'Trapped' and 'imaginary' capital challenges improve access to civil legal aid
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Louise Heath
Rebecca and Claire,1Names changed to protect client identities. who have each survived domestic abuse, faced the prospect of confronting their abusive ex-partners alone in the family court due to unfair rules on the assessment of their interest in the family home, which included ‘trapped’ and ‘imaginary’ capital. As a result of judicial review proceedings brought on behalf of both women by Public Law Project with the support of The Law Society,2The Law Society supported the proceedings financially by providing an adverse costs indemnity. many more low-income homeowners will now be able to access legal aid across all civil matters.
Rebecca’s legal aid application was refused due to an irrational rule,3Specifically, Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013 SI No 480 (the 2013 Regs) reg 37(2) capped the amount of mortgage that could be deducted at just £100,000. which ignored that her home was subject to a large mortgage. Rebecca failed the assessment due to ‘imaginary’ capital that simply did not exist. She owned so little equity that she could not mortgage the property further or meet the costs of representation through selling it.
The lord chancellor agreed to settle Rebecca’s case and has laid amending regulations.4The Civil Legal Aid (Financial Resources and Payment for Services) (Amendment) Regulations 2020 SI No 1584. As a result, the full value of any mortgage or secured debt will, in future, be deducted when assessing the value of an interest in land for legal aid purposes (previously capped at £100,000).
The regulations laid to resolve the problem of ‘imaginary’ capital took effect on 28 January 2021. However, individuals whose cases fell to be considered before then or who have ‘trapped’ capital can seek to be granted funding on a discretionary basis, applying the principle in R (GR) v Director of Legal Aid Casework [2020] EWHC 3140 (Admin), 24 November 2020.
Claire’s application was refused due to ‘trapped’ capital in the family home, where she wished to remain living with her children. Her ex-partner sought to force the sale of the property and disputed her entitlement to an equal share of the proceeds. He would not consent to mortgage the property and Claire would have been unable to afford loan repayments in any event.
Claire’s family solicitors made representations that the director of legal aid casework should assess the value of the property as ‘nil’. This would result in her passing the means assessment. The resulting dispute before the High Court was whether a discretion to value capital resources ‘equitably’5Set out in reg 31(b) of the 2013 Regs. could be applied to land, such as the family home.
The High Court found in Claire’s favour, declaring that the director’s discretion is ‘a discretion open to her in all cases save in respect of the valuation of money’ (para 76). The discretion could therefore be applied to afford an interest in land a ‘nil’ value.
Detailed guidance on the implementation of the judgment in GR is awaited from the Legal Aid Agency (LAA); however, it is important to remember that, as a High Court judgment, the decision is effective immediately and does not require amended guidance from the LAA before it can be relied on.
In controlled work, it is open to practitioners to apply the discretion themselves,6Decisions relating to the making and withdrawal of determinations about controlled work are delegated to providers by the director of legal aid casework: see para 3.2 of the 2018 Standard Civil Contract Specification. taking into account any relevant guidance (once published). Where a provider exercises a discretion that has been delegated to them, an assessor may only overturn a determination that an individual qualifies for services where the provider’s determination was manifestly unreasonable.7See Points of principle of general importance manual, LAA, February 2017, page 23, decision number CLA 59 dated 22 November 2016, HAL/138352.
In applications for certificated funding, accompanying representations can request that the director exercises discretion. That is not a pure discretion – it must be exercised compatibly with public law principles and the rights of the individual under the European Convention on Human Rights (ECHR).
Representations should identify any ECHR rights engaged (commonly articles 6 and 8) by reference to the importance of the issues at stake; the complexity of the procedural, legal and evidential issues; and the ability of the individual to represent themselves without legal assistance. These are the same criteria applicable in applications for exceptional case funding.8R (Gudanaviciene and others) v Director of Legal Aid Casework and Lord Chancellor [2014] EWCA Civ 1622 at para 72.
The guiding question for the director will then be whether the claimant can practically and effectively use the capital in their property to secure legal representation. The representations should clearly explain the insurmountable barriers to doing so, accompanied by any evidence available. PLP has produced a further note with more detailed guidance.
PLP will be monitoring the impact of GR and may have capacity to advise on the lawfulness of a refusal to exercise discretion. We may also have capacity to consider referrals of clients who have been refused legal aid due to other aspects of the income or capital regulations. We have a dedicated email address for enquiries: enquiries@publiclawproject.org.uk.
 
1     Names changed to protect client identities.  »
2     The Law Society supported the proceedings financially by providing an adverse costs indemnity. »
3     Specifically, Civil Legal Aid (Financial Resources and Payment for Services) Regulations 2013 SI No 480 (the 2013 Regs) reg 37(2) capped the amount of mortgage that could be deducted at just £100,000. »
4     The Civil Legal Aid (Financial Resources and Payment for Services) (Amendment) Regulations 2020 SI No 1584. »
5     Set out in reg 31(b) of the 2013 Regs. »
6     Decisions relating to the making and withdrawal of determinations about controlled work are delegated to providers by the director of legal aid casework: see para 3.2 of the 2018 Standard Civil Contract Specification»
7     See Points of principle of general importance manual, LAA, February 2017, page 23, decision number CLA 59 dated 22 November 2016, HAL/138352. »
8     R (Gudanaviciene and others) v Director of Legal Aid Casework and Lord Chancellor [2014] EWCA Civ 1622 at para 72. »

About the author(s)

Description: Daniel Rourke - author
Daniel Rourke is PLP's lead lawyer on legal aid.