Receiving legal aid can be a liability for many years

If people cannot afford to pay a lawyer is it fair to ask them to take out a loan at 8 per cent to the Legal Aid Board, asks Andrew Stevenson

Lawyers are often disgruntled with the Scottish Legal Aid Board. But many citizens who receive legal aid find that it is more powerful, bureaucratic and intrusive than they had ever imagined. For example, years after a case has concluded, they may find themselves having to hand over bank statements to enable the Board to scrutinise their spending.

One common public misconception (which often soon evaporates if they find themselves embroiled in the system) is that anyone granted legal aid gets a lawyer’s services for free. This can be true in some instances, and in any case fees chargeable by solicitors are a paltry fraction of their private rates, but many recipients of legal aid (“assisted persons”) can find their property the subject of “clawback” by the Board, removing the shine of victory in court.

It is one of the principles of the legal aid scheme that an assisted person who wins a case should, if possible, reimburse the Board to the extent that the Legal Aid Fund has been depleted by financing his or her conduct of that court action. This is perfectly reasonable in theory. Flowing from this principle is the requirement that, in the event of success, such reimbursement should be from any property recovered or preserved by that litigant.

Recovery and preservation are different beasts, and the way reimbursement occurs may not always feel reasonable. It is one thing where a litigant receives a sum of money, quite another where the success is not having to sell one’s home. Divorced women with a young family are especially vulnerable.

The assisted person might win in court, sell his house and go to ground, leaving the Board out of pocket and unable to trace him. To avoid this situation the Civil Legal Aid (Scotland) Regulations 2002 allow the Board to “require the party, at that party’s own expense” either to sell his interest in the house or “to grant a standard security over that interest in favour of the Board”. Essentially, the latter creates a mortgage to secure the sum due to be paid back by the assisted person.

One might ask how a divorced woman might feel knowing that, despite having thwarted her husband’s attempts in court to force the sale of the matrimonial home, the Board has the power to insist upon it to pay her legal fees. At one time, the 2002 Regulations allowed an exemption from clawback of well over £5,000 in divorce actions. This was abolished in 2011. Since then, the whole sum paid by the Board in fees and outlays in such cases is recoverable from property recovered or preserved.

However, the problem is not so much in the security or even that the Regulations require that the debt “shall bear interest” The unfairness is that the interest rate is the same as the judicial rate, ie that which accumulates on a decree granted by the court. At present this is a whopping 8 per cent per annum. Putting it another way, the Board makes good money by, in essence, lending to assisted persons. The position is the same in England, where the security is known as a “statutory charge”.

Those who receive legal aid are often burdened for years with a liability to pay the Board. Often, through no choice of theirs, they find themselves in court. 8 per cent per annum is far too high given inflation is currently only around 1.7 per cent and the Bank of England base rate is 0.75 per cent

Furthermore, this mandatory arrangement is the equivalent of an “interest only” mortgage, and if little or nothing is paid until the house is sold, the debt will simply escalate. If the property is a former matrimonial home, the assisted person may hope to raise children there, in their best interests.

The Board’s guidance that “clients may find it more economical to get loans from commercial lenders to clear the net liability” is hopelessly unrealistic if they are on a low income or benefits.

The Board’s lending rate (and indeed the judicial rate) should be reduced substantially. The Legal Aid Fund exists to help the impecunious. If they cannot afford to pay their lawyer privately one has to question whether it is fair that they be saddled with a loan of 8 per cent per annum.

Andrew Stevenson is a Council Member, Scottish Law Agents Society