THE FUNDING OF LEGAL SERVICES

THE FUNDING OF
LEGAL SERVICES 14

Legal aid (now called public funding) was introduced after the Second World War to enable people who could not otherwise afford the services of lawyers to be provided with those services by the State. The system and costs grew enormously over the decades. The system underwent various restrictions and cutbacks during the late 1990s and was replaced by other systems like the Community Legal Service (2000) and the Criminal Defence Service (2001). The term ‘legal aid’ is still used as a descriptive, non-technical term to refer to State-funded services. It is run by the Legal Services Commission (LSC) and assists over two million people each year.

The importance of the system was neatly encapsulated by Tim Dutton, QC as Chairman of the Bar Council in 2008. He noted ((2008) NLJ 1031):

Following legal aid reforms suggested by Lord Carter in his report, ‘Legal Aid – A market-based approach to reform’, which was published on 13 July 2006, there were numerous changes made to the legal aid system (see 14.3). This chapter examines all the major elements of state-funded legal services. It also examines the alternative system of funding – conditional fee arrangements – under which payment to lawyers is made dependent on particular results.

The proposals in a report of a review team under Lord Carter of Coles (Procurement of Criminal Defence Services: Market-based reform, 2006) are being gradually implemented and are set to make substantial changes to the system. The system advocated by Carter is one where lawyers have to bid competitively to win contracts for doing criminal legal aid work. Under this new market-based model, all criminal legal aid lawyers are paid fixed fees – rather than being paid by time spent – and compete for contracts for work in police stations and courts.

The reforms prevent the highest-earning barristers being paid, £1 million a year from legal aid as used to be case. Such a reorganisation could halve the number of the 2,500 legal aid firms and cause wide-scale mergers.

Most criminal trials are now covered by fixed fees, but fees in the long and most complex criminal trials are still the subject of negotiation between the Government and the professional bodies.

Legal aid work does not provide the lucrative million-pound briefs of the commercial or chancery bar. It is work done by about a third of the Bar – with a higher proportion of young, women and ethnic minority barristers. They choose it because they are committed, as Peter Lodder, QC puts it, ‘to serving the public, are conscientious and prepared to put something back into the system’ (Frances Gibb, ‘Counting the cost of reforms’, The Times, 11 September 2008).

There are several State-funded schemes to facilitate the provision of aid and advice. Each scheme has different rules relating to its scope, procedures for application and eligibility. Because of the importance of justice and access to the legal machinery, the idea behind legal aid is to give people who could otherwise not afford professional legal help the same services as more wealthy citizens. This raises important social, political and economic questions. Do poorer people deserve the same quality of legal advice as that which can be afforded by wealthy people? If so, how should such schemes be funded? The LSC, in its strategic plan published in April 2009 for the period 2009–2012, has a vision of ‘fair access to justice to the people who need it but can least afford it’.

Part I of the 1999 Act established a Legal Services Commission (LSC) to maintain and develop the Community Legal Service (CLS) and the Criminal Defence Service (CDS), which replaced the Civil and Criminal Legal Aid schemes, respectively. The Act also enabled the Lord Chancellor to give the Commission orders, directions and guidance about how it should exercise its functions. The Community Legal Service Fund replaced the legal aid fund in civil and family cases. The Commission uses the resources of the Fund in a way that reflects priorities set by the Lord Chancellor, and its duty to secure the best possible value for money, to procure or provide a range of legal services. The Commission also has a duty to liaise with other funders of legal services to facilitate the development of co-ordinated plans for making the best use of all available resources. The strategy is to develop a network of legal service providers of assured quality, offering the widest possible access to information and advice about the law, and assistance with legal problems. The CDS is intended to ensure that people suspected or accused of a crime are properly represented, while securing better value for money than was possible under the legal aid scheme.

14.3.1 CONTROLLED AND LICENSED WORK

As noted at 14.2 above, legal aid funding was granted on a case-by-case basis until the system of franchising was introduced in August 1994, where firms of solicitors meeting certain requirements were able to contract to undertake certain cases without prior approval, and claim funding on a more advantageous basis than previously. This franchise or ‘contract’ system has formed the basis of the legal aid scheme.

Funded services for all civil contract work fall under the headings of ‘controlled work’ and ‘licensed work’. In family cases controlled work covers legal help, family help (lower) and legal representation. In non-family cases there are three levels of service for controlled work: legal help, help at court and controlled legal representation, which includes legal representation before a mental health review tribunal or the asylum and immigration tribunal. For controlled work the decision about whether to provide services in a particular case is made by the supplier, who is either a solicitor or a not-forprofit organisation, such as a law centre or Citizens’ Advice Bureau (discussed below, at 14.10.2). They bid for a contract to provide legal services funded by the LSC to the Regional Legal Services Committees. Under the contract, the number of cases that may be undertaken by the suppliers is limited.

• Terrorism and Serious Fraud Office (SFO) if anticipated to last between 25 and 40 days and if two of the following apply:

(a)    at least 10,000 pages of prosecution evidence;

(b)    at least 10,000 pages of unused or third party material;

(c)    more than five defendants;

(d)    fraud or serious drugs cases where the value of the fraud or drugs exceeds £1m.

Providers must notify the Complex Crime Unit (CCU) if they are instructed on VHCC criteria. A panel scheme commenced on 14 January 2008 for VHCC criminal cases and was suspended from 14 July 2010 when such cases became subject to an individual case contracting arrangement. Under the 2010 scheme organisations and individuals must obtain VHCC accreditation to undertake this work. VHCC was reintroduced in December 2006 for family cases. In civil cases, the LSC’s Special Cases Unit (SCU) is responsible for managing VHCC, which fall into four categories:

• individual VHCC, which is where costs are expected to exceed £25,000, such as child care proceedings;

• multi-party actions, which can range from 10 to 1,000 claimant actions;

• exceptional funding cases, which is where funding is approved outside the funding code;

• exceptional ‘one off’ contracts with firms without franchises, such as where clients run out of money during a case and the firm has no franchise.

The VHCC is subject to a consultation for a new and better scheme that was due to be completed by 13 July 2009. The consultation has not been completed and the current interim scheme will continue for another year to allow further VHCC cases to be undertaken.

In family cases, licensed work covers family help (higher) and legal representation other than matters that are dealt with by an individual case contract. In non-family cases, legal representation can be either for investigative help or full representation.

14.3.2 CONTRACTING

The contract for civil work used to be carried out under a General Civil Contract under the CLS. However, this has now been replaced by a new Unified Contract, which is discussed below, at 14.3.3.

The current contract for criminal work is covered by a General Criminal Contract, under the CDS. This contract was in place prior to the legal aid reform programme. As a result of The Law Society’s judicial review of the civil Unified Contract (see paragraph 14.3.3) this General Criminal Contract was terminated on 13 January 2008. An open tender process commenced in late September 2007 for a new six-month contract commencing 14 January 2008, which incorporated the new reforms for criminal legal aid. The LSC introduced the Unified Contract for criminal work in July 2008, and agreed a civil contract scheme in the same month ((2008) NLJ 494–5). All criminal legal aid providers had to sign a new contract from 14 July 2010 and on 1 September 2011 the LSC published amendments to the contract relating to fees that took effect from October 2011. The 2010 contract introduced standard terms that the LSC introduced to its three main contracts, namely civil, crime and VHCC (crime). The Unified Contract (Civil) will also be subject to changes to fees from 2011. A further judicial review in September 2010 in relation to family legal aid was successful (see paragraph 14.3.3). This has prevented the start of the 2010 family contract. On 5 September 2011 the LSC published an invitation to tender for new contracts for Family Services and Family with Housing to commence in February 2012.

On 20 July 2009 the LSC published its response to the second stage of proposals to introduce Best Value Tendering (BVT). The plan was to set up BVT pilot schemes in Greater Manchester and Avon & Somerset for defence work in police stations and magistrates’ courts. The pilot schemes were to commence in July 2010, fully evaluated and, if successful, will be introduced throughout the country by 2013. Following concerns of practitioners the LSC confirmed to The Law Society (by letter dated 13 August 2009 and published on The Law Society website) that they would extend the evaluation period and not extend it to other CJS areas before 2013. The Law Society then announced on 17 December 2009 that the government was going to drop the plans for the BVT pilot.

A contract may be awarded to allow a supplier to undertake work within one or more categories. The contract will state the categories and terms under which the supplier may provide legal advice and representation. The purpose of specifying categories in respect of civil contracts is to ensure an appropriate distribution of legal and advice services to meet demand in each region.

In order to assess demand and ensure that the right kind of services are available to meet the needs of a region, Community Legal Service Partnerships (CLSPs) were set up. The purpose of CLSPs is to provide a forum, in each local authority area, for the local authority and the LSC, and if possible other significant funders, to come together to co-ordinate funding and planning of local legal and advice services, to ensure that delivery of services better matches local needs. The Commission and the CLSPs were intended to encourage innovation by the voluntary sector in the delivery of advice, through increased use of information technology and mobile ‘outreach’ services providing help to people in remote communities.

Overall, the intention was to:

• make best use of all the resources available for funding legal services, by facilitating a co-ordinated approach to planning;

• improve value for money through contracting and the development of quality assurance systems;

• establish a flexible system for allocating central government funding, in a rational and transparent way within a controlled budget, so as to provide legal services where they are judged to be most needed; and

• ensure that the scheme is capable of adapting to meet changing priorities and opportunities.

The establishment of CLSPs was ahead of schedule. However, the LSC no longer facilitates CLSPs and the LSC has asked each CLSP to consider whether it has a viable role as a provider forum.

The service provided may be at different levels depending on the case. The different levels of service are:

Legal Help : this is the provision of initial advice and assistance.

Help at Court : this enables a solicitor or adviser to speak on behalf of a person at certain court hearings without formally acting for that person in the whole proceedings.

Approved Family Help : this is the provision of help in relation to family disputes including the resolution of the matter by negotiation or otherwise. This covers initial advice and assistance, issuing proceedings and representation where necessary in order to obtain disclosure of information from another party or to obtain a consent order when matters in dispute have been agreed. It is available in two forms: Help with Mediation where a person is attending mediation sessions and General Family Help.

Family Mediation : this covers mediation for a family dispute, including finding out whether mediation is suitable or not.

Legal Representation : under this, a person can be represented in court. It is available in two forms:

Support Funding : this provides partial funding for very expensive cases, which are otherwise funded privately. It is available in two forms:

14.3.3 UNIFIED CONTRACT

Since 1 April 2007, Unified Contracts have replaced the General Civil Contract and Family Mediation Contracts, which expired on 31 March 2007. There was initial opposition to the new civil contract from practitioners. However, this has been mostly overcome and now in excess of 90 per cent of legal aid law firms have signed up to this new contract. The Unified Contract contains five key documents:

• The Contract for Signature. This specifies the contract term (which will initially run to 31 March 2010) the parties, the contract documents and authorised signatories. It also contains key information tables and annexes relevant to each particular provider, along with key performance indicators (KPI) and payment provisions.

• Office Schedules. Every office of a provider will have a schedule to the contract (see below), which will run for a period of 12 months from 1 April to 31 March. This will contain details of matter starts, payment limits, outreach work and any special provisions applying to that particular office.

• Standard Terms. The new standard terms build on the terms of General Civil Contract and apply to all providers.

• Specification. This contains provisions about the performance of contract work and includes remuneration rates and runs alongside the Unified Contract standard terms. Since 1 October 2007, the General Civil Contract Specification has replaced the Unified Contract Specifications (Solicitor and NfP), which was in force from 1 April 2007. This has introduced new fee schemes, including fixed and graduated fees. The introduction of the new fee schemes is the result of legal aid reform recommended in Legal Aid: A market-based approach to reform in July 2006. It is anticipated that the new fee schemes will lead to greater competition among the providers, which in turn will produce good quality work and efficiency.

• Indemnities and Guarantees. The LSC may ask providers to give indemnities and guarantees.

The existing providers of the 2007 Unified Contract will have it extended until 14 November 2010 and new contracts will be issued to successful applicants from the following day.

According to the LSC website the Unified Contract (Civil) 2007 has been extended until 15 December 2010 for only the suppliers who currently deliver ‘family only’ and ‘family and housing’ publicly funded legal services. The quashing order issued by the High Court means that the LSC cannot proceed with awarding the 2010 Standard Civil Contracts in respect of those services to providers who were successful in the recent tender.

The aim of the Unified Contract is to put not-for-profit advisers on the same footing as solicitors who carry out civil legal aid work and to create greater efficiency when working with providers. It is anticipated that one way this will be achieved is by requiring providers to work with the LSC by means of email to reduce administrative time and costs. In addition, providers will be required to meet certain standards that are contained in KPIs.

Another major change to this new system is the move away from issuing separate contracts to each office of a provider and instead issuing a contract to the whole organisation of the provider with each contract containing a schedule detailing the work that an individual office can undertake. The LSC will be able to stipulate a minimum and maximum number of cases that an individual office may start each year.

The Unified Contract introduces new provisions on equality and diversity, which is likely to be a major benefit to legal aid clients. According to the LSC Executive Director of Policy, Richard Collins, the new contract is not expected to reduce the legal aid costs, but to make available a greater proportion of the current budget available for civil legal aid.

The new contract introduces new payment on account provisions. It is no longer possible to receive the £250 automatic payment on account that was made once a legal aid certificate was issued. Instead a claim can now be made in the first three months.

14.3.4 QUALITY MARK

In order to be a supplier under either the CLS or the CDS, the solicitor or not-for-profit organisation must achieve the minimum standards under the respective Quality Marks. There are three kinds of Quality Mark: information, general help and specialist help, with a supplier displaying an appropriately endorsed logo on its premises. A supplier of information will typically be a library and provide leaflets, reference material and access to the CLS or CDS Directory of Services. A supplier of general help will provide information and advice and will be a Citizens’ Advice Bureau or other advice agency. A supplier of specialist information will be a solicitor, a law centre, or some Citizens’ Advice Bureaux, and it will be able to give information and advice on a complex problem in a specialist legal area, which will be shown next to the supplier’s entry in the CLS or CDS Directory.

Since the introduction of Unified Contracts, suppliers will be required to meet the quality required under the key information tables set out in their contract. This Specialist Quality Mark is expected to be used by all providers (including those included on the Preferred Supplier Pilot) until the LSC only work with preferred suppliers. As part of the changes taking place in legal aid, the LSC set up a pilot preferred supplier scheme and now propose a national preferred supplier scheme. It is anticipated that having preferred suppliers will result in the consolidation of the market and improve value for money. The LSC proposes that the criteria for determining whether a supplier will qualify as a preferred supplier is by looking at KPIs such as success rates and bill assessment rates, file assessments and peer review.

As from 1 April 2000, the Legal Services Commission replaced the Legal Aid Board. It was considered necessary to establish a new body to reflect the fundamentally different nature of the CLS when compared to civil legal aid. Within the broad framework of priorities set by the Lord Chancellor, the Commission is responsible for taking detailed decisions about the allocation of resources. It is also required to liaise with other funders to develop the CLS more widely. The Commission has a wider role in respect of the CDS than the Legal Aid Board did in respect of Criminal Legal Aid. The Board had very limited responsibilities for legal aid in the higher criminal courts. Membership of the Commission differs from that of the old Legal Aid Board, to reflect a shift in focus from the needs of providers to the needs of users of legal services. Also, the Commission is smaller than the Board: 7–12 members rather than 11–17. This is intended to facilitate ‘focused decision making’.

Legal aid has been one of the fastest growing parts of the public sector over the past 25 years, and expenditure has increased at almost 6 per cent per year in real terms, compared to similar increases in health and education of approximately 4 per cent and 2 per cent respectively. At approximately £38 per head of the population, the LSC also spends more in England and Wales than is spent by any other jurisdiction for which comparative data is currently available.

According to the LSC’s annual report for 2009/10,

• legal aid funded over 2.965 million acts of assistance overall at a cost of £2,237 million;

• Criminal Defence Service (CDS see 14.7 below) providers delivered 1.53 million acts of assistance;

• the LSC held 2,390 (including 332 by not-for-profit organisations) civil and 1,679 criminal contracts for legal aid focusing on areas of most need at 31 March 2010;

• the LSC opened its first community legal advice network.

The LSC achieved 15 out of 22, partially achieved five and missed two key performance indicators in the year.

The LSC has two main duties in respect of the CLS:

• Second, as part of a wider CLS, the Commission has, in co-operation with local funders and interested bodies, developed local, regional and national plans to match the delivery of legal services to identified needs and priorities.

14.5.1 COMMUNITY LEGAL SERVICE CONTRACT

In carrying out the first duty of managing the CLS, the LSC developed the General Civil Contract to introduce contracting within the statutory framework created by the Access to Justice Act 1999, in effect since 1 January 2000. There are two versions of the General Civil Contract, one for solicitors and one for not-for-profit agencies, because of the differences in the terminology and methods of delivery used by these types of suppliers. An important aspect of the new scheme is that the right kind of services should be available to meet the needs of a region. In furtherance of this aim, the Commission published a Consultation Paper in 2002, setting out its proposals for establishing regional priorities for civil contracting through the production of Regional Legal Services Committees’ reports, Regional Directors’ contracting strategies and CLSPs. Following this consultation, the Commission has put in place a new process for the regional prioritisation of needs. As a result, new bid rules for the award of General Civil Contracts for Controlled Work apply as from 1 January 2003, although these were further revised on 1 April 2004 to reflect regional priorities and to hold a wider bidding process.

The new term for litigants who obtain LSC funding is ‘LSC funded clients’, and the fund out of which litigants who obtain LSC funding is referred to as the CLS Fund. Section 7 of the 1999 Act allows the Lord Chancellor, using regulations, to set financial eligibility limits. Therefore, an applicant must be able to show that his capital and income are within the current financial limits.

14.5.2 FINANCIAL ELIGIBILITY TEST

The Community Legal Service (Financial) (Amendment) Regulations 2007 (which amends the Community Legal Service (Financial) Regulations 2000) set out the thresholds for financial eligibility for all applications for funding made on or after 8 April 2008. The test uses the basic concepts of ‘disposable income’, that is, income available to a person after deducting essential living expenses; and ‘disposable capital’, that is, the assets owned by a person after essential items like a home. If a person could sell her home, pay off the mortgage and still have more than £100,000 left (called ‘equity’), then she will not qualify for aid.

• For all levels of service, there is (as of April 2011) a gross income cap of £2,657 per month. This cap may be increased by £222 per month for each child in excess of four. A client who is directly or indirectly in receipt of Income Support or income-based Jobseeker’s Allowance automatically satisfies the gross income test for all levels of service.

• For the service of Legal Help, Help at Court and Legal Representation before Immigration Adjudicators and the Immigration Appeal Tribunal, the disposable income must not exceed £733 per month. There is a capital limit of £3,000 for controlled legal representation in respect of immigration matters and £8,000 for all other levels of service. There is an intention that the £3,000 limit for immigration matters will be raised to £8,000 following consultation on a suitable scheme.

• For the service of Family Mediation, Help with Mediation and other Legal Representation (which may be subject to a contribution from income and capital), the disposable income must not exceed £733 per month and there is a capital limit of £8,000.

When assessing gross income and disposable income, State benefits under the Social Security Contributions and Benefits Act 1992 (Disability Living Allowance, Attendance Allowance, Constant Attendance Allowance, Invalid Care Allowance, Severe Disablement Allowance, Council Tax Benefit, Housing Benefit and any payment out of the social fund), back to work bonuses under the Job Seekers Act 1995, war and war widows’ pensions and fostering allowances are disregarded.

The only level of service assessed by the supplier for which contributions can be sought is Legal Representation in Specified Family Proceedings. However, provided that the client’s gross income is below the prescribed limit, clients with a disposable income of £315 or below per month will not need to pay any contributions from income, but may still have to pay a contribution from capital. A client with disposable income in excess of £315 and up to £733 per month will be liable to pay a monthly contribution of a proportion of the excess over £311, assessed in accordance with the following bands:

A client whose disposable capital exceeds £3,000 is required to pay a contribution of either the capital exceeding that sum or the likely maximum costs of the funded service, whichever is the lesser.

For example, if disposable income is £480 per month, the contribution will be in Band B, the excess income is £15 (£480 – £465), the monthly contribution would therefore be £43.50 (£38.50 + £5 [a third of the excess income]). The Community Legal Advice website has an online legal aid eligibility calculator to enable people to check whether they are likely to qualify financially.

Provided it is not disregarded as subject matter of the dispute, a client’s main or only dwelling in which he resides must be taken into account as capital, subject to the following rules:

(a) The dwelling should be valued at the amount for which it could be sold on the open market.

(b) The amount of any mortgage or charge registered on the property must be deducted, but the maximum amount that can be deducted for such a mortgage or charge is £100,000.

(c) The first £100,000 of the value of the client’s interest after making the above mortgage deduction must be disregarded.

The original proposal was that homeowners with £3,000 equity in their homes would be liable to make contributions to the cost of their legal aid. This was dropped following outrage by practitioners and legal interest groups, as it was said that such a move would effectively abolish legal aid for virtually all homeowners.

14.5.3 THE FUNDING CODE

In addition to financial eligibility, an applicant’s case must also satisfy a new merits test. The Commission prepared a Code (2007) which replaces, and is intended to be more flexible than, the merits test that was used for civil legal aid. The Code sets out the criteria for determining whether services funded by the CLS Fund should be provided in a particular case and, if so, what services it is appropriate to provide. The Code also sets out the procedures for making applications. In drafting the Code, the Commission was required to consider the extent to which the criteria for assessment should reflect the following factors (s 8 of the Access to Justice Act 1999):

The Code is required to reflect the principle that in many family disputes, mediation is more appropriate than court proceedings. This is intended to reinforce the development, under the Family Law Act 1996, of mediation as a means of resolving private law family disputes in a way that promotes as good a continuing relationship between the parties concerned as is possible in the circumstances. The government has argued that mediation is more constructive than adversarial court proceedings, and that litigation in these cases usually serves only to reinforce already entrenched positions and further damage the relationship between the parties. In addition, the cost of court proceedings is higher than that of mediation, and additional costs have to be borne by the property of the family, reducing the amount available to the parties and their children in future. The credibility of mediation as an appropriate forum for family matters in general suffered a blow in 1999, when the government abandoned plans to introduce the scheme related to divorce after pilot studies failed to produce good results.

The Commission revised the merits test for Controlled Legal Representation and issued guidance that came into force on 16 December 2002. The reform of the merits test, which regulates the demand that qualifies for help, is said by the government to complement the reforms of the supply of services – with the intention of creating a flexible system for deploying resources to meet a range of priorities within a controlled budget.

14.5.4 LEGAL SERVICES PROVIDED

Section 4 of the 1999 Act describes the services that may be provided under the CLS. These range from the provision of basic information about the law and legal services to providing help towards preventing or resolving disputes and enforcing decisions that have been reached. The scheme encompasses advice, assistance and representation by lawyers (which have long been available under the legal aid scheme), and also the services of non-lawyers. It will extend to other types of service including, for example, mediation in family or civil cases where appropriate.

Under Sched 2, restrictions are specified in respect of other services for certain categories. Only basic information and advice will be available for:

• disputes involving allegations of negligent damage to property or the person (‘personal injury’), apart from those about clinical negligence. These cases are generally considered suitable for conditional fees;

• allegations of defamation or malicious falsehood. Generally, legal aid was not available for representation in defamation, but it was sometimes possible to get legal aid by categorising the case as one of malicious falsehood. The government’s view is that these cases do not command sufficient priority to justify public funding; in any event, they may often be suitable for a conditional fee;

•