Part of the government’s “transforming legal aid” agenda was to “restore public confidence” in the operation of judicial review by ensuring that only meritorious cases were brought. The method chosen to achieve that was to make payment for judicial review work conditional on permission being granted by the court (with limited exceptions, at the discretion of the LAA). Regulations to that effect came into force on 22 April 2014.
Four solicitors firms – Ben Hoare Bell, Deighton Pierce Glynn, Mackintosh Law and Public Law Solicitors – and the housing charity Shelter challenged the regulations. The claimants represent the range of judicial review work, covering between them work across categories such as immigration, housing, community care, public law and actions against the police, and were supported by witness evidence from a number of other organisations.
The High Court gave judgment today in Ben Hoare Bell Solicitors & Ors, R (On the Application Of) v The Lord Chancellor  EWHC 523 (Admin). The grounds of challenge were that a) the Lord Chancellor had no power to make the regulations introducing conditional funding; b) the regulations were inconsistent with the statutory purpose of LASPO; and c) that they would have a chilling effect on access to the courts, because providers would not be able to risk taking on work without payment.
The court held that the regulations were not made ultra vires, but they were incompatible with the statutory purpose. That being the case, there was no need to decide the chilling effect point, though Beatson LJ said that, had that been decided, the result would have been that the high threshold needed to show a chilling effect had not been met.
The outcome of the case is therefore that the regulations implementing conditional funding have been found to be unlawful. Giving the judgment of the court, Beatson LJ focused on the Lord Chancellor’s purpose in bringing in the regulations, which was to incentivise lawyers to focus efforts only on meritorious cases by ensuring that payment would not be made (subject to discretionary exceptions) in cases where the merits were not such as to lead to a grant of permission.
Beatson LJ identified a number of scenarios where a case may never reach the permission stage, or permission might be refused, because of factors wholly outside the control of the claimant or his representatives. These include a withdrawal of the decision under challenge by the defendant, and a decision by the Court to consider permission orally or at a rolled up hearing. There may be a number of reasons why these situations occur unconnected to the merits of the claimant’s case, or because the claimant has not a weak but a strong case. It did not appear from the consultation documents that the Lord Chancellor understood the way rolled-up hearings are used.
As a result, making payment conditional on a grant of permission goes beyond a rational or proportionate connection with the stated aim, that of focussing providers on the merits of the claim. In some cases – such as where a defendant concedes or withdraws the challenged decision – the solicitor cannot be said to have misjudged the merits. In others, where the court directs an oral or rolled-up hearing significantly increases the amount of costs at risk and does so in an unpredictable way dependent on the decisions of the courts and the actions of third parties, not on the judgement of the claimant’s lawyers – and only after proceedings have been issued. Allowing a discretion to be paid where permission is not granted does not go far enough to cure the defects. And whether payment is guaranteed before the event, or allowed on a discretionary basis afterwards, it still does not serve the incentivising purpose.
The court also noted, but did not hear full argument on and did not finally decide, that the regulations may conflict with a solicitor’s professional duties. Legal aid regulations provide that a solicitor’s retainer continues until a certificate is withdrawn by the LAA, and the LAA can require a solicitor to continue to act while a certificate is in force. Inadequacy of fee is not a reason, under legal aid contracts, which allows the termination of a retainer. This could result in a situation where a provider is locked in to continuing with a case without payment and without the ability to terminate the retainer or withdraw from the certificate.
Overall, the court’s conclusion was that the conditional fee regulation extended beyond circumstances which were rationally connected to the stated purpose which led to its introduction. It was therefore inconsistent with the LASPO scheme.
This represents yet another defeat for the Lord Chancellor’s attempts to impose further cuts that go beyond those envisaged by LASPO at the time it was passed. We noted in our comment on the domestic violence gateway challenge that there was a difference in the construction of the statutory purpose of LASPO found in that case by Lang J and in the residence test case by Moses LJ. This case seems to be more consistent with the approach of Moses LJ and perhaps therefore gives some hope to the prospects of a successful appeal in the domestic violence gateway case.