BRIEFING PAPER Number 06537, 17 December 2015 Paying the statutory charge: legal aid in England and Wales By Gabrielle Garton Grimwood Inside: 1. What is the statutory charge in civil cases? 2. What is the statutory charge in criminal cases? 3. Why is the Legal Aid Agency seeking repayment of the statutory charge now? www.parliament.uk/commons-library intranet.parliament.uk/commons-library papers@parliament.uk @commonslibrary
Number 06537, 17 December 2015 2 Contents Summary 3 1. What is the statutory charge in civil cases? 4 1.1 Exceptions and waivers 5 2. What is the statutory charge in criminal cases? 6 2.1 Means testing for criminal legal aid 6 Capital contribution orders 7 3. Why is the Legal Aid Agency seeking repayment of the statutory charge now? 8 Cover page image copyright: Royal Courts of Justice by Joe Dunckley. Licensed under CC BY 2.0 / image cropped.
3 Paying the statutory charge: legal aid in England and Wales Summary For some individuals, legal aid is provided at no cost. Others may, at the end of their case, have to repay some or all of the costs. Since 1 April 2013, repayment arrangements have operated under the Legal Aid, Sentencing and Punishment of Offenders Act 2012. In civil cases, individuals who keep or retain money or property (for example in claims for financial provision on divorce) may, at the end of their case, have to repay some or all of their legal aid costs. The Legal Aid Agency will make a charge or claim known as the statutory charge on the individual s money or property. This may be done at the conclusion of the case or (sometimes) several years afterwards. Regulations made under the 2012 Act allow for certain exceptions and partial exceptions to the statutory charge; all or part of it may be waived where its enforcement would cause grave hardship or distress to a legally-aided party or would be unreasonably difficult because of the nature of the property. In criminal cases, a capital contribution order may be made where the director of legal aid casework determines that an individual should contribute towards the cost of their legal aid. There is no scope to waive such an order. Where there is a debt and an individual informs the collection agency that they are unable (for example) to release equity to repay the debt, the collection agency will apply to have a charge placed on the property, so that the debt can be paid at such time as the property changes hands. The debt will attract interest. This note describes how the statutory charge may be levied.
Number 06537, 17 December 2015 4 1. What is the statutory charge in civil cases? The statutory charge is a charge which may be levied at the conclusion of a case in which someone has won (or retained) money or property. The Legal Aid Agency s (LAA) leaflet Paying for your civil legal aid: Information for legal aid applicants summarises how this works: 3. What do I have to pay? This depends on the outcome of the case. If you have kept or gained money or property from the case, you will need to repay your legal aid costs to the LAA after the case ends. This is done through the statutory charge. The charge is made by law on the money or property concerned. (...) 4. What happens if I keep or gain property? In either of the following circumstances, the LAA may allow you to repay your legal aid costs at a later date if this is reasonable: If you keep or gain property that is to be used as your home at the end of your case. If you gain money in a financial settlement that is to be used to buy a home. The LAA will register a charge on your home, similar to a mortgage, with the Land Registry to secure the debt. Interest currently 8% is charged on this debt. 1 The Explanatory Memorandum to the Civil Legal Aid (Statutory Charge) Regulations 2013 summarises the circumstances in which repayment of the statutory charge may be postponed: 7.7 Part 3 also allows the Lord Chancellor to postpone payment of the statutory charge where it attaches to a home. This will only happen where certain conditions are met including where the property is to be used by the legally aided party s dependants and where it would be unreasonable for the legally aided party to repay the amount of the charge at the conclusion of the proceedings. 2 The Land Registry in 2012 published a Public Guide to applications by the LSC 3 to protect a statutory charge. 4 In reply to a Parliamentary Question in March 2012, the junior justice minister at the time, Jonathan Djanogly, said that statutory charges would normally be repaid immediately but, where they were not, would attract simple interest: 1 Undated 2 SI 2013/503 3 Legal Services Commission, replaced (under provisions in the Legal Aid, Sentencing and Punishment of Offenders Act 2012) by the Legal Aid Agency 4 Land Registry Public Guide 23C (LSC) Applications by the Legal Services Commission for a restriction to protect a statutory charge arising under the Legal Services Act 1988 or the Access to Justice Act 1999, July 2012
5 Paying the statutory charge: legal aid in England and Wales Payment of the statutory charge in respect of the legal aid fund must normally be made immediately. Where the charge attaches to property which is being used as the home of the person liable to pay it, or (in family proceedings) money which is to be used to buy a home, enforcement of the charge may be postponed where it would be unreasonable for the client to repay the relevant amount. In those circumstances simple interest is payable at the rate of 8% a year. 5 Jonathan Djanogly suggested that the present interest rate of 8 per cent per annum was intended to encourage people owing money to pay promptly: The rate of 8% simple interest is designed to encourage those who can raise private funds to repay their statutory charge, either through extending their mortgage, or lending from a reputable bank, to do so. Money recovered helps to keep legal aid on a sustainable footing, which reduces demand on the taxpayer. 6 1.1 Exceptions and waivers There are some, limited circumstances in which the statutory charge does not apply. The Civil Legal Aid (Statutory Charge) Regulations 2013 set out the exceptions (paragraph 5) and partial exceptions (paragraph 6) to the statutory charge. 7 Paragraph 8 makes provision for all or part of the statutory charge to be waived where its enforcement would cause grave hardship or distress to a legally-aided party or would be unreasonably difficult because of the nature of the property. 5 HC Deb 13 March 2012 c217w 6 HC Deb 27 March 2012 c1076w 7 SI 2013/503
Number 06537, 17 December 2015 6 2. What is the statutory charge in criminal cases? As with civil legal aid, individuals receiving legal aid in criminal cases may be required to contribute to the cost of their representation. 2.1 Means testing for criminal legal aid Citizens Advice provides information on help with legal costs legal aid, including the types of help that might be available in criminal cases. The Criminal Legal Aid Manual sets out the key differences between the magistrates and Crown Court schemes. 8 The gov.uk website offers further guidance to help providers work out who qualifies for criminal legal aid. The gov.uk website offers detailed guidance on means testing for criminal legal aid. The Criminal Legal Aid (Financial Resources) Regulations 2013 deal with financial eligibility. 9 Part 2 deals with advice and assistance, where financial eligibility is assessed according to disposable income and disposable capital: Disposable income and disposable capital 6. (1) Subject to regulation 14, the disposable income of an individual under this Part is that individual s total income from all sources during the period of calculation after the Director has deducted any amount in accordance with regulations 11 and 12. (2) Subject to regulation 14, the disposable capital of an individual under this Part is the amount or value of every resource of a capital nature of that individual, after the Director has deducted any amount in accordance with regulation 13. Part 3 of the regulations deals with representation and likewise makes provision for financial eligibility. Individuals must inform the LAA if their financial circumstances change in a way that might affect their eligibility for legal aid. The regulations also provide for the reassessment of financial resources where (for example) there has been an error or new information has emerged: Reassessment of financial resources 24. (1) Where it appears to the Director (a) that there has been some error in the assessment of an individual s financial resources; or (b) new information which is relevant to an individual s application for a determination by the Director under section 16 of the Act has come to light (whether under regulation 26 or otherwise), the Director must reassess the individual s financial resources. (2) If the Director has reassessed the individual s financial resources in accordance with paragraph (1) and determines that an individual s financial resources are such that the individual is no 8 Legal Aid Agency, August 2015: page 45 9 SI 2013/471
7 Paying the statutory charge: legal aid in England and Wales longer eligible in accordance with section 21(1) of the Act for representation under section 16 of the Act, the Director must withdraw the individual s determination. Capital contribution orders The Criminal Legal Aid (Contribution Orders) Regulations 2013 provide for the director of legal aid casework to determine whether an individual should make a contribution towards the cost of their legal aid in the Crown Court. The director of legal aid casework may make a new determination of the individual s liability to repay legal aid following a reassessment of their income 10 or capital. 11 The director may also seek to recover overdue sums, which are recoverable summarily as a civil debt. 12 The Explanatory Notes to the regulations set out how CCOs are applied. If there are enforcement costs, these may be added to the amount payable: Once proceedings have concluded, if an individual is convicted, then the individual may be liable [to] make a contribution from their capital assets up to the full amount of the individual s defence costs, under a capital contribution order (CCO). If an individual fails to pay a contribution as required, then enforcement action may be taken and the costs of enforcement may be added to the amount payable by the individual. 13 The prisoners organisation Unlock also has a webpage on criminal legal aid/contributions to legal aid, which describes CCOs. There is no scope to waive a CCO. If an individual is unable to pay then, in practice, the matter will be passed to the Rossendale collection agency. Where an individual informs the collection agency that they are unable (for example) to release equity to repay the debt, the collection agency will apply to have a charge placed on the property, so that the debt can be paid at such time as the property changes hands. The debt will attract interest. 10 SI 2013/483: regulation 19 11 SI 2013/483: regulation 35 12 SI 2013/483: regulation 46 13 Paragraph 7.3
Number 06537, 17 December 2015 8 3. Why is the Legal Aid Agency seeking repayment of the statutory charge now? Since 2000, the LSC and more recently the LAA have been trying to recoup the money owed to the public purse via the statutory charge. In recent years, the LAA has been asking about the financial circumstances of people against whom a statutory charge has been registered, to ascertain whether they are now in a position to pay, whether by paying the debt in full or by setting up a standing order to pay in instalments. Some constituents have expressed concern that they are being asked to repay the statutory charge, even though (perhaps) the matrimonial home they retained in a divorce settlement has not been sold. For civil matters, the LAA s leaflet Paying for your civil legal aid: Information for legal aid applicants provides contact details in case of queries about money owed. Any constituent who has received a request from the Agency for information about their financial circumstances or for repayment of the statutory charge might protect their interests by seeking both legal and independent financial advice.
9 Paying the statutory charge: legal aid in England and Wales
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