Family law no island: Statutory charge or Pyrrhic damages
Posted on 22nd Mar 2017 in Family Law
Continuing his series discussing the impact on family law and practice of legal developments in other areas, David Burrows considers the origins of the legal aid statutory charge in an old common law remedy developed in cases by reference to which the statutory provisions should still be construed.
Human Rights Act 1998 damages and legal aid
It is often said the old jokes are the best. So it is of case law; but only occasionally of wine. Of the legal aid statutory charge it is not only that the old cases are the best. Judging by recent statutory charge cases, and by what is referred to by judges in their judgments, lawyers and government bodies are not looking at their older – but still alive and kicking – ICLR sources.
The statutory charge, whether legal aid or in private paying proceedings, is derived from an old equitable remedy, namely the solicitor’s lien on property – which includes money or damages – recovered or preserved for the client thanks to his/her work. In Foxon v Gascoigne (1874) LR 9 Ch App 654, 657 Sir George Jessel MR described the lien:
Now, what does that expression ‘actual recovery or preservation’ mean? Generally, I apprehend, it means that where the plaintiff claims property, and establishes a right to the ownership of the property in some shape or other, there the property has been recovered; that where a defendant’s right to the ownership of property is disputed, and that right has been vindicated by the proceedings, there the property has been preserved.”
This is the lien which is now in statute as Solicitors Act 1974 s 73 for private costs and as Legal Aid Sentencing and Punishment of Offenders Act 2012 (“LASPOA 2012”) s 25(1) for money due to Legal Aid Agency (“LAA”). It applies to money (eg damages or a matrimonial case lump sum) in exactly the same way as it applies to property; and is designed to give lawyers (in private cases) or the legal aid fund (where a person has legal aid) a first claim on any cash or property before the client gets to it.
In both private and legal aid cases the statutory origins are in a common law remedy (see eg Lord Lowrie in Hanlon (below) at 189H). Therefore, unless the common law position, as recorded in statute, is expressly changed by Parliament, it must be construed according to existing earlier case law (see eg R v Secretary of State for the Home Department, ex p Simms  UKHL 33;  2 AC 115 eg per Lord Hoffman at 131).
Solicitors Act 1974 s 73 provides:
(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…”
LASPOA 2012 s 25(1) is:
(1) Where civil legal services are made available to an individual under this Part, the amounts [due to Lord Chancellor] are to constitute a first charge on – (a) any property recovered or preserved by the individual in proceedings, or in any compromise or settlement of a dispute, in connection with which the services were provided (whether the property is recovered or preserved for the individual or another person).”
Recent case law: statutory charge and family proceedings
As will be seen from recent case law considered here, recent Human Rights Act 1998 (“HRA”) damages cases have failed altogether to consider earlier still applicable case law to explain the meaning and operation of the charge. This must always be done by reference not only to earlier case law but to the underlying solicitors’ lien principles (see eg most recently Morgan v Legal Aid Board  EWHC 462 (Ch);  1 WLR 1657, Neuberger J).
For family lawyers the statutory charge issue – prevalent pre-LASPOA 2012 in financial relief cases, where the former matrimonial home was recovered or preserved in proceedings – has revived in care proceedings. This is where a parent or child seeks maladministration damages for the local authority (HRA 1998 s 8); and where, if they are successful, the LAA say their charge extends to the money recovered in the HRA proceedings.
In each case a parent or child, or both, was seeking damages under Human Rights Act 1998 s 8(2), which, with s 8(1), says:
8 Judicial remedies
(1) In relation to any act (or proposed act) of a public authority which the court finds is (or would be) unlawful, it may grant such relief or remedy, or make such order, within its powers as it considers just and appropriate.
(2) But damages may be awarded only by a court which has power to award damages, or to order the payment of compensation, in civil proceedings.”
Thus, in three recent family cases, the pendulum – it really is a pendulum – of judicial approach to the law has swung between Cobb J and Keehan J in such a way that it is tempting to fear, respectfully (of course), that the judges were not referred to older relevant case law:
- In P v A Local Authority  EWHC 2779 (Fam);  4 WLR 180, Keehan J considered an application by the Lord Chancellor that the charge applied, in HRA damages proceedings (for which LAA had refused legal aid) and where these followed legally aided wardship proceedings. He said no.
- By contrast, in CZ (Human Rights Claim: Costs)  EWFC 11 a HRA damages claim was said by Cobb J, on application by the LAA, to attract the charge for the parallel care proceedings.
- H (A Minor) v Northamptonshire County Council  EWHC 282 (Fam) comes between. The Lord Chancellor – or her advisers – changed their mind at the eleventh hour. She conceded that the charge did not apply, where they had issued a certificate for the damages proceedings separate from care proceedings.
In R (Faulkner) v Director of Legal Aid Casework  EWHC 717 (Admin);  4 WLR 178, Mostyn J took an entirely conventional – and correct (it is respectfully asserted) – line. The charge applied to Mr Faulkner’s damages (the judge’s job was made easier still by Mr Faulkner’s counsel having told the Supreme Court (in an earlier round of his litigation) that the charge would operate.
As far as I can see from the reports of these cases no reference was made to pre-2012 case law; and yet to construe legislation which – with modern amendments to language – merely reproduces the old (for example the terms of Legal Aid Act 1974 s 9(6) and of s 73 (as relevant) are the same as LASPOA 2012 s 25(1)), seems to me to be poor practice by the advocates involved.
Human Rights Act 1998 damages and care proceedings
The problem arises in particular in relation to claims following care proceedings where children and parents are respectively represented. In cases where the local authority have breached a European Convention 1950 right (eg taking a child away in breach of respect for family life: HRA and Art 8; as happened in CZ (Human Rights Claim: Costs) (above), Cobb J) the parties may go on to claim a declaration that a local authority have acted unlawfully (HRA ss 6 and 7) and that they be paid damages (s 8(1) and (2)). They may have legal aid for that also. Some lawyers – unwisely I believe: see below – have merely amended their certificates, and pressed on under HRA.
Legal aid for care proceedings is granted regardless of means or of the merit. Costs are often high and will generally exceed the amount of the modest damages awarded under HRA s 8(4). Even if costs are awarded to the ‘successful’ party, the damages – if subject to the charge in relation to the care proceedings – will almost invariably be more than swallowed up by the charge (as Cobb J said was to be the position in CZ (above)). The damages claim becomes a Pyrrhic exercise.
When can the statutory charge apply?
The statutory charge has been part of legal aid legislation since the earliest Legal Aid Act in 1949. It puts the Lord Chancellor in the same position that lawyers would be under the solicitor’s lien (now Solicitors Act 1974 s 73). To define whether the charge applies four questions must be asked. These are extracted from Hanlon v The Law Society  AC 124 (the Law Society was then responsible for legal aid); though Hanlon seems not to have been referred to in any of the above four cases. Hanlon related to the charge under Legal Aid Act 1974 s 9(6); but for all material purposes the charge is defined in the same way in s 25(1), so Hanlon can be treated as the law today.
In Hanlon a nurse petitioner (represented in all higher courts by Sir Nicholas Wall P (as he then was not) who was lead in the House of Lords by Joseph Jackson QC) had legal aid for matrimonial proceedings where she had also been involved in defended divorce and custody proceedings; and in which she (famously at the time: Hanlon v Hanlon  EWCA Civ 10;  1 WLR 592) secured an outright transfer of her former matrimonial home. How much of the costs of these various proceedings applied for the charge? The following issues arose for an answer to that question:
Does the statutory charge apply in legally aided proceedings?
(1) What are the ‘proceedings’? – The starting point for definition of the extent of the charge is: what is the scope of the legal aid certificate (ie the proceedings which it covers, and see Lord Scarman in Hanlon v Law Society at 186G-H). The scope of a legal aid certificate is akin to the solicitors’ retainer for work to be done for a client. If there are separate proceedings (eg for ‘civil proceedings’ under HRA 1998 s 8(2) (below)) then different principles for definition of s 25(1)(a) ‘proceedings’ apply.
(2) What is ‘the property’? – ‘Property’ is any property or money (eg a lump sum in matrimonial proceedings or damages) which was in issue between the parties in the proceedings (or included as a ‘compromise or settlement’ (s 25(1)(a)) of any proceedings: Van Hoorn v The Law Society  FLR 203).
(3) Was the property in issue in the proceedings (or part of a ‘compromise or settlement’ of the case)? – Whether the charge applies to particular property turns on whether or not it was in issue in the proceedings for which the certificate was granted (Watkinson v Legal Aid Board  1 WLR 419;  2 FLR 26 CA). ‘What has been in issue is to be collected as a matter of fact from pleadings, evidence, judgment and/or order’ (per Lord Simon in Hanlon v Law Society at 180H). It is the proceedings (ie the lis) between the parties which defines the proceedings. In the case of HRA 1998 s 8(1) damages cases, the lis is between the claimant (parents and/or child) and the local authority; and the costs (subject to the ‘separate proceedings’ point below) can be the costs only in the ‘civil proceedings’.
(4) Was the ‘property recovered or preserved’? – Property is only ‘recovered or preserved’ if it is in issue in, or part of a compromise of, proceedings: ‘A person recovers or preserves in legal proceedings only what is in issue between the parties’ (Lord Scarman in Hanlon at 187G). Property is recovered if a person takes proceedings to convert it to his own use – eg a property adjustment order (Curling v Law Society  FLR 831, CA); property is preserved if a person successfully resists a claim to his property – eg an order for sale or (Parkes v Legal Aid Board  1 FLR 77, CA).
Only proceedings which are covered by a legal aid certificate are subject to the charge (Hanlon v Law Society (above)). So what happens where – as under review here – care proceedings and HRA 1998 damages are involved? Can the statutory charge apply to costs in the children proceedings, attaching to the HRA damages? Yes says Cobb J (CZ (above)); no said the Lord Chancellor in H v Northants (above). Taking account of Hanlon v Law Society the question turns, in my opinion, on whether there are separate proceedings. This is not an issue which has been addressed clearly by the family judges in the cases I have mentioned.
But why ‘family judges’, at all? HRA 1998 s 8(1) and (2) says that the court can award such damages ‘within its powers as it considers just and appropriate; but ‘(2) … damages may be awarded only by a court which has power to award damages… in civil proceedings’. Family courts have no power to deal with non-family ‘civil proceedings’ (the types of case they can take on are listed in Senior Courts Act 1981 Sch 1 para 3). In Anufrijeva and anor v Southwark London Borough Council  EWCA Civ 1406,  QB 1124 the Court of Appeal said applications should be made in the Administrative Court; but certainly it must be under Civil Procedure Rules 1998). It seems, perhaps, that family courts judges – unless where a case is transferred to a family judge with an Administrative Court ticket – should not be dealing with these cases at all. Legal aid for care proceedings in the family courts is one thing. Legal aid for damages should be in a separate court under CPR 1998 (as was Faulkner (above), for example); and under a separate legal aid certificate.
If proceedings are separate the statutory charge costs can only relate only to those separate (ie not to any parallel) proceedings. Costs of care proceedings could not be charged against HRA 1998 damages. Such damages can only be claimed in ‘civil proceedings’ in a court which ‘has power to award damages’ (HRA 1998 s 8(2)), which family courts do not have. Proceedings must be issued under (i) CPR 1998 Pt 8 (or Pt 54: per Anufrijeva) if facts are agreed); or (ii) CPR 1998 Pt 8 and r 21.10 (X v Dartford and Gravesham NHS Trust (Personal Injury Bar Association and another intervening)  EWCA Civ 96,  1 WLR 3647) and PJS v News Group Newspapers Ltd  UKSC 26,  AC 1081 for anonymity of any child or adults).
And then there are Civil Legal Aid (Procedure) Regulations 2012 (SI 2012/3098) (in Hanlon their Lordships explain how regs can be used to explain primary legislation: see eg Lord Scarman at 186 E). The 2012 Regulations govern the conduct of civil legal services (ie legal aid casework) including reg 38(3) (as amended; emphasis added):
“(3) … the Director must issue a separate certificate for each—
(a) form of civil legal services for which the individual qualifies; and
(b) set of proceedings to which a determination relates, unless the Director decides that the proceedings are so closely connected that they should be covered by a single certificate.”
Even if the Legal Aid Agency say HRA damages proceedings are ‘closely connected’ (per reg 38(3)(b); and I am waiting to hear whether any guidance is issued on this) they remain ‘separate’ within the terms of Hanlon v Law Society; and should not be dealt with under an amended certificate if there is any doubt (Watkinson v Legal Aid Board (above), CA).
Statutory charge and HRA damages
If the steps derived from Hanlon v Law Society are followed; and the proceedings are indeed separate – which, in the case of a damages claim under HRA s 8, they must be, I believe – then damages are exempt from the statutory charge for care proceedings. The charge can arise only to the relatively trivial extent that there is any short-fall between costs payable by the defendant and what is paid by LAA for the legal services.
And if, after all that, the LAA says they think that by using a separate legal aid certificate you have been massaging the legal aid provisions to evade the legal aid statutory charge, then it is back to the law reports:
- Manley v Law Society  1 WLR 335, CA
- Davy-Chiesman v Davy-Chiesman  Fam 48,  1 WLR 291, CA
- Clark v Clark (No 2)  1 FLR 179, Booth J
- Watkinson v Legal Aid Board (above)
These cases will explain to you the difference between evading the charge; and – as with tax advice – permissible statutory charge avoidance (especially Watkinson in the case of separate legal aid certificates). But that is for another day….
David Burrows is a solicitor advocate, trainer and writer. His book Evidence in Family Proceedings was published by LexisNexis/Family Law last year.
He writes a blog at DB Family Law
Links in the above article to statutes go to either www.legislation.gov.uk, links to rules of court go to www.justice.gov.uk and links to cases (where available) on BAILII. Citations to ICLR law reports may be used on ICLR Online but require a subscription. (There are links to them from any judgment also available on BAILII.) FLR reports are available via LexisNexis (by subscription).