of the undertaking regarding costs in the order of 7 October.
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1998
On 14 January 1998 the second area office extended solicitors C's legal aid certificate to include representation on an application for committal. On 22 January solicitors C informed DRD that Mrs Y's opponent had declared himself bankrupt.
The Chief Executive's comments on the complaint
7.14 Regarding LAB's payment of solicitors A's bill, the Chief Executive said that LAB were obliged under the 1988 Act to pay costs which had been properly incurred and that, once costs had been taxed by a court, they had generally to be accepted as properly incurred; the taxation certificate produced by the court in Mrs Y's case was, in effect, a direction to LAB to pay solicitors A's costs, subject to the power of deferment for breach of the regulations (paragraph 7.3). The existence of a claim against the solicitors in respect of the services provided was not relevant; the extent of the costs and any statutory charge and interest arising would fall to be considered in taking forward any such claim. The taxation process provided for notification to the assisted person of the payment of taxed costs and in the normal way of things there would be contact after the taxation between the assisted person and the solicitors regarding the operation and extent of the statutory charge. In Mrs Y's case relations with the solicitors had broken down; however, her new solicitors could have made representations on her behalf on the issue of whether the previous solicitors should be paid.
7.15 Regarding the application of the statutory charge, the Chief Executive said that LAB had no power to waive the charge. Mrs Y's application for legal aid had included a declaration that she had read a leaflet explaining the statutory charge, and confirmation from solicitors A that they had explained it to her. With hindsight, it would have been helpful if the first area office had contacted Mrs Y or solicitors B sooner about the application and postponement of the charge, rather than continuing their attempts to pursue the matter through solicitors A. The Chief Executive apologised for the unacceptable delay in taking the matter forward, which had meant that, although in the light of the taxation proceedings Mrs Y was aware of the likely amount of the deficiency to the legal aid fund, she had not received a formal notification from LAB of the amount actually paid and therefore outstanding until after she had completed form CLA37 in October 1996. The fact that the charge had been registered in April 1994 and had been accruing interest since then was a point which solicitors B should have taken into account in the negligence proceedings.
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7.16 Regarding pursuit of the costs ordered against Mrs Y's opponent, the Chief Executive said that Mrs Y could have taken enforcement proceedings in respect of the costs order, either as a private client or with legal aid. LAB could also have taken such proceedings once the existence of the order had been reported to them by Mrs Y or her solicitors. Though a solicitor was required under the 1989 regulations to report to LAB immediately on the completion of a case, solicitors A had in March 1993 asked for Mrs Y's legal aid certificate to be discharged without giving details of the conclusion of the case. With hindsight, the first area office should perhaps have pursued the matter more vigorously at that stage, and from January 1994 when solicitors A had submitted their report and costs claim. There had been a delay from February to April 1994 by solicitors A in resubmitting the claim. From April to July 1994 the office had been trying to clarify the operation and extent of the statutory charge; by July they had considered that point resolved and from then on had concentrated on obtaining from Mrs Y a completed form CLA37, although they had not received the completed costs questionnaire which they had requested in February. They had subsequently tried without success to obtain the questionnaire from solicitors A in March 1995 (although they had been informed by then that solicitors A were no longer acting for Mrs Y); the Chief Executive apologised for the fact that the matter had not been kept under review and followed up more pro-actively. Mrs Y's telephone call of 23 May 1996 had prompted DRD to pursue the matter with solicitors B. The Chief Executive also apologised for the fact that at that stage DRD had not sought clarification from Mrs Y concerning the various orders for costs, as they had eventually done in March 1997.
7.17 Regarding DRD's return on 15 December 1997 of the payment of £4,000 received from Mrs Y's opponent, the Chief Executive recognised, with the benefit of hindsight, that an alternative course of action would have been to allow Mrs Y time to consider her position on the decision to return the cheque. DRD could have held the cheque while further instructions/advice were taken and, in any event, protected the position, prior to banking the cheque, by communicating to the opponent that payment would only be accepted on the basis that it was a part payment, despite his apparent intentions to the contrary. The Chief Executive had asked his Policy and Legal Department to provide guidance to DRD on payments in full and final settlement and the possibility of counter offers in such circumstances.
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7.18 The Chief Executive said that the handling of Mrs Y's affairs by the first area office and DRD had fallen below the level of service she was entitled to expect. There had been unacceptable delays and poor decisions which, with the benefit of hindsight, had not represented the best way of taking forward matters as speedily as possible. He apologised for that and said that he was arranging for the interface between area offices and DRD to be examined with a view to improving procedures and standard letters. He was also considering improvement to procedures regarding confirmation to assisted persons of the operation and amount of the statutory charge and the use of form CLA37. LAB were implementing a new corporate information system which would give access to an assisted person's entire legal aid history and ensure that all the necessary information on quantification of the statutory charge and recovery of costs was obtained before the solicitor's bill was paid.
7.19 However, the Chief Executive said that the lack of clarity as to the enforcement of the costs order could have been resolved earlier if Mrs Y's solicitors had liaised more effectively with LAB on the matter. There had also been periods when Mrs Y had instructed DRD to adopt a particular approach, and delays by Mrs Y and solicitors C in providing copy court orders, in particular the order of 7 October 1997 which had been obtained by solicitors C without DRD's knowledge, a copy of which had not reached DRD until 15 December. The Chief Executive did not accept that any loss resulting from the return of the opponent's payment of £4,000 was attributable to LAB, but undertook to examine the delays for which LAB had been responsible and the impact upon Mrs Y if and when the impossibility of recovery of costs from the opponent had been established; LAB were continuing to liaise with solicitors C on the matter. In the meantime the Chief Executive offered Mrs Y an ex gratia payment of £250 in recognition of the poor service she had received.
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Findings
7.20 I deal first with the question of LAB's payment of solicitors A's bill and registration of a charge in that respect against Mrs Y's home. LAB were not obliged to consult Mrs Y about payment of the bill. As the costs had been taxed by the court and Mrs Y had attended the taxation hearing, I find no injustice to her in the fact that LAB did not query the size of the bill or whether Mrs Y had been informed of her interest in it and associated rights. There was no evidence of a loss to the legal aid fund which might have given LAB grounds to defer payment under Regulation 102 (paragraph 7.3). I understand Mrs Y's frustration, in view of the proceedings she was taking against solicitors A, at not having more control over the payment process, but I accept the Chief Executive's view that that was not relevant; Mrs Y's remedy against solicitors A lay properly in the outcome of the negligence proceedings, and any other action to protect her position in that respect was a matter for solicitors B. Accordingly I do not criticise LAB's decision to pay solicitors A's costs as taxed.
7.21 Having authorised payment of the bill, LAB were entitled to protect their consequent claim on the property recovered by Mrs Y in the proceedings by registering a charge against her home, and correctly asked her to complete form CLA37 to enable enforcement of the charge to be postponed. I find it unsatisfactory that LAB did not at that stage notify Mrs Y of the amount outstanding and the rate of interest, as they eventually did in October 1996 following receipt from her of the completed form; and that they subsequently told her in their letter of 4 December 1996 that they were unable to issue a statement of an assisted person's indebtedness to the fund until they had received a completed form CLA37. That meant that Mrs Y received from LAB no indication that solicitors A's bill had been paid and that she was being charged interest accordingly; and she might reasonably have drawn the conclusion that the interest agreement would take effect only from when she signed form CLA37. The effect of that lack of information was exacerbated by the fact that Mrs Y was no longer represented by solicitors A. However, letters from Mrs Y and solicitors B during that period show that they were aware of the existence of the debt, if not the exact amount, and DRD's note of Mrs Y's telephone call on 23 May 1996 and Mrs Y's letter of 26 May to the second area office suggest that she had at that stage become aware of the true position. I conclude that LAB's deficient communication on the point did not prevent Mrs Y's indebtedness to LAB from being taken fully into account in arriving at the settlement of the proceedings against solicitors A; LAB were not responsible for the fact that the settlement obtained in October 1996 fell short of Mrs Y's total debt by that time. While I criticise LAB for failing to make clear at the outset the position regarding Mrs Y's indebtedness to them, I do not attribute to that failure any financial disadvantage to Mrs Y. I regard the Chief Executive's apology for the delay in resolving the matter and his undertaking to improve procedures regarding confirmation to assisted persons of the statutory charge as a suitable response to that part of Mrs Y's complaint.
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7.22 I turn next to the question of LAB's pursuit of payment of the costs owed by Mrs Y's opponent. I consider that LAB's responsibility for that matter began in April 1994 when they told solicitors A that their financial controller would take over recovery action and asked them to complete a costs questionnaire. They then failed to follow up the matter properly until Mrs Y telephoned DRD in May 1996. Mrs Y has said that she was told by LAB in a telephone conversation that they probably would not pursue her opponent's debt because they had a charge against her home. LAB's papers suggest that the first area office believed it was not DRD's policy normally to pursue recovery where the statutory charge applied, because LAB's position was adequately protected. LAB have told the Ombudsman's staff that that belief accounted for the office's failure to pursue the costs questionnaire. DRD's subsequent actions - albeit at Mrs Y's prompting - indicate that the first area office's assumption was inappropriate. I criticise LAB for the consequent delay of two years in pursuing the costs owed by Mrs Y's opponent; I welcome the Chief Executive's apology for that and undertaking to examine the interface between LAB's area offices and DRD and the relevant standard letters to assisted persons.
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7.23 In May 1996 Mrs Y sent DRD a copy of the order of September 1992 for costs, indicating that it did not represent the total owed by her opponent. DRD did not take steps to clarify that point until March 1997, an omission for which the Chief Executive has apologised. In the meantime DRD made one attempt to obtain payment from Mrs Y's opponent, but had not followed that up when in November 1996 Mrs Y asked them to suspend action. In February 1997 she asked them to resume; their initial response to her fax was to file it to be dealt with on review. LAB have since explained to the Ombudsman's staff that that was done by a case worker no longer employed by LAB and that the normal procedure would have been to determine the urgency of the fax and deal with it accordingly; I welcome that assurance. I find no fault with DRD's handling of the matter between March and September 1997. Their efforts were then overtaken by those of solicitors C, who obtained a payment undertaking by means of the court order of 7 October 1997. In December that undertaking and solicitors C's letter in pursuit of it resulted in Mrs Y's opponent sending DRD a payment of £4,000. On 15 December DRD returned that payment without consulting solicitors C (who they knew by then to be acting in the matter). The Chief Executive has recognised that Mrs Y should have been given time to consider the matter and consult her solicitors before the cheque was returned. I criticise DRD for mishandling the situation and welcome the Chief Executive's undertaking to provide them with guidance on the point for the future.
7.24 Mrs Y's complaint that LAB had failed to pursue effectively payment of her opponent's costs was justified; the fact that her solicitors did not complete a costs questionnaire was unhelpful, but delay by the area office meant that action by DRD did not even begin until more than two years after LAB had suggested it would, and DRD's management of the case was not always as brisk and effective as it should have been. The Chief Executive has acknowledged and apologised for the poor service Mrs Y received, given assurances of appropriate operational improvements and made Mrs Y an ex gratia payment of £250 in recognition of the difficulties she experienced as a result of LAB's shortcomings. I welcome those measures. There remains the question of whether LAB's delays and errors caused Mrs Y any financial loss for which LAB should compensate her. In the light of Mrs Y's comment to DRD that her opponent would not pay his share of the costs if he could avoid doing so, and the extent to which subsequent events, culminating in his declaration of bankruptcy, bore that out, I cannot say even on the balance of probabilities that DRD would have obtained any payment from him had they acted sooner. Subject to paragraph 7.25 below, therefore, I regarded the Chief Executive's undertaking to examine the matter further when the final position regarding recovery of the costs had been established as having been the correct approach as far as the effect of delays by LAB was concerned.
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7.25 The Chief Executive did not initially accept that any loss resulting from the return by DRD on 15 December 1997 of the payment of £4,000 was attributable to LAB. As I see it, Mrs Y succeeded, largely through her own efforts and those of solicitors C, in obtaining a payment from her opponent. In my view Mrs Y was entitled to be given time to consider her position, and DRD's return of the payment without giving her that opportunity was maladministrative. As matters now stand the prospect of recovery of the costs has been diminished. I find it unjust that Mrs Y should bear that consequence. I therefore asked the Chief Executive if, in view of the fact that DRD's poor handling had denied Mrs Y an opportunity of reducing her debt to LAB by £4,000 on 15 December 1997, LAB would on an ex gratia basis reduce the statutory charge against Mrs Y's home by £4,000 plus the interest which would have accrued on that amount since 15 December 1997. The Chief Executive agreed, subject to an undertaking from Mrs Y that she would in the event of a subsequent recovery of any part of the costs ordered to be paid by the opponent remit those monies to LAB forthwith by way of a refund of the £4,000. I welcome that.
Conclusion
7.26 LAB were not at fault regarding payment of the costs of Mrs Y's previous solicitors and although there were deficiencies in their communication with her about the statutory charge those did not disadvantage her financially. However, there was significant delay by LAB in pursuing the costs owed by Mrs Y's opponent, and they mishandled the opponent's offer to pay £4,000 towards those costs in December 1997. The Chief Executive of LAB has apologised for the shortcomings identified, and I now pass on those apologies to Mrs Y through this report. The Chief Executive has also given assurances of subsequent improvements to procedures in the relevant areas; LAB have made Mrs Y an ex gratia payment of £250; and have agreed on an ex gratia basis to reduce the statutory charge against Mrs Y's home by £4,000 plus interest since December 1997, subject to an undertaking from Mrs Y to refund the £4,000 from any money subsequently obtained from the opponent towards the costs. I regard that as a satisfactory outcome to a partly justified complaint.
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