LSC wins appeal in landmark case on legal aid payments

The appeal court has overturned a High Court judgment that delays by the Legal Services Commission in seeking to recover payments on account amounted to an abuse of process.

The LSC had sought to recoup an alleged overpayment of £109,064 made to barrister Aisha Henthorn relating to cases undertaken between 1987 and 2000 under a civil legal aid certificate.

There was no allegation or suggestion of impropriety by Henthorn, who is now in her seventies and voluntarily disbarred herself in 2001 due to ill health.

On appeal, the LSC reduced its claims to £80,470 in respect of cases carried out between June 1992 and September 1998.

In a test case on limitation, the principal issue concerned when time started to run under the Limitation Act 1980 in relation to the LSC’s claims, and whether the agency had left it too late to pursue them.

In March, the High Court held that the time runs from the date that the work is actually completed, which meant that the LSC’s claims were time-barred because they related to work completed more than six years before the proceedings were commenced.

Criticising the ‘culture of delay’ at the LSC, Judge Thornton ruled that the ‘stale nature’ of the claims had ‘severely disadvantaged’ Henthorn’s ability to defend them - some of which related to work done over 20 years ago - and amounted to an abuse of process.

Following an appeal by the LSC, in which the Law Society and Bar Council intervened, the Court of Appeal today overturned that ruling.

Giving judgment, Master of the Rolls Lord Neuberger, sitting with Lord Justice Lewison and Sir Stephen Sedley, held that time starts running not from the date that the case is completed, but once the costs have been assessed by a costs judge.

It was argued on behalf of Henthorn, supported by the Law Society and Bar Council, that this could leave solicitors and barristers not knowing how much they were entitled to for a very long time; and that lawyers would, therefore, have to retain their papers and other records for an indefinite period.

However, Neuberger saw no problem with this, given that it was the solicitor’s duty to ensure that a costs assessment was carried out.

Neuberger also overturned the previous ruling that the LSC’s claims amounted to an abuse of process, because the passage of time meant Henthorn could not properly defend the claims as she had wound up her practice and disposed of her papers.

He said: ‘In my view there is nothing in this point. Where a claim is based on a statutory right subject to a limitation period, which has not yet expired, it seems to me that it would require wholly exceptional facts before an abuse argument based on delay could have any chance of success.’

An LSC spokesman said: ‘The LSC is pleased the Court of Appeal’s judgment in LSC v Aisha Henthorn has clarified the limitation period for recovering unrecouped payments on account, recognising our providers’ responsibilities for assessment of costs.’

He added: ‘The issue of claims where there has been no assessment remains outstanding, but we urge all providers to ensure final claims for costs are made promptly and in accordance with our contract.’

Law Society chief executive Desmond Hudson said: ‘We are disappointed with the judgment. We hope Mrs Henthorn appeals and if she does we would seek to intervene again.’

Hudson said the outcome does not affect the separate maladministration complaint made by the Society in 2008 to the Parliamentary Ombudsman in relation to late claims made by the LSC for the recoupment of payments on account.

In light of the Henthorn judgment, the Society will be issuing new guidance to solicitors on record-keeping in legal aid cases.

Nicholas Bacon QC, who led for the Bar Council on this issue, commented: ‘Whilst the judgment is disappointing, it has nevertheless provided some much needed legal clarity as to when time starts to run with regard to the Limitation Act in relation to civil legal aid payment on account cases. It also offers the potential for remedies that a barrister may have against a solicitor who fails to meet their obligations.’

Read the the full judgment.