Duncan Lewis (Solicitors) Ltd, R (On the Application Of) v The Lord Chancellor

Duncan Lewis is a firm of solicitors. Most of its work is immigration work and much of that is publicly funded through the scheme of legal aid administered by the Legal Aid Agency, now part of the department of the defendant Lord Chancellor and Secretary of State for Justice. In this judicial review Duncan Lewis challenges the Secretary of State's decision to reduce its claim for costs to nil in a case where work was carried out for a client who was financially eligible for legal aid, although at the time the Secretary of State asserts that the firm had not conclusively established that fact to its satisfaction.

In 2012 Duncan Lewis opened a file for its client, KW, on the basis of an application form signed on 7 December 2012. It provided KW with legal help and the first stage of what is called "controlled legal representation". Duncan Lewis was successful in what it did because the result was that on 12 February 2014 KW was granted what she had sought, namely leave to remain in the United Kingdom. She was able to access public funds subsequent to that decision.

When KW approached Duncan Lewis in 2012 she had informed it that she and her son were being supported by the London Borough of Ealing ("the Council") under section 17 of the Children Act 1989. She provided a letter from her allocated social worker in the Council, dated 14 November 2011, on the Council's letter head, confirming this and stating that the Council was funding accommodation at a cost of £30 per night and providing £64.30 weekly subsistence. (I interpolate to explain that the £64.30 a week grossed up to £278.63 a month.) That letter added that the support for KW and her son continued until their immigration matters were resolved. The letter also noted that KW cared for the son appropriately and that she was engaging well with the professional agencies. An address was given for where KW and her son were being accommodated.

KW also provided Duncan Lewis with another letter from the same social worker to the son's school, dated 31 July 2012, that he and his mother were being supported under section 17 of the Children Act 1989 due to their inability to access public funds, and that they were being accommodated by the Council's Children Housing Support Scheme at what was the same address as mentioned in the earlier letter.

On 5 December 2012 a solicitor at Duncan Lewis wrote to the Council’s social worker that KW was coming in on the Friday (in other words 7 December) and could the Council send an updated letter about the support the Council were providing. It is obvious from that email that there had already been some contact between the solicitor at Duncan Lewis and the Council social worker. It is apparent on the correspondence that the social worker worked only part-time.

As I have said, the client came to Duncan Lewis on 7 December. No doubt the solicitor at Duncan Lewis took instructions and the client signed a legal help form. That form was in standard terms. It gave the background to the client under the heading "Financial Eligibility". The form stated that the client was not in receipt of income support, jobseeker's allowance, income related employment and support allowance or guaranteed credit, nor was the client in receipt of a NASS payment, in other words payment that those seeking asylum receive. The claimant had no partner. The client reported that she had no capital. The figure in the form for income was indicated as £278.63 per month. The dependants' allowance (for the son) was filled in as £282.40, leaving a total monthly disposable income in the negative of £3.77. The solicitor indicated in the form that evidence had been provided as to KW’s means and that that evidence was the letter from the Council. The solicitor also noted that the client did not have a bank account.

In response to the Duncan Lewis email of 5 December the following week, on 10 December, the Council’s social worker replied in almost identical terms to those in the letter sent to the school earlier in the year. The address for KW and the son in that letter remained the same as in the previous letters.

Duncan Lewis undertook work, as I have said, for KW, the amount exceeding the threshold for an exceptional case, at the time known as an "escape case". Accordingly, on 22 May 2014, Duncan Lewis submitted the file to the Secretary of State for billing. The Secretary of State wrote on 10 June 2014 that the claim had been reduced to nil, the reasons being:

Duncan Lewis appealed that decision. To assist its case it sought further information from the Council, which provided it in a letter of 1 July 2014. That was to the effect that KW and her son had been supported under section 17 of the Children Act 1989 from 3 August 2010 until 27 March 2014, and that it:

The Secretary of State sent the appeal to an independent adjudicator, a solicitor. He upheld the Secretary of State's decision on 11 August 2014. He gave these reasons:

The adjudication decision then referred to a limited provision, which is not, in my view, relevant in those proceedings, set out in summary form the substance of the letters from the Council, and then concluded as follows:

The Secretary of State adopted the adjudicator's decision on 1 September 2014 and informed Duncan Lewis that while its net costs claimed were £1052.71, the net costs allowed were £0.00. That is the decision under challenge in this judicial review.

The Access to Justice Act 1999 established the Legal Services Commission. Its functions included, under section 4, the establishment and maintenance of the Community Legal Service, in broad terms, to provide civil legal aid. Section 6(3) empowered the Legal Services Commission to fund services as part of the Community Legal Service by, inter alia, entering into contracts with persons or bodies for the provision of services by them. Section 6(4) provided that the Secretary of State could, by order, require the commission to discharge its functions in subsection (3), in accordance with an order. Section 7 of the Act provided that the Commission could only fund services for an individual as part of the Community Legal Service if that person's financial resources were such that, under the regulations, he or she was an individual who could be so funded. The section then provided in subsection (3) that regulations could include provision requiring the furnishing of information.

The regulations under the Act were the Community Legal Service (Financial) Regulations 2000, SI 2000 No 516. Regulation 4 (1) provided that subject to regulation 3, which there is no need to detail, the assessing authority, to which an application was made, should determine the financial eligibility of the client in accordance with the regulations. Regulation 4(2) stated that where the assessing authority were satisfied that the client was properly in receipt of income support, income-based jobseekers’ allowance, a state pension credit, an income-related employment and support allowance or universal credit, that person should be eligible for all levels of service listed in the regulations without making contributions. This is the so-called "passporting provision" of the regulations: persons in receipt of those benefits automatically qualified for legal aid. Regulation 5 provided that where a client's monthly disposable income did not exceed £733 and his disposable capital did not exceed £8,000, that person should be eligible for funded services.

Under regulation 6 the client was obliged to provide the assessing authority with the information necessary to enable it to determine whether that person satisfied the conditions set out in regulation 4, and to calculate, where relevant, the disposable income and disposable capital of any other person concerned. Regulation 7 obliged the assessing authority to calculate disposable income and disposable capital in accordance with regulations 16 to 37. Regulation 7(2) stated that when calculating disposable income the period of calculation should be one month. Regulation 7(3) added that one month meant a period of one calendar month, which ended on the date on which the application was made. Regulation 7(4) stated that the assessing authority should refuse the application where it calculated that the client had disposable income or disposable capital, which made him or her ineligible to receive funded services.

Regulation 8 provided that the supplier should not provide any funded services prior to the assessment of resource in accordance with regulation 7, other than in accordance with the funding code procedures or where authorisation to do so was given by the Commission in a contract. The regulations then stated that where the assessing authority was the supplier, it was to decide the application of the regulations but in doing so it should have regard to any guidance issued by the Legal Services Commission: r.9.

There is no need to refer in detail to further regulations, except to note that there was a duty on the client to report changes in financial circumstances (regulation 13), and a duty on the assessing authority to correct errors or to reassess in the light of new information (regulation 14). Regulation 15 provided that where the eligibility of a person was assessed under regulation 5 and it appeared that his circumstances may have altered so that his normal disposable income may have increased by an amount greater than £60, then the assessing authority should undertake a further assessment. There was a qualification to that in regulation 15(6) if the assessing authority considered a further assessment inappropriate. Regulation 16 provided that income should be taken to be income which a person may reasonably expect to receive in cash or in kind. Regulation 20 dealt with calculating disposable income where there was a dependent child: it was reduced in accordance with figures provided elsewhere. It is common ground between the parties that the relevant figure in this case was £282.40 a month.

The Funding Code, referred to in the Act, contained in Part B a specific provision as to the assessment of means. In paragraph 6.2 it said:

Importantly, paragraph 12 of Part 2E of the Guidance dealt with the evidence of means. Paragraph 12.1 provided that the specification contract provided that satisfactory evidence in support of the client's information as to means had to be provided before assessment and the evidence retained on file. Paragraph 12.2, "Evidence of means", read as follows:

Subparagraph (5) of paragraph 12.2 contained a table setting out specified sources of income in the left-hand column, and in the right-hand column what would be acceptable satisfactory evidence. None of these categories covered section 17 Children Act subsistence payments. The box for state benefits had, as satisfactory evidence, a recent bank or building society statement; the original benefit notification letter supported by a recent bank statement where the notification letter was more than 6 months prior to the date of the application; or the most recent letter notifying a change in the benefit amount which had to be no more than 6 months old. The right-hand column dealing with asylum seekers in receipt of NASS support read:

The Standard Civil Contract Standard terms, which firms such as Duncan Lewis entered with the Legal Services Commission, required that they comply with all relevant legislation: refer to the contract specification for the day-to-day performance of the contract; submit a claim for payment in accordance with the provisions of the contract, adding a claim "must be true accurate and reasonable".

The separate contract specification contained detailed provisions as to how firms such as Duncan Lewis should carry out the task of assessment, in particular, the client's details had to be fully completed, the form signed by the client, and the completed form kept on file. Paragraph 3.35 of the contract specification provided that satisfactory evidence in support of the prospective client's information as to their means had to be provided before a firm assessed financial eligibility, subject to the provisions of paragraph 3.36.

In her cogent and attractively advanced submissions on behalf of the Secretary of State, Ms Scolding submitted that the decision by the Secretary of State based on the independent adjudicator's decision was not in error. The crux, she submitted, was whether the law required the client in this case had provided “satisfactory evidence”. In her submission, KW had not done so. Tracing through the legal framework from section 7 of the 2009 Act through the regulations, such as regulation 6, to the provisions of the Funding Code, in particular paragraph B6, and the Guidance Part 2E, in particular, paragraph 12, she submitted that it was vital that satisfactory evidence be obtained by the law firm to assess the means of clients. It was essential to the proper operation of the scheme and, in particular, to the ultimate accountability, which the Secretary of State had, to Parliament, for the spending of public money.

In her submission, satisfactory evidence meant evidence which enabled an accurate assessment of financial eligibility in accordance with the statutory provisions. Given that consistency across the board was essential when many firms were assessing the eligibility of clients it was, in Ms Scolding’s submission, essential that satisfactory evidence was provided in an objective form which allowed the Secretary of State to have confidence in the administration of public monies, and which also allowed his department to conduct assessments to check how the task was being performed.

In this case, she submitted next, if the question were to be asked: "Was the evidence provided by the client satisfactory and had Duncan Lewis carried out an assessment in accordance with the legislative scheme?", the clear answer would have been "No". First, the evidence in the letters from the Council social worker dated 14 November 2011 and 31 July 2012 did not relate to the computation period of the month before the application. The letter of 2011, which contained figures, was over 12 months out of date. Moreover, there was no up-to-date evidence in the later letters of July and December 2012 of the actual sums involved, an essential element on her case to the provision of satisfactory evidence. Ms Scolding underlined that this was not one of the passported cases of regulation 4(2), where the exact figures were objectively available.

Thirdly, Ms Scolding contended, it would have been perfectly straightforward in this case for Duncan Lewis to obtain the precise figures, and she made good that proposition by reference to what had occurred in 2014 when, within a couple of days, Duncan Lewis were able to obtain the precise figures involved for two years previously. It was not good enough, on her case, if indeed it were the reality, to simply respond that section 17 Children Act subsistence was low and well within the requisite income limits provided for under the legal aid scheme. As an aside she referred to the need for clients to identify all sources of support, including in kind support.

A further string to Ms Scolding’s bow was that the decision of the Secretary of State under challenge was based on an adjudication by an independent adjudicator. Given that context the court should be cautious about intervening too readily. What is now the Legal Aid Authority (previously the Legal Services Commission) has to have a clear approach which will apply across the board to all legal aid providers. Consequently, there is a need for bright-line rules. In light of this, Ms Scolding submitted that it cannot be the case that the Secretary of State’s decision in this case can be regarded as irrational.

In my judgment, Ms Scolding was right to emphasise the need for providers of legal aid to carry out eligibility assessments of clients consistently and in compliance with the legislative framework, and also to underline the crucial requirement that public monies be appropriately spent. In my view, however, the Secretary of State's decision is flawed based, as it is, on an erroneous decision of the independent adjudicator. That is because the independent adjudicator asked himself the wrong question when evaluating how Duncan Lewis acted in this case.

Duncan Lewis had a clear obligation to ensure KW's eligibility. It had the two letters at the time of the interview of 7 December and several days later the confirmatory letter from the Council. Those letters made clear that KW was in receipt of section 17 Children Act 1989 subsistence. It is well-known that that level of section 17 support provided by local authorities is low. The legal background to and the reality of section 17 subsistence to avoid destitution have been examined in several decisions of this court (see R (on the application of) PO v. London Borough of Newham [2014] EWHC 2561 (Admin), [32] – [37] and Mensah v. Salford City Council [2014] EWHC 3537 (Admin), [6], [40], [43], [59], [61].

So in this case KW had provided evidence that she was receiving section 17 support and that that support was being continued. The Council had set out the figures in the letter of November 2011. The two subsequent letters, although not referring specifically to the amount, gave no indication that what KW was receiving had been varied. Given the level of section 17 support there was no prospect that she would be anywhere near the financial eligibility threshold, even with the mistake in calculation because of the temporary receipt of Child Benefit.

Ms Scolding accepted that the crux of the case was whether this evidence was satisfactory. Paragraph 12 of Part 2E of the Guidance is the only legal instrument where the meaning of this term is addressed directly. Satisfactory evidence not set out specifically in the table in subparagraph (5) is said in paragraph 12.2(1)-(2) to be that which is “reasonably sufficient” to establish the client’s income during the computation period, and if there is no direct reference to the computation period, evidence may still be accepted as confirmation of that income “where it seems reasonable to do so”.

The table in subparagraph (5) does not address specifically section 17 Children Act 1989 assistance. It refers to satisfactory evidence for state benefits. Drawing an analogy between the two is not easy, however, when reference is made there, for example, to the provision of bank statements with the state benefit identified. That certainly did not apply in this case, when KW did not have a bank account. Nor where the table refers to satisfactory evidence for NASS support does it offer help in this situation of section 17 support, although it does say (as does the entry for state benefits) that the evidence should not be less than 6 months old. Of course in this case the latest letter from the Council about KW was dated 31 July, less than 6 months old. Then, just after KW visited Duncan Lewis and the legal help form was completed, there was the further letter on 12 December.

Duncan Lewis certainly had to apply the law and Guidance, but the Guidance, by not referring to section 17 support, contained a gap. Therefore Duncan Lewis had to make a judgment whether they had satisfactory evidence, in the way it is defined in general terms in paragraph 12 in Part 2E of the Guidance. They had the letters which they no doubt read against the background of their extensive knowledge of the position of persons without leave to remain in the United Kingdom or NASS support, and what such persons might obtain in terms of section 17 support from local authorities. What the adjudicator and hence the Secretary of State had to do was to address the issue of whether Duncan Lewis were correct to accept this evidence as reasonably sufficient.

However, the adjudicator did not ask himself that question. He simply decided on the basis of the failure of the Council’s letters to provide the up-to-date value of its payments to KW that Duncan Lewis had not complied with its legal obligations. The adjudicator’s decision was correct in terms of the error in the amounts which he identified (the second passage from his decision quoted earlier), but that had no bearing on whether he had asked himself the correct question as contained in paragraph 12.2 (the first passage quoted).

In my judgment, therefore, in the special circumstances of this case, the decision was flawed. I will quash the decision.

MS SCOLDING: I am grateful. There is obviously the question of relief. At the end of my skeleton argument I indicated that if the matter was quashed it should go back to a costs assessor for a further assessment. My learned friend does not agree with that. She says--

MS WARD: Given the terms of your judgment I have to accept that the failure to ask the correct question is a paradigm case where it is appropriate. I do not ask you to remake the decision on that basis.

MR JUSTICE CRANSTON: You are asking for something?

MS WARD: I do not ask you to make the decision. I have said that if you were with me on certain points the decision should be substituted, but that is not something I pursue now.

MR JUSTICE CRANSTON: I have said I will quash the decision and therefore it goes back to be remade.

MS WARD: Yes.

MS SCOLDING: As far as the issue of costs, I cannot resist the payment of the claimant's costs on the facts of this case. I had the opportunity to take some instructions on the summary assessment of costs. I have no query about the rates. In fact the only queries I have are about the work done on documents, which seem, in the defendant's submissions to be excessive: 30 hours for the B grade fee earner and 7 hours and 80 minutes for the A grade fee earner, which seem to be quite significant for a lot of documents which they should already have and be familiar with. I would suggest substituting 15 hours in total for that point.

I also note, if I am being pedantic, that these days you should usually have something attached to the work done on documents, which sets out exactly what work was done on what. I certainly have not seen a copy of that. That may be an omission on my part. I would say 15 hours would be an appropriate sum, rather than nearly 38 hours. I am quite happy to undertake that calculation, albeit that my ability to calculate is--

MR JUSTICE CRANSTON: Where does it go approximately?

MS SCOLDING: It is going to be approximately half. If it is 6 plus--

MR JUSTICE CRANSTON: In terms of the grand total - that is what I am interested in. They have £35,000. Is that right?

MS SCOLDING: Yes, £35,000. That is the point I would like to make on the work done on documents--

MR JUSTICE CRANSTON: Where does it take the grant total?

MS SCOLDING: If one halves that, that would be £4,000 rather than 8,000. That would take that down to say £31,000 roughly: £25,000 before VAT roughly. Then if one turns over to the next page, my Lord, and I hate to do this to fellow counsel, Miss Ward's fee for the hearing does seem slightly excessive. Obviously I do not think there are any very up-to-date SCCO rates. The only ones I could find in my White Book are, I know, a little bit out of date. I think the cost for a half day hearing for a junior, 10 years plus call, is approximately £1,700. I would suggest that a reasonable fee of somewhere in the region of £3,500 may well be a more appropriate figure than the £12,500 my learned friend has claimed. I have no question about the fee for advice/conference/documents at £3,625. If one then reduces that down by sort of £9,000, so pre VAT, that would be £25,000 less £9,000, which is approximately £16,000, so £16,500 plus VAT on that of 20%.

MR JUSTICE CRANSTON: Ms Ward, tell me how much you are worth?

MS WARD: I have not been involved in my client's obviously competent negotiations of my brief fee. I am not going to seek to defend it in full and not going to seek--

MR JUSTICE CRANSTON: What about the other figures?

MS WARD: I would say that £3,500 is light without wanting to blow my own trumpet too much. On work done on my own documents, given the volume of the documentation and need to go through it (not obviously the claim documentation but the contractual and statutory materials) in my submission the hours claimed are not particularly excessive, but my Lord you will have to take a view.

MR JUSTICE CRANSTON: A grand total of £28,000. Thank you very much to the two of you.

MS SCOLDING: I have instructions to ask to seek permission to appeal in the circumstances of this case, principally because this is a point of general importance which could apply to a number of situations. I would ask for permission to appeal on that basis.

MR JUSTICE CRANSTON: Thank you, Miss Scolding, I think you will have to go somewhere else.

MS SCOLDING: I am most grateful.

MR JUSTICE CRANSTON: Thank you very much.