Legal Aid

HC Deb 15 February 2000 vol 344 cc193-202WH 12.29 pm

Mr. Richard Allan (Sheffield, Hallam)

I am pleased to secure the debate as a way of highlighting an issue that has been brought to my attention by several constituents. I am not, nor have I ever been, a lawyer, so I seek the Committee's indulgence if I use wrong legal aid terms. Several cases have been brought to my attention by people who believe that those taking action against them are doing so on the basis of legal aid funding that has been secured fraudulently, and I shall refer to one such case. I accept that the Minister cannot address the specific details of the case as it is still on-going. I am looking for a general response to this and similar cases.

I hope that the Government will say that they are serious about investigating claims of fraud in the system and will offer some encouragement to my constituent that his experience will not be repeated. I am sure that many other hon. Members have had similar experiences in their surgeries of listening to the frustration felt by people who are paying for their own costs while defending themselves against someone whom they believe is receiving legal aid through misrepresentation or trying to change the circumstances of the case to take advantage of loopholes.

The frustration to which I refer comes from several features of the operation of the system. First, it often appears to people that the Legal Aid Board does not act swiftly or effectively to take legal aid away from claimants when evidence is produced that suggests that their claim is ineligible. Secondly, the sort of evidence that must be produced to prove that someone's claim is invalid seems to go well beyond that which is required in other areas of means-tested public funds. Thirdly, I draw attention to the lack of feedback to the complainant about what action has followed the allegations. The fact that the law often requires that there is no feedback certainly compounds the frustration felt by people in such situations. The legal protection against revealing information is understandable and I shall not challenge that in this debate. I shall focus instead on the delay and the ineffectiveness of the system for responding to the allegations that someone is ineligible for legal aid.

A case was brought to my attention by Mr. Barry Whitworth, the chairman of T. W. Ward Machinery Ltd. in Sheffield. It concerns a former director and shareholder, Mr. William Gerrard. The case has a long history; it was raised with my predecessor before the 1997 general election and it deals with matters that go back about 14 years to 1986. In 1995, my constituent wrote a letter to the then Lord Chancellor which opened with the comment that be believed that the Lord Chancellor had expressed concern at how legal aid was being administered and that reforms were in prospect. The Government may be able to claim that some reforms have been made since then, although there may be a dispute about their nature. However, things have certainly moved on.

Mr. Whitworth said that his small company and its employees were being seriously threatened by what he believed to be a shocking and blatant abuse of the legal aid system. A former director and shareholder was dismissed from employment with the company in November 1986. He had failed on three occasions through court proceedings with claims against the company. He then obtained a legal aid certificate with which to go to the appeal court to pursue the claims further. My constituent believed that his objective was, and always had been, to cause as much aggravation and cost to the company because of the circumstances of the dismissal. He cited as evidence in support of that view the fact that the individual had turned down several attempts to settle the claim out of court.

My constituent accepted that there was a valid dispute and had attempted to settle it. He believed, however, that the individual continued to pursue the case because he wished to continue to cause aggravation to the company against which he felt some grievance. My constituent cites as primary evidence for his belief that the individual should not have had a legal aid certificate the fact that the individual was operating as a machine tool dealer, which was a similar line of business to his own. He believed that the individual obtained the legal aid certificate by putting his company into receivership and then continuing with what was effectively the same business from the same premises with the same stock, but had moved it into his wife's name with only a minor change of trading identity. My constituent believed that that was a technique to obtain significant legal costs.

My constituent believed that the individual was enjoying a reasonable life style, earning in excess of £50,000 a year, that he had stock in his warehouse with a retail value of more than £500,000 and that he was advertising machinery with a stock value in excess of £1 million. He had evidence that the person involved was holidaying in places such as Australia and New Zealand, and felt that that would be sufficient to disqualify him under the constraints of the legal aid system, which requires that people should be in need before having access to public funds. My constituent felt as though he had a gun to his head in relation to the court proceedings, while the other person involved had a blank cheque to underwrite his ability to continue the court case well beyond what my constituent thought reasonable.

The Legal Aid Board's reponse took three months to arrive. My constituent made his claims in December 1995, and in February 1996 he received a letter from the policy and secretariat of the Legal Aid Board that detailed the relevant considerations. The letter informed my constituent that section 38 of the Legal Aid Act 1988 prevents the disclosure of information and said that the information supplied to the Cardiff area office, where the application had been made, met the statutory tests and that the Benefits Agency had determined that the assisted person was financially eligible for legal aid.

My constituent thought that strange, given his information. He supplied the information that I cited from the original letter about why the person involved should be considered ineligible, and was told that it would be sent to the Benefits Agency's legal aid assessment office in Preston. He was assured that an investigation would take place and that a report would be made on the investigation. No response arrived, but in August 1996 my constituent was informed that the legal aid certificate had been revoked for other reasons to which he would not be privy. However, by 4 September 1996, the legal aid had been reinstated and the case was due to resume. My constituent could not be told why.

My constituent's solicitors expressed their anger at that turn of events, which they felt was highly inappropriate and placed my constituent in a difficult position. They wrote to the Legal Aid Board's legal department, saying that the net effect of the decision to revoke the certificate and subsequently reinstate it was that substantial work done over the years by the first firm of solicitors would be for nought, and that further public funds would be used to employ a second firm of solicitors to spend many working days reading through the boxes of papers at a cost of thousands of pounds. They pointed out: All this is done to benefit a … litigant who has turned down a payment into Court made on commercial terms and who openly leads a quite extravagant lifestyle and clearly had access to funds. My constituent's solicitors felt that that was not an appropriate use of legal aid funds, and made significant representations on that basis.

Jane Griffiths (Reading, East)

Is the hon. Gentleman aware that his constituent in Sheffield is not alone in suffering from a lack of proper scrutiny and accountability in the allocation of public funds? I pay tribute to the Reading Chronicle, which has assisted in exposing the lack of scrutiny in the Reading legal aid office.

Mr. Allan

I am grateful to the hon. Lady for alluding to the breadth of the problem. Many hon. Members will have had similar experiences. I know that she has a constituency interest in tackling the problem. I hope that anyone who works in the legal aid system will be able to take action and deal effectively with such matters in future.

The saga of my constituent continued throughout 1997. In September 1997, my constituent's solicitors finally received a response to their original allegations of December 1995 about the claimant's merits. The letter acknowledges the fact that the response was delayed. It notes that the board failed to inform my constituent's solicitors of the conclusion of its investigations. It contains an apology, made on behalf of the board, for that error and for any inconvenience caused. However, the response makes it clear that, having investigated the claims that had been made, the information did not materially affect the grant of legal aid. Legal aid was therefore continued to support the appeal even after the information had been supplied. The letter confirmed that my constituent could not be informed of the reasons for the decision, and that litigation was due to continue following that award. I hope that the Minister will deal with the provision of timely information by the Legal Aid Board, as that is an especially disturbing aspect of the case. My constituent has been trying to run a business and plan his legal costs, and it has been difficult to obtain information about what was happening.

In February 1999, my constituent contacted me again to express his ongoing frustration that the situation had still not been resolved. He informed me that he was appalled to hear from the news this morning that the auditors for the Legal Aid Board have qualified their accounts for the seventh year and state that no less than 13 per cent. of recipients of legal aid are not qualified to receive their support. I would be interested to hear the Minister's response to that. All hon. Members can imagine my constituent's frustration on reading that in his daily paper when he felt that the person against whom he was conducting his legal business should have fallen into such a category. He said that the continuing scandal was unacceptable bearing in mind that the Lord Chancellor's Department and the Government had promised to deal with any corruption and ability to defraud the system. A new selection of papers that he sent to me made it clear that his business was suffering because of his problems. He had lost count of the number of legal firms that had represented his opponent during the 13 years, and said that his opponent was able to continue only because of the legal aid system's support. He again said that he believed that the individual had means and continued to run a machine tool business. Anyone in the trade has access to information about other people in it, and he is sure that the individual is carrying on a substantial business.

I wrote to the Lord Chancellor's Department in response to my constituent's letter and received an explanation of the situation and some qualifications of it. I sent it to my constituent, who was disturbed to read that To qualify financially, an applicant's disposable means must be within certain limits. These are currently £7,777 per annum for income and £6,750 for capital. My constituent felt that the capital limit might be exceeded, in view of the representations that he had made about the business holding £500,000 of goods. He sent me several advertisements and the accounts for Severn Machine Tools Ltd., with which he believed that the claimant was involved. Advertisements from magazines such as Machinery Market in September 1988 and January 2000 set out a catalogue of valuable equipment that my constituent believes is in the control of the individual against whom he is claiming. He again sent me company accounts for the firm to show me that it had substantial assets that he believed should qualify.

Action was taken by the Legal Aid Board in 1999 to remove the legal aid certificate from Mr. Gerrard, presumably based on information that my constituent supplied about the means. My constituent became even angrier when he found that mistakes were made in that process, and his frustration was understandable. A letter from the Legal Aid Board in November 1999 explained the situation. It said that Mr. Gerrard ceased to receive legal aid on 20 April when his legal aid certificate was revoked", but it could not give any further information … due to the provisions of Section 38 of the Legal Aid Act". It states that an individual can appeal, and that therefore a hearing took place on 5 August 1999 when the Area Committee resolved to dismiss the appeal and to confirm the revocation of the certificate. However … regrettably an administrative error was found in the appeals process necessitating the reinstatement of Mr. Gerrard's certificate. However, this office is still actively investigating the matters". There was a further period of uncertainty. To its credit, the Legal Aid Board took the opportunity to apologise to my constituent for the unfortunate administrative error and to assure him that matters … are being actively considered … and a final decision should be available shortly". However, the administrative error allowed further adjournments of the case, and while the uncertainty remained my constituent continued to incur legal costs because his solicitor had to deal with the situation.

I close with a final letter from my constituent written in January this year. He sent me further documentation, told me about the catalogue of errors and mismanagement and then explained again his situation by saying that he is in limbo whilst the system appears to provide little or nothing in the way of support or sympathy of any kind for our case whilst clearly bending over backwards to help this individual". He again sent me the latest company advertisement which, as usual, involves several million pounds of machine tools and equipment in a business with which he believes the individual is involved. My constituent feels that he is in limbo and that the case needs to be resolved.

I have had other cases that give me cause for concern, where what I believe to be credible allegations of fraud do not seem to be properly followed up. In particular, spouses or partners are used in such fraud; in some cases, spouses are said to hold assets and in others it is denied that someone is a partner where doing so provides a good loophole. I have had a case of someone who told the Legal Aid Board that the house he lived in, the car he drove and everything else belonged to his landlady with whom he had no personal relationship; he was just a lodger who paid rent. Yet I was given other information to suggest that there was a relationship. I question whether the Benefits Agency would decide in such circumstances to pursue the individual to see whether he was being supported and had access to assets because of a relationship.

I hope that the Minister will state that the Government are committed to a fair legal aid system. I do not wish the scope of legal aid to be too restricted because legal aid is essential for some people to obtain access to the legal system and claim their rights under the law. However, I wish to see it available to the genuinely deserving, if one can use that phrase—those who are otherwise too poor to go to court. I wish the Legal Aid Board to act vigorously to ensure that that is the case when making grants of legal aid. I look forward to a positive response from the Minister to the concerns that I have raised about the general issues of my constituent's case.

12.47 pm

The Parliamentary Secretary, Lord Chancellor's Department (Mr. David Lock)

I congratulate the hon. Member for Sheffield, Hallam (Mr. Allan) on securing the debate and thank him for raising the matter today. I was grateful to hear about the problems that he perceives in the legal aid scheme. As he knows, the Government take welfare fraud extremely seriously and are determined to tackle it in any form, including legal aid.

As the hon. Gentleman said, at the moment people are entitled to receive legal aid only if they qualify financially and if their case has enough merit to warrant it. It is vital that public funds are not wasted by being committed to weak or trivial cases, when the money could be better used elsewhere. The Legal Aid Board is acutely aware that granting legal aid has important consequences for both sides. It gives one party the access to justice that he needs and otherwise might not get, but at the same time it can greatly affect the balance of power in a case. The board therefore takes very seriously both the process of granting legal aid and the requirement to keep people's legal aid under review.

I shall briefly address the points raised about the individual case. As the hon. Gentleman said, legal aid was granted only in October 1996, to support an application to the Court of Appeal. Mr. Gerrard was a director, shareholder and employee of T. W. Ward Machinery Ltd. and his case against the company began in October 1986. Legal aid was granted only in December 1994 when the case went to appeal. The Court of Appeal allowed that appeal and as a result Mr. Gerrard was granted a full civil legal aid certificate, following his success at the Court of Appeal. In August 1996, following representations from T. W. Ward's solicitors about the merits of Mr. Gerrard's case, the area office decided to discharge his certificate. Mr. Gerrard appealed to the independent area committee, which reinstated his certificate.

Such cases will not get legal aid in future. Publicly funded help needs to be focused on cases where substantial but limited resources can do the most good. So some types of case will come out of the scheme altogether—including business cases. The Government do not believe that those warrant a share of the limited funding that will be available. However, a suitable alternative exists, in the form of conditional fee agreements, that still gives access to justice. The Government have recently said that the rules will change in April to allow insurance premiums and the success fee to be recoverable, thus making a conditional fee agreement a real possibility in the type of cases that we are discussing. Someone facing a conditional fee agreement, particularly backed by an insurance policy, will be able to litigate, confident that if he successfully defeats the claim, a fund exists against which the costs of meeting the litigation can be claimed.

The Legal Aid Board took over responsibility from the Benefits Agency for means assessment during 1997. The first time that it considered the representations in the case was in October 1998. The case was referred to the newly set up special investigations unit in December. The unit investigated the matter promptly and Mr. Gerrard's certificate was embargoed in March 1999 and then revoked in April. I accept, as the hon. Gentleman said, that there were some procedural errors during the revocation progress, but I stress that the embargo remains in force so that Mr. Gerrard's solicitors have not been able to take his case further on legal aid.

Mr. Gerrard has appealed, so I cannot say any more about the status of his certificate. That is a matter for the independent board. At the time of his original application, responsibility for means assessment in civil legal aid cases lay with the Benefits Agency. During 1997, the task was transferred to the Legal Aid Board and a special investigations unit was set up to deal with applications from people with particularly complex means. The SIU carries out a thorough investigation when the applicant has complex finances and perhaps an aura of wealth. Its aim is to detect any non-disclosure of assets and to provide an accurate means assessment in accordance with the legal aid regulations.

I shall refer to two matters in passing. Transferring assets to one's spouse will not assist a legal aid application because, rightly, the regulations require applicants to disclose the assets both of themselves and their spouses. I can say to the hon. Gentleman that, if anyone is considering transferring the yacht, the business, the shares and the pension fund to his spouse, it will not do any good. Secondly, he rightly referred to the qualification on the Legal Aid Board's accounts. That came about because the category of people that the auditors could not accept as eligible arose in criminal cases when legal aid is granted by the court, not in civil cases when legal aid is granted on evidence provided by the applicant's solicitor.

However, I am sure that the hon. Gentleman will be pleased to know that, through the recovery of defence cost orders provisions that will come in force later this year, the issue of who is or who is not eligible for legal aid in criminal cases and how proper contribution is obtained from those who have assets for their criminal defence will be dealt with properly. We are confident that the new system will meet many of the objections raised about the previous system.

The hon. Gentleman referred to representations. Last year, the board received 5,500 representations relating to means. That compares with more than 6,000 in the previous year. I expect the figures for the present year to show a further reduction as, for the first half of the year, only 2,292 were received. Merits representation also show a slight decrease. The majority of representations are considered by the board's area offices. Last year, 68 per cent. of them led to no change in the certificate. Of those that did result in a change, the most likely outcome was either discharge or revocation, which was 28 per cent. of the total.

In October 1998, new guidance was issued that aimed to ensure that all claims are dealt with within three months of receipt of representations. When there are complex financial circumstances to investigate, it may take longer, but the aim is to respond within three months.

Merits challenges raise particular difficulties. I have already mentioned the effect that the granting of legal aid has on the power structure betwen the parties in a case. People with legal aid have protection against paying costs that private clients do not enjoy. Even though legal aid costs are carefully controlled, they can still have a daunting effect on the other party to the litigation. The board takes representations seriously and considers them carefully.

Often at the core of representations are disputes over the facts that are a matter for the court to try. It is not for the board to try those issues, nor can it refuse or discharge legal aid purely because the other side would be put in a difficult financial position if legal aid were continued. Its role is to decide whether the applicant has a good case to put before the court, one that a reasonable person of moderate means woud back with his or her own money.

The board is also conscious that advice about the merits of a case comes from the applicant's solicitor or barrister. Lawyers owe duties both to the client and to the legal aid fund, and those duties can conflict. We accept that there may be a temptation for solicitors to overstate the merits of an applicant's case. That can be done in an effort to improve the cleint's bargaining positon or because the solicitor wishes to see the case progress and knows that, if the board is advised that the case is weak, it is likely that legal aid will be discharged. We are conscious of the fact that the same solicitor will be paid from the Legal Aid Board, should legal aid continue.

In the past, the merits test did not give enough recognition to that conflict. The stricter funding code and the Government's intention to target funds where they can do the most good will enable the new Legal Services Commission, which will come into effect in April, to monitor and ensure that the conflict is properly recognised in the granting of legal aid. If there is doubt about the merits of a case, the Legal Aid Board can refer the application to an independent barrister for an opinion. A pilot of those arrangements is under way at the Cambridge office and I expect it to be used more in the future.

The hon. Gentleman may be interested to know that the SIU has been successful to date. It has conducted about 500 investigations on civil legal aid and, of those, 82 per cent. led to a change in the certificate. A little under 50 per cent. of the total were revoked, so, for all purposes, the applicant would be treated as if he were never granted legal aid in the first place and would not receive cost protection from the beginning of the case. Of the remaining 32 per cent. the majority were discharged or refused. A small percentage resulted in a change to the contributions payable. Since 1998, the SIU has also prepared reports to help courts to determine applications for criminal legal aid and, during its one-year pilot operation, it received 100 referrals. Its success in those cases was even more impressive; in 98 per cent. of them, it recommended to the court that it should refuse legal aid or change the contributions payable.

The hon. Gentleman referred to confidentiality. The problem under the present rules is that, when information is received about an applicant's status, it is rightly protected by confidentiality. The Government are committed to combating welfare fraud and, under the existing Legal Aid Act 1988, the Legal Aid Board can pass information to other agencies only when there is suspected fraud under that Act. I am pleased to say that, as a result of section 20 of the Access to Justice Act 1999, which will come into force in April this year, the commission will be able to disclose information for the detection of any offence to any appropriate body, not just those under the Legal Aid Act 1988. The message must go out to anyone who is considering applying for legal aid by providing false information that the legal aid authorities have the right to refer that to the Benefits Agency or the police or to take any other steps to highlight welfare benefit fraud. Anyone who provides false information when applying for legal aid is likely to be found out and I am sure that that will affect the balance between the parties in litigation.

I am grateful to the hon. Gentleman for raising the many issues concerning legal aid. I hope that the framework of the Access to Justice Act will result in a much better, tighter and appropriate use of public funding in cases where it is merited.

Question put and agreed to.

Adjourned accordingly at One o'clock.