Freely Available British and Irish Public Legal Information
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
England and Wales High Court (Administrative Court) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Administrative Court) Decisions >> Duncan & Anor, R (on the application of) v Legal Aid Board & Anor [2000] EWHC Admin 294 (16 February 2000)
URL: http://www.bailii.org/ew/cases/EWHC/Admin/2000/294.html
Cite as: [2000] EWHC Admin 294
[New search] [Printable RTF version] [Help]
QUEEN v. LEGAL AID BOARD and LORD CHANCELLOR ex parte IAN DUNCAN AND NICOLA MACKINTOSH [2000] EWHC Admin 294 (16th February, 2000)
Case No: CO/4807/99
IN THE SUPREME COURT OF JUDICATURE
QUEEN'S BENCH DIVISION
DIVISIONAL COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Wednesday, 16th February 2000
LORD JUSTICE ROCH
LORD JUSTICE BROOKE
and
MR JUSTICE GAGE
- - - - - - - - - - - - - - - - - - - - -
THE QUEEN |
| |
- and - |
||
THE
LEGAL AID BOARD |
|
Smith Bernal Reporting Limited, 180 Fleet Street
London EC4A 2HD
Tel No: 0171 421 4040, Fax No: 0171 831 8838
Official Shorthand Writers to the Court)
Mr Richard Gordon QC, Jenni Richards & Paul Bowen (instructed by Mackintosh Duncan for the Applicants)
Mr Nigel Pleming QC & Beverley Lang (instructed by the Legal Aid Board for the First Respondents)
Jonathan Crow (instructed by the Treasury Solicitor for the Second Respondent)
As Approved by the Court
Crown Copyright ©
Index
Part Title Para Nos
1 An overview of the issues in the case 3 - 17
2 The history of legal aid before the 1988 Act 18 - 31
3 The 1988 Act and its aftermath 32 - 51
4 The need for reform: the advantages and challenges of controlled contracts 52 - 77
5 Certificated legal aid 77 - 86
6 The allocation of funds and the bidding system 87 - 111
7 The firm of Mackintosh Duncan and its contract award 112 - 130
8 The Burgundy book 131 - 135
9 Mackintosh Duncan's concerns about the new scheme 136 - 175
10 Prescribed panels 176 - 183
11 The new controls over travelling expenses 184 - 205
12 Practical problems facing firms under the new scheme 206 - 219
13 The meeting on 20th December and the amended contract offer 220 - 250
14 The Board's discretions and the need for transparency 251 - 302
15 The new generic franchise categories, their purpose and their scope 303 - 324
16 Particular franchise categories: (i) mental health 325 - 373
17 Particular franchise categories: (ii) community care 374 - 394
18 Particular franchise categories: (iii) employment 395 - 398
19 Particular franchise categories: (iv) immigration 399 - 413
20 The Law Society and the Legal Aid Practitioners' Group 414 - 430
21 The complaints by other practitioners 431 - 443
22 The applicants' submissions: (i) The common law right of access to the courts 444 - 468
23 The applicants' submissions: (ii) The right conferred by section 32(1) of the Legal Aid Act 1988 469 - 477
24 The applicants' submissions: (iii) the treatment of the not for profit sector 478 - 485
25 The applicants' submissions: (iv) Wednesbury irrationality 486 - 547
26 The court's conclusions 548 - 584
LORD JUSTICE BROOKE:
This is the judgment of the court.
1. There is before the court an application by Ian Duncan and Nicola Mackintosh for permission to apply for judicial review. They are the partners in a small firm of solicitors who have been practising under the name of Mackintosh Duncan since 1st July 1999 from office premises in Borough High Street, Southwark. The respondents to this application are the Legal Aid Board ("the Board") and the Lord Chancellor. At one level the applicants are challenging the legal validity of the whole new scheme for legal advice and assistance and free representation at mental health review tribunals which was introduced by the Board under powers given to it by the Lord Chancellor and with the authority of both Houses of Parliament with effect from 1st January 2000. At this level the applicants also challenge the legal validity of two directions made during December 1999 by the Lord Chancellor under Section 4(4) of the Legal Aid Act 1988 ("the 1988 Act") and one statutory instrument made by him in the same month, following positive resolutions by each House of Parliament, under Section 8(3) of the Act. At a lower level the applicants challenge the legal validity of the new scheme because they castigate as irrational certain aspects of the way in which the Board has planned and implemented it, particularly in relation to the way in which it affects their firm and their clients or potential clients. Their application is supported by the Law Society. Although the Society has not formally intervened, there are in evidence two statements by its President, Mr Robert Sayer, nearly 40 letters and two affidavits from firms of solicitors or other interested agencies who are worried about the way the scheme will affect their staff and their service to their clients, and a large number of documents concerned with the scheme and the events that led up to its introduction.
2. On 13th December 1999 Latham J refused the applicants interim relief. He directed that their application for permission be listed for hearing before a Divisional Court on 12th January 2000, with the substantive hearing to follow if permission was granted. On 12th January we granted the Board and the Lord Chancellor a short adjournment, for reasons we gave then. The six-day hearing eventually started on 24th January, and we are very grateful to the parties and to their legal representatives for the skill they have displayed in presenting a large volume of complex material before the court in such a clear manner so quickly.
Part 1. An overview of the issues in the case
3. The importance and sensitivity of the issues we have been invited to consider can be gauged from one sentence near to the start of Nicola Mackintosh's first affidavit. She says that her firm is bringing these proceedings as a result of severe concerns that the scheme as currently envisaged will have devastating results for the most vulnerable people in society, who are in most need of quality legal advice and representation. Her sentiment is echoed by the President of the Law Society. His first affidavit ends like this:
"Practitioners are seriously concerned at the effect of the contracting process on their clients. They believe that their clients will be denied access to justice. Many firms who specialise in social welfare areas of work often deal with people from deprived areas who desperately need access to effective legal help. They frequently do this work from a strong commitment to the vulnerable and disadvantaged because they believe that people with legal problems have an entitlement to good quality services. The Society believes that the current contracting proposals will effectively deny many of the most vulnerable members of the community access to the very help they need."
4. Language as powerful as this made us look very carefully at the policy objectives which underpin the new arrangements introduced by the Board. Although it is a corporate body in its own right and is not to be regarded as the servant or agent of the Crown (1988 Act, Schedule 1, paras 1 and 2), it derives most of its resources from funds paid to it by the Lord Chancellor out of money provided by Parliament (ibid, Sections 6 and 42), and in discharging its functions it is bound to have regard to such guidance as may from time to time be given by him (ibid, Section 5(4)).
5. Although the detailed history of this matter will follow later in this judgment, it is necessary to describe now how in January 1998 the Lord Chancellor invited the Board to prepare for his consideration a new system of advice and assistance for all civil and family matters. This system, he said, should be based exclusively on contracts so far as possible at fixed prices/rates let by the Board to suppliers who could demonstrate a suitable level of quality. He wished the Board to prepare for his consideration an implementation plan to deliver this objective by the end of 1999.
6. After conducting a consultation process, the Board reported to the Lord Chancellor nine months later. On 13th October 1998 he accepted the Board's proposals and asked it to implement them. During the following year Parliament debated the bill which was to become the Access to Justice Act 1999 ("the 1999 Act") and in April 2000 the Board, and the 1988 Act, will be replaced by the new Legal Services Commission and the relevant provisions of the 1999 Act. That Act was preceded in December 1998 by the publication of a Government White Paper called "Modernising Justice" (1998, Cm 4155).
7. Although the reforms with which we are concerned were introduced under the enabling powers contained in the 1988 Act (which will continue to be the governing statute for the first three months of the new scheme), they are expressly mentioned in paragraphs 3.13 and 3.16 of the White Paper. Mr Jonathan Crow, who appeared for the Lord Chancellor, told us that we were entitled to consider the contents of the White Paper when identifying the policy objectives which the Lord Chancellor wished the Board to pursue.
8. Mr Richard Gordon QC, who appeared for the applicants, therefore invited us to read very carefully the Lord Chancellor's Foreword to the White Paper. Its underlying theme is that people must be confident that they can enforce the rights they have, if need be, and that the more people are helped to become citizens with a stake in society, the less society has to fear from one of the worst effect and causes of social exclusion: crime.
9. Chapter 3 of the White Paper is concerned with the reform of civil legal aid. It explains that it is necessary to set priorities which reflect genuine need (para 3.5), and that any system for funding legal services in civil and family cases should meet four objectives (para 3.6). Of these objectives the three that are most relevant in the present context are that such a system should:
(1) direct the available resources to where they are most needed, to reflect clearly defined priorities;
(2) provide high quality services that achieve the best value for money;
(3) have a budget which is affordable to the tax payer; and can be kept under control.
10. With these aims in mind, the White Paper explains that the Government believes that three areas should have greatest priority (para 3.7):
(1) social welfare cases, which help people to avoid, or climb out of social exclusion; for example, cases about people's basic entitlements, like a roof over their heads and the correct social security benefits;
(2) other cases of fundamental importance to the people affected. This covers cases involving major issues in children's lives (like care and adoption proceedings); and cases concerned with protecting people from violence;
(3) cases involving a wider public interest. This category includes two types of case: those likely to produce real benefits for a significant number of people; and those challenging the actions, or failure to act, of public bodies (including cases under the Human Rights Act), or alleging that public servants have abused their position or power.
11. These, therefore, are the Government's policy objectives. They have now been approved by both Houses of Parliament when they passed the Access to Justice Bill and approved by positive resolution the regulations whose legal validity is impugned in these proceedings. That the reforms with which we are at present concerned fall within the umbrella of these policy objectives is made quite clear in paragraphs 3.13 and 3.16 of the White Paper, which expressly refers to them.
12. At the heart of the present dispute, then, lies a paradox. Of the two partners in the applicant firm, Ms Nicola Mackintosh has established herself as a household name in this country in the field of mental health and community care law. Although the firm is tiny, she tells us that in December 1999 approximately five new clients a day were being referred to her. Most of their cases involved strong grounds for the issue of judicial review proceedings to ensure that they might receive community care or mental health services. She wishes to make her professional skills available, at legal aid rates of pay, to some of the most disadvantaged members of society. Her entire practice lies in the fields of community care, health services and mental health law.
13. Her partner, Mr Ian Duncan, wishes to expand his privately funded employment law practice into the very new field of disability discrimination law. On the face of it, the "high quality services" which this firm set out to provide were likely to "achieve the best possible value for money", and were at the heart of the "areas of greatest priority" identified by the Government in paragraph 3.7 of its White Paper. It is therefore hardly surprising to read in paragraph 62 of Ms Mackintosh's first affidavit her description of the way in which she and Mr Duncan were reassured, when planning the possibility of their new firm, by the Lord Chancellor's statement that the new regime would focus on the most vulnerable in society, and on areas of social welfare law, such as community care work.
14. They were, however, obliged to bring these proceedings at the beginning of the second week of December 1999 because at that time the Board had still not offered them a contract to perform any services of legal advice or assistance or representation of any kind under the new scheme, although it was due to start in about three weeks' time. A week later the Board did in fact offer them a 15-month contract, on terms which they accepted, subject to their right to a review, and without prejudice to the issues they were raising before this court. They interpreted this contract, however, as meaning that there was no guarantee that they would be awarded more than two "matter starts" in employment law, 10 "matter starts" in mental health law, and 23 "matter starts" in community care law during the 15 months for which the contract would be in force. They did not see how they could continue to practise on this very uncertain basis. The proceedings therefore continued to a hearing. At first the Board was the only respondent, but after the Lord Chancellor had made the two directions and the regulations to which we have referred, he, too, was joined as a party.
15. Mr Gordon submits that the new scheme is unlawful because its provisions imperil the common law right of every citizen of this country to unimpeded access to the courts. He also submits that its introduction violates the requirements of Section 32(1) of the 1988 Act. This sub-section provides, in effect, that a person entitled to advice, assistance or representation may select the lawyer to perform those services for him/her from among the lawyers willing to provide such services under the Act. If the scheme survives these challenges, then it is necessary to move to a more detailed level of analysis. This is because Mr Gordon argues that the Board has acted unlawfully and irrationally in the way in which its scheme favours generalist firms which provide a family law service to local clients, and prejudices specialist firms which, like his clients, have a regional or national reputation and are practising in what the Board regards as a developing niche field of law. This is not his only complaint in this regard - he also complains that the scheme irrationally stultifies the development of new practices, for instance - but we will consider the full range of his arguments under this head at the appropriate stage of this judgment.
16. At this point, however, we would mention that, as the argument developed, it became increasingly obvious that the applicants' main concerns about the details of the scheme were focused on a very few, very important, areas of complaint. The documentation we had seen did appear to be rather rigid, as to a considerable extent it has to be if a public body like the Board is to deal with everybody in an even-handed way. It was clear to us that we needed to know more about the principles on which the Board intended to exercise the extensive residual discretions it had retained for itself. At the end of the first week of the hearing we received a paper prepared by counsel for the Board which was designed to respond to some of the anxieties we had expressed in this regard.
17. Before we turn to the evidence and the arguments on what Mr Gordon described as the "Wednesbury", or "super-Wednesbury", issue, which we will have to consider in considerable detail, it is worthwhile reminding ourselves that what is under challenge is a major piece of policy-charged social reform, costing over £200 million of public money, and authorised by Parliament in the sense we have described. Whatever Mr Gordon may say, there are bound to be teething problems before social reforms on this massive scale get bedded down. Everything else being equal, the courts have always shown restraint when invited to interfere in matters which involve policy choices in the way in which public resources are distributed within necessarily finite budgets (see, for an example of a case in which "right to life" issues were held to have overly influenced a judge at first instance, R v Cambridge Health Authority ex parte B [1995] 1 WLR 898). This, no doubt, was the reason why the applicants abandoned their challenge to the decision to allocate £20 million of the new controlled budget of £202 million to the "not for profit" (nfp) sector.
Part 2. The history of legal aid before the 1988 Act
18. After this preliminary overview of the issues, we turn to the evidence before us. The summary that follows will be necessarily abbreviated. We must strike a balance between being seen to have understood all the matters canvassed in 2,300 pages of documents (including over 300 pages of affidavits and witness statements) and having to prepare this judgment for delivery with the speed which the very considerable public interest in these sensitive matters demands. Even if we do not expressly mention in this judgment all the points that were made to us, we have nevertheless taken them into account.
19. We must first say something about the arrangements that have been made in this country over the last hundred years for providing assistance from public funds to those who need legal advice or assistance in civil matters but who cannot afford to pay for it. The expression "civil matters" covers a very wide spectrum of non-criminal matters in which the assistance of a lawyer can be helpful.
20. The earliest known scheme of this type was introduced in 1914. The High Court or the Court of Appeal could refer litigants to a solicitor, provided that their means fell within prescribed limits and their case was reasonable. The solicitor would investigate the case and report back to the court, which could then assign the case to a solicitor and counsel, selected from lists of those prepared to help in this way. Solicitor and counsel either acted free of charge or at very low levels of fees. In 1925 responsibility for the scheme was transferred from the courts to the Law Society. Until 1949 this help was all that was available, and those receiving publicly funded legal assistance could only choose from a small number of legal representatives.
21. Between 1949 and 1972 the situation was governed by the Legal Aid and Advice Act 1949. Part I of that Act provided for three categories of help: legal aid in civil proceedings which was introduced immediately; legal assistance in civil proceedings (for example, in negotiations, or in considering whether to take steps to assert or dispute a claim); and legal advice in civil and criminal proceedings, limited to oral advice by solicitors. In the event, the second and third categories of help were not introduced until 1960 and 1959 respectively.
22. So far as legal aid was concerned, the legally assisted person was entitled to choose his/her own solicitor and counsel, but only from panels maintained by the Law Society of those willing to act for persons in receipt of legal aid. Barristers were able to specify the types of cases which they were not willing to undertake, while separate panels were maintained for solicitors in relation to different classes of work, and a solicitor had to specify the panel he/she wished to join.
23. So far as legal advice was concerned, a plan to set up a nationwide network of advice centres was eventually discarded for financial reasons, and the scheme introduced in 1959 provided that such advice would be available from practising solicitors in their own offices. This scheme was restricted to solicitors on a legal advice panel, but any solicitor in practice was entitled to have his/her name on the panel unless excluded by reason of professional misconduct. It came to be known as the "green form" scheme.
24. The Legal Advice and Assistance Act 1972 replaced the legal assistance and legal advice schemes with a new scheme under which such advice and assistance could be given both orally and in writing, and by counsel as well as solicitors. The system of legal advice panels was maintained. The Legal Aid Act 1974 was a consolidating Act, bringing into one place all the relevant statute law, including some recent new provisions relating to criminal legal aid, without amending the law.
25. In 1975 the Legal Aid Advisory Committee recommended that the panel system should be abolished. It considered that the panels were burdensome and expensive to run, and that they did not serve any useful purpose. This advice was accepted, and a new Section 12 of the Legal Aid Act 1974 was inserted by Parliament in 1977 whereby a person entitled to receive advice or assistance (or legal aid) might select the solicitor to advise or assist or act for him/her and, if the case required, his/her counsel, and should be entitled to make the selection him/herself. Between 1975 and 1999, therefore, an assisted person could receive the appropriate type of help from any barrister or solicitor who was willing to undertake such work on the terms imposed by the legal aid scheme, provided that he/she had not been excluded from legal aid work by reason of professional misconduct. The number of people using the green form scheme increased from about 100,000 in 1973-4 to 1.5 million in 1996-7.
26. The Legal Aid Act 1979 extended the advice and assistance scheme to include "advice by way of representation" (ABWOR) in specified types of cases for the first time. Prior approval had to be obtained from the Law Society, unless approval was given directly by the court, and criteria were applied which related to financial eligibility and the merits of the case. Since 1979 the scope of ABWOR has been steadily extended.
27. These, then, were the arrangements in force prior to the enactment of the 1988 Act. This Act provided the enabling framework for directions to be given and regulations to be made of the type that are being impugned in these proceedings. Mr Alan Cogbill, who is a senior civil servant in the Lord Chancellor's Department, has told us that many countries still retain the panel system today, in contrast to allowing any solicitor in private practice to provide advice and representation. He says that it is clear that such countries spend considerably less on legal aid than we do in England and Wales. The fact that we spend much more per capita on legal aid than other common law countries is graphically illustrated by the chart on page 124 of a new book called "The Transformation of Legal Aid" (OUP, 1999), in a chapter by a Dutch academic, Professor Erhard Blankenberg, called "The Lawyers' Lobby and the Welfare State: The Political Economy of Legal Aid". The writer comments on page 122 that if Canada claims "Cadillac legal aid", the British are seemingly driving a Rolls Royce.
28. Mr Cogbill adds that successive British governments perceived the drawback in the existing arrangements. The development of our legal aid scheme meant that the services that were provided to the public, and their cost and quality, were determined almost entirely by lawyers. There was no way of ensuring that those in the greatest need would receive the advice they needed, and in particular few solicitors provided advice in relation to welfare benefits or other areas of social welfare law. As a result, clients with problems in these fields often had to rely on advice agencies which were funded by local authorities and charities rather than the legal aid and advice scheme.
29. Mr Cogbill says that there was also a tendency among solicitors to push clients towards representation in court, which was not always the most appropriate way to solve the problems of individual clients. There was also no way of ensuring that the services provided met any quality standards, and there was no incentive for solicitors to provide their services in the most efficient way.
30. In 1986 the Government undertook an efficiency scrutiny of legal aid. One of the recommendations of this study was that the green form scheme for legal advice should be abolished and replaced by a system of advice based on a much greater involvement of advice agencies.
31. The following year, after a consultation process, the Government published a White Paper in which it accepted that there was force in some of the objections to the scrutiny team's proposals. It believed, however, that the existing green form scheme could be improved to provide better service at lower cost. It was also attracted to the principle of using the skills of advice agencies, especially in relation to those areas of work in which their special experience was likely to be greater than that of many solicitors in private practice.
Part 3. The 1988 Act and its aftermath
32. This, then, was the immediate background to the enactment of the 1988 Act, the relevant parts of which will remain in force until they are replaced by the relevant provisions of the 1999 Act which comes into force on 1st April 2000. The 1988 Act retained the same three-tier system for providing legal aid and advice.
33. The green form scheme for legal advice and assistance appears in Part III of the 1988 Act. Under this scheme a limited amount of legal advice can be given without any prior authorisation from the Law Society to anyone who meets the financial eligibility criteria. The scheme covers advice on any question of English law, with a few limited exceptions (most wills, for example, and conveyancing matters).
34. ABWOR is also provided for in Part III of the Act. Prior authorisation has to be obtained (except in an emergency), and ABWOR is available for a limited number of hearings, specified in regulations, such as civil cases in the magistrates' courts, hearings before Mental Health Review Tribunals ("MHRTs") and the Parole Board, and prison disciplinary cases.
35. Civil legal aid is provided for in Part IV of the Act. Subject to financial eligibility and merits criteria being satisfied, full advice and representation is available for specified types of proceedings. Prior authorisation, in the form of a certificate covering each stage of the proceedings, has to be obtained.
36. Although the initial framework for the provision of legal advice, ABWOR, and civil legal aid remained unchanged, Parts I and II of the 1988 Act heralded the making of significant changes to the scheme, some being immediate, and some being presaged by the creation of enabling powers. The Act removed the administration of the scheme from the Law Society. Instead, it created a new statutory body, the Legal Aid Board, which started work in April 1989. Mr Steve Orchard, who is now a member of the Board, has been its chief executive since that time.
37. The Act also made provision for the first time for advice, assistance and representation to be provided under contracts made between the Board and other bodies, such as citizens' advice bureaux or firms of solicitors.
38. Since the existence of these enabling powers is central to the present dispute, it will be convenient to set out the relevant provisions of the 1988 Act (as amended) at this stage. We are concerned in this case with Part I (Sections 1-2, entitled "Preliminary"), Part II (Sections 3-7, entitled "Legal Aid Board and Legal Advice") and Part III (Sections 8-13, entitled "Advice and Assistance"). We are not concerned with Part IIIA ("Mediation") or Part IV ("Civil Legal Aid"), Part V ("Criminal Legal Aid") or Part VI ("Legal Aid in Special Cases").
39. Sections 1-4 of the Act provide, so far as is material, as follows:
"PART I
1. The purpose of this Act is to establish a framework for the provision under Parts II, III, IIIA, IV, V and VI of advice, assistance ... and representation which is publicly funded with a view to helping persons who might otherwise be unable to obtain advice, assistance ... or representation on account of their means.
....
2(5) Regulations may specify what is, or is not, to be included in advice or assistance of any description, or representation for the purposes of proceedings of any description, to which any Part or provision of a Part of this Act applies ...
(6) Advice, assistance and representation under this Act, except when made available under Part II, shall only be by legal representative, but in the case of Part II, may be by other persons.
....
(10) In this Act "person" does not include a body of persons corporate or unincorporate which is not concerned in a representative, fiduciary or official capacity so as to authorise advice, assistance or representation to be granted to such a body.
(11) In this Act "legally assisted person" means any person who receives, under this Act, advice, assistance, mediation or representation and, in relation to proceedings, any reference to an assisted party or an unassisted party is to be construed accordingly.
PART II
3(1) There shall be established a body to be known as the Legal Aid Board (in this Act referred to as "the Board").
(2) ... [T]he Board shall have the general function of securing that advice, assistance ... and representation are available in accordance with this Act and of administering the Act.
....
4(1) Subject to the provisions of this Act, the Board may do anything
(a) which it considers necessary or desirable to provide or secure the provision of advice, assistance ... and representation under this Act; or
(b) which is calculated to facilitate or is incidental or conducive to the discharge of its functions;
and advice, assistance ... and representation may be provided in different ways in different areas in England and Wales and in different ways in different fields of law.
(2) Without prejudice to the generality of subsection (1) above, the Board shall have power -
(a) to enter into any contract ...
....
(4) The powers to provide advice, assistance ... or representation under this Part and to secure its provisions under this Part by means of contracts with ... other persons or bodies -
(a) shall not be exercisable unless the Lord Chancellor so directs and then only to the extent specified in the direction; and
(b) if exercisable, shall be exercised in accordance with any directions given by him.
....
(6) Advice, assistance and representation provided by the Board under this Part may be granted with or without limitations and may be amended, withdrawn or revoked.
....
(8) The Board may, from time to time, prepare and submit to the Lord Chancellor proposals for the assumption by it of any functions in relation to the provision of advice, assistance or representation under this Act."
40. Section 5 sets out the Board's duties. By Section 5(5) the Board is to have regard, in discharging its functions, to such guidance as may from time to time be given by the Lord Chancellor. Section 6 provides that the Board shall have a separate Legal Aid Fund. It goes on to prescribe what sums are to be paid out of such a fund and what sums are to be paid into such a fund. Section 7 places a duty on the Board to keep separate accounts in respect of its Legal Aid Fund and to have those accounts audited. The accounts are to be prepared in such form as the Lord Chancellor, with the approval of the Treasury, directs. The Lord Chancellor has to lay before each House of Parliament a copy of the accounts and the auditors' report.
41. The Act continues:
"PART III
8(1) Subject to the provisions of this section, this Part applies to any advice or assistance and advice and assistance under this Part shall be available to any person subject to and in accordance with the provisions of this section and sections 9, 10 and 11.
(2) This Part only applies to [ABWOR] if, and to the extent that, regulations so provide ...
(3) Advice or assistance of all descriptions or advice or assistance of any prescribed description is excluded from this Part, or is excluded as regards any areas, if regulations so provide; and if regulations provide for all descriptions to be excluded as regards all areas then, so long as the regulations so provide, this Part (other than this subsection) shall not have effect.
9(1) Advice and assistance to which this Part applies shall be available to any person whose financial resources are such as, under regulations, make him eligible for advice or assistance under this Part."
42. It is to be noticed that a person eligible for legal aid is given by this sub-section a right to have advice and assistance under Part III of the Act made available to him/her. The financial limits for eligibility for advice and assistance were fixed in regulations made by the Lord Chancellor. There are both income and capital limits which are different from those for ABWOR and legal aid. The assessment of means of a client who sought advice and assistance was the responsibility of the solicitor, who also collected any contribution due in respect of ABWOR.
43. Part III provided for a financial limit on the prospective cost of advice and assistance. It also required a solicitor not to give advice or assistance so as to exceed the prescribed limit without obtaining the approval of the Board.
44. Section 36(3)(b) of the Act provides that no regulation may be made under Section 8 of the Act unless a draft of it has been laid before and approved by resolution of each House of Parliament.
45. Section 32 provides:
"(1) Subject to the provisions of this section, a person entitled to receive advice or assistance or representation may select the legal representative to advise, assist or act for him from among the legal representatives willing to provide advice, assistance or representation under this Act.
(2) Where the Board limits a grant of representation under Part IV to representation in pursuance of a contract made by the Board, it may, as it thinks fit, assign to the legally assisted person one or more legal representatives or direct that he may only select a legal representative from among those with whom such a contract subsists.
....
(7) Regulations may provide that the right conferred by subsection (1) above shall be exercisable only in relation to legal representatives who are for the time being members of a prescribed panel."
46. The Board was given the power to enter into contracts of the type that are being challenged in these proceedings pursuant to directions made by the Lord Chancellor under Section 4(4) of the Act on 4th and 28th December 1999.
47. By his first direction, the Lord Chancellor directed that the Board's power to enter into contracts to secure the provision of advice, assistance or representation under Parts II, III and IV of the Act might be exercised in accordance with four principles. The first was that contracts might be entered into with any supplier of legal services which was able to meet the requirements of LAFQAS (that is, any franchisee) or pass the preliminary audit against LAFQAS (that is, any provisional franchisee) (para 2(a)). Next, the Board was at liberty to determine with which franchisees and provisional franchisees it was to enter into contracts (para 2(b)). Thirdly, contracts might secure the provision of controlled work (that is, advice, assistance and representation under Part II of the Act, to which Part III of the Act does not apply) and licensed work (that is, representation under Parts III and IV of the Act) in accordance with the Board's general civil contract documentation (para 2(c)). And fourthly, contracts for the provision of controlled work should set financial eligibility for work provided at the same levels as financial eligibility was set under Part III of the Act (para 2(d)). In his second direction, the Lord Chancellor directed that, for the avoidance of doubt, authorisation of the provision of work in accordance with the Board's general civil documentation in paragraph 2(c) of the earlier direction extended to work under the system of tolerances set out in that documentation as well as work in specific franchise categories.
48. We will explain the meanings of LAFQAS and tolerances later in this judgment. (For LAFQAS, see paras 64(9) and 152-5 below; and for tolerances, see paras 110-111 and 148-150 below). Although for the most part we are not concerned in these proceedings with licensed work contracts under Part IV of the Act, it became necessary for us to understand the outline of the new arrangements that are being introduced there, and we have included a short description of them in Part 5 of this judgment (see paras 78-86 below).
49. The final stage of the reform process occurred on 16th December 1999 when, following affirmative resolutions by both Houses of Parliament, the Lord Chancellor made the Legal Advice and Assistance (Scope) (Amendment) Regulations 1999 which excluded from Part III of the Act all advice and assistance other than in criminal proceedings and personal injury and clinical negligence cases, together with ABWOR in MHRTs.
50. From 1994 onwards the Board had been exercising powers under Part II of the Act to grant franchise contracts to solicitors' firms on a voluntary basis in a wide range of categories of work, and in 1997 the Legal Advice and Assistance (Scope) Regulations 1989 were amended so that any advice and assistance provided under contracts made under Part II of the Act were excluded from the provisions of Part III. Under such contracts solicitors were permitted to authorise their own extensions for green form and legal aid work, and were awarded a higher rate of payment. Over the same period the Board also operated a number of pilot projects both with non-solicitor advice agencies and solicitors' firms. The areas of work for which a franchise contract was available were originally very limited. More recently they were expanded to cover the areas of legal work. A franchise in mental health was created for the first time in December 1998. Its scope originally focused on practitioners representing clients before MHRTs, but it was later extended to other advice and proceedings which arise out of mental health issues.
51. We will describe later in this judgment how three specialist panels were recently created pursuant to regulations made under Section 32(7) of the Act (see paras 176-183 below).
Part 4. The need for reform: the advantages and challenges of controlled contracts
52. Mr Orchard, for the Board, and Mr Cogbill, for the Lord Chancellor, have described in their evidence what were perceived to be the defects in the former arrangements for providing advice and assistance under Part III of the Act.
53. From the Board's perspective, Mr Orchard identified five main problems.
54. First, solicitors could set up in practice where they wanted, deliver the services they chose to deliver, and decide whether or not they would do any work at all under the Legal Aid Act, and if so to what extent. This led to the provision of good, comprehensive legal aid coverage in the fields of family law, personal injuries and crime. Each of these categories of law provided significant volumes of work. Much of it was done under legal aid certificates, which attract higher rates of pay than green form advice.
55. In contrast, there was patchy provision by solicitors in areas of law such as debt, immigration, welfare benefits, housing and employment (which the Board describes generally as "social welfare law"). Few cases have to be litigated, except, perhaps, in the housing field, and most of this work was done under the green form scheme. Appearances at most of the tribunals operating in these fields of law were not covered by that scheme. A consequence of all this was that relatively few solicitors developed real expertise in these fields. The nfp advice sector, on the other hand, which is mostly staffed by non-lawyers, developed expertise to compensate for the comparative dearth of advice provided by solicitors.
56. Next, Mr Orchard describes how fraud has featured among the real practical problems the Board has had to address in recent years. Evidence from the Board has led to interventions in solicitors' practices and prosecutions of solicitors for fraud in a number of cases. In the overwhelming majority of these cases there has been fraud on the green form scheme rather than any other part of the legal aid scheme.
57. Mr Orchard also refers to problems the Board has encountered over the supervision of work by suitably qualified solicitors. The Board identified many instances of firms doing a high volume of work under the legal aid scheme where the work was done by non-qualified individuals without any, or any real, supervision. While work done by such individuals, if properly supervised, can be a valid and effective addition to the system of legal provision, he says that without it the quality of advice can be wholly inadequate.
58. Finally, he tells how there have been many instances of apparent demand that has been generated by the activities of solicitors, regardless of any real need on the part of clients. This abuse occurred mainly in the fields of housing and welfare benefits. Many solicitors marketed their services aggressively to generate clients and income, often by systematic canvassing on housing estates where residents were invited to sign green forms. In almost every case where this occurred the income generated for the firm was significant - in some cases, over £500,000 a year - but the value of the service to the majority of the clients has, in the Board's view, been negligible.
59. Mr Cogbill has added to this evidence from the perspective of Government. He says that because the services provided under the legal aid scheme were still shaped by lawyers, there was no incentive for solicitors to achieve value for money for their clients, and no compulsory quality standards which solicitors had to meet. It was impossible to target expenditure on priorities or on the areas of greatest need.
60. Concern over the potential of fraud on the part of some solicitors was sufficiently serious for the Comptroller and Auditor-General to add a note of qualification to the 1993-4 Appropriation Account submitted to Parliament by the Lord Chancellor on expenditure on legal aid. For this and other reasons the Comptroller and Auditor-General could not be satisfied that all legal aid and advice expenditure had been spent properly and for the purpose voted by Parliament.
61. In recent years, legal aid expenditure has grown and grown. In the six years ending in 1998-99, the net cost of legal aid increased by 34%, while the number of people helped increased by 1%. The unit cost per case in every category also increased substantially above the level of inflation. Successive Governments were paying increasing amounts of money for fewer people to be helped, and increased expenditure on legal aid reduced the funds available for other Government priorities. The 1998 White Paper shows (at para 3.8) how spending on all forms of civil and family legal aid rose in the six years to which we have referred from £586 million to £793 million, and how the Government was determined that this level of growth in expenditure (35% compared to general inflation of 13%) could not be sustained in future. The only options available to Governments to reduce expenditure in the past have been to reduce financial eligibility, to reduce the scope of the scheme, or to reduce remuneration rates. As a result of successive reductions in financial eligibility, the percentage of households financially eligible for legal aid was reduced from about 70% in the 1950s to about 50% to-day. Reducing eligibility, however, took no proper account of priorities or need.
62. These, then, were the perceived mischiefs which the new arrangements which are under challenge in these proceedings were introduced to combat. Mr Orchard summarised the principal defects of the advice and assistance scheme the Board has been operating since it came into existence under six main heads. He said that it was:
(a) supplier led, with no mechanism to control or prioritise the work being done within it;
(b) susceptible to fraud, abuse and wasteful expenditure;
(c) limited in scope, in that it provided for no representation at most tribunals or assistance at any of the more routine court hearings;
(d) available only to a relatively limited section of the population;
(e) too often subject to poor quality advice, particularly in areas requiring specialist help; and
(f) characterised by many suppliers who neither knew nor understood the services each other provided.
63. The last point, Mr Orchard says, is relevant because advice and assistance is potentially the most important part of the overall scheme. It usually governs the first point of contact between solicitors or lay advisers in the advice sector and those who are seeking help. If they cannot deal with a client's problems there and then, they need to know where they can seek appropriate assistance or to whom they can refer the client. The experience of the client at this first point of contact is crucial to the success of the scheme. Mr Orchard says euphemistically that the range and quality of services available at this stage were in need of improvement. Ms Mackintosh, from the perspective of her experience in a very specialist field of law, strongly endorsed Mr Orchard's evidence in this regard.
64. The main milestones in the history of events (before the end of 1998) which led up to the introduction of the new scheme were as follows:
(1) May 1995. The former Government issued a consultation paper called "Legal Aid: Targeting Need". This paper proposed the development of contracting for all types of legal aid work.
(2) November 1995. The Board published its response to this paper. Its proposals were accepted both by the former Government and by the present Government.
(3) October 1997. The present Lord Chancellor set out his views on legal aid reform in a speech to the Law Society's Annual Conference on 18th October. He expressed his commitment to the introduction of contracting for legal aid work.
(4) January 1998. On 14th January the Lord Chancellor made the request to the Board which we have set out earlier in this judgment (see para 5 above).
(5) April 1998. The Board published a consultation paper called "Reforming the Civil Advice and Assistance Scheme". This paper set out detailed proposals for the allocation of funds to the Board's 13 regions, and explained how the new Regional Legal Services Committees ("RLSCs"), which were set up during 1997 and 1998, might operate within the proposed new structure.
(6) July 1998. On 16th July both Houses of Parliament were informed, in answers to Parliamentary Questions, that the Lord Chancellor had asked the Board to complete arrangements for the provision of civil advice and assistance exclusively through contracts by the end of 1999.
(7) October 1998. The Board published its report to the Lord Chancellor following consultation. In this report the Board announced its final proposals on the allocation of funds to the regions. These proposals included mental health work and immigration work. (So far as the latter was concerned, the Board recommended a further review, and a further report, following the review, was published seven months later). The Lord Chancellor accepted the Board's proposals in a letter to its chairman on 13th October 1998. He also supplied the Board's proposal to set aside a budget of at least £20 million for the nfp section.
(8) November 1998. The Board published for consultation purposes draft contract documentation on "Exclusive Contracting". This paper proposed a guarantee of a contract for all firms with franchises in family, mental health and immigration work who met the deadline for applying for contracts under the new scheme (these came to be known as "Section A" of the Bid Panel).
The Board explained that it could not propose a similar guarantee in relation to other categories of work because it had not yet received recommendations from the RLSCs on this topic, and because it was obliged to give priority to nfps.
Contracts would be awarded for three years three months, with annual schedules. For the second and third years of each contract the Board would only guarantee to contracting firms 80% of the matter starts awarded to them in the previous year.
(9) December 1998. The Board published an updated edition of its 97-page paper entitled "Legal Aid Franchise Quality Assurance Standard" ("LAFQAS"). This document set out, among other things, the new quality requirements which were designed to support the move towards a contracted legal aid scheme. Particular emphasis was placed on Supervisor Standards and Supervision, Financial Management and Control, and Business Planning.
(10) December 1998. The Government published its White Paper called "Modernising Justice". This contained its proposals for the Board to be replaced by a Legal Services Commission following the passage through Parliament of the Bill which became the Access to Justice Act 1999. It also contained an indication by the Lord Chancellor that he intended to increase financial eligibility once he was satisfied that contracting had settled down and the budget was under control. We have referred to the policy objectives identified in this White Paper earlier in this judgment.
65. Although the new scheme could not come into effect until the necessary direction(s) had been given to the Board and the necessary regulations had been approved in draft by both Houses of Parliament, it was decided to postpone taking these steps until the new contracts were about to be signed. In the event they were not taken until December 1999, just before the new scheme came into effect.
66. Before we set out the history of events in 1999, both generally and in relation to the applicants and their plans, we must first explain the reasons why both the Board and the Government considered that a change to a system of contracting was desirable in order to combat the mischiefs we have described.
67. From the Board's perspective, Mr Orchard says that contracting will provide the Board with control and the ability to prioritise the overall budget for advice and assistance. This will, in turn, enable it to adopt a far more positive approach towards the services that can be delivered within that budget. It also means that from the outset additional services will come within the scope of the scheme. He instances in this context representation at immigration appeals (whether before adjudicators or the appeal tribunal), and a new "Help at Court" scheme which will allow representation at the more routine court hearings, and enable clients' representatives to make points by way of mitigation in cases where there is no defence and therefore no eligibility for legal aid.
68. The new scheme also provides that there will be no charge for advice and assistance work, except in personal injury and family law cases, so that clients will not have the cost of help deducted from any awards they ultimately recover. As we have said, the 1998 White Paper announced the Government's intention to increase financial eligibility, and thus make the scheme more widely available, once the budget was under control. Mr Orchard also mentions the fact that the new general civil contract contains several measures that are designed to eliminate wasteful expenditure, reduce bureaucracy in claiming costs, and require effective supervision and quality control.
69. From the Government's perspective, Mr Cogbill says that the shift of power from lawyers to the Board has finally enabled compulsory quality standards to be imposed, so that clients can be assured that they are receiving quality-assured advice. The Board will now be able to monitor the services provided by contractors so as to ensure that they provide value for money. Contracting will also enable the Government to control the budget for civil legal aid more effectively because the value of contracts will be known in advance. The introduction of a controlled budget is perceived as helping the Government to meet its wider aim of making the best possible use of public money in this field. It will also impose a discipline on the Board and its suppliers.
70. In the past, the budget for legal aid that was presented to Parliament was based on forecasts which were frequently wrong, since they had to be based on estimates of the amount of work lawyers were likely to do. When the forecasts were wrong, Parliament had to vote more money. The contracting scheme enables the Government to decide how much money it should allocate to civil legal aid, taking account of priorities and of the need for legal services. The Board has retained in its budget for the first year a reserve of £9 million which it will use to expand contracts where appropriate as the pattern of genuine need becomes clearer, if the amount it has initially allocated proves to be insufficient. If this reserve, in turn, proves to be insufficient, Mr Cogbill says that it will be open to the Lord Chancellor to reallocate resources within his own overall budget, or to the Government to reconsider its spending plans.
71. He says that the previous scheme provided only crude means of keeping within a budget, and that it placed pressures on other areas of Government spending. The new scheme will not entail any reduction in the funds available. Indeed, the Lord Chancellor has allocated £202 million to the Board for advice and assistance for the financial year which begins in April 2000, an increase of £22 million from the figure of £180 million allocated in 1999-2000.
72. Mr Orchard adds that contracting will also allow the Board to be more imaginative in allowing methods of delivery which will reach more clients. He describes the £2 million allocated in the first year to contracts with 16 organisations which will provide telephone or outreach services, or services that provide expert support to front line advisers. After gaining experience in the first year of the scheme, the Board expects to let contracts which will address much more widely issues such as rural access, the needs of particular client groups, and the lack of widespread expertise in particular categories of work. The Public Law Project, for instance, has been granted 650 telephone-based matter starts and 25 complex referrals, and Liberty 650 telephone-based matter starts and 35 complex referrals in a new public law category of work, at a total cost to the Board in the first year of the scheme of £190,000 for this pilot project for "second tier services".
73. There were, inevitably, formidable difficulties to be encountered in the transition from the green form scheme to a controlled contracted regime.
74. To begin with, the Board faced an unknown contingent liability for work that had been started under the green form scheme but not billed or completed before the start date for the new contracts. There were also significant variations in the cost of cases and in the elapsed time between the start and the billing of cases, both between different categories of law and within them. For the time being, the Board felt obliged to continue with payment for time at an hourly rate, although it is exploring the possibility, and indeed the desirability, of a change to block contracting or competitive tendering. It also had to make arrangements to accommodate a significant expansion of work in the nfp sector, for which, as we have said, a minimum budget figure of £20 million was allocated in the first year of the new contracts.
75. It knew that a degree of uncertainty was inevitable in the first year of the new scheme. It set out to produce a contract structure that struck a good balance between four needs. The need for the scheme to be targeted and prioritised; the need that it should meet the legitimate requirements of clients; the need that it should meet the interests of the suppliers of legal services who had to have as much certainty as possible in planning their businesses; and the need to control overall spend. It therefore determined to structure the new contracts with seven main purposes in mind.
76. First, it had to provide for a maximum amount which would be payable (unless it was changed by the Board) to a contracted firm in any one financial year. This was known as the "schedule payment limit". In the first financial year of the scheme, this had to cover the amount the firm would bill for cases that were started both before and after the new contract came into effect (if they were completed within that first year). Next, it had to allow for a reconciliation between billing and payments, and also for adjustments to payments, either upwards or downwards. It also had to control the number of cases suppliers were allowed to start, and to provide a guarantee of payment for all matter starts allowed. This would be achieved either by way of reconciliation and adjustment to schedule payment limits or by adjustment to the next year's schedule. Fifthly, it had to allow the number of case starts to be adjusted upwards or downwards to reflect any changes from historical patterns in the average time needed to complete cases, or in their average cost, or in the way clients distributed themselves among the contracted firms. Next, it had to provide firms with a smooth cash flow which reflected the value of the work they were doing; and finally, it felt it had to allow flexibility by means of tolerances, except in areas that required a genuine specialism, or where there was already adequate coverage. The controversial topic of "tolerances" is one to which we must return.
77. Mr Orchard says that the Board has made it clear to Government that it cannot guarantee to operate within the controlled budget for the first two years of contracting, and that suppliers will also have to accept a certain amount of uncertainty during this period. It has indicated its intention to carry out a very thorough review of the workings of the new arrangements within the first six months of the new contracts, and to adjust matter starts and schedule payment limits accordingly. The purpose of this review is to ensure, in the light of a limited amount of practical experience, that there is as good a match as possible between contract resources and the places where clients in general need are actually going for help.
Part 5. Certificated legal aid
78. Although these proceedings were not concerned with the arrangements under Part IV of the Act, it became clear to us that those arrangements were inevitably linked with the arrangements with which we were concerned, and that we needed to understand what was happening in this respect.
79. Mr Orchard explained to us that certificated civil legal aid was being replaced by "licensed work". This was the second category of work covered by the general civil contract. At present the Board was only awarding contracts for licensed work in the categories of immigration, family, and, from 1st April 2000, personal injury and clinical negligence. In other categories, any firm could apply for a legal aid certificate, as at present. The general civil contract licence provisions would, however, be extended to cover all categories by April 2001.
80. In the categories of family and immigration, licensed work came into effect from 1st January 2000, in accordance with the Legal Aid (Prescribed Panel) (Amendment) Regulations 1999 ("the 1999 regulations"). The contract schedule proforma we had been shown was also being used in relation to the issue of licence contracts in family and immigration. Licensed work currently included all representation in the family category and all certificated legal aid in the immigration category (principally judicial review). The possession of a general civil contract qualified all relevant solicitors within a firm as members of the relevant panel for the purposes of the 1999 regulations. Clinical negligence, as we have seen, was already subject to prescribed panel regulations by means of a separate franchising contract. This contract would come to an end on 31st March 2000.
81. On 1st April 2000 personal injury and clinical negligence cases would come within the general civil contract. From that date practitioners will need to have a licence under the general civil contract if they are to undertake representation in those fields. Firms will be granted a licence in any category covered by the new arrangements on application, provided that they have, as a minimum, passed a preliminary franchise audit. The contract does not limit matter starts or the overall budget for licensed work.
82. Mr Orchard made it clear that a firm could apply for and obtain a general civil contract licence in family or immigration work without having to be awarded a controlled work contract. This was known as a "licence only" contract. The two schemes were separate. There might be a number of reasons why a firm might have one contract, but not the other. Some firms specialised in child care cases, where the provisions of the legal aid scheme allow legal aid certificates to be backdated to cover initial advice and the making of a legal aid application, provided it is submitted quickly. A few do not trouble to claim for initial advice, and apply for legal aid certificates where appropriate. Some do not generally undertake legal aid, but are willing to act for clients who are (or become) eligible for legal aid certificates for proceedings. Some are newly established, or for some other reason have missed the deadline for securing a controlled work contract for matter starts. They will often wish to do certificated cases, even if they have been awarded no matter starts during the current year. Mr Orchard said that this might be a reasonable holding position, pending an application for a contract mid-year, or pending the award of schedules for controlled work for 2001-2002.
83. He told us that the Lord Chancellor expects the Board to extend the licence provisions of the contract to all certificated cases by April 2001, after which all civil legal aid would be covered by contracts. He said that this would require careful consideration and development.
84. Mr Orchard added that it should not be assumed from the fact that matter starts for certificated cases were not controlled that there was no budgetary or other control at all for this work. On 1st April 2000 a new Funding Code would introduce a wholly new set of criteria for the grant of certificates for representation under the 1999 Act. These criteria would be tailored to the individual circumstances of each category of case, and would replace the tests of "reasonableness" which apply to all categories of case under the 1988 Act. The strictness, or otherwise, of the criteria will reflect the Lord Chancellor's decisions about priorities for each type of case.
85. Some cases, such as public law children cases, will qualify automatically for funding. Others, such as pure damages claims, will in the absence of special features have to meet strict criteria for prospects of success and cost benefit. Mr Orchard said that the development of the Funding Code would in future be a significant means of controlling and prioritising expenditure on licensed work.
86. He summarised this part of his evidence by saying that the introduction of the General Civil Contract on 1st January 2000 was only the first stage of a programme of legal aid reform. He accepted that advice and assistance for personal injury and clinical negligence work was currently not subject to the control of matter starts. This was for a transitional period only. From 1st April 2000 these categories would be brought under the General Civil Contract, although initially the Board would award case starts in accordance with the actual number of clients currently taken on by each office. This policy was in place for technical reasons which he gave us. In both categories, the Board expected to control the budget and case starts as from 1st April 2001. Criminal legal aid would continue under the present system until October 2000 when it was intended that the Criminal Defence Service provisions of the 1999 Act would be brought into effect.
Part 6. The allocation of funds and the bidding system
87. Both Mr Orchard and Mr Martin South, who is the project manager of the Board's General Civil Contracting Project, have explained the way in which the Board allocated the available funds to different parts of the controlled work scheme. Although we will give an outline of this topic here, we will have to revert to it again and again during the course of this judgment.
88. We have already described how, under the old scheme, advice could be given on any question of English law (unless expressly excluded). For administrative purposes, however, the Board had established defined categories for many areas of law. Eleven different categories (known as "franchise categories") featured in the evidence, but crime, personal injury and clinical negligence were all excluded from the new scheme at this stage. Account had to be taken, however, of the existence of the tolerances in crime contracts. These were designed to enable criminal firms to give advice and assistance to their clients on any civil matters that might arise in the course of their relationship with their client. Of the other eight, family, mental health and immigration were treated individually. In contrast, welfare benefits, debt, employment, consumer and housing tended to be grouped together as social welfare categories in much of the Board's evidence.
89. When franchising was first introduced on a voluntary basis from 1994 onwards, it was developed in subject specific areas of law which covered the overwhelming majority of work done under the legal aid scheme. Personal injuries and family law are good examples. Mental health and clinical negligence were later added as subjects for franchises. The Board wished all its new controlled contractors to have satisfied the quality control standards it requires of its franchisees, and it therefore set out from December 1998 onwards to identify the further areas of law which could be included in a new generic franchise. Four new categories, Education, Actions Against the Police, Community Care and Public Law had finally emerged from this exercise by the end of 1999.
90. The Board did not invite RLSCs to assess the need for legal services in their areas for these niche non-franchise areas of law, because it knew that by their nature practitioners in these fields tended to be specialists who attracted clients from a wide geographical area, sometimes on a national basis. This is the reason why it initially suggested in April 1998 that practitioners in these specialist fields should come forward themselves with proposals. This suggestion encountered a wide measure of support during the 1998 consultation.
91. The Board knew that it was being allocated an annual budget for controlled work of £202 million for the year 2000-2001. We have already mentioned the £20 million (minimum) allocated to the nfp sector, the £2 million for new projects and the £9 million reserve. The Board then estimated for each of its 13 regions a contingent liability for 2000-2001 in respect of the amount likely to be payable during that year in respect of work undertaken (but not billed) under the relevant parts of the 1988 Act before 1st January 2000. This amount was provisionally assessed at this early stage as the relevant percentage of the amount paid out for green form claims nationally in the year ending 30th November 1998. This percentage varied between categories of law. In mental health, for instance, bills tended to be submitted and paid quickly, and the resultant percentage was only 19%. In the family category, by contrast, the equivalent figure was 69%. The amount originally set aside for this contingent liability was 60% of the total budget (or about £120 million). The rest of the money allotted to the Board for the first year of the scheme was available to pay for new cases both started and claimed in 2000-2001.
92. Two different methods were adopted for allocating these funds. In its April 1998 consultation document the Board proposed an allocation to its 13 regions which reflected current levels of expenditure in family law work, and a 25% shift in the social welfare categories (except immigration) towards an allocation based on the number of people receiving income support in 1996 (as a proxy for legal aid eligibility) in each region. At that time the Board proposed to wait for reports from RLSCs before deciding how to make the allocations for immigration work. The Board's suggested approach encountered a measure of support on consultation, and Mr Orchard says that nobody put forward a better solution.
93. As things turned out, the Board decided to make its allocations for not only the family but also the mental health categories of work on the basis of the amount it had spent on them in the year ending 30th November 1998, subject to any necessary adjustments for changes in numbers or the cost of cases. This reflected its view that this measure represented a fairly accurate indication of the need for legal services in these two fields. (See the Guidance on Fund Allocation and Contract Awards, Section 6.) The Board later increased the funds allocated for mental health when it could see, from the figures submitted by the practitioners on the Section A bid panels for the six months ending 31st May 1999, that the volume of mental health cases was increasing. It will be remembered that although Article 6 of the European Convention on Human Rights ("ECHR") is silent in respect of any right to legal assistance at public expense in civil proceedings, the Court at Strasbourg has on at least two occasions (once in relation to a family case and once in relation to a patient compulsorily detained in a psychiatric institution) adverted to the need for such provision in family or mental health civil cases in certain circumstances. See Airey v Ireland (1979) 2 EHRR 305 at paras 24 and 26; and Megyeri v Germany (1993) 15 EHRR 584 at para 23.
94. The Board adopted a different approach to other categories, because it did not believe that the amount currently being spent was a reliable indication of the need for legal services. The "income support weighting" approach was intended as a starting point, and the Board intends to review it and revise it over time.
95. The Board announced the timetable for applying for the new contracts in the September 1998 edition of Focus (the quarterly newsletter the Board sends to every legal aid account holder). It republished this timetable, as amended, in the December 1998 edition. Both timetables made explicit the need for solicitors' "organisations" to apply to join Section A of the Board's "bid panel" for the categories of law in which they intended to bid for a private practice contract by 31st January 1999. Mr South explains that this deadline was necessary for the Board's planning purposes. It had to know which firms might potentially win contracts, and it also needed to be able to anticipate the resources which would be required to undertake audits, where necessary, in relation to the bidding. In order to remain on the bid panel, the office had either to be franchised in the relevant categories of law or to have applied for a franchise and passed a preliminary audit within the time set out in the timetable. In December 1998 the deadline for applying for franchises was extended by three months to 31st March 1999 in response to protests from the Law Society. Section B of the "bid panel" was created to allow for existing firms which missed any of the Board's deadlines, firms which split up, and new firms, like the applicants' firm, which came into existence in 1999. The lawfulness of the Board's 31st January deadline for Section A firms was upheld by Sullivan J in R v Legal Aid Board ex p Elton (CO/1232/99, 22nd April 1999, unreported) on an application made by a firm which had missed that deadline by a few days. 6,812 firms (an expression we will continue to use although some firms had offices in different localities which made separate applications that are included in this total) were originally included on the Section A panel.
96. In April 1999 the Board published further draft General Civil Contract Documentation, together with Rules for Bidding (known as "the Terracotta book" from the colour of its cover). It also sent a Questionnaire to the Section A firms on the Bid Panel for a generic franchise category seeking information about the number of new matters they had started in each category of law for which they sought a contract between 1st December 1998 and 31st May 1999.
97. This information was needed because once the Board had decided on the contracts it would allocate on a priority basis to nfp agencies in relevant categories of law (mainly debt and welfare benefits), its chosen policy, when offering contracts to the firms on the Section A private practice bid panel, was to make a notional allocation of cases to what was called a "bid zone" for a selected category of law, on the basis that cases would then be awarded to the selected firms on the bid panel for that category in the bid zone pro rata to their "baselines". Bid zones are geographical sub-divisions of the Board's 13 regions. In the London region, the 33 London boroughs formed 33 separate bid zones. During the course of 1999 the Board stopped referring to areas, and the senior local manager was now the Regional Director, not the Area Manager.
98. The "baseline" for each firm was calculated by taking the number of cases started in the relevant categories of law during the six months that ended on 31st May 1999, and then doubling it to obtain an annual figure. This was seen to be a more accurate reflection of a firm's current rate of taking on cases than would be furnished by any (much earlier) information already in the Board's possession. Its adoption meant, however, for some firms that if their practice was contracting the resulting baseline figure was smaller than the number of claims they had submitted in respect of completed cases during the 12 months ending on the same date. The baseline figures were calculated regardless of where the firm's clients lived, so that the allocation processes recognised all the starts actually undertaken by a firm with a national client base.
99. The Board notionally allocated the funds for each region to bid zones and categories of law by reference to a number of factors. The main governing factors were the recommendations of RLSCs and the likely capacity of firms within each zone to undertake work in the priority categories identified in that zone. It explained in helpful detail the way in which it allocated the funds to the bid zones and between categories of work, and the way in which it calculated the total number of new matter starts for each bid zone (see Appendix 2 to the Board's skeleton argument). The generic non-franchise categories received different treatment, selected firms being allocated work strictly commensurate with their baseline figures.
100. In May 1999 the Board extended the deadline date for firms to pass a preliminary franchise audit to 31st December 1999, and the deadline date for the receipt of Section A contract bids to 13th August 1999. In June 1999 it invited certain Section A firms to bid for contracts. The form for bidding included, for the bidders' information, the number of case starts notionally allocated to the bid zone in which the bidder's office was situated. It also contained an estimate of the amount the Board would pay in respect of cases both started and claimed in the first year of contracts. This initial allocation was notional rather than final because the amount finally awarded would depend to a large extent on the number and capacity of the firms actually bidding. Bids were invited for any franchise category in a bid zone in which an allocation of funds had been made for contracts in that zone. If social welfare categories had been identified as a low priority in a particular bid zone, no invitations to bid would be sent to firms in respect of those categories except in well-defined exceptional circumstances. Each firm was invited to submit a bid which asked for an annual number of new case starts in the category specified in the invitation.
101. At the same time the Board sent to the Law Society and to the Legal Aid Practitioners' Group and others a copy of its newly published Guidance on Fund Allocation and Contract Awards. An article explaining this guidance was published in the July 1999 edition of the Legal Aid Practitioners' Group's newsletter "Legal Aid News", and in London an officer of the Board spoke at meetings attended by about 700 representatives of firms on the Section A bid panel, at which copies of the Guidance were made available to everyone who attended. The Board also made the Guidance available to any solicitors' firm which requested it. Neither Ms Mackintosh nor Mr Duncan, whose firm opened its doors for trade on 1st July, attended any of these meetings since their firm was, inevitably, not on the Section A panel.
102. In September 1998 the Board had told the readers of Focus that it would complete the agreement of contracts with all suppliers by September 1999. This date was later put back by a month, but even if this revised timetable had been adhered to, the scheme could have been introduced in an orderly manner, and many of the difficulties that arose in late November and December when contracts were eventually offered could have been averted.
103. The revised timetable was, however, thrown badly out of joint when the Board started to receive the bidding firms' answers to its questionnaire. More than 10% of the respondents gave it information that was patently and obviously wrong. If the Board had not challenged these figures, the firms that provided information which was inaccurate, incorrect, or (in some cases, the Board believed, dishonest) would have benefited at the expense of those that had reported accurately. These challenges, which took up a great deal of time and resources and delayed the moment when contracts could be offered to Section A bidders, resulted in the reduction of the overall baseline figure for the whole country by many thousands of cases. The papers before the court reveal one firm which maintained that it had done 50 housing cases and 100 welfare benefit cases during the baseline period, whereas the Board ascertained the true figures to be 25 and 19 respectively.
104. The schedule payment limit which appears in each of the new contracts represents an informed estimate of the value of claims that the relevant firm will submit in the schedule period. Since the first of these periods was 15 months long, an appropriate pro rata addition was made to what would otherwise have been an annual figure. Those claims will be for cases started before the contract began, and also for cases both started and completed in the period covered by the schedule. The proportion of cases both started and completed in a year varies, by category of law, between 30% and 60% of the overall claims submitted during the year. This range is wider for individual firms.
105. On 26th November 1999 the Board started to send out contract offers to firms which were still on the Section A bid panel, being those who were in possession of a franchise from the Board or who had passed its preliminary franchise audit. The number of new matter starts in each category which was allocated to each bid zone was divided between the firms bidding in that category. New matter starts were awarded pro rata to each bidder according to its baseline, although a bidder could not receive more starts than it had bid for. For the four non-franchise categories, solicitors were simply awarded as many starts as were identified from their baselines. Contract values for the firms which were offered contracts in franchise categories were normally based on the average cost of cases derived from their claims for the year to 31st May 1999. They were advised of their average cost of case for each category of law, a calculation which included all cases, both more and less expensive, whether long or short-running. A particular problem emerged in relation to some of the contract values for non-franchise and Section B offices which we will discuss later in this judgment. Section A offices were given a deadline of 15th December within which to decide whether to accept the contract they were offered. After that date the way would be open to offer a contract to Section B firms. If the Board had been able to adhere to its original timetable, there would have been far more time before the end of the year to deal in a well-organised manner with the selected Section B firms (which had been omitted from explanatory meetings like those held in the London area in the summer of 1999) and to complete the bulk of any reviews requested by firms who were dissatisfied with their original allocation.
106. In relation to Section B firms, like the applicants, the Board resolved that it would be unfair to treat them more favourably than Section A firms. It therefore decided the number of cases it would authorise by reference to the same baseline. It was impossible, however, to adopt this approach in relation to a new firm, because by definition it would have no equivalent past record. The Board therefore decided that it would have to adopt a shorter and more recent period (usually the six months ending on 30th November 1999) for calculating the baseline in these cases. When it did so, it would normally award a contract in the first place to such a firm for the matter starts disclosed in this baseline on a provisional basis, and give its regional directors the discretion to vary this amount. It resolved that it would keep the number of cases started by new firms (and others) under close review as work under their contracts progressed, and that it would respond promptly, where appropriate, by increasing the number of cases that could be started under the contract. No schedule payment limits were calculated for Section B firms at the start of their contracts. Claims were to be paid when submitted, on a case by case basis, until sufficient information was obtained to specify appropriate figures in the contract.
107. By 13th December 1999 contracts had been awarded to slightly more than 5,000 firms. These firms carried out about 80% of the current volume of the civil advice and mental health work which was now coming under contract. The great majority of the other 6,000 solicitors' firms who previously did green form work and were not offered a contract did not apply for one, mainly because the volume of legal aid work they had carried out in the past was very small. In the field of mental health the Board allocated an amount sufficient to enable it to award contracts for the numbers of cases indicated by the baselines.
108. At the advice and assistance level, the Board knew from past experience that the great majority of contracts let to solicitors would be category specific contracts for family work. In the event, of the 5,156 contracts offered in the first round of contracting, 4,636 included a contract for family work. Many of these contracts were for family work alone, and the balance were for family work combined with other specific categories. Only a small number of category specific contracts other than family were awarded. In his second statement Mr Orchard gave the figures for the awards of category specific contracts to Section A firms and nfp agencies respectively:
Firms nfps
Family 4636 2
Welfare Benefits 514 228
Debt 507 168
Immigration 473 65
Housing 834 114
Mental Health 328 11
Employment 358 69
Consumer 238 6
Education 32 4
Community Care 28 3
Actions Against Police 39 -
Public Law 5 -
Crime tolerance 181 -
109. Many firms will, of course, have a contract comprising an award in more than one category. It is at once noticeable that there is very little involvement by nfp agencies in the categories of family, mental health and community care.
110. The Board maintains that it has had to introduce into its new scheme what it describes as tolerances in contracts for a number of reasons. The first is because tolerances allow a holistic service to be provided to clients who have more than one legal problem. For example, a client may seek advice on family, housing and welfare benefit matters at the same time. Tolerances also provide access to advice for clients in areas where there may be no contractors in a particular category of law, perhaps because there is insufficient business to justify a subject specific contract beyond family law. Most importantly, if there were no tolerances, no new categories of law could emerge, and the new scheme would be frozen into the delivery of only those categories of law which existed when it started. Mr South points out that education law (which attracted 32 category specific contracts in Section A) has developed significantly over the past few years, and that nobody could be certain what legal needs would emerge over the next few years.
111. The total value of work allocated to tolerances in the awards to Panel A firms was 13.5% of the total value of all new matter starts awarded. Mr Orchard considers that this figure substantially meets the Board's aim of ensuring that as much work as possible is carried out within category specific work carried out under specialist supervisors. Some work is specifically excluded from tolerances because the Board recognises the importance of providing clients with real expertise (where it exists) and that some problems should be directed towards those who have demonstrable competence. Family and clinical negligence work cannot be carried out within tolerances. The Board also made it clear that mental health and immigration would not normally be included in tolerances, and so far as Mr South is aware, no contract has been awarded that allows mental health work to be done within tolerances. In any event, LAFQAS requires franchised organisations to accept cases only within the limits of their competence, and even where work is done outside the area of law for which a contract is held, the contract requires it be done according to the contract standards.
Part 7. The firm of Mackintosh Duncan and its contract award
112. The applicants, as we have said, are a two-partner firm of solicitors, who have been practising in Southwark since 1st July 1999 in the fields of employment, community care, mental health and human rights law. In employment law, they wish to develop a service to clients in disability discrimination cases.
113. Ian Duncan, who is a senior solicitor, specialises in those two fields, as well as undertaking community care and health work. His partner, Nicola Mackintosh, specialises in the fields of mental health, community care, health and human rights law from a public law perspective. She has a considerable reputation in her specialist fields. In 1992, whilst she was still a trainee solicitor, she was appointed a member of the Law Society's MHRT Panel, on which she still serves. She is also a member of the Law Society's Mental Health and Disability Committee. She founded the Mental Health Advocates' Group, which she co-ordinated until she founded the Community Care Practitioners' Group in 1994. She is still the co-ordinator of that group. She also finds time for writing and speaking at conferences. She co-authored one of the leading textbooks on community care law, and is a member of the editorial committee for the Community Care Law Reports. She regularly speaks at conferences on issues relating to mental health, disability and access to services. So far as her practice as a solicitor is concerned, she has been retained in many of the test cases brought in the field of community care, mental health and health law in recent years. As we will describe, she is so well known that she receives referrals at the rate of about 25 per week from all over the country, although she cannot, of course, accept all the cases that are referred to her.
114. Until July 1999 Mr Duncan and Ms Mackintosh were partners in the firm of TV Edwards, a firm in East London which is one of the largest firms in the country undertaking legal aid work. He was the managing partner and legal aid franchise manager at that firm, and she was responsible for supervising the work of the solicitors in the firm's social welfare unit, which acted for clients in her specialist fields. She has told the court that that unit has now been dissolved, and that there is now only one part-time solicitor at her old firm who undertakes community care cases.
115. In order to illustrate the complexity of the issues that have arisen in this case, we must explain how a solicitor in Ms Mackintosh's chosen field of practice used to look after her clients' needs under Part III of the 1988 Act until the end of last year. The initial limit of the advice and assistance scheme for any individual case in all the areas of work relevant to this case was two hours' work, which the Board might extend, depending on the need for further work. The solicitor had to carry out a strict financial eligibility test of the client's means, but if clients passed that test, there was no restriction on the availability of the scheme. Solicitors were not paid anything until they submitted their bill for assessment at the completion of their work. The basic rate of remuneration was £44 per hour, with slightly higher rates for firms with a franchise and for those in London, up to a maximum of £48.25 per hour. There was no guarantee that the solicitors' bill would be paid in full. Solicitors have to pay for all their office expenses out of this income. There is no sign here of the gold-mine which is so often mentioned in contemporary public discussion of legal aid issues.
116. Under the advice and assistance provisions in this part of the scheme the solicitor might take the client's instructions at an initial interview, conduct further interviews, make telephone calls and write letters, prepare documentation, write any letters before action and obtain all the information that is needed to enable a determination to be made as to whether a client had sufficient grounds for bringing legal proceedings. At that point (but not before), an application for full legal aid might be prepared and submitted to the Board under Part IV of the Act.
117. Ms Mackintosh says that in her experience it was only in rare cases that an extension to the two hour limit was not required. In a number of cases the time needed to undertake the necessary work was substantially increased. She instances clients with physical disabilities or mental health problems, those whose first language is not English, cases where the documentation is considerable, or where the legal issues are particularly complex. The two hour limit is invariably exceeded in cases where a client's disability necessitates a home visit.
118. As we have already mentioned, she shares Mr Orchard's view of the importance of the legal advice and assistance scheme. From her perspective, it allows the funding for the preparation of cases that is necessary before proceedings are brought (if, indeed, they are appropriate in any given case). Without such funding, solicitors would simply be unable to continue the work. In addition, quality advice from an appropriate expert at an early stage in many cases avoids the need for proceedings to be brought at all, and this aspect of the scheme carries with it consequential cost savings.
119. The scheme is available free of charge only to people on very low incomes with minimal capital. It is therefore confined to a client group who are, by definition, in poverty and, in the main, among the most vulnerable members of society. They also tend to be the client group who are in most need of legal help in relation to housing problems, debt, welfare benefits, entitlement to community care and mental health services, and so on.
120. There is a dearth of specialist practitioners in the field of community care and health law. Ms Mackintosh therefore receives referrals on a national basis from such sources as national charities, citizens' advice bureaux, law centres, social workers, psychiatrists and solicitors unfamiliar with this area of the law. The cases are always urgent, particularly because clients are often passed from one organisation to another without their problem being adequately rectified. As a result, their condition deteriorates to the extent that they are at physical risk, or at severe risk of a mental health breakdown or relapse, and they may be a danger to the wider community in the absence of prompt and expert legal advice and action.
121. When Mr Duncan and Ms Mackintosh were planning to set up a specialist small firm in their fields of practice, they were naturally interested in the impact the proposed regime might have on the type of casework they were intending to undertake and on the financial projections of their firm. Mr Duncan therefore had a preliminary meeting with Mr South in January 1999 to let him know what they had in mind. There is an unresolved dispute about what was said at that meeting, but Mr Duncan gained the impression that provided they applied for a franchise as soon as they started trading, they were highly likely to be awarded a contract in the areas in which they specialised. The reason for this was that the Board wished to retain close links with niche quality practices like theirs in the field of social welfare law. The applicants had also been reassured by the Lord Chancellor's statement that the new regime would focus on the most vulnerable members of society.
122. In due course they obtained a three-year lease of office premises in Southwark where they began to practise in July 1999 under the name of Mackintosh Duncan. Of their two support staff, one was another solicitor from their old firm who had experience in community care and mental health law, and was also a member of the Law Society's MHRT panel. They invested £27,000 in a new computer system and software package for time recording and case cost analysis. This was one of the requirements imposed by LAFQAS on a firm which sought a franchise, and they submitted their application for franchises in the employment, mental health, community care and public law categories before the deadline date of 30th July 1999.
123. They had always realised that they would be excluded from the Section A bid panel. They were confident, however, that they would be awarded an appropriate contract as a member of the Section B panel in view of their specialist skills, and that they would know where they stood in relation to that contract well before the end of 1999.
124. They became concerned, however, about the Board's lack of progress in processing their franchise application, although they were encouraged when they were asked by the Board to indicate the likely number of cases they anticipated they would undertake during 2000 in the categories for which they had applied. They responded on 2nd October, when they took the opportunity to tell the Board how Ms Mackintosh received instructions from all parts of England and Wales, ranging from Cornwall to the North of England, and how bid zones based on London boroughs were entirely inapplicable for identifying clients' needs in her area of expertise. They also mentioned the dearth of practitioners in the area and the needs of the client base. Although their letter was addressed to the Board's London Regional Director, a copy of it was sent to Mr South. The preliminary audit eventually took place on 25th October 1999. They were told that they had passed with flying colours in the generic categories of mental health, community care and employment law. The Board said (as was correct at that time) that there was no generic category of public law. On 29th October they sent to the Board their "notice of intention to bid".
125. On 12th November 1999 the Board acknowledged their application and sent them a copy of its Guidance on Fund Allocation and Contract Awards. Although the Board asserts that it sent them this publication two months earlier under cover of a letter of which Mr Duncan acknowledged receipt, Ms Mackintosh says that she saw it for the first time when she received the 12th November letter, and her conduct is certainly consistent with her having studied this document for the first time in mid-November. She was seriously alarmed by its contents, particularly as the Board told her firm in its covering letter that the provisional allocations for Southwark for employment, mental health and community care contracts at the date when Section A panel members were invited to bid were:
Employment £15,798 78 cases
Mental Health £15,245 48 cases
Community Care £0 nil cases.
126. It explained that the sums quoted represented the likely cost of the bills delivered in the year if the cases mentioned were all started in the first year of contracting.
127. On 15th November the applicants asked for explanations of a number of the things they had now been told. When they received no reply, they sought advice from counsel. They then wrote to the Board again on 24th November, telling it that counsel had advised that the proposed regime was unlawful. They sought an urgent meeting. This led to a response from the Board dated 25th November which did not satisfy them. A five-page letter before action was written on 1st December. This elicited a nine-page reply dated 6th December, which failed to allay their concerns, and these proceedings commenced shortly afterwards. On 13th December, as we have already said, Latham J refused to grant interim relief and adjourned the application for permission to apply for judicial review. The hearing of this application eventually began on 24th January.
128. On 14th December the Board invited the firm to bid for a contract on the B panel. They were invited to provide details of the number of cases they had started under the green form scheme in the 5-month period since 1st July 1999, and to state the maximum annual number of new case starts in each franchise category in which they sought a contract. On 16th December they replied, giving the following figures
Last 5 months Maximum Bid
Community Care 18 75
Mental Health 8 50
Employment 0 45
129. On 20th December they had an open meeting with Mr Hamilton and Ms Patterson, who represented the Board. Subject to one matter, Ms Mackintosh's record of this meeting appears to be agreed. Ms Mackintosh maintains that Mr Hamilton told her that they would be awarded 8 mental health cases, 18 community care cases and two employment cases for the first 15 months of the contract. Mr Hamilton disputes that he said this. He points out that this would have been inconsistent with what it is accepted that he told the applicants about these cases being sufficient to last six months, when the position would be reviewed. However that may be, the contract offer they received just before Christmas unequivocally referred to the matter starts for a 15-month period ending on 31st March 2001. A small upward adjustment had been made, so that the contract, which the firm accepted, without prejudice to their challenge in these proceedings, was based on the following permitted case starts:
Community Care 23
Mental Health 10
Employment 2
130. The Board, however, told the firm in the letter dated 21st December which accompanied the contract offer that a degree of flexibility was built into these figures. It said:
"We will of course keep the number of new matter starts under review as you and others commence work under the contract. Where the number of clients coming to you indicates that we should increase the number of new matters you may start, we will do so if we can, given the financial allocation to the bid zone and the performance of other contractors.
You may apply, normally after three months, for an increase in your contract award if your number of new starts appears likely to exceed the number we have allowed you in the schedule (though it may be appropriate for you to apply earlier, particularly in categories of law other than family or mental health).
During the first six months of Schedules starting on 1 January 2000, you should not turn clients away because you fear that the rate at which you are starting cases might lead you to exceed the number of matter starts authorised in the Schedule for the full year. If, during the first six months or afterwards, you believe that the number of starts authorised by the Schedule is too low, you must approach us immediately. After the first year of contracting, we will expect to make changes to the number of authorised matter starts or the Schedule payment limit only where long-term trends are clear."
Part 8. The Burgundy book
131. The final observation in this letter reflected the terms of Section 2.4, paragraph 13 of the Overview contained in the General Civil Contract Documentation which formed part of the contract offer. This documentation in its final form had been produced by the Board in October 1999, and is generally known as "the Burgundy book" from the colour of its cover.
132. The contractual provisions set out in the Burgundy book are complex, but the Board provided an overview which was expressed to provide some background to and explanation of the contract documents, although it said it was not "a formal part of the contractual relationship". Other relevant parts of the overview were in these terms:
"2.1 Objective
1. We want to encourage committed, high-quality providers of legal services to become contracted providers. We want to establish and develop long-term relationships with these providers to ensure that those eligible to receive publicly funded legal services have access to competent, appropriate, quality assured and value for money services that meet their needs.
2. The objective of this contract, therefore, is to secure the provision of competent, quality assured, best value contract work in specified categories of working and from specified offices. So far as controlled work is concerned the objective is to secure it within a controlled budget.
....
2.4 The Schedule
....
7. The Schedule payment limit is the maximum amount we will pay over the period of the Schedule unless it is varied as set out below.
....
9. We will pay the amount of the Schedule payment limit to you in equal monthly amounts, called standard monthly payments.
....
12. Our objective is to try, in co-operation with you, to achieve an equilibrium between the value of your claims for completed work and the Schedule payment limit. In order to do this, we must exercise control over the number of new matters that are started, since the average cost or duration (or both) of your cases may change.
13. [See the Board's letter of 20th December 1999 in para 130 above].
14. Clause B17. You may apply to vary the maximum number of matter starts or the Schedule payment limit, or both, at any time. We will respond positively to such a request if we can do so within the overall controlled budget and if the additional work proposed meets identified needs."
133. By Clause B15 of the contract, the Board reserved the right, on or after the issue of its quarterly statement to the contractor, to amend the Schedule to the contract in respect of the maximum number of matter starts, the tolerances, the Schedule Payment limit and the Standard Monthly Payment. Clauses B16-18 and B20 read:
"16. Subject to Clauses B17 and B18, we will not make an amendment, under Clause B15, to reduce your maximum number of Matter Starts or your Schedule Payment limit unless, calculating from the Schedule Start Date:
(a) the amount payable in respect of your Controlled Work claims is at least 10% less than the total of your Standard Monthly Payments since then; or
(b) in any Category of Work, the total number of Matter Starts which you have notified to us is at least 10% less than the number which (assuming a regular distribution of Matter Starts while this Schedule is in force) we reasonably expect it to be; or
(c) in any Category of Work, your average matter cost (determined with reference to your Controlled Work Claims) is at least 10% higher than your Standard Matter Cost.
17. At any time while this Schedule is in force, you may apply to us to increase or decrease your maximum number of Matter Starts, any tolerance, or your Schedule Payment Limit (and Standard Monthly Payment). Subject to any provision in Guidance, we may determine your application in our complete discretion.
18. If we make any amendment under Clauses B15 to B17, we may make such amendments to your maximum number of Matter Starts, to the tolerances, to your Schedule Payment Limit and to your Standard Monthly Payment as we consider are appropriate having regard to the amendment made and the sum of money available to pay for controlled work (in the Zone or otherwise) while the Schedule is in force.
....
20. Subject to Clause B21, any Next Schedule will authorise a number of Matter Starts which is at least 80% of the Matter Starts authorised under this Schedule."
134. The right to seek a review of a decision by a Regional Director is contained in Part 5 of the Rules for Bidding contained in the Terracotta book. By Rule 5.4 the grounds for a review are fairly restricted, being comparable to the grounds of review available to the High Court on an application for judicial review.
135. Before we leave the Burgundy book, we must make it clear that we reject Mr Gordon's submission that if a contractor applies under Clause B17 for an increase, the Board has power to determine such an application by awarding a decrease. The Board's power to amend matter starts or schedule payment limits downwards within the period for which a schedule is in force (in the absence of an application for a decrease by the contractor under Clause B17) is strictly governed by Clause B16. This means that a firm awarded a controlled contract need not fear a unilaterally imposed reduction in either of these matters during the period when a schedule is in force unless any of the three events mentioned in that clause have occurred. In other words, so long as the controlled work claims keep reasonably in kilter with the standard monthly payments, the firm actually undertakes and notifies the number of matter starts that could reasonably have been expected of it by the stage of the contract in question, and its average matter cost (as revealed in its controlled work claims) is reasonably in line with its "standard matter cost", it will be in no danger of having its contract unilaterally downgraded in the ways to which we have referred. On the other hand, it may receive only 80% of its original matter starts in the next schedule period.
Part 9. Mackintosh Duncan's concerns about the new scheme
136. Although the contract offer to the applicants was expressed to cover the period between 1st January 2000 and 31st March 2001, it did not contain a schedule payment limit or a standard monthly payment. Annex B to the contract contained these provisions:
"It is not practicable to specify a Schedule Payment Limit or a Standard Monthly Payment that is effective from the Schedule Start Date. Unless we specify a Standard Monthly Payment, we will pay you on a matter by matter basis for the Controlled Work that you perform.
We will monitor your Controlled Work Claims and will issue a Schedule amendment Notice specifying an appropriate Schedule Payment Limit and an appropriate Standard Monthly Payment when we consider that it is practicable to do so. The Schedule Payment Limit and the Standard Monthly Payment will be based on the claims for payment that you have submitted."
137. Although by now heavily engaged in this litigation, the applicants sent a five-page response to the Board on 4th January 2000 in which they requested a review of their contract offer. We will be considering in the course of this judgment a number of the points they made in this letter. In particular, they observed that the allocation of only 10 mental health cases was likely to leave them at risk of failing to meet LAFQAS standards in this area of the law, and at serious risk of having to make their employed solicitor redundant. They added that they were concerned about the intention of the Board to fix a payment limit for Section B firms on the basis of their figures for the first three months of 2000. The present judicial review proceedings were currently taking all their time and were likely to continue to do so until they were finally determined. The firm was also involved in a number of other major judicial review proceedings which would be determined in the first three months of 2000. This would also influence their ability to undertake new work, so that the resultant figures would not be truly representative of their usual pattern.
138. They told the Board that the whole scenario left them in an extremely uncertain position and would prejudice their clients They would be unable to plan the firm's finances and review their business plan as required under LAFQAS if the uncertainty was not removed, and they would be forced to turn away clients because they had so few matter starts. The Board had recognised that they were a niche practice, accepting clients on a national basis, but no consideration appeared to have been afforded to this fact when determining their contract award.
139. At the meeting on 20th December Ms Mackintosh had unsuccessfully sought a guarantee from the Board that if the number of new matters the firm was allocated proved to be insufficient for it to continue undertaking work, new case starts would be awarded (see para 234 below). Mr Orchard has explained that the Board could not provide such a guarantee at that stage because the position in relation to new matter starts and the availability of funds was developing all the time. He anticipated that the position would settle down for the final nine months of the first contract period when the review (due to take place between April and June 2000) was completed.
140. Ms Mackintosh also says that Ms Patterson told her at the meeting that there was little or no prospect of further mental health cases being offered to her because they had largely been allocated (see para 239 below). Mr Orchard maintains that this remark was taken out of context. He says that Ms Patterson was merely making the point that current trends were showing that in the mental health category, unlike other categories, few firms were failing the audits and dropping out of the contracting scheme as a result. This meant that there would be no spare matter starts available for allocation as a result, but the Board's £9 million reserve would still be available.
141. One of the applicants' main complaints is that the way in which the Board allocated them their case starts was completely unfair and irrational. In the first five months of their existence they had been heavily involved in setting up the firm and installing the office systems required to satisfy the Board's audit. They were also involved in major litigation which was progressing at this time independently of their green form and ABWOR work. They had invested heavily to ensure that they attained the franchise standard as soon as possible. They also intended to expand and to recruit staff to deal with the numerous referrals of new clients they were receiving every day from all over London and on a nationwide basis.
142. Another of their complaints relates to the average cost the Board had adopted for cases in each franchise category. In the three franchise categories in which they were interested, these worked out at:
Community Care £136.10
Employment £139.91
Mental Health £506.11
143. The Board had not in the past included community care or other new specialist franchise categories in its recording systems, which merely had a residual category called "other". When a firm applied for a franchise in one of these categories, the Board had adopted the average cost of cases in the firm's "other" category for the 12-month period up to 31st May 1999 as the average cost of work in the specialist category in their contract. Mr Orchard accepted that this figure would only be completely accurate if the firm did no work except in this category, but he said that this category would, for a specialist firm, be likely to be the largest single case type among the "others" that were recorded on its account, so that the Board's approach was a reasonable one.
144. For a firm like the applicants which had no historical data of this type which the Board could use for this purpose, it had adopted the average cost of cases as the average cost for all suppliers with a claims history in the relevant category. For community care, this average cost was based on the average cost in the "other" category of all the firms which had applied for a specialist franchise in this field.
145. Mr Orchard is satisfied that this was the only practical way of deriving an average cost which was a reasonable approximation for the purposes of starting the Section B contracts for new firms. As each firm submitted actual claims, the Board would quickly build up a picture of its actual average costs in each category. It would then be able to adjust the firm's schedule payment limits or new matter starts appropriately so as to ensure that monthly payments would in future be in line with the firm's actual claiming pattern.
146. Mr Orchard added that it may well be that firms providing green form advice at an average cost of £136.10 in community care cases have been advising their clients they have no legal case. Alternatively, if they have a good case, the solicitors may be using the legal aid scheme to apply for a legal aid certificate to take proceedings. This, he says, was an appropriate and usual use of the green form scheme. He adds that Ms Mackintosh had no reason to rely on this low figure as the basis for querying the quality of the advice given by other solicitors working in this field.
147. The applicants respond that it would have been very much better for the Board to have asked them on 14th December 1999 to tell it the average cost for each community care case it had started and billed since 1st July 1999. At £346.23, their average cost was markedly higher than the Board's estimated figure of £136.10. In fact, even this figure was unusually low for them because they had dealt with several cases in which the client had been able to travel to their office, and where their advice had resulted in a successful outcome after minimal work. Ms Mackintosh complains about the Board's approach, which was to consider cases in all the specialist franchises together without taking into account the wide variations there were likely to be in the average cost in each category. The reason why this point is important, she says, is because the schedule payment limits in the new contracts are based not only on the average cost per case but also on an assumption that only about one third of the cases allocated under the contract for a 15 month period will be started and billed within the same period. This approach produces an inaccurate picture and results in severe problems in terms of cash flow for firms, threatening their very survival.
148. The next bone of contention is the subject of tolerances, which the applicants complain is unfair and irrational in the way it affects a small specialist firm like theirs. The evidence shows that every solicitors' office with a family law franchise (about 90% of the total of 5,156 offices initially awarded a contract) is entitled as of right to a tolerance of 10%. Some tolerances are as great as 100% (or £20,000, whichever is the lesser amount): the average tolerance across the board is 13%. The possession of a tolerance of this kind means that a firm can take on cases in areas of law for which they do not have a franchise without the need to observe LAFQAS supervisor standards in those fields. A firm which possesses a non-family franchise in, say, mental health, is entitled to a 10% tolerance if it is allotted more than 10 cases, but this tolerance is of a different kind, because such a firm is not entitled to any more cases; if it has 10 cases and a tolerance of one, it may take on one case in a different field of law within its total allocation of 10.
149. The Board justifies its decision to add tolerances to family contracts because it says it needs to ensure that there will be proper access for clients to a network of contracted suppliers. It appears that the proportion of contracted offices with a family contract (90% of the total) increases substantially in rural areas where the problems of access to legal services are more pronounced. Firms that are able to sustain a business without undertaking family cases operate for the most part in and around large cities, because it is only there that they can find a sufficient number of clients. Tolerances will only be higher than 10% in areas where the Board's regional director thinks that this is necessary to ensure client access to contracted services, because of the lack of availability of other franchised suppliers. Within the minimum and maximum limits, tolerances were weighted towards those suppliers who were franchised in the greatest number of categories. Mr Orchard describes family practitioners as the general practitioners of the legal system and says that the Board's allocation system has to reflect this fact. The vast majority of contracted offices which do not have family contracts are in urban centres.
150. Ms Mackintosh complains that the Board has given no rational explanation of the reasons why family firms should be provided, as of right, with greater levels of tolerances than firms specialising in any other areas of law. A family practitioner does not, she says, encounter more clients with problems in several other areas of law which need holistic treatment than, say, a community care provider. Community care clients almost invariably need advice in other areas of law, such as welfare benefits, housing and debt, and she has had the same experience with her mental health clients. In those circumstances she says there is no rational reason why a solicitor in family law should be better placed than a solicitor in another field for the purposes of allowing new areas of law to emerge and new expertise to be developed within firms.
151. She points with approval to the Board's model in relation to clinical negligence franchises, by which specialist solicitors in this field are given more generous treatment if they have to travel to see their clients: see pages 228-9 of the Burgundy book, and paras 200-202 below. This model is not, however, followed in any other specialist category of law. Its adoption more generally would have achieved access for clients in other specialist fields to solicitors who possess a high level of expertise, and would result in the provision of a better service from public monies. Under the Board's scheme as it stands, people are being denied access to firms which possess relevant expertise, while large sums of public money are being allocated to firms who do not possess that expertise and who may not wish to undertake the work.
152. An integral part of her complaints in this respect relate to the way in which LAFQAS standards are not being applied rigidly to work conducted within tolerances. The firms granted tolerances must possess office systems which comply with franchise standards, but this requirement does not provide any quality assurance for the legal services that are being provided.
153. It is necessary to explain this issue in rather greater detail in order to understand it properly. LAFQAS requires the presence of a qualified supervisor in each category of work for which a non-generic franchise is awarded. Standard L2 requires of a supervisor direct experience in a set number of cases in the previous 12-month period, a background of experience, knowledge and understanding in the relevant category for a minimum period, which is generally at least three years for full time employees, attendance on at least three courses in the subject each year and a demonstration of his or her ability to ensure that staff are kept regularly up to date in that field of law and practice, and an awareness of the limits of their, and their staff's, professional compass. LAFQAS Annex 1 ("Supervisor Standards") contains a list of the specific supervisor standards for each of the 11 non-generic franchise categories. For mental health, for instance, if the work supervised includes representations at MHRTs, the five requirements are:
Areas of Knowledge
(1) Current membership of the Law Society's MHRT Panel;
(2) Representation on 10 MHRT case files;
Other requirements
(3) Subscription to at least 1 nationally published specialist journal;
(4) Access to medical reference publications which must cover:
(i) categorisation of mental illnesses, and
(ii) classification of psychiatric medication;
(5) Access to the current edition of the Mental Health Act Manual.
154. If work is carried out within tolerances, no supervision of this quality is required, and the applicants complain that an inevitable consequence of the Board's policy will be that highly specialist work, like community care cases, will be carried out by non-specialist lawyers who have no appropriate, well-informed supervision available.
155. Mr Orchard accepts that it is factually correct that tolerance work does not require a supervisor experienced in the relevant field of law. He maintains, however, that many recognised quality assurance systems only ensure organisational systems and procedures, and take no account at all of the experience of staff or the quality of their work product. He cites in this context Lloyds Register ISO 9002 Standard, which is the system to which the Board itself subscribes. The Board's LAFQAS standard, he says, provides assurance both as to the quality of a firm's systems and procedures and as to the quality of its work. The latter is assured by means, among other things, of regular sample file review as well as by transaction criteria audits by Board staff. He asserts that it is misconceived to say that work which is subject to quality assurance as regards the systems and procedures by which it is carried out is not quality assured. He adds that neither the Board nor the Law Society would accept the contention that solicitors are never competent to take on cases outside the area in which they are franchised.
156. In response, Ms Mackintosh observes that just because a firm undertakes family work, it does not mean that it is qualified or willing to undertake work in all other areas of law. Many of her own cases come from family firms and citizens' advice bureaux because practitioners are unable to deal with community care cases due to the complexity of the law.
157. Her complaint about the tolerance system, as operated by the Board to date, is that the high level of additional tolerances which are particular to family firms have been achieved through the removal of funds from expert practitioners in other areas in the law, who are experienced and willing to undertake the work at controlled work rates, in the name of client access. This, she maintains, is irrational in a scheme which aims to ensure quality provision for clients.
158. She repeats her complaint that work undertaken under tolerances does not have to be done to the LAFQAS quality standard for the particular area of law. The Board has not revealed the amount of money that has been allocated in family tolerances, but she maintains that this must be a considerable sum given the high number of case starts and the number of family contracts awarded nationally. The fact that family firms are allocated a minimum of 10% extra tolerance cases (whereas the 10% of tolerance cases allocated to other categories have to be found from within the matter starts allocated) is indicative, she says, of the priority given to such firms.
159. The applicants were also extremely critical of the manner in which the need for legal services had been assessed in London. This exercise, it will be remembered, finished up with a notional allocation of 48 mental health cases and no community care cases for the whole of the London Borough of Southwark.
160. Ms Mackintosh says that the London RLSC was the last to be created. It met for the first time in September 1998. It had only one full time member, and because of severe resource constraints it was unable to liaise with the other RLSCs before February 1999 when it was obliged to produce its final report (although it made it clear that its findings were provisional). It explained why it had found that its task was an immense one, and it emphasised that it had not been allowed enough time to produce an accurate model for the assessment of need in several areas of the law. Despite its serious shortcomings, however, the report had been influential in relation to the allocation of funds, and the award of contracts in areas where the need was low.
161. The London RLSC had criticised all three of the Board's predictive models of need. It had not made any recommendations or any assessment of need in relation to community care, education or human rights, and no definition had been produced as to the scope of the new public law category. Ms Mackintosh observed that according to the Mental Illness Need Index ("MINI") score, which was the only statistical information before the RLSC on this topic, the whole of London had a higher than average population with mental health problems in comparison to the rest of England and Wales. Notwithstanding this fact, the RLSC had assessed the need for mental health services on the basis that in the 33 borough/bid zones, the bottom 11 zones on the MINI score should be rated as "low need", the middle 11 as "medium need" and the top 11 as "high need", regardless of whether a "low need" zone actually had a higher score on the MINI than the average for the rest of England and Wales. In the event, in April 1999 the London RLSC recommended that the allocation of cases to bid zones was inappropriate for mental health. It was not clear to Ms Mackintosh whether the Board had accepted that recommendation, and how funds had actually been allocated. It appeared, however, from the Board's letter of 6th December 1999 that in the end mental health cases were allocated to each firm's baseline, although firms were not informed of this.
162. Against this confusing background, Ms Mackintosh was even more confused by the fact that Section 6 of the Board's Guidance on Fund Allocation appeared to state that in the mental health category funds for new cases would be allocated to zones on the basis of current expenditure, while Section 7, to contrary effect, said that where the relevant RLSC strategy identified no high or medium priorities for a zone (as, for mental health, in 11 of the London boroughs) the Board would initially attempt to allocate 0% of case starts to category specific contracts. Her concern was heightened by Section 9, which appeared to say that if an individual bid zone, such as a London borough, had surplus funds following the "first stage" allocation of funds to category specific contracts, the last thing an Area Manager was encouraged to do, among five listed options, was to transfer the funds to another zone.
163. Mr Orchard maintains that Sections 6 and 7 of the Guidance are not mutually contradictory, presumably because the "category specific contracts" mentioned in Section 7 should be understood as excluding by natural implication the family and mental health categories mentioned in Section 6. Mr Gordon unsurprisingly describes the Board's published documentation on allocation matters as "opaque".
164. It was against this background that the applicants were so worried about the allocations of funds to Southwark in their specialist fields of practice. On 26th November 1999 all that the Board could tell them about the nil allocation of funds for community care cases to the whole of the London Borough of Southwark was that no supplier had emerged as a likely community care contractor. The applicants knew that one local firm had obtained a franchise in community care and had made a bid for a contract, and that they had made their own future presence in Southwark as community care specialists known to the Board long before their firm had been created and they had started to practise there. Although the Board had referred to a questionnaire sent to firms undertaking work within this generic franchise category, neither she nor Mr Duncan had ever received such a questionnaire, and she was surprised that it had not been sent to the Community Care Practitioners' Group, given its obvious relevance to the members of that group. When she did see it eventually, she noted that it merely asked firms to state how many cases were undertaken in each category, although at that time there was no definition of the categories of work.
165. The Board's response to this criticism was that the figures they had disclosed to the applicants on 12th November had resulted from their original notional allocation of funds to the borough. The amount finally awarded depended to a large extent on the number of firms who actually made bids. The cost figures simply represented the likely expenditure in the first year of the contract, and many cases started in 2000 would not be billed during that year. When contracts were awarded, mental health cases in Southwark increased from the notional figure of 48 to an actual figure of 179, and community care cases from nil to 40. This, Mr South says, reflects the Board's flexibility and the care that it took. He explained the original nil figure for community care by saying that the Board did not initially recognise the other contractor mentioned by Ms Mackintosh as a potential supplier in community care law.
166. Ms Mackintosh responded to the effect that in the field of mental health, many Section 2 cases are started and claimed within a few days, and Section 3 cases in only a few weeks. The concept that many of the 48 cases notionally allocated to Southward for the year 2000 would not be billed until 2001 or later simply did not accord with reality.
167. The applicants' concern about the high priority and preferential treatment accorded to family law was heightened by the confusing way the Board had approached the definition of the new generic categories (for which see paras 303-324 below). Ms Mackintosh said that different firms had been told different things about these new categories. Until recently there was a category called "civil liberties" and no category called "public law", so that they had been told at the end of October that they could not apply for a franchise in public law. Towards the end of 1999 they were told that "civil liberties" had now been reclassified as public law, although no definition of the scope of this category had been provided. The Board had eventually produced a definition of the scope of the community care category, although it had not consulted the Community Care Practitioners Group at all about this definition. (It appears that the Board sent relevant correspondence to Ms Mackintosh, as the group's co-ordinator, at her former practice address, and it was not forwarded to her. Definitions of all the new generic categories were, in fact, published in the December 1999 edition of `Focus').
168. What was perceived to be an absence of a detailed understanding of the way a community care practice operated led to a sustained attack by the applicants on the way in which the Board had approached the allocation of contracts in this specialist field. The Board had said that only 28 such contracts were initially let - the applicants' Section B contract was the twenty-ninth - but Ms Mackintosh knew of one firm which had been refused a contract because it did not undertake over 30 cases each year. If there were so few practitioners, it made it all the more strange that her firm had not been allocated all the cases it had bid for, but was limited to 23 cases over a 15-month period. She says that family firms are simply ill-equipped to undertake work in the complex field of community care. Clients are often very badly advised by unskilled practitioners, and there is no guarantee that such firms will take on community care under tolerances. The effect of the Board's policy was to allow generalists to undertake the work when they did not have the necessary expertise, whilst specialists, like her firm, were being actively prevented from taking the work.
169. Her concern was accentuated by the fact that the manner in which further allocations would be made in the field of community care was wholly unclear. No account had been taken of the fact that she had been the head of a team of four solicitors working in the fields of community care and mental health at her previous firm. She assumed her previous firm's new contract was founded on baseline figures derived from the work she and her former colleagues had done there, although only one solicitor was now undertaking community care work there on a part-time basis. There is also no solicitor there who meets the LAFQAS supervisor standards for mental health, yet that firm had been awarded a mental health contract which may have been based on the figures achieved when she was at the firm.
170. Ms Mackintosh was also critical of the way in which the Board had estimated its likely contingent liability for bills presented for work done to 31st December 1999. She said that the record of claims made by a firm over a year ago would not represent a true record of the firm's work in progress. She suggested that this figure could have been obtained from individual firms. She gave an example of one firm for whom the Board had estimated the value of its work in progress as £6,145, whereas in fact the firm had an actual work in progress figure of £105,397.27, and its current billing history showed that it was claiming and receiving in the region of £35,000 per month. She said that this showed that the Board's estimate was entirely at odds with reality. The effect of mistaken assumptions like these would fundamentally affect firms' ability to continue undertaking work for clients, since their monthly payments would in many cases not even cover staff salaries. Even if mistaken estimates could and would be adjusted in due course (which was by no means clear) this would come too late for many firms.
171. Mr South responded to this criticism by accepting that for most firms the schedule payment limits under the contract were based on the average cost of cases derived from their actual claims for the year to 31st May 1999.
172. He said, however, that the value of work in progress for a firm was quite different to the value of the claims that it would make during any particular year. In essence, an unknown amount of additional work would be done on each case in progress before a claim was made for it. It could not be assumed that all cases in progress would be completed and claimed within any particular period. Accordingly, it would not have served any purpose to seek information from firms about the value of their work in progress.
173. He told us that the Board had considered seeking information from firms about the number of cases in progress immediately before the commencement of contracts. He accepted that, in principle, this would have enabled it to refine its estimates of its contingent liability and to set more accurate schedule payment limits, although it would have taken it some time to make the necessary calculations. In the light of its experience in relation to many firms inaccurately reporting their baselines, however, it became clear that the Board would not be able to rely on the information provided by this means.
174. The Board therefore decided to rely instead on its records of claims received in order to calculate contract awards. He added that the contract award was only a starting point. As cases were started and claims were received from firms under contract, the Board would review and revise their contracts to enable the true value of the Board's contingent liability to be accurately reflected in their contract schedules. He said, that the Board would of course pay in full for all work legitimately undertaken.
175. Mr Orchard added that the contingent liability payable by the Board in the financial year 2000-2001 was under constant review as it went on monitoring on a daily basis the number of green form claims that were being submitted. It would increase new matter starts to compensate if the contingent liability reduced faster than the Board originally anticipated.
Part 10. Prescribed panels
176. We have observed how Section 32(7) of the 1988 Act empowered the making of regulations which might provide that the right of choice conferred by Section 32(1) should be exercisable only in relation to legal representatives who were for the time being members of a prescribed panel. In January 1999 regulations were made under this section limiting the giving of advice or assistance or representation under the Legal Aid Act in relation to certain claims in the clinical negligence field to authorised litigators who were for the time being members of a panel of franchised litigators called the Clinical Negligence Franchise Panel. On 16th December 1999 similar regulations were made as regards family proceedings and immigration proceedings, and two further panels called the Family Franchise Panel and the Immigration Franchise Panel were created for this purpose.
177. Ms Mackintosh is extremely keen that similar prescribed panels should be set up in the fields of law in which she practises. She welcomed the Board's aim of ensuring that publicly funded legal work should be supervised by suitably qualified solicitors, but she said that this aim could have been achieved by the creation of prescribed panels of solicitors meeting the franchise standard and by corresponding contracts with the nfp sector. These reforms, she said, would have had the effect of providing a comprehensive service at a quality standard, which would have offered a better service for clients and a more effective use of public money.
178. Instead, firms around the country, like her own, had invested considerable expenditure in human and financial terms in preparing for franchising which may have been wasted if they are unable to survive under the contracting regime or have not been offered a contract at all. She was confident that quality provision could be achieved by way of prescribed panels of solicitors who meet the franchise standard, as opposed to the new contracting regime.
179. Mr Orchard said, in response, that the geographical distribution of solicitors' firms which had applied, or were applying, for franchises in different categories of law was such that the use of prescribed panels for all franchised categories would result in hopelessly inadequate access to justice nationally, particularly in the new specialist franchised categories of law such as community care or education. He did not believe that this was a position which the Law Society would support.
180. He accepted that the Board had introduced prescribed panels for clinical negligence, and that they had been a considerable success. Special considerations, however, applied in that field of law. The Board had received evidence to the effect that very many solicitors had inadequate medical understanding and were spending very large sums on medical negligence litigation with very poor results indeed for clients. He provided statistics and other evidence in support of the need for reform in this part of the legal aid system.
181. There are now over 220 panel firms providing specialist clinical negligence services nationally, which the Board thinks is a reasonable natural spread for such a highly specialist area of law. Mr Orchard said the Board knew of no equivalent evidence of large scale incompetence by non-specialist lawyers in the areas covered by the new specialist franchises such as community care or education. He added that the very low numbers of specialist solicitors in these new areas made it quite unrealistic to restrict this work entirely to specialists. In any event, the use of prescribed panels would not have allowed the Board to implement the Lord Chancellor's policy of a controlled budget for controlled work.
182. Ms Mackintosh reverted to her advocacy of a panel system when she read Mr Cogbill's evidence that a panel system had proved to be more cost effective in other countries than the scheme previously in operation in this country under Part III of the Act. She said that a suitable prescribed panel system would ensure that clients would obtain services from quality assured practitioners without the artificial and arbitrary limits on case starts and schedule payment limits which were features of the new regime.
183. She added, in reply to Mr Orchard, that the most obvious solution to the question of geographical access to providers in the community care field was to foster those practitioners who had a proven expertise in the field. Such practitioners should be allowed to accept clients from a national base, and to travel to visit them in hospital or at home. That was exactly what the previous system had permitted, and is the model used for the clinical negligence panel. It has resulted in expert practitioners being allowed to undertake work without limit. In other words, the client has been assured that the right expert would be providing the advice.
Part 11. The new controls over travelling expenses
184. During the course of the hearing we were shown a decision by a legal aid office at Reading to refuse an extension to the permitted expenditure under the applicant firm's new controlled contract to allow Ms Mackintosh to undertake a home visit to a client who lived in that area. It was said that a local solicitor should undertake the work.
185. We were invited to compare this aspect of the new controlled regime with the more relaxed regime which obtained up to 31st December 1999, and also with the more generous arrangements allowed to franchised clinical negligence solicitors on a prescribed panel.
186. Under the old regime applications for extensions of the permitted limit of expenditure were assessed by a test of reasonableness (see the Legal Advice and Assistance Regulations 1989, reg 21(2)). The applicants do not know to what extent distance played a part in the Board's decisions on extensions, although they assume that regard was had to all the circumstances of the case, including the specialised nature of the advice and the disability of the client. In any event, under the old regime Ms Mackintosh frequently travelled all over the country to visit clients.
187. We reject a submission made by Mr Gordon to the effect that the refusal of a green form extension in these circumstances on the basis that a local solicitor should do the work would have been a breach of Section 32(1) of the Act. Section 10 of the Act imposed a statutory restriction on the power of a legal representative to give advice or assistance which was likely to cost more than a prescribed limit, and in our judgment the Board would have been entitled to consider whether services of a similar character could be obtained by the client in his/her local area when deciding whether or not to exercise its discretion to authorise the travel costs of a more distant firm.
188. In April 1996 the Board published in Focus some costs guidelines of a very general nature. These guidelines stated that every application for an extension had to be considered objectively on the information made available and on its own facts and merits. Pages 41-43 of the 1998-9 Legal Aid Handbook set out some of the basic questions a legal aid office had to answer in dealing with the reasonableness of an extension, but no specific guidance about the reasonableness of travel costs appears to feature in that check list.
189. The new voluntary franchise schemes that were developed between 1994 and 1999 devolved to franchisees a considerable amount of power to authorise their own extensions. In the April 1998 edition of Focus the Board published "Guidance: Exercise of Devolved Powers". Paragraph 1.5 of this guidance is headed "Distant Solicitors" (see the 1998-9 Handbook, pp 21-2). It set out a number of factors which favoured the acceptance of instructions from a client who was at a distance from the solicitor. These factors included any legitimate expectation of the client of specialist assistance, the lack of availability of that expertise in the client's geographical area, the nature, complexity and/or significance of the subject-matter such as to justify the involvement of a distant solicitor, and significant previous knowledge of the client such as to justify renewed involvement even though the client was at a distance. These factors had to be balanced against the distance between the client and solicitor in terms of accessibility for the client and increased cost of travel and travelling time.
190. The guidance made it clear that the greater the distance the greater the justification which would be required. It was unlikely to be justified for a solicitor to travel to attend on a client at a significant distance from his/her office, involving, say, a one way travelling time of more than two hours, on the basis that it would be more appropriate for the matter to be dealt with by a solicitor local to the client. This would, however, depend on all the circumstances. Where a franchisee did not consider a longer travelling time to be justified, he/she should consider what assistance he/she could provide in ensuring that the client was referred to an appropriate source of information regarding advisers with relevant expertise who were more local to the client.
191. Rule 2.9 of the new contract specification (see pp 107-9 of the Burgundy book) is more restrictive. It reads, so far as is material:
"Controlled Work must be provided from your Schedule Office or Offices, or via any outreach service specifically authorised by a contract with us ... However, subject to Guidance, Controlled Work may be provided to a client on an individual basis where the client for good reason cannot attend a Schedule Office, and it is reasonable in the circumstances for you to accept instructions from that client."
192. The second part of the rule envisages that it may be appropriate for a solicitor to travel from his/her office "to attend on counsel, experts, witnesses or site inspections where it is appropriate to do so as part of the provision of Controlled Work".
193. Seven paragraphs of guidance then follow. Paragraph 1 is particularly important in the context of community care and mental health. It reads:
"Your contract has been entered into on the basis of the provision of supply from a particular office or offices within a specified Zone. Requests for authority to provide the service off premises ... will therefore be considered in this light. In determining requests, we will also have regard to the need for legal services and the availability of other suppliers in the particular Zone where it is proposed that the off premises services will be provided."
194. Paragraph 2 of the guidance makes it clear that approval will not be required under this rule for individual cases where there is good reason why the client cannot be seen at the relevant premises. One good reason will arise if a home visit is justified where the client is elderly, ill or disabled, and unable as a result to travel to the solicitor's office. Paragraph 4 of the guidance provides:
"Even where there is good reason, it is unlikely to be reasonable in the circumstances for you to accept instructions from a client who is at a distance from your office (involving a one way travelling time of more than one hour) where it will be necessary for you to travel to see that client. In these circumstances a client who is not able to attend your office would normally be expected to instruct another supplier, unless your acceptance of instructions is justified by one of the factors set out below."
195. The same factors are then listed as appeared in the 1998 guidance, with the significant exception of:
"the nature, complexity and/or significance of the subject-matter such as to justify the involvement of a distant solicitor."
196. Paragraph 5 of the guidance provides:
"However, with the exception of clinical negligence matters, it is unlikely to be justified in any event for you to travel to attend on a client at a significant distance from you, involving a one way travelling time of more that two hours in the absence of exceptional circumstances, for example where you are close to completion of a matter involving particular expertise and the client having been in custody at a centre local to you, is moved to a prison further away."
197. Paragraph 7 of the guidance suggests that the relevant Regional Office may be an appropriate source of information to whom a client should be referred regarding suppliers with relevant expertise who are more local to the client.
198. Pages 214-229 of the Burgundy book contain category specific guidance on general rules relating to mental health contracts. Paragraph MH2.9 (see pages 216-7) simply repeats, in more abbreviated terms, the guidance given under Rule 2.9, except that it acknowledges in Paragraph 1 that clients in the mental health area of work may be at a distance from the solicitor, in particular because they may be in hospital. A different paragraph numbered MH2.9 (see page 224) gives guidance on off-premises work in relation to controlled legal representation in mental health cases. Paragraph 1 of this guidance reads:
"In deciding whether, in a case involving [MHRT] proceedings work, it is reasonable to travel at a distance from your office, you should have regard to the factors set out in paragraph 4 of the Guidance to Rule 2.9 (including any legitimate expectation of the client of specialist representation by a MHRT panel member and the availability of such expertise local to the client) but should also have regard to the undertaking which is required to be given by a MHRT panel member to conduct such cases personally."
199. The other paragraph of this guidance merely summarises in succinct form the practical effect of the previous rubric and ends by making it clear that the fact that a solicitor has accepted instructions in the case will not of itself justify his/her travel on assessment.
200. As Ms Mackintosh has observed, the equivalent guidance contained in the category specific guidance for clinical negligence contracts are more generous. Paragraph CN3.11, headed "Outward Travel", on pages 228-9 of the Burgundy book addresses this issue. Paragraph 1 of that guidance begins:
"It is accepted that clients seeking advice about clinical negligence may be at a distance from you, in particular because of the requirement that only specialist practitioners deal with this work. Accordingly we expect that you will travel to see clients where this is reasonable and necessary."
201. Paragraph 2 repeats more or less word for word the guidance set out on pages 21-22 of the 1998-9 Handbook in relation to the factors a solicitor should take into account whether deciding to accept instructions from a distant client. It includes the factor relating to the complexity of the subject-matter which was omitted from the guidance given under Rule 2.9, and the first relevant factor is rewritten in these terms:
"any legitimate expectation by your client of specialist assistance in light (sic) of the subject-matter, that is, by a specialist practitioner dealing with other similar cases."
202. Paragraphs 4 and 5 of this guidance are very much more generous than the equivalent guidance in all other categories. They read:
"4. It is unlikely to be justified for you to travel to attend on a client at a significant distance from your home or office, including a one way travelling time of more than 3 hours, on the basis that it would be more appropriate for the matter to be dealt with by a franchisee/contracted supplier more local to the client. This will, however, depend on the circumstances of the case and the availability of another franchisee/contracted supplier closer to the client.
5. Where you do consider a longer travelling time to be justified in a particular case (for example, possibly because your client's claim relates to a specialist area and you have particular experience of handling other similar cases) a note outlining that justification should be made on the client's file."
203. There is no category specific guidance at all in the Burgundy book for community care contracts. In this context an application for travelling time and expenses made by a specialist supplier like the applicants, who are acknowledged to be providing services on a national basis in a field populated by comparatively few specialist suppliers, is governed by the general guidance set out under Rule 2.9.
204. In his fourth statement Mr Orchard says:
"Ms Mackintosh has ... failed to notice that the contract contains several new measures which will facilitate her firm in dealing with distant clients."
205. He refers in this context to various explicit provisions which appears on pages 104, 107, 120, 214 and 216 of the Burgundy book. None of these provisions addresses the difficulties which Ms Mackintosh will now encounter when she wishes to pay a home visit to a client more than one hour's travelling time from her office, and a visit of more than two hours' travelling time will be more or less out of the question. In these circumstances the applicants complain that these restrictions are inconsistent with the thrust of Mr Orchard's statement and with the Board's acknowledgement that specialist solicitors like the applicant firm have a nationwide client base and that there are few practitioners with specialist expertise in her field.
Part 12. Practical problems facing firms under the new scheme
206. Another aspect of the new regime of which Ms Mackintosh was strongly critical was the fact that an award to a firm of a limited number of matter starts would make it virtually impossible for such a firm to comply with LAFQAS supervisor standards, and this would imperil its chances of retaining its franchise. She complained that Section 10 of the Board's Guidance on Fund Allocation and Contract Awards stated that where there were less than 15 annual case starts for a given category, this would be taken as an indication that the LAFQAS requirements would not be met. She said that this did not necessarily follow, and even if it did, it was unfair that this rule did not apply to contracts for family, mental health or immigration, because contracts were guaranteed to franchisees in these categories. She did not understand why this guarantee did not extend to a specialist firm in community care which met the LAFQAS standards.
207. The satisfactory resolution of other problems of this nature would depend on the exercise of discretion by the Board, but the exercise of this discretion would depend on the availability of funds within the relevant zone.
208. The main thrust of the applicants' concerns about the unfairness and irrationality, as they see it, of the Board's new scheme are set out vividly by Ms Mackintosh towards the end of her first affidavit. By the time she swore that affidavit she had been in touch with a number of other specialist firms who were equally anxious about the effect of the scheme on their clients.
209. In the mental health field she said that several franchised practitioners had told her they would not be able to continue. Many were sole traders, and the Board's restrictions would make it impossible for them to continue representing clients. Even large, well-established firms were seriously concerned for the viability of their departments.
210. The Board's approach, she said, would produce the result that firms simply would not be able to retain staff to undertake the work. The monthly standing payments have to cover profit costs, disbursements and VAT (if relevant), and in many cases they would be insufficient to pay the wages of staff and office overheads, let alone the disbursements (where an independent psychiatric report may cost £450).
211. The average cost of mental health cases had been reduced to a minimal sum by assuming that only a small number of cases will be both started and claimed for in the 15-month schedule period. One firm with an allocation of over 500 new mental health cases would only receive £64,000 over that period. This worked out at £4,266.67 per month, which was not enough to pay staff salaries, let alone other costs. Another firm has been allocated so little in its schedule payment limit that it was considering making its entire department of 10 experienced mental health practitioners redundant.
212. A number of mental health practitioners had been allocated fewer new case starts under their contract offer than the volume needed to meet the LAFQAS standards, a fact which would likely to mean that their franchise, and therefore their contract, would be lost.
213. In the community care field, a number of practitioners who had been offered contracts were baffled by the way the Board had decided to allocate a specific number of case starts, and how their initial bid had been reduced. There was no objective standard against which to judge the way allocation decisions were made, and the Board had allowed for insufficient specialist providers (in terms of matter starts) to cope with the copious number of strong cases that were currently being referred. The average cost of £136.10 was wholly insufficient for a community care case, even before it was reduced to take account of the Board's assumption that only a small number of cases would be billed in the first 15-month period.
214. Although Ms Mackintosh does not practice in the field of immigration law, several practitioners in that field had told her they had been astonished by the offers they had received. They had been told by the Board that because there were insufficient quality providers in immigration law, they would be allocated an increased number of case starts and funding, and had been encouraged to expand. One firm had recruited three extra members of staff in anticipation of this increase, but the schedule payment limit they had been allocated would not provide for these staff costs and consequential overheads to be covered.
215. Ms Mackintosh was also very critical of the way in which the Board's scheme would stultify the development of the suppliers' market in future. She was aware that Part 6, and particularly Rule 6.5, in the Terracotta book purported to address the problems that would be faced by a new firm which would not be required to demonstrate that it had any current legal aid clients in order to pass the preliminary audit, but she asked rhetorically how such a firm could produce financial information, evidence of financial backing and a business plan without being assured of a contract. Firms would not be able to recruit extra staff in the absence of prior guarantees as to funding and case starts, and thus movement within the profession would be stifled. The scheme would discourage new, young, committed solicitors in undertaking legal aid work for the poorest people in society, and would further restrict the already scarce opportunities for training contracts to be offered to those wishing to undertake such work.
216. She thought that the Board was ignoring the reality that no sensible solicitor would ever purchase or lease office premises without having a guarantee from the Board of a large enough contract, and that no financial institution would advance monies without equivalent certainty. Mr Orchard discounted these fears. He said that solicitors set up business all the time without any certainty as to the number of clients they might eventually achieve, and that only a very small number of firms relied for the whole of their income on the green form scheme. He was sure that in those rare cases where contracts had been agreed in principle, letters of intent could be provided in order to assist with the establishment of a new office and to make appropriate financial arrangements. Ms Mackintosh responded to the effect that letters of intent from the Board would not provide sufficient security for financial institutions because its contract states that its terms (and case starts, payment etc) may be varied. She added that no prudent solicitor would commit him/herself to regular outgoings in the absence of assurances, and that a firm's ability to attract clients was entirely separate from the question of a contract award which enabled those clients actually to seek advice from the firm.
217. She then turned to the particular problems which her firm, and its potential clients, would face. She and Mr Duncan had based their entire business plan and their financial projections on the assumption that the Board would comply with its assurance that firms possessing a mental health franchise would be offered a contract. Although Mr Hamilton said in his letter dated 6th December 1999 that this assurance only applied to Section A bid firms, this was never stated at the time. In her original affidavit she repeated the reasons why, in the light of her national reputation in the field of community care and the Lord Chancellor's published statements, they regarded it as very unlikely that they would not be offered a contract in community care.
218. In a subsequent affidavit she said that the contracts they were in the event awarded had so few matter starts they would have to turn many clients away. Large numbers of referrals were being made to her because of her reputation in the field and the lack of alternative skilled community care providers, and she would not be able to ensure that the many clients she would have to turn away would all receive quality advice from another specialist firm. Instead firms with less, or no, expertise in the field would be able to accept them under tolerances.
219. Furthermore, because of the way the standard monthly payments to firms were calculated, firms would simply not accept clients whose cases were likely to involve a considerable amount of expenditure. As a result, clients and cases of the type we have mentioned earlier in this judgment (see para 117 above), which require much more time and attention than the norm, were likely to be avoided by firms because of the higher cost their cases would involve. This practice was described pejoratively in the evidence as "cherry-picking". She added that firms would be likely to be deterred from obtaining independent reports (for MHRTs, for example) because of their additional cost, and despite the fact that this might not be in their clients' best interests. It was clear to us that with her vast experience of the green form and ABWOR scheme in her specialist fields, Ms Mackintosh was very deeply concerned that the average costs of £136.10 for community care cases and £506.19 for mental health cases (including representation at MHRTs) would result in a very serious reduction in the quality of the services her firm could render to its clients, even if they were actually allowed to act for very many of them.
Part 13. The meeting on 20th December and the amended contract
220. One of the difficulties that arose from the way in which contracts were not, in the event, awarded until a few weeks before the new regime came into operation, was that there was a good deal of scepticism about the likelihood that the Board would increase the original quantity of allocated matter starts in a contract schedule if they were clearly inadequate. We have already shown how the two mechanisms for an increase were by way of a request for a review under Part 5 of the Rules for Bidding (for which there was no right to an oral hearing and which offered no prospect of an increase unless it could be shown, in effect, that a Regional Director had exercised a discretion improperly or had failed to follow the Board's rules in a way which would have affected his decision) or Clause B17 in the Burgundy book which reserved for the Board a complete discretion, subject to any provision in Guidance, as to the way in which it might respond to a firm's request for an increase. There was also the potential for an increase under Clause B15, but again no details were given of the principles which the Board might exercise when deciding whether to increase the figures in a contract schedule following the delivery of a quarterly schedule. (See, generally, paras 133-134 above).
221. This was one of the topics which was ventilated at the meeting between the applicants and representatives of the Board on 20th December 1999 which we will now consider in greater detail.
222. The Board was represented at this meeting by Mr Hamilton, its legal director, and Ms Patterson, its London area reform implementation manager. We will summarise the effect of Ms Mackintosh's minute of the meeting, adding in square brackets our understanding of the effect of what was said, if it is not completely clear from the text of the minute.
223. Mr Hamilton began by explaining the way in which the Board had decided to award the new Section B firms, which could not provide the same baseline figures as the original Section A firms, the actual number of cases they had undertaken in the six months up to the end of November 1999 as a provisional award. They anticipated that this award would be sufficient to last six months. They would be starting a major review process on 1st April 2000, and this review, which would be completed within six months [ie by the end of June 2000] might lead to a reallocation of starts depending on the numbers of clients these firms had attracted.
224. He said that if Mackintosh Duncan found they were running out of cases, he would encourage them to be proactive in discussing this with the Board in order to obtain a good service. If there was a problem, they should let the Board know.
225. He said there was a difficulty in setting their schedule payment limit in the same way as everyone else. The Board did not know their contingent liability because they had no information about the firm. Ms Patterson explained that the Board needed to understand the firm's billing profile, and its average cost per case.
226. Mr Hamilton added that the Board appreciated that the applicants were a specialist firm. The figure of £136.10 for a community care case was a real figure for costs per case calculated on a national basis. The Board was not proposing to adopt this figure for the applicants. Instead, it would pay them for cases as claims over the first three months to build up a picture for usable cash. [By this he presumably meant the cash the firm needed to provide its controlled work service to its clients]. The Board would not set a scheduled payment limit for the first three months, but by then it would have built up a monthly cash flow picture. At the time of the meeting Mr Hamilton could not tell them the schedule payment limit or the result of the six month review.
227. Ms Mackintosh expressed anxiety that if the firm's performance was monitored during the first three months of the year 2000, this period would be insufficient to build up a representative picture of the firm's profile. In particular, they would be working on their judicial review case against the Board. What Mr Hamilton was saying did not give them any certainty.
228. Ms Patterson replied that they could always come back to the Board, and the Board might adjust the case starts upwards. Cash flow tended to correct itself. It was not a disadvantage to the Board, as it could always reconcile the figures. [By this she must have meant that if the monthly cash payments, calculated as an appropriate part of the total payment limit in the contract schedule, exceeded the claims submitted by a contractor in the schedule period, there would be a refund due to the Board at the end of this period, unless it was carried over as a credit item to the Board into the calculations for the following year's schedule period.]
229. Mr Hamilton explained that some people saw the schedule payment limit as a bit of a bogeyman. In fact, most firms welcomed the benefit of certainty, and it was very good for cash flow. In the first year the Board would have to pay for work done. Of course, the estimates (on which the schedule payment was based) would not reflect reality, but the Board could always adjust them.
230. He said that the Board's estimates were a pretty good stand for most firms, but then most firms were bread and butter types. The Board might consider a longer period of monitoring in an exceptional case. Ms Mackintosh asked if he was saying that the applicants would be paid the national average of £136.10 for community care cases. Ms Patterson replied that the aim was to arrive at the actual average cost per firm. As far as community care work was concerned, there were only ten firms in London with whom the Board had contracted. The Board's view was that it did not really care [she was, presumably, referring to a firm's average cost per case] so long as it contracted with the suppliers whom it wanted.
231. Mr Hamilton explained that the fixing of an average cost per case had two purposes. The first was that it allowed the Board to identify the firms which were well on the outside of the normal range of figures. The Board then had to determine why this was. The applicant firm would certainly be on the outside, and would have an average cost per case which was higher than normal. Perhaps this was because they did the work better, they were specialist, and so on. The Board knew that the firm was good, and this was what it wanted. There were a lot of firms practising in the fields of housing or benefit or immigration law who were undertaking a lot of work from which the client did not benefit, and if necessary [in relation to such firms] the Board would take action to reduce the cost per case. This was not the position with the applicants' firm which carried out in depth work to a very good standard.
232. The second reason why the Board needed to establish an average cost per case was that it wanted to be able to plan work within a controlled budget, and the average cost per case assisted in this context It helped the Board plan to translate case starts into cash flow, although it was only one of a number of indicators. If the average cost [established by the Board for a firm] shot up, the Board might have to address this, and the Board had power to reduce future case starts [pursuant to Clause B16(c)] if the case goes over a particular amount. It would, however, regard it as a failure if it had to cut back on case starts.
233. Ms Mackintosh observed that the Board claimed that it wanted to contract with "good firms". She asked how the Board decided who was good, when it did not have any transaction criteria for community care. Mr Hamilton said that the Board used the auditing process for this purpose. It was difficult to distinguish between good firms and excellent firms, but it was very easy to see bad firms. At this early stage the Board would not be distinguishing between good firms and excellent firms. Its aim was to get everyone up to a reasonable standard.
234. There then followed an exchange to which the applicants attached great importance:
"NM: Can you guarantee us that if we've used up the case starts allocated to us between 1st January and 1st April, we will get enough cases to continue for the next year?
JP/RH: No. We cannot guarantee this."
235. Ms Patterson told Mr Duncan, in answer to a request, that if he used up one of his two allotted cases in employment, he should ring her up and tell her.
236. Ms Mackintosh then explained that she and Mr Duncan had created their firm because they had worked on several cases together, in spite of having come from opposite ends of the spectrum so far as the law is concerned. She said, by way of example, that in a judicial review case involving a hospital closure they had worked together in negotiating leases to continue the use of a building. Their aim was to provide a comprehensive service.
237. There followed a brief discussion of the firm's wish to develop Disability Discrimination Act work in the context of employment law, which it believed to be a much needed area. Ms Patterson commented that the problem with employment work was that the clients were often not eligible for advice and assistance. Mr Duncan agreed. Ms Patterson added that she anticipated a drop-out in London among employment law contractors because firms would not be able to meet the supervisor standards. There was therefore a good possibility of extra funds in this area.
238. She said that the amount spent [in the London region] on community care was very small in macro terms, and the Board was finding out more about it. It was not prioritised, and the Board had based [its award of contracts] on a spend-led allocation. Until the RLSC came back with something concrete in relation to community care, the Board would let the current spend go. [The possibility of extra funds in this area] depended on who was the centre of excellence and who was not.
239. So far as mental health [in the London region] was concerned, there was a different emphasis. There had been a very significant growth [since 30th November 1998] compared with the turnover [up to that time], and this grant had been higher than the Board had anticipated. By way of comparison, Ms Patterson said that the Board had let 65 contracts in mental health in London alone, whereas in community care it had let 28 contracts [in Section A] nationally. For mental health, the Board was only left with the reserve fund, and this was more of an issue. There was unlikely to be a drop-out in this area, since most firms would get through the audit, and most of the case starts had already been allocated.
240. After Mr Hamilton and Ms Patterson had explained some fairly basic maters relating to the Board's method of allocating sums under contracts and its system of tolerances, Ms Mackintosh expressed surprise that the Community Care Practitioners' Group had not been consulted over the identification of the new generic franchise categories. She said that it comprised solicitors, barristers, the nfp sector, advice agencies, and the information offices in all the major charities in the field of community care, such as MIND, MENCAP, the National Schizophrenic Fellowship, RADAR and so on. The Group had a wide membership, and she said it would have been sensible for the Board to have consulted them in relation to the issues affecting community care and public law. The Group would also be more than willing to assist in future, particularly with regard to the development of transaction criteria and supervisor standards for community care.
241. The meeting ended with a brief discussion of the future timetable, so far as the Board's offer of a contract to the firm was concerned.
242. To some extent the participants at that meeting were talking at cross-purposes. Mr Hamilton and Ms Patterson were experienced administrators, who knew the way the Board had structured its treatment of the Section A firms, and also knew, however much they might have wanted to encourage a centre of excellence in a new Section B specialist firm from the outset, that they had to treat all potential contractors equally and could not give to one firm guarantees which they could not give to others.
243. We would interpret this dialogue along the following lines. The Board was saying, in effect:
"At present we have to allot case starts on current track record. For you, this is your record since you started in July. We are allotting you the same number of cases as you have done since July for the first six months of the new contract. This is a provisional award, and if you run out of case starts in that period, you must ring us up and ask for more. We have power to give you more. There is going to be a thorough review of the whole system in April-June, and we will then be awarding case starts based on your actual track record to date.
We want to encourage centres of excellence. We cannot guarantee anything without seeing your track record in practice. We will be basing your schedule payment limit and your standard monthly payments from April onwards on your actual costs and not on average national costs.
We do not know much about community care, but there are only 10 contractors in this field in the whole of the London region, and we want to encourage the good ones. If you show us that you are attracting cases in the employment field, it looks as if there will be spare capacity in the gift of the London region, so you must keep in touch with us closely once clients start coming to you. In mental health, on the other hand, it looks as if the London region will have no spare capacity, so that applications for new starts will have to be drawn from the Board's reserve. We are sorry we cannot guarantee you anything more today, but you must get in touch with us as soon as you are likely to run out of cases in any category. We do want to encourage high quality suppliers and you must trust us."
244. We would interpret the firm's response as follows:
"We have no confidence in the way in which you may exercise your wide discretions. You are telling us that you are only willing to guarantee us 8 starts in mental health, 2 starts in employment, and 18 starts in community care over the next 15 months. You tell us you will be carrying out a review, but if you are going to base any future awards of starts on what we can undertake in the next three months, any resulting figure will be very unrepresentative. You refuse to guarantee that we are going to get enough starts to enable us to continue for the year after 1st April. You do not seem to know much about community care, and you have defined the scope of the new generic category of community care without consulting the practitioners' group which represents all the leading specialist interest groups in this field. The average national cost of £136.10 for a community care case is ludicrously low in relation to the work we undertake in this very specialist field. We do know what we are talking about. We do not see how we can run our firm and employ staff on such an uncertain basis."
245. The issue which led to the dispute over the accuracy of Ms Mackintosh's minute of the meeting continued to reverberate throughout the early exchanges of evidence. The applicants insisted that they had been given a contract which set out their matter starts for a fifteen month period. This was what the schedule said. The Board relied on its covering letter, and on what Mr Hamilton had told the applicants on 20th December, and maintained that it was merely a provisional award for the first six months. Ultimately, to put the matter beyond doubt, the Board prepared a formal amendment to the contract, in which a new schedule made it clear that it only covered a six month period. Mr Orchard said that the Board was content to agree it with the applicants to put the basis of their award beyond doubt.
246. Ms Mackintosh remained dissatisfied. She said that this new schedule failed to take into account the fact that the Board gave no guarantee of any cases or further funds after the six month schedule. The award was still based on the rigid application of the Section B rule (50% of baseline or even less). For the applicants, it was based upon figures for five months, and not six months, and it was not even increased pro rata to reflect the shorter period the firm had been trading. And finally it failed to take into account all or any of the factors to which she had previously deposed, such as the fact that much of the first five months was spent on setting up systems to comply with LAFQAS, computer training, other major judicial review cases and so on.
247. Whilst she appreciated that the Board was now attempting to clarify beyond doubt that the award was for six months, this was actually of little consolation to the firm, since there was no corresponding guarantee of any cases at all after 1st July 2000.
248. Her attitude to the new contracts remained implacable. To her mind, any contract specifying an award provided no certainty at all. The case starts might be altered (down or up), the schedule payment limit might be altered (down or up), and even the scope of the work under legal advice and assistance was now governed by the Board's complete discretion. The Board had still provided no information as to the guidelines or policy by which it was going to exercise that discretion.
249. It is pertinent to remark at this stage that in the frenzied pace at which Mr Orchard and Ms Mackintosh were exchanging evidence towards the end of the first week of the hearing, she understandably overlooked the provisions of Clauses B20 and B21 on page 33 of the Burgundy book, which provide, so far as is material, that:
"20. Subject to Clause 21, any Next Schedule will authorise a number of Matter Starts which is at least 80% of the number of Matter Starts authorised under this Schedule (as amended).
21. If the Next Schedule is for a ... longer period than this Schedule, the number of Matter Starts assured by Clause B20 will be adjusted pro rata."
250. As we understand the position - and we must make it clear that we did not receive submissions on this point - the acceptance of the amended schedule would enable the applicants to rely on receiving an additional award of at least 120% of the matter starts set out in this amended six-month schedule during the nine month period between 1st July 2000 and 31st March 2001.
Part 14. The Board's discretions and the need for transparency
251. It will be readily apparent that there was a chasm between the applicants' perception of the effect of the new scheme on a small, specialist firm like theirs which had been awarded comparatively few matter starts and the responses they and we were receiving from the Board. A continuing dialogue, full of creative tension, ended with the delivery of Mr Orchard's fifth statement on the afternoon of the fourth day of the six-day hearing, and the delivery of Ms Mackintosh's fifth affidavit in response the following afternoon. If we may say so, this very detailed evidence was of a consistently high quality, so far as its clarity was concerned, and the two chief protagonists on each side were well matched for each other. The court is indebted to them both for making the issues so clear.
252. This very late exchange of detailed evidence during the course of the hearing came about in the following way. During the early stages of the hearing we took the opportunity of expressing to Mr Pleming QC, who appeared for the Board, certain anxieties about the apparently arbitrary and secretive way in which the Board appeared to be disposed to exercise in future the very wide discretions it had reserved for itself under the scheme. In response to these anxieties, on the second afternoon of the hearing Mr Orchard asked all the Board's Regional Offices to report to him urgently about the issues that had been raised by the profession and the public in each region in the time since the contract awards were sent out. In a statement he submitted to the court two days later, he said that there was a common theme running through the responses he received, which was best summarised in the London response:
"I assume from the silent majority of contractors who have simply got on with it that they are broadly content with the way the scheme is operating. We have had a steady stream of enquiries regarding transitional provisions from the changeover from green form/claim to the new contract report form. These are mainly the "which form do I fill in?" variety and can be regarded as teething troubles ... Although larger in scale the level of queries has been no more than for the introduction of CIS (the Board's new computer system) or other major changes in forms. We had originally anticipated a high level of challenge as regards the principles of the scheme and the allocation itself. I am heartened that the preoccupation of most practitioners have been to do with the details and not the principles. I should say that 90% of the queries overall are down to practitioners not having read the Burgundy book."
253. London had had 10 requests for increases in new matters starts, all of which were granted. Mr Orchard added that there have been 207 requests for a review in London, and a total of 246 requests nationwide. He understands that only 20% of these are likely to proceed to a determination by the Contracts Review Body pursuant to Rules 5.4 to 5.9.
254. Mr Orchard then mentioned the reports from four regional offices. In Newcastle, there had been meetings of the local Franchise Liaison User Group attended by over two thirds of the 308 contracted firms and all the 18 nfp contractors. These meetings revolved largely around questions which were answered by reference to the contract documentation. Reading reported a similar picture. Leeds reported to similar effect: in Sheffield no adverse comments at all about contracting had been made by any of the many solicitors who had attended a Community Legal Services Partnership launch, at which positive comments were made about the coverage of social welfare law in Sheffield. There was the same message from Cardiff.
255. Despite the Panglossian nature of this evidence, we realised that we would have to look very carefully indeed at the totality of evidence before us in order to consider the extent to which the applicants' fears were justified. If they were, then there would be a very serious case for the Board to answer in response to the applicants' charge that in devising its scheme the Board had not taken properly into account the government's policy objectives in its White Paper when it was deciding how to treat a firm of solicitors who were prepared to offer to their clients a high quality specialist service at controlled work rates.
256. In carrying out this analysis we had the benefit of a paper signed by counsel who appeared for the Board, prepared towards the end of the first week of the hearing, which purported to describe their clients' approach to controlled work contracts. A large number of references were added to this paper over the weekend. We also had the benefit of the applicants' detailed response to that paper.
257. The Board's paper began with the assertion that it intends to ensure that no firms in possession of a contract will run out of matter starts during the period between 1st January and 30th June 2000. It regards this as a transitional period, pending the wide-ranging review of the operation of the scheme which it will be conducting during the second quarter of the year.
258. The Board relied on four paragraphs of Mr Orchard's evidence, two paragraphs of Mr South's evidence, one paragraph of Mr Hamilton's evidence, the letter which accompanied the offer of a contract to the applicants, and a recent letter from Mr Hamilton to the applicants to make good this proposition.
259. We have read all these passages, and the comments the applicants have made about them. It is certainly true to say that the officers of the Board have made no positive commitments. Mr Orchard has said that "extensions will be forthcoming in appropriate cases". Mr South, for his part, said that firms should not turn clients away because they feared that the rate at which they were starting cases might exceed the number of matter starts authorised by contract schedules for the full year. Given the existence of the £9 million reserve, he was confident that the Board would generally be able to respond positively to increase numbers of matter starts in the initial period if firms would otherwise be unable to take on new cases. He said that the Board had put in place a process which would enable it to amend contract schedules by letter, and to respond very quickly to such requests where appropriate. In our judgment, the evidence, read as a whole, supports the Board's professed statement of intention.
260. The applicants are very critical of the fact that the Board has also said that it would not be revising schedule payment limits at the same time as it responded in this way to requests for new matter starts. This is a rather different issue, and is tied up with the Board's wish not to commit itself to an increase in its total spend until it completed its comprehensive review. So far as the applicants are concerned, however, they ought in our judgment to take a considerable amount of comfort from the message Mr Hamilton gave them on 20th December about the Board's wish to encourage good firms and its wish to satisfy itself that its contractors were providing value for money, and from Ms Patterson's reference on the same day to the Board's need to identify the centres of excellence in the community care field (see paras 231, 233 and 236 above).
261. Next, the Board says that all contracting firms were informed of its intentions in a letter that accompanied their contract. This letter, as we have already seen in the applicants' case (see para 130 above), contained the following passage:
"During the first six months of Schedules starting on 1 January 2000, you should not turn clients away because you fear that the rate at which you are starting cases might lead you to exceed the number of matter starts authorised in the Schedule for the full year. If, during the first six months or afterwards, you believe that the number of matter starts authorised by the Schedule is too low, you must approach us immediately."
262. The applicants accept that the letter contained this passage, and that it accurately reflects the terms of the Overview in the Burgundy book (at p 10), but, as we have shown earlier in this judgment, it was preceded by a passage which said that an application for an increase in a contract award should normally be made after three months. They also referred us to a passage of the Overview at p 6 (section 1.5, para 9), which stated that the Board would have the flexibility to increase the number of case starts and the schedule payment limit if it could do so, but that this was dependent on the financial allocation to the zone and the performance of other contractors. Mr Hamilton had qualified one of his answers on 20th December with the words "subject to the provision for everyone else", and the Board had never said how it would exercise its discretion on an application to increase case starts.
263. There may be a legitimate criticism, to which we will turn below, that the Board did not make transparent to anyone, let alone to high quality specialist firms, the principles on which it would exercise its discretion on an application to increase matter starts in the first six months of the contract. On the other hand, they were told that they must not turn clients away (Burgundy book, p 10, section 2.4, para 13), and Mr Hamilton had made it clear to the present applicants that the Board wished to encourage high quality firms. The reference to the "performance of other contractors" in the passage to which we have referred bears out Mr Hamilton's message that the Board was on the look-out for quality.
264. In our judgment, that reference, coupled with the passage in the Board's letter, and supported by what Mr Hamilton and Ms Patterson said on 20th December, should have given the applicants no reasonable cause for concern that the Board would not increase their matters starts if they ran out of starts in the early weeks or months of their contract. Even if the relevant region or bid zone had exhausted its allocation, the applicants were aware of the existence of the Board's reserve fund and its desire to encourage quality provision. In the paragraph of the Burgundy book to which we have referred, the Board contrasted the way it would respond immediately to requests for more matter starts in the early months of the contracts with a later statement that after the first year of contracting it would expect to make changes to authorised matter starts or the schedule payment limit only where long term trends were clear.
265. It was then said that if a firm applied for an increase during this initial period, the Board's policy was that it would start by asking for details of the new matters that had been started by that firm under its contract to date. It would then decide whether the firm's current rate of starting matters indicated that it would run out of new matter starts before the April-June 2000 review, or whether, in particular circumstances, there was good reason to believe that there would be an exceptional increase in the firm's number of new matters in the near future. For example, it might have been told that a large number of asylum seekers were to be referred to it for advice.
266. The Board would then have to satisfy itself that the information the firm gave it about the number and category of matters already started under the contract was accurate, that it had not generated demand improperly and in breach of the terms of the contract (for example, by cold calling), and that the matters it had already started fell within the scope of its contract. For instance, a case would have to represent a genuine welfare benefit problem, and not a routine check.
267. The applicants contended that this statement about the Board's policy was not contained in its evidence at all. We would comment that if this is indeed the Board's policy, it is a legitimate criticism that it has not been spelled out until it produced this statement by counsel, largely unsupported by evidence, on the fifth day of the hearing under pressure from the court. Merely to say, as Mr Orchard did in one of the Board's three cross-references on this topic, that extensions would be forthcoming in appropriate cases, does not advance matters at all, and we have already referred to the relevant passages in the letter which accompanied the contract, which did not address these detailed matters at all.
268. On the sixth day of the hearing, after Mr Pleming's closing speech, the Board asked for permission to put in evidence a sixth statement by Mr Orchard in which he sought to confirm that this was indeed the Board's policy. Although we welcomed the cross-references to the existing evidence we were then being offered, we were not willing, against Mr Gordon's opposition, to admit any further evidence at that stage, particularly as he had made it clear that his clients would, in turn, seek to respond to it, as they had responded in detail to all Mr Orchard's earlier statements.
269. On the other hand, there is nothing particularly surprising, as we observed to Mr Gordon, about the matters the Board has listed. We will turn to the question of immigration starts later in this judgment (see paras 400-406 below), but except for the reference to the Board's reaction if it had reason to believe that there would be an exceptional increase in new matters in the near future, all the other matters listed flow naturally from what any reasonably prudent public body would do in the circumstances. This conclusion is reinforced by what Mr Hamilton had told the applicants on 20th December about the Board's wariness about "lots of firms" which were not giving value for money in the fields of housing, immigration and welfare benefits.
270. The Board then maintained that if, following this examination, it was satisfied that the firm in question would run out of new matter starts before 31st March 2000, it would increase its number of matter starts. In doing so, it said it would apply certain guidelines. It would assume that the current rate of starting matters would continue, and it would award enough further matter starts to enable the firm to continue to start matters at the same rate until 31st March. In an exceptional case, as when there was an anticipated future flood of referrals of asylum-seekers, the Board would award the number of matter starts that were needed to meet the required number of matters.
271. In addition to saying in general terms that extensions would be forthcoming in appropriate cases, Mr Orchard said in his second statement that if any difficulties emerged, the reserve was available to address them. He added that there were ample powers to increase both matter starts and monthly payments should firms run out of provision for new cases which were not adequately catered for in the area in question. Clients were not restricted in their choice as to which contracted suppliers to contact for help, and niche practices might continue to draw clients from a wide geographical base.
272. In his evidence for the Lord Chancellor, Mr Cogbill said that the applicants and other firms would be able to apply to expand their starts on the basis of demand, and that the Legal Aid Board had retained the capacity to meet appropriate applications and to expand contracts. He added that the new regime provided considerably more flexibility to control expenditure, because contracts could be amended to meet the areas of greatest need. The Government and the Legal Aid Board, he said, were satisfied that, taken together with the reserve, there were sufficient new starts to meet demand during the first year, and that satisfactory mechanisms existed to address any shortfalls.
273. The Board also asked us to consider Mr Orchard's evidence in his fifth statement about what had in fact happened in this context in the three weeks since the new contracts had started. The London office had received 10 requests for increases in new matter starts, all of which had been granted. The Reading office had received four requests from firms for increases in new matter starts as a result of reaching their limits. All had been granted. Elsewhere in the country there had been 14 other requests for increases in new matter starts to allow contracted firms to continue to see clients. All had been granted, including two requests for increases in mental health contracts. Mr Orchard added that most of the applications had been for increases in immigration from firms outside London arising from the effects of Home Office dispersal policy.
274. Of the 246 pending requests for a review, up to 200 were either for requests to increase the number of new matter starts to reflect the current volume of business, or (which is irrelevant in the present context) to increase schedule payment limits to reflect what was asserted to be a greater contingent liability than had originally been allowed for. Mr Orchard said that all those requests would be dealt with on their merits. Early variations would be made straightaway to alleviate financial problems in a firm if this was justified, or to prevent a firm reaching the limit of its new matter starts. We note that he said this quite unequivocally.
275. He added that about 70 firms had contacted the Board with claims that their contract awards had put them in severe financial difficulty or that they would have to lay off staff. All these cases were being reviewed by the Board's regional directors, who had discretion to increase schdeule payment limits if it appeared that the actual rate of claiming by a firm for cases within its contract was likely to exceed its monthly payments. Some changes to contract schedules had already been made for this reason and more were in hand.
276. The applicants again contended, with a good deal of justification, that the Board's existing evidence did not identify the guidelines it now claimed that it was applying. Mr Orchard's descriptions of the way that new matters starts were now being awarded to the firms who were applying for them did not set out the basis on which discretion was being exercised in their favour, and although he referred in paragraph 12 of his statement to "issued guidance", no such guidance had been published by the Board or made available to firms.
277. The Board relied on what Mr Orchard said in paragraph 67 (i) of his second statement, but there he had said that there were ample powers to make increases should firms run out of provision for new cases which were not adequately catered for in the area in question. The applicants say that this means that if there are other firms with available case starts in the area, the power to increase will not be exercised.
278. The applicants also asked us to note that in that passage Mr Orchard said that clients were not restricted geographically in their selection of the contracted supplier they might approach for help. They say that this is contradicted by the provision in the guidance under Rule 2.9 on page 105 of the Burgundy book, which we have already considered, which prevents solicitors from travelling more than two hours, even where the client is disabled or has mental health problems or needs specialist help.
279. We would comment that Mr Orchard made the statement in question in response to a very broad-brush attack by the President of the Law Society in paragraph 2 of his first affidavit, which was for the most part concerned with the welfare of firms, not clients, and we do not believe that he had his eye on the level of detail referred to by the applicants in their response. Once again, we consider that the general tenor of the Board's evidence bears out the assertion which was made about its policy up to 31st March 2000. We refer in this context to the quite unequivocal statement by Mr Orchard that the Board would increase schedule payment limits in the circumstances he posited if it considered that the request was justified in order to alleviate financial hardship within a contracting firm.
280. It was also said on behalf of the Board that during this initial period it would not be rationing the number of new matter starts awarded by category, by geographical area or according to the number of firms which might be applying at any one time. It was confident that it possessed sufficient reserves to meet the likely demand for new matter starts over this period from its unallocated matter starts, or from its reserves, or from the matter starts which would be released when firms failed audits.
281. The applicants again maintained that the Board's evidence did not support this statement. Indeed, Mr Orchard's description of the purpose of the £9 million reserve in paragraph 32 of his second statement did not mention the allocation of additional case starts in the first three months of the contract to firms which had already (or were about to) run out.
282. We note, however, that in paragraph 22 of his second statement, when the issues in this case had become more tightly defined, Mr South said that given the existence of the Board's reserve fund, he was confident that it would generally be able to respond positively to requests to increase numbers of new matter starts where firms would otherwise be unable to take on new cases. He said this in response to an assertion by Ms Mackintosh in paragraph 15 of her third affidavit that firms had no certainty whatsoever as to whether their contract would be adjusted in order that they might be able to take on new clients. Although it is true that reference is made from time to time in the Board's evidence to the position of other firms and to the allocation already made in the relevant geographical area, it must be remembered that the issues that are at the heart of this litigation, so far as the applicants are concerned, relate to the position of specialist firms who serve a wider client base than that contained in their individual bid zones, and not what Mr Hamilton described as the bread and butter firms which provide a predominantly local service and to whom far the greater part of the Board's contracts were awarded.
283. In other words, although we are satisfied about the correctness of the applicants' criticism that the way the Board intends to exercise its discretion to increase matter starts under Clause B17 did not become transparent until we started asking questions about it, there is nothing in the evidence which is wholly inconsistent with the Board's assertion that this is the way in which it intends to respond in these early weeks, pending its review, there are matters already in evidence that are consistent with it, and Clause B17 gave it a complete discretion as to how to respond to an application for an increase.
284. The Board then referred to the general review it would be conducting in the second quarter of the year 2000 into the way contracts were operating. It asserted that its aim would be to amend the contracts so that they would reflect more accurately the true distribution of clients and the pattern of claims being billed.
285. Although the first of the Board's cross-references on this point appears to be misplaced, the applicants accepted that the Board had announced its intention to perform this review. The Board's evidence shows that this is to be a full review of all contracts. In paragraph 98 of his fourth statement, to which the Board did not expressly refer us, Mr Orchard told us that at the end of the review the Board would possess accurate information concerning the rate of matter starts by all firms across the country during the first few months of the contract in each category of law, and that this would give it a common set of data which would allow all firms to be treated equally in each category. Furthermore, Mr Hamilton told the applicants what the Board had in mind at the meeting on 20th December, and subsequently referred to a "major review of all contracts" in his letter to them dated 20th January 2000.
286. The Board maintained that its review would identify how many matter starts had been commenced by each firm in each category; compare the number of matter starts actually commenced with the contract awards; analyse the number, value, duration and category of claims already made since 1st January 2000 (and over a period to be specified before that date); compare the data on claims with the schedule payment limits in the contracts; take into account any new advice or information from RLSCs or other sources about the level of need in different bid zones, areas and categories; consider the award of contracts to potential suppliers on the bid panel where existing supply was inadequate to meet demand in bid zones or areas; and identify the amounts of funds that were then available. The applicants accept that Mr South covered most of these matters in paragraph 22 of his second affidavit. In so far as he did not mention the second and fourth of them expressly, we consider it to be self-evident that any "full" or "major" review of all the contracts would have been certain to have embraced them.
287. The Board said that it would be consulting the Law Society and other relevant bodies in the course of this review. Matter starts, tolerances and schedule payments might be increased. They would only be decreased in accordance with the provisions of Clauses B16-B18 of the contract (for which see para 133 above). Except for a case arising under Clause B16(c) (where matter starts may be decreased because of the much higher than standard cost of earlier matters), they would only be decreased commensurately with the rate of decrease in new matter starts or claims. New firms might also be awarded contracts at the end of the review.
288. The applicants do not dispute that there are passages in the Board's evidence that support this statement of what may take place. They took a new point, however, in response, relying on a passage on page 9 of the Burgundy book (section 2.4, para 5), to the effect that additional tolerances could not be awarded to non-family civil contracts. This was based on a statement in the Overview that in these contracts the number of tolerances would be set as a fixed percentage of the contract size. This, presumably, is a reference to Section 11 of the Board's Guidance on Fund Allocation and Contract Awards, which states unequivocally that tolerances for contracts in other civil categories will be 10% of case starts, but it appears to us to have nothing to do with the Board's discretion to award new matter starts on an application under Clause B17 on page 33 of the Burgundy book. This clause says in terms that a contractor may at any time apply to the Board to increase its maximum number of matter starts, any tolerance, or its schedule payment limit (and standard monthly payment). When Mr Pleming told us that this was the way the Board would have power to respond if a community care contractor applied to it for permission to have additional matter starts to enable it to provide a holistic service to a client who needed advice on housing and welfare benefits as well as community care, we did not understand Mr Gordon to maintain that the Board would not have power to respond positively to this request even if the contractor in question had used up its existing tolerances.
289. The applicants, taking a consistently pessimistic attitude to the likely way the Board might exercise its powers in respect of a firm of their admitted quality, reminded us of the existence of the Board's power under Clause B16(c) to reduce the maximum number of matter starts in a contract schedule, and its power, set out on page 76 of the Burgundy book (in Section 16, para 16 of the Standard Terms 2000 of the General Civil Contract), to make changes to the contract, including amendments to the matter starts and the schedule payment limit, if any Access to Justice legislation, when it comes into force, "affects this contract". Mr Hamilton, however, had told them expressly on December 20th that the Board would regard it as a failure if it had to cut back on case starts, and the applicants did not expand their reasons why they had cause to fear the application of the inevitable "force majeure" clause that must have been included to guard against any new situation brought about by the application of the new Act in which the Board was not able to perform what it had contracted to perform and was obliged to reduce the award even to a high quality firm like theirs.
290. The Board then maintained that during the rest of the first 15 month schedule period, if a firm applied to increase matter starts, the Board would conduct some of the same tests as it would in relation to requests made in January-March 2000 prior to its major review. It would also ascertain whether other suppliers in the category in the relevant bid zone, or in neighbouring bid zones, possessed unused matter starts. If so, it might advise the firm in question to redirect its client to those suppliers. Alternatively, it might reduce the matter starts awarded to suppliers who were under-using their award, and redistribute them to suppliers who had attracted more clients than they could accommodate within their existing award of matter starts.
291. The Board said that it would be unlikely to take either of these courses in relation to suppliers in small, highly specialist categories, such as community care. Where there was a large surplus of allocated funds in a different category, the Board might redistribute these to a category where demand was exceeding allocated resources. Alternatively, it might fund further matter starts from its reserve.
292. The applicants maintained, once again with considerable justification, that the Board's evidence does not support in terms this statement of its professed intention. Indeed, they say that it does not reflect the much more restrictive approach contained in paragraph 9 of Section 1.5 of the Overview (see page 6 of the Burgundy book). This mismatch between the evidence before us and the more positive statements contained in the Board's note may be explained in part by Mr Orchard's statement at the end of paragraph 22 of his fifth statement to the effect that the Board would be consulting on the guidance which would apply subsequently to its second quarter review to deal with individual applications to vary the contract awards in future.
293. We consider that the Board is right to be fairly cautious at this stage in committing itself too far in relation to the policy it hopes to adopt following the shake-up of the contract schedules that will follow the forthcoming major review which is intended to result in tying matter starts and schedule payments more closely to contractors' actual proved performance. We see nothing in the evidence to contradict Mr Orchard's evidence that the Board would be unlikely to reduce matter starts in the case of suppliers in small, highly specialist categories, such as community care, particularly if those suppliers are of the quality that the applicants clearly are. On 20th December Mr Hamilton and Ms Patterson told them in terms that the Board wanted to contract with good firms, and that they knew that Mackintosh Duncan were good.
294. Next, the Board explained that its Regional Directors possessed a discretion to use unallocated funds at any time to fill in any gaps between the main rounds of fund allocation, whether by increasing new matter starts or tolerances for any existing contract firm, or by inviting bids from a firm on the bid panel. This is a condensed summary of Rule 6.1 on page 42 of the Terracotta book, which is concerned with the use by Area Managers/ Regional Directors of unallocated funds under their control, and is followed by quite detailed guidance on this topic. Most of the Board's cross-references on this topic in fact related to the use of the Board's reserve fund. The applicants say they do not doubt the existence of a discretion to allocate funds from the reserve.
295. The Board then accepted that in contrast to the first six month period, the number of available matter starts might ultimately be limited by the amount of the funds available nationally. The Board was aware in this context that ECHR obligations might require the grant of controlled legal representation in certain cases, and that priority would have to be given to such cases. In his second statement Mr Orchard referred in quite general terms to the prospective impact of new legislation, such as the Human Rights Act, as being one reason for the creation of the £9 million reserve fund. In his fifth statement Mr Orchard said at paragraph 22 that the Board fully intended to comply with the requirements of that Act. A little earlier he showed that he was aware of the potential for a rapid growth in the field of mental health, as solicitors looked to new sources of clients.
296. The applicants contend, correctly, that the potential use of the reserve for the purpose mentioned by Mr Orchard does not contain any guarantee of funding for cases where Convention obligations would require funding, and that he does not say at this stage of his evidence that priority would be accorded to such cases. As the evidence for the Board developed, it contained a statement by Mr South that the Board anticipated that in mental health the reserve fund would be sufficient to increase matter starts. The applicants maintain, however, that, although Mr Orchard in his fifth statement evinced an awareness of the vulnerability of mental health clients, he still provided no guarantee of funding for mental health and other similar cases. Nor did he set out the Board's understanding of what compliance with the Human Rights Act or the ECHR would require it to do.
297. The interface between certain types of mental health cases and the requirements of the Convention is a topic in its own right, to which we will come in due course (see para 572 below). At this stage of our analysis of the evidence, it is obvious that the Board is aware that there might be pressure on its budget towards the end of the first year of the new scheme - indeed, Mr Orchard has said in terms that the Board has warned the Government that it may run into difficulties in operating within its allotted budget for the first two years of controlled contracts (see para 77 above). Mr Cogbill, for his part, has told us, in effect, that the Lord Chancellor is already aware that there may be a call for more funds (see para 70 above). What goes without saying, however, is that if there is a field of law in which the ECHR requires a state to provide legal assistance in a civil matter out of public funds, then the British Government (through the Board as its appointed agent for this purpose) must do so, and for the last six months of the first schedule period of the first contracts our national courts will be able to compel compliance with any obligation in this respect that they may have identified.
298. Finally, the Board observes that the present contract schedules only run until 31st March 2001. It says that it intends to make new awards for the following year to all the firms which already possess contracts, and where appropriate, to issue new contracts to firms on the bid panel. The Board has already announced (see paragraph 3.2 on page 18 of the Burgundy book) that rules for the award of second year schedules (that is, to cover work from April 2001 onwards) will be published for consultation in the autumn of the year 2000, by which time its approach will be informed by its experience of managing the contractual arrangements until that time.
299. The applicants accept that this information is already in the public domain. They also note that on page 11 of the Burgundy book (Section 2.4, para 18) the Board has said that it generally accepts that each next schedule after the first will allow the same or more work to be done. It cannot, however, guarantee this because it cannot be certain that the needs for legal services and the priorities will remain constant. It does guarantee, however that the schedule for the second year of the contract will authorise at least 80% of the matter starts shown in the schedule (as amended) for the first year. The applicants have, however, invited us to note that in paragraph 13 on page 10 of the same book the Board says that it will expect to make changes to the number of authorised matter starts or the schedule payment limit only where long term trends are clear. Although we did not hear argument on this point, this appears to us to refer to prospective changes in the middle of a contract year, and not to the fixing of a payment limit in a new contract schedule.
300. Finally, the Board says, correctly, that it has set out its rules for the award of contracts after 1st January 2000 on pages 42-45 of the Terracotta book. The applicants accept that it has, but they continue to maintain that the application of the Board's rules will not overcome the practical difficulties which firms will face in trying to set up in practice. We will return to this contention later in this judgment.
301. Mr Orchard commented that this sort of situation would not be uncommon in the first year of contracts, and that the Board stood ready to make the necessary decisions as, for example, organisations lose their contracts as a result of audit failure or as the Board's diminishing contingent liability to non-contracted firms clarifies.
302. The way in which firms may drop out at different stages of the process was illustrated by some other figures Mr Orchard gave us. On 31st January 1999 there were 6,812 firms on the Section A Bid panel. 438 of these firms did not submit a franchise application by the due date, 557 withdrew prior to an audit, and eventually a reduced total of 5,156 contracts were offered. Mr Orchard said that only a small number of firms that passed an audit and met the timetable failed to receive any contract at all. On the other hand, as we have seen in the applicants' case, contracts were being offered and awarded to firms if the firm passed a preliminary audit, and they would be withdrawn in due course if they failed to achieve the standards required by a full audit when it eventually took place. On 4th January 2000 there were 4,909 contracts in operation. Over 200 firms who had been offered a contract had dropped out by this early stage either because they failed an audit or because they decided for some other reason not to proceed with the contract.
Part 15. The new generic franchise categories, their purpose and their scope
303. We will now turn to aspects of the evidence relating to some of the small specialist categories that have featured in this case, and in particular to the evidence relating to the mental health and community care categories that form the bulk of the applicants' practice. Before we do so, it will be helpful to say a little more about the history of the development of the four new generic franchise categories which emerged during the course of 1999.
304. In the December 1998 edition of Focus, the Board announced that legal aid, advice and assistance in areas of law not covered by existing franchise categories (which now extended to over 85% of legal aid work) would be covered under a new generic franchise standard. Its aim was to ensure that all areas of work covered by exclusive contracts would be provided by quality assured suppliers, and the acquisition of a franchise would be a prerequisite for a contract.
305. The Board's new generic franchise would cover all the areas of legal aid work not included in the existing franchise categories. The new generic franchise would include education, community care and certain aspects of public law. Organisations would apply for the generic franchise, specifying the area of law to which the standard would apply.
306. Applications for the new generic franchise would be invited in February 1999, practitioners would have to submit their application for such a franchise by 31st July 1999, and they would have to pass a preliminary audit by December 1999. They would have to meet the deadline for the Section A bid panel, however, so that a firm like the applicants, which met the 31st July deadline, did not qualify for consideration when contracts for the new generic franchise categories were originally awarded at the end of November 1999.
307. The Board also said in December 1998 that it was continuing to consult with members of the profession on the question of what constituted appropriate expertise in the specified niche areas.
308. In the March 1999 edition of Focus the Board said that this consultation process was continuing. It also said that organisations providing services in niche areas of law, such as education or community care, or emerging areas of law such as access to healthcare, could now apply for a generic franchise. It mentioned the LAFQAS requirements for supervisors, but it said that in emerging areas of law it would be flexible in applying this franchise requirement. It added that generic franchise work would be performed within tolerances by non-specialist franchised firms, and that contracts to deliver advice and assistance within the generic franchise arrangements would only be let where the relevant RLSC had identified a need for that specific legal service.
309. In June 1999 the Board published its Guidance on Fund Allocation. It explained on page 18 that although its general approach to bids for contracts would be informed by the advice of RLSCs about priority needs, it might be that RLSCs had not identified such need in all cases involving generic non-franchised categories. This was because some organisations which specialised in non-franchise categories draw their clients from a wide area which goes beyond the boundary of a single zone (or even an area office). The Board had sent out the questionnaire to which we have earlier referred, asking Section A firms to tell them how much work they had conducted in each of the non-franchise categories for which they had applied to join the bid panel. The Board said it had used this information to help it to decide whether to invite bids for contracts in specific non-franchise categories in particular zones and to determine the funds it would allocate to the relevant zones for contracts.
310. There followed some guidance to which the applicants took exception on the grounds that it gave improper preference to non-specialist firms and did not encourage the development of specialist practices:
"(1) Organisations conducting fewer than 10 case starts in specific non-franchise categories should be able to conduct this work under existing tolerance levels.
(2) Where organisations are conducting between 11 and 30 annual case starts in a specific generic category, we will consider increasing the tolerance where we can (ie where the bidder is being offered a contract in another category).
(3) We will consider issuing contracts for category specific work in non-franchise categories where an office is conducting a minimum of 30 case starts in each category annually."
311. The Board related this third requirement to the LAFQAS supervisory standards. It said that the 30 annual case starts were in line with the requirements of 350 hours per year set out in LAFQAS, and made it clear that it only wished to issue contracts to offices which were about to obtain and maintain a franchise for the relevant generic category. The Board accepted, however, that there might be some exceptions to this rule. They said that Area Managers had the flexibility to let generic category specific contracts where an organisation conducted fewer annual case starts but could demonstrate a need for the service and compliance with the supervisor standards.
312. The Burgundy book was published in October 1999, and Appendix C (on pages 259-270) contained a list of franchise category definitions. It also contained a residual list of cases which did not fall within any franchise category. These cases might be performed within a tolerance if they were controlled work and if they were certificated work they would be outside the scope of the contract. The Board gave a warning on page 259 that not all proceedings which fell wholly or partly within the revised franchise categories were necessarily within either the scope of legal aid or the future scope of funding under the 1999 Act.
313. This was the first occasion on which a franchise category definition of community care and the other generic categories had been published. At this stage education, community care, actions against the police and civil liberties were the names of the new franchise categories.
314. The definition of the community care franchise category was in these terms:
"(1) Legal Help and related proceedings concerning the provision of services or facilities by a Social Services or Health Care Authority to the client or a dependant in the community, but excluding any matters falling within the Welfare Benefits or Clinical Negligence franchise categories and proceedings before the [MHRT].
(2) For the avoidance of doubt, Proceedings under Section 47 of the National Assistance Act 1948 are included."
315. The new civil liberties franchise category was defined in these terms:
"(1) Legal Help or related proceedings concerning the civil liberties or human rights of the client or a dependant including under the Human Rights Act 1999 (sic) once implemented, and matters involving the application of the [ECHR] in English law, but excluding any matters which fall within the Crime franchise category.
(2) For the avoidance of doubt, this would include data protection and freedom of information issues."
316. The mental health franchise category was given this definition:
"(1) Legal Help, where the primary problem or issue relates to a point of English law concerning mental health or the Mental Health Act 1983, including matters concerning education issues only where based on mental impairment.
(2) All proceedings before the MHRT (including those arising from criminal proceedings), all other proceedings under the Mental Health Act 1983 and any other proceedings where the primary issue is mental health, but excluding any matters falling within the Clinical Negligence or Personal Injury franchise categories."
317. The expression "legal help" has replaced the old expression "legal advice and assistance" (but not ABWOR) with effect from 1st January 2000. A new expression "controlled legal representation" has replaced ABWOR before the MHRT and also covers representation before the Immigration Appeal Tribunal and immigration adjudicators.
318. The applicants have pointed out to us that proceedings for judicial review, proceedings for habeas corpus, and indeed any other administrative law proceedings were included in the October 1999 residual list except where "the principal proceedings or underlying substance of the case fell within a civil franchise category". It followed that legal help in such matters could be handled by family law practitioners within the additional tolerances that had been awarded to them, while specialist practitioners, with their maximum 10% tolerances, would lose one of their specialist category matter starts if they embarked on giving legal help in any of these administrative law matters on the residual list.
319. The terms of the new general civil contract (solicitors) were subsequently amended, following consultation and detailed discussions with the Law Society and the Legal Aid Practitioners Group, and ten pages of amendments accompanied the Board's offer of a contract. So far as revisions to the new franchise categories were concerned, in October the Board had issued a warning that they were the subject of consultation which was due to end towards the end of that month, and that if any changes arose as a result of the consultation, suppliers would be notified.
320. The ten pages of amendments did not include any of these revisions. Instead, they were announced by the Board in the December 1999 edition of Focus. We have been told that this issue contained a statement that revised guidance and definitions contained in the six-page statement entitled "Franchise Category Definitions (Appendix C of the General Civil Contract Specification) General Guidance on the Categories" which appeared on pages 16-21 (copies of which we have seen), would come into force from 1st January 2000 and would supersede the consultation version which appeared in Appendix C in the Burgundy book.
321. These revisions included a revision of the first part of the community care definition so that it now read:
"... the provision of services or facilities in the community in residential or nursing accommodation) by a Social Services or Health Care Authority to the client or dependant ...."
322. It also contained a complete overhaul of the definition for the new franchise category which was now called "Public Law". The new definition read as follows:
"Legal Help and related proceedings concerning:
(1) the civil liberties or human rights of the client or a dependant, including under the Human Rights Act 1998 once implemented, and matters involving the application of the European Convention on Human Rights (and other human rights instruments ratified by the UK) in English law;
(2) public law challenges to the acts, omissions or decisions of public bodies, including challenges by way of judicial review or habeas corpus.
(3) For the avoidance of doubt, this includes data protection and freedom of information issues, and matters which may also fall within the definition of any other franchise category."
323. The items in the residual list under the heading "Administrative Law" were correspondingly abbreviated.
324. This history shows vividly the size of the task that confronted the Board when it was under pressure to introduce the new controlled work scheme by the beginning of the year 2000. It was generally very familiar with the categories of work which had all come within the scope of franchises by the beginning of 1999, but it was very much less familiar with the details of the work involved in the new generic categories, and the necessary consultation process continued for most of 1999. We have already observed how, no doubt under the influence of all its other pressures, the Board did not notice that the Community Care Practitioners' Group did not respond to the correspondence it had sent to Ms Mackintosh, the group's co-ordinator, at her former address. As a result it proceeded to finalise the definition of the scope of this category without any input from this important practitioners' group. We have also noticed how at the meeting on 20th December 1999 Ms Patterson implied to Ms Mackintosh that the London Region of the Board, at any rate, had still quite a lot to learn about community care. The development of the fourth new generic category, ultimately called "public law", was even more of a belt and braces affair, and as late as the fourth week in October the applicants were being told that they could not bid for a franchise called public law.
Part 16. Particular franchise categories: (i) Mental Health
325. After this overview of the way in which the new generic franchise categories came to be identified and their scope eventually defined, we will consider in greater detail aspects of the evidence relating to four of the controlled work franchise categories: mental health, community care, immigration and employment.
326. First, mental health. The old green form scheme covered both legal assistance and ABWOR. The Law Society had created its own MHRT panel, but the Board did not introduce a mental health franchise until December 1998.
327. Before that time, all solicitors had to apply to the Board's Area Office for authority to represent a patient at a MHRT. The area office would then decide whether it was reasonable for the client to receive ABWOR, but a conventional "legal merits test" (as would have been applicable under Part IV of the Act) was not in force. When the Board's mental health franchise was introduced, franchised firms could approve their own ABWOR representation and register it with the Board.
328. From April 1994 onwards, ABWOR in MHRT hearings was made available without reference to a client's financial resources by virtue of the Legal Advice and Assistance (Amendment) Regulations 1994, which came into force on 11th April 1994. These regulations inserted into the Legal Advice and Assistance Regulations 1989 a new regulation 5A which provided that ABWOR in MHRTs "shall be available without reference to the client's financial resources".
329. It appears that this amendment may have been introduced in consequence of the decision of the European Court of Human Rights in Megyeri v Germany (1993) 15 EHRR 584. In that case the court concluded that, in relation to a person of unsound mind compulsorily detained in a psychiatric institution, "it is essential that the person concerned should have access to a court", and that such person should (unless there were special circumstances) "receive legal assistance in subsequent proceedings relating to the continuation, suspension or termination of his detention". This was because "the importance of what is at stake for him - personal liberty - taken together with the very nature of his affliction - diminished mental capacity - compels this conclusion".
330. A solicitor undertaking ABWOR work at MHRTs might undertake an unlimited number of cases of this type. The Mental Health Act 1983 gives all detained patients the right to apply to such a tribunal for their discharge, and in all but a very few cases, access to free legal representation is assured. For this work preparation was paid at the rate of £52.75 per hour, again with slightly higher rates for franchised firms and London firms. Advocacy was paid at higher rates.
331. The work involved in such a case might involve travelling to visit a client in a psychiatric hospital, taking instructions, considering reports from the client's consultant psychiatrist and often obtaining an independent report, reading the client's medical notes, and taking further instructions, before preparing for the hearing and representing the client at it.
332. In December 1999 the notional limit on the amount of work that might be undertaken in representing a patient at a MHRT was £2,500, which might be extended if, as often happened, further work was required. This sum included disbursements. These might include the cost of commissioning independent reports from a psychiatrist (often £400-£500) or a psychiatric social worker (if issues relating to the provision of suitable community care services arose in the case).
333. In some cases the time between receipt of the first instructions from the client and the tribunal hearing is very short, since the hearing must take place within seven days of an application being received. In those circumstances the period that elapses before claim for payment is made for the work will be correspondingly short. The Tribunal Office was now beginning to list more quickly hearings for applications for discharge from the longer compulsory detention provisions. This means that the rate at which claims for payment for such cases are made is also increasing. Mr South does not dispute the existence of this trend, but points out correctly that it will have a "one-off" effect.
334. Ms Mackintosh says that there are insufficient practitioners who have experience in this work. In large parts of England and Wales there are no practitioners at all. Since clients are compulsorily detained, the solicitor has to travel (sometimes long distances) to represent them, and the lack of NHS beds means that clients are often placed in hospitals well outside their local area, sometimes at other ends of the country. The unique discrete nature of the work and the fact that the preparation of the case and representation at the hearing are invariably undertaken by the same person means that many solicitors who specialise in mental health are sole practitioners.
335. Mr Simon Foster, the principal solicitor of MIND, also told us that although London and other cities received good coverage by mental health solicitors, he feared that in suburban and rural areas the number of specialists, which was already very low, was likely to be very limited indeed. In some areas, there was only one such specialist, and in others, none at all.
336. Ms Mackintosh told us she has represented many of her mental health clients for many years, as is often the case with practitioners in this field. This is because clients are either detained for long periods, or are "revolving door" patients, suffering from chronic conditions which relapse from time to time. She has built up a relationship with these clients. This is particularly important given their vulnerability and the often considerable history of their condition, and the records of their admission to hospital.
337. She believed that the introduction of the Human Rights Act 1998 in October 2000 will be of the utmost importance in relation to her clients. Her practice will be radically changed, and the work of the firm is likely to expand still further (if it is able to survive).
338. Mr Foster, too, referred to the gathering speed of reform in this area of the law, as greater emphasis is paid to the rights of those suffering from mental disorder or other mental incapacity. He said that the last three years have seen an explosion of new measures which are directly relevant to mental health law, ranging from what he called the new Health Act and partnership working to the Disability Discrimination Act. He, too, thought that the Human Rights Act would have a massive impact on the way in which statutory agencies treat those with a mental disorder. He reminded us that the Government was currently consulting on reforms to the Mental Health Act. It was also putting forward proposals for those with personality disorders and other proposals (based on the 1995 Law Commission report) for reform of the civil law relating to those with mental incapacity. He said that unless those experiencing mental distress had access to a sufficient number of informed and experienced solicitors, he could not see how they could be expected to exercise their rights under the new legislation in this field, much less under that which was proposed.
339. In its evidence Mr Orchard said that the fact that a member of the Law Society's MHRT panel undertakes to represent a patient at a MHRT if a patient is referred to him/her as a panel member needed to be discussed between the Board, the Law Society and practitioner groups. By a letter dated 18th January 2000 Mr Hamilton told the applicants that Ms Mackintosh had been wrong to use the word "undertaking" in her first affidavit. In fact the Board had used the same word in this context on page 224 of its general civil contract documentation. Further inquiries revealed that the word "undertake" was used in a Law Society document in a loose sense. There is, however, an obligation on the solicitor to use his/her best endeavours to represent such clients on such a referral. Ms Mackintosh has described what is required before a solicitor can join the panel, for which an application fee is payable, and how he/she must undertake a number of cases during a three-year period. This meant that there was a considerable amount of quality assurance built into panel membership.
340. We have already seen how the Board budgeted for a substantial increase in its expenditure in the mental health category for the year 2000-2001. In his first statement Mr Orchard said that in 1998-99 it spent just over £10 million on Part III cases in this category. In 1999-2000 it estimated that its annual claim rate was £11 million. It was budgeting £13 million for this work in 2000-2001. It also awarded 18,000 matter starts to Section A firms in mental health for 2000-2001, over 2,000 more than its estimate of the number of bills it would pay for this work in 1999-2000.
341. In paragraph 37 of his fourth statement Mr Orchard reveals that the Board initially awarded 261 mental health contracts to solicitors' offices outside London and 67 to London offices, and a further 11 to nfp agencies. 14 further contracts were awarded to Section B offices. (These included the award of 10 starts in mental health to the applicants). Mr Orchard considers that this was an excellent result given that several offices would have more than one solicitor on the Law Society's MHRT panel. He says that the great majority of solicitors on the Law Society's panel will have been awarded a contract. He adds that the overall effect of contracting in the mental health field has been to concentrate the work in the hands of specialist providers, while at the same time creating a national network of suppliers so as to ensure reasonable coverage and access.
342. He explained that the Board had invested significant resources in achieving this result since the mental health franchise was first launched in December 1998. It had developed a "starter pack" for firms wishing to apply for the new franchise. Area offices had held meetings and presentations on the potential benefits for firms. The Board had worked closely with mental health practitioners to develop the franchise supervisor standards. This had led to further impetus as these practitioners persuaded others of the benefits of franchising, especially the ability to self-grant representation before MHRTs without the need for the prior approval of the Board. He said that the resulting network of over 350 contractors was a planned rather than a haphazard result.
343. The new contract specification states that there are limits on the costs of each case, which may only be increased with prior authority of the Regional Director. In this context, the maximum limit for non-MHRT mental health work is £500 and for MHRT work it is £1000. Ms Mackintosh's attitude, based on practical experience, is that these limits were wholly insufficient bearing in mind the extent of the work required in most cases. In many MHRT cases an independent report from a consultant psychiatrist will be required, as well as at least three visits to the detained client to take instructions and attend the hearing. Bearing in mind that mental health work must also comply with "transaction criteria" which specify the work to be done, Ms Mackintosh found it impossible to see how this might be achieved within the limit the Board was imposing.
344. Mr Foster had expressed a linked concern in paragraph 14 of his affidavit. He said that he understood that those who hold contracts would be required to comply with a schedule payment limit, which placed an overall cost ceiling on their cases. In his opinion this would mean that solicitors would be less inclined to take on the cases of those clients in mental distress whose behaviour was challenging, because these cases were time-consuming and very expensive, even where on paper they had merit.
345. Mr Orchard denied that there was any such cost "ceiling". He said that the figures in the contract specification had been set at the reasonable point at which each case should be reviewed by the Board, and a further extension granted only if it was justified. They were far higher than the limits on the former green form scheme, which in mental health cases were equivalent to two hours' work. The contract figure might mean that a highly specialist firm like the applicants, which concentrated on doing each case in depth, would have to come to the Board for approval in more cases than most firms, but he considered that this was justifiable. He added that it should not be assumed, as Ms Mackintosh appeared to assume, that extensions would not be forthcoming. They would be in appropriate cases.
346. He emphasised that there was no absolute ceiling on the costs of an advice and assistance case, but only a cost limit for the purposes of a review by the Board and a further extension being granted, if appropriate. However expensive an individual advice and assistance case might be, the supplier would be paid for all work reasonably done, provided it was an authorised matter start, and provided that any financial extension above the relevant cost limit had been obtained.
347. Mr Orchard went on to point out some special features of the new mental health contract. It allows solicitors to travel to see clients who are in a mental hospital or who are physically or mentally disabled (see Burgundy book, pp 107 and 216); allows the costs of that travel in such cases prior to signing an application form (ibid, p 129); allows an application for advice and assistance to be made on behalf of a client who is unable to attend the solicitor in person in cases of mental disability (ibid, pp 104 and 214); allows payment for telephone advice in such cases prior to signing an application form (ibid, p 129); and allows postal applications for assistance without the need for a personal attendance in such cases (ibid, p 120).
348. Issues concerned with the costs of mental health cases also featured in the dialogue between Ms Mackintosh and Mr South. In paragraph 25 of his first statement Mr South said in December 1999 that the national average cost of Part III mental health cases was currently in the order of £700. The national average cost of cases both started and claimed in the same year was just over £600, which reflected the fact that these tended to be shorter running cases. The range of costs was very wide, and MHRT cases cost significantly more than the average (many of them in excess of £1,000, with a small number in excess of £2,000). Ms Mackintosh, for her part, said that the cost could range up to £3,000 or more.
349. Ms Mackintosh's concern was that under the new system, unlike the old, the Board required firms to seek prior authority if a MHRT case was likely to exceed £1000, and according to her understanding of the new contract this authority would only be granted if there were available funds in the zone in which the firm's office was situated. A client might therefore be faced with the prospect of his/her solicitor being forced to stop work on a case half way through, or having to find another solicitor in a different zone where funds were available, with all the added expense and duplication this would involve as well as distress to the [mentally disabled] client.
350. Mr South responded to the effect that Rule 3.6 of the Contract Specification (see page 122 of the Burgundy book) established an "Upper Financial Limit" which might not be exceeded without the authority of the Board's Regional Director. He accepted that Paragraph 2 of the guidance to that rule did say that the Regional Director would have "regard to the allocation of funds to the zone for the relevant category". He maintained, however, that Ms. Mackintosh was wrong to infer from this statement that authority would only be granted if there were funds available within the relevant zone. He said that the Board's usual approach would be to grant authority "where the other tests applied by the rule and the contract generally were satisfied". While the Board wished to monitor high cost matters and to ensure that the money spent on them was properly accounted for, Mr South said that the application of the Upper Financial Limit in individual cases was not one of the mechanisms on which the Board would rely in managing a controlled budget.
351. Ms Mackintosh was not satisfied by this explanation. In reply to Mr South's statement that she had been wrong in inferring that the Board's decision would be informed by the availability of funds available in the particular zone, she quoted the guidance note to which Mr South had referred, which is in these terms:
"....You must not exceed the upper cost limit in any matter without our authority. The Regional Director may grant or refuse such authority on our behalf and will exercise the discretion having regard to the allocation of funds to the zone for the relevant category (and for contract tolerances if the Legal Help is provided within a tolerance), the level of your Standard Monthly payments and to Guidance."
352. (She did not include the first nine words in this guidance, however, which read: "In order that we can monitor high cost matters").
353. She contended that the question whether a practitioner might continue to deal with a particular matter was therefore highly dependent on the way in which the funds had been allocated to a zone on a macro level, and not, as Mr Orchard had said, based on the question whether the case warranted an extension or whether further work was "reasonably required". She said that this meant that it was even more vital for such allocations to have been based on transparent methods and accurate data.
354. Another controversy arose out of Mr Orchard's evidence that in family and immigration controlled representation work, regulations would restrict the work to a prescribed panel, (namely those with a licence contract from the Board) in exactly the same way as had already been successfully achieved in clinical negligence cases. Licences would be issued to suppliers on the panel provided they had passed the Board's preliminary audit, and there would not be any bid process at all. The Board's intention was to control quality, not numbers of cases, for this work.
355. Ms Mackintosh took note of this evidence that family and immigration representation before tribunals [in fact, before immigration adjudicators, the Immigration Appeal Tribunal, and magistrates' courts, for family cases] was not to be limited to a preordained budget or numbers of case starts, on the grounds that these would be restricted to members of a prescribed panel. She said that in contrast for MHRT work the number of overall cases allocated were limited, and there was no rational explanation why a client detained under the Mental Health Act should be placed at a disadvantage as compared with the clients of family lawyers. Indeed, she found this differential treatment of mental health clients surprising, having regard to the ECHR requirement of an independent review of a patient's detention and the impending implementation of the Human Rights Act.
356. Mr Orchard said that it was not right to conclude from the facts identified by Ms Mackintosh that the Board's arrangements placed clients detained under the Mental Health Act at a disadvantage compared with family clients. Typically, he said, most solicitors who undertake legal aid work provide representation in family cases. This was subject to the detailed and well understood merits criteria set out in the Legal Aid Act and to the guidance given by the Board on the practical effect of these criteria. Most financially eligible clients have ready access to solicitors, and there is not a great deal of unmet need.
357. In contrast, many patients detained under the Mental Health Act did not receive legal help at present. The provision of specialist legal aid services under Part III of the scheme had hitherto been patchy, and there was no means test for MHRT representation. Unlike family representation, there was therefore a potential for a considerable growth in expenditure in the mental health field. This distinction was borne out by trends in claims for advice and assistance, which in family work showed an overall decline whereas in mental health they showed an increase.
358. Mr Orchard said that mental health patients were a highly vulnerable group, and the decision to commence tribunal proceedings for the release of detained patients often required a high degree of responsibility and scrupulous care to be taken by the solicitor. Applications should not be automatic, as Ms Mackintosh herself acknowledged. There was the potential for rapid growth in this field, as solicitors looked to new sources of clients, and this consideration had informed the Board's decision to put this work in the controlled part of its budget.
359. This did not mean that the Board will not increase matter starts to meet genuine demand as it emerges, as Ms Mackintosh believed. Its location in the controlled budget would, however, allow the Board to monitor and plan the development of services in this field far better than if it was treated in the way that family representation is treated. The Board had already allowed for a significant expansion in its contract awards over and above the previous rate of claims, and it fully intended to comply with the requirements of the Human Rights Act. He reiterated the fact that the number of new matter starts awarded under mental health contracts showed an increase over past rates of claim. In contrast, in family contracts it showed a decrease. To this extent, mental health had been given priority over family work.
360. Mr Orchard added that the Board had endeavoured generally to put as much advice and assistance and ABWOR into the controlled budget as possible. It had appeared anomalous, however, in the family law field to treat family ABWOR (which covered magistrates' court proceedings) differently from family certificated cases (which cover other court proceedings). There was often a choice of court for family representation, and the Board considered that the choice should not be affected by the shape of the contract. This, in our judgment, was an eminently sensible decision.
361. Another contentious issue related to the practical effect of the LAFQAS supervisor standards on a small specialist firm in the mental health field like the applicants, which had been awarded so few matter starts. Ms Mackintosh pointed out that the allocation of only 10 mental health cases, with no guarantee of any further cases, presented the firm with major problems in terms of compliance with those standards. As we have seen, LAFQAS requires a mental health supervisor to undertake 10 MHRT cases every year (at least five of which must involve representation at a final hearing), or 10 cases which are substantial non-MHRT cases. These might involve guardianship, proceedings for a "best interests" declaration for a person under an incapacity, or enforcing a mentally ill client's rights to aftercare services in the community.
362. It followed that a firm like hers which had been allocated only 10 cases over a 15-month period risked losing its franchise and its contract altogether through no fault of its own, simply because the Board had not allocated it enough cases to give it any hope of complying with the LAFQAS requirement. Moreover, since a supervisor may meet LAFQAS requirements by one of two alternative routes, each of which required 10 cases to be undertaken, the firm was faced with the very real prospect of turning clients away whose case did not fall into the route they had been forced to select.
363. If, for instance, the firm decided that it would seek to comply with LAFQAS by undertaking non-MHRT cases (route 2), they would have to reject clients who approached them for representation at a MHRT. If they decided to pursue route 1, there would be no guarantee that five out of the 10 MHRT cases would actually proceed to a final hearing. She pointed out in this context that clients detained under the civil sections of the Mental Health Act 1983 are often discharged by their Responsible Medical Officer prior to their MHRT hearing, unlike restricted patients in respect of whom no such power of discharge exists.
364. Ms Mackintosh observed that her firm had two solicitors who undertook mental health work - herself and an assistant solicitor. They were both members of the Law Society's MHRT panel. If she was required to attempt to comply with LAFQAS herself in order to continue to meet the supervisor's standards (so as to preserve the franchise and thus the contract), this would mean that her assistant solicitor would be unable to carry out any work. Her future with the firm would therefore be in doubt, and they would have to consider making her redundant.
365. Mr Orchard responded to the effect that the 10 mental health cases awarded to the firm were intended to last for six months. If the firm in fact used its authorised matter starts at a faster rate, then he said it had been advised, as we have already seen, not to turn clients away but to approach the Board immediately. He went on to comment that although it was too early to say what would happen as a result of the second quarter's review of contracts, it was wrong to say that the firm was likely to lose its franchise and contract altogether because the number of new cases awarded would prevent the firm from meeting LAFQAS requirements. He said that this was true even though the firm had two solicitors undertaking mental health work. He added that the firm had no compelling grounds for making a redundancy on the basis of the contract award.
366. In our judgment, this statement by the Board's chief executive only makes sense if the Board has already perceived that it must increase the award of matter starts substantially to the applicants as a result of the review it proposes to commence in two months' time. Otherwise his statement would be incomprehensible, since the logic of Ms Mackintosh's evidence is unassailable. No responsible firm of solicitors could go on employing a second specialist mental health solicitor on such a shaky foundation, so far as the promise of future work is concerned.
367. In her fourth affidavit, Ms Mackintosh illustrates this point from her practical standpoint as the joint principal of a small firm. In his fourth statement Mr Orchard had also asserted that there was no justification for another solicitor's assertion that his mental health department would have to be closed down and 10 people made redundant as a result of the introduction of the new contracting regime.
368. Ms Mackintosh said that Mr Orchard's comments wholly ignored the reality of running a business, and that the Board had based its calculations on assumptions and estimates which were out of date and at odds with practical reality. If practitioners were unable to pay for overheads, then redundancies were inevitable, and it was for the firm placed in this dilemma which had to assess its business viability. Firms will indeed turn away clients, she said, if their contract award leads them to believe that they have no guarantee that any further funds or cases will be allocated, so that they have to prepare for redundancies.
369. She complained that the Board had not addressed the matters set out in her third affidavit and in letters from practitioners regarding "cherry picking" of clients (see para 219 above). By this she meant that the effect of the new regime would be to deter firms from accepting instructions from clients who are "difficult", who have mental health problems, who are physically disabled, or whose first language is not English (see para 117 above).
370. In addition, whilst the scheme (as before) permits a solicitor to visit a client at home or in hospital, she said that this wholly ignores the fact that the solicitor is now constrained by the schedule payment limit within which the firm must operate. More expensive cases are therefore likely to be rejected in favour of "quick" and "easy" cases in order to remain within the constraints of the contract. This would have a profound effect on client access.
371. She added, as we have already observed, that the new rules on travelling to visit clients were more restrictive than under the previous scheme. Indeed, she said, it would only be in the most exceptional circumstances that a home or hospital visit might be made if the client was over one hour's travel from the solicitor's office. We would observe that this is, in fact, an exaggeration of the effect of the new rules, which are on pages 216 and 217 of the Burgundy book or, for community care clients, on pages 108-9 (see paras 194-198 above).
372. Ms Mackintosh told us in her affidavit sworn on 18th January 2000 that her firm had taken two new clients in the last few days. One proved to be a detained client who had already applied to a MHRT under section 2 of the Mental Health Act 1983, and was therefore not a "MHRT" case as such. He might well be detained for a further period under section 3 of the Act and would wish to instruct the firm in that event. The other is a client detained under section 3 of the Act whose solicitor (who has acted for him for the last seven years) was unable to continue doing so because she was in the process of applying for a franchise. She therefore possesses no contract, and has asked Mackintosh Duncan whether they would be able to accept all her regular and old clients.
373. Since 1st January 2000, therefore, the firm has taken one "route 1" client and one "route 2" client under LAFQAS, leaving them, as Ms Mackintosh understood the position, with only eight more cases over the next 14 ½ months. The firm was faced, she said, with the prospect of failing to meet LAFQAS standards purely as a result of the number of cases they had been allocated. She referred us to Ms Patterson's statement that most if, not all, case starts in mental health had already been allocated in the London region. This area of law was "more of an issue" to the firm, as far as further case starts were concerned.
Part 17. Particular franchise categories: (ii) Community Care
374. Community care law is a fast growing area of litigation, arising from the implementation of the National Health Service and Community Care Act 1990 in April 1993 and the high volume of litigation arising from the application of the provisions of the Act.
375. Ms Mackintosh's clients are almost always too ill or disabled, mentally or physically, to travel to her office, and she therefore visits them at home. She may have to assist a mentally ill patient who is about to be discharged from psychiatric hospital onto the streets without accommodation or support; advise a physically disabled client who is housebound in relation to his/her rights to disability adaptations and home care; advise a client regarding his/her entitlement to NHS care and services; advise on the legality of decisions to close hospitals, day centres for the disabled and residential care homes, or challenge (in the event, successfully) a decision by a health authority to withdraw all community psychiatric services from mentally ill, suicidal people. She may also advise the carers of a disabled person as to their rights to services, enabling them to continue to care for a relative with assistance, and preventing a crisis from occurring.
376. Most of the cases she deals with involve consideration of bringing proceedings for judicial review. The proceedings are aimed at ensuring service provision for clients. They do not involve financial claims.
377. Her clients have already had considerable contact with the statutory agencies in an attempt to secure the services they need, and she is often faced with a client who has several files of papers for her consideration at the first interview. Cases involving hospital or day centre closures may involve a lot of documentation and complex legal issues. She said the cost of undertaking community care advice and assistance under the green form scheme was often about £1,500, and it could reach £2,000 or more.
378. This, of course, was the reason why she regarded the Board's average cost of £136.10 per case as absurd in relation to the work which she knows is required to meet the needs of the clients who are referred to her.
379. We have already described how the RLSCs were not invited to assess need in relation to the niche areas of law in the generic non-franchise categories. The Board took the view that by their very nature, practitioners in niche areas were specialists who attracted clients from a wide geographical area, and sometimes on a national basis. There was little point endeavouring to ascertain need by local geographical area in relation to this work. To bring the story up to date, Ms Mackintosh told us that the London RLSC had recently been asked to assess need for education and community care work within its region.
380. It followed that when it was allocating funds for community care contracts, the Board's approach was largely informed by such material as was provided by practitioners themselves, and as we have seen it did not consult the Community Care Practitioners' Group at all. Mr Orchard referred us in this context to Section 10, and the additional guidance on page 18, of the "Guidance on Fund Allocation and Contract Awards", to which we have already referred. The questionnaire mentioned on page 18, which was sent in April 1999 to all the Section A firms who were interested in a contract for a non-franchise category of law, asked for the annual number of cases which the firm was doing in each niche category in which they sought a contract. After analysing these responses, the Board, as we have already said, eventually awarded 32 contracts for Education, 28 for Community Care, 39 for Actions Against the Police and five for Public Law. Mr Orchard later told us that one award was made to a B Panel firm in education, in addition to the single award to the applicants in community care. He understood that all the Section B firms which had bid for one of the new specialist categories had received contracts in the field of their choice.
381. In these circumstances he was at pains to stress that the allocation of funds for these niche areas of law followed, rather than preceded, the existence of a suitable bidder on the relevant bid panel. He said that the applicants had been quite wrong to assert at the hearing on 13th December that they could not be awarded a contract in community care, because no unallocated funds had been set aside. This, he said, was a simple misunderstanding.
382. Ms Mackintosh responded that she had never seen the questionnaire, but she was critical of what she had heard about it. We have been shown a copy of it. It was dated April 1999, before the Board had finally determined its allocations policy as a result of the information it received from the potential bidders on baseline matters. The effect of a covering letter sent with the questionnaire was to tell these non-franchise firms that the Board would not invite bids where it appeared that the firm would not meet the supervisor standards. For this purpose it would be necessary to undertake at least 350 hours work each year for each non-franchise category in which they intended to bid. It also told them that although the Board's approach to inviting bids would be informed by the advice of RLSCs about priority need, for non-franchise categories, in particular, it "may" be that RLSCs have not identified such need in all cases. Because the Board realised that some organisations in these fields of law drew their clients from a wide area which went beyond the boundaries of a single bid zone (or even an area office), it wished to supplement the advice it had had from RLSCs with a better understanding of the amount which was currently being carried out by organisations on the bid panel.
383. As Mr Orchard told us, firms were invited to give the annual numbers of cases they started. It was suggested that they "may" find it helpful to relate this figure to the "baseline" figure for the six month period up to 31st May 1999. The questionnaire had three columns for completion: "Category"; "Annual number of case starts"; "Withdraw from Bid Panel". (This related to the strong hint in the covering letter that a non-franchise firm should withdraw from bidding in a relevant category if it could not be sure that it would undertake 350 hours work in that category).
384 Ms Mackintosh's criticisms are, in our judgment, to this extent justified because the form merely asked firms to state how many cases had been undertaken in each category. There was no definition of the categories of work. The covering letter was fairly vague about the period for which information was being requested. What was more, the firms were not asked to say whether the figures they supplied included private as well as legally assisted clients. In a field of law in which the Board knew that it did not have as much information as it possessed in relation to other fields with which it was much more familiar, the information it would have received from the responses to this questionnaire would not have given it all the information it really required before settling a policy which would restrict a specialist firm like Mackintosh Duncan to a client-base not more than one hour's travelling time from its office (other than in an exceptional case, where two hours' travel would be permitted).
385. Mr Orchard's attitude, expressed in his fourth statement, was that in the field of community care many cases did not call for the specialist skills needed to deal with clients that were required in the mental health category. This was one of the reasons why the Board considered it acceptable for this work to be carried out within tolerances. Another reason was that limiting provision to the very few specialist firms would cause very serious problems in relation to geographical access to help. In response, Ms Mackintosh told us, among other things, that many of her referrals came from family firms, citizens' advice bureaux and so on, because generalist practitioners were unable to deal with community care cases due to the complexity of the law.
386. Our attention was drawn in this context to the recent case of R v North and East Devon Health Authority ex p Coughlan (1999) 2 CCLR 285, in which Ms Mackintosh's firm had acted for the successful applicant in judicial review proceedings. A glance at the legislation and guidance referred to in the judgment of Lord Woolf MR at pp 288-9 shows how extremely complex and important the legal issues in a community care case can be. The applicant was a doubly incontinent tetraplegic lady living in a nursing home in the west country. Under the Board's proposals it would be quite impossible for a London-based solicitor like Ms Mackintosh to act for such a client under the provisions of her controlled contract unless she required the client to visit her in her office in London (which would be out of the question for many of Ms Mackintosh's grievously disabled clients): and in that case the client would presumably have to find the money for her travelling expenses from somewhere else. Alternatively, Ms Mackintosh would be limited to coming onto the scene for the first time on a certificate granted under Part IV of the Act once a letter before action written by another firm had received an unfavourable response. This, Mr Gordon rightly submitted, would involve expensive double-manning, even if, as is not always likely to be the case, the other firm was willing to drop out at that stage.
387. We were told that the applicants' firm has been referred approximately 20 new community care cases since 4 January, some of which they have had to defer pending resolution of the current proceedings. All, we were told, are cases where the clients do not wish to be referred elsewhere, given the firm's national reputation in dealing with such matters.
388. The most pressing case is that of a disabled woman in her early 20s who is severely disabled and doubly incontinent. She has been given only five incontinence pads each year by her local NHS Trust, despite the fact that she currently uses up to six pads each day. The Trust is applying rigidly an "environmentally friendly pad policy", requiring the client to wash the pads out at the end of each day for use on the following day. This was an extremely urgent case, as the client was being forced to buy extra pads from her Income Support. This was placing the future of her supported accommodation package at risk. It was also complex, given the issue of resources and what Ms Mackintosh described as the conflict with the European Convention on Human Rights.
389. The other community care cases referred to the firm in January involved issues relating to hospital discharge before proper and lawful assessments of need had been carried out; payment from a client's income support for nursing services; threatened withdrawal of health/community care services; closure of a day centre; failure to provide services to carers who are at breaking point in caring for their relatives; and the refusal of an authority to install a stair lift to enabling a severely disabled client to access the toilet on the first floor (she is currently using a bucket in her living room). In short, Ms Mackintosh told us that these were all part of the normal run of cases which were referred to her firm on a regular basis.
390. Whilst it was the case that the firm had not yet exhausted its 23 community care case starts, it was clear to her that the limit would soon be exceeded. This was quite apart from the fact that, as she had previously told us, the firm had planned to recruit further staff in order to cope with the high level of referrals they received.
391. She was critical of the fact that the Board had sought to use the number of cases which the firm had undertaken in its first five months of trading as a basis for criticism, when Mr Orchard stated that it was the "firm's own choice of work which is preventing any expansion of the firm's controlled work in its franchised category", and not the contract award. She said that this completely missed the point, which was that they could not take on extra staff without corresponding guarantees from the Board, and that these guarantees had been refused. If they were able to take on new staff, then they would obviously be able to deal with more clients.
392. They did not know whether their case starts would be increased, and they had no idea how funds had been or would be allocated to their bid zone, a matter which in her perception impacted on the number of cases which they could undertake. She said that this lack of clarity left the firm and its clients in an extremely fragile position. They might be forced to make staff redundant, as opposed to building on their excellent reputation in expanding their services.
393. Mr Orchard responded to her concern that her firm might not be granted extensions of the initial financial limit for work in any given case because funds were not available in her bid zone. He said that although the contract included a provision which will allow the Board to take into account the availability of funds in a bid zone when deciding whether to increase the cost limit on each advice and assistance case, he did not expect this to happen as a general rule. He said that it might happen where, for example, a firm was expending average costs per case on a regular basis which went significantly above the average and represented an undue expenditure when compared with needs in the area.
394. He said that this provision would allow the Board to investigate the circumstances and take a considered view if it believed that it represented a problem. He added that the availability of funds in a bid zone would not be a consideration in the vast majority of cases in which an application to extend an individual costs limit were made. Generally, he said, such requests would be dealt with exactly as they were under the previous arrangements, so that if the additional work could be shown to be justifiable and reasonable, extensions would be forthcoming.
Part 18. Particular franchise categories: (iii) Employment
395. There is only one issue that arises under this head. It was common ground at the meeting on 20th December 1999 that historically this has not been a fertile field for green form work because clients were often not financially eligible. The applicants, however, wish to provide a total service for their disabled clients. For this purpose Mr Duncan wishes to harness his skills as an employment lawyer to assist the clients who are coming to the firm for advice. The new Disability Discrimination Act provides the vehicle for the provision of such services in a very new field of English law. The firm takes the view, however, that the award of only two employment cases in a 15-month contract makes it completely impossible to provide information to the market about the existence of this service.
396. Mr Orchard brushed off their worries in his fourth statement by saying that the firm should not feel constrained from providing a service under the Disability Discrimination Act if eligible clients come forward. Ms Mackintosh responded by saying that Mr Duncan would be starting one of their two permitted cases when he sees the client at the end of January. The firm would therefore have only one remaining case. Although Mr Orchard had said that they should not be constrained from providing the service they seek to provide for eligible clients, this ignored the limitation that had been placed on their permitted case starts. The firm could not prudently spend funds on marketing their services on the foundation of an award of only two cases.
397. She added that it was unclear to the firm whether any further funds and cases would be allocated, especially as Mr South had said that the notional allocation to the zone (the whole of the London Borough of Southwark) had been reduced to its current level "to reflect the baseline of the only firm bidding". This, she said, was only one of a number of unknown factors which would either result in the firm being awarded further case starts, or in clients being turned away, and they simply did not know what method the Board would use when approaching such difficulties. The London RLSC had made no recommendation as to the need for employment law services. This caused the firm great uncertainty, because they would not know from one day to the next whether further clients would be able to use their services.
398. They had, of course, been told by Ms Patterson on 20th December that she anticipated a drop-out in London in this field because firms would not be able to meet the supervisor standards, and that there was therefore a good possibility of extra funds in this area. From the applicants' perspective, this did not necessarily mean that any spare funds would in fact be allocated to their Southwark-based firm.
Part 19. Particular franchise categories: (iv) Immigration
399. Although the applicants do not practise immigration law, it was clear from the evidence that uncertainties in this field were causing great concern to firms that did. Mr Orchard told us that many of the worries expressed by suppliers during the month of January arose in this category of law.
400. He said that the Board had awarded a total of 85,000 new matter starts in immigration to 473 solicitors' firms and 65 advice agencies. For the reasons we have already explained (suspected fraud and audit failures), 9,000 of these, all in London, have already become available for reallocation.
401. He told us in his fourth statement that the Board was considering whether these 9,000 starts should be ring-fenced for asylum cases and allocated to fully franchised immigration practitioners pro rata to their asylum baselines up to their maximum bids. It would make a final decision on this point very soon. If this happened, fully franchised immigration practitioners in London could receive significant increases in their contracts. He was understandably reluctant to increase new matter starts for holders of immigration contracts who had only passed a preliminary franchise audit, given the failure rate at pre-contract audit. He said that if new matter starts in immigration still remained available after this process was completed, the Board would invite firms without contracts on the Panel to bid. Alternatively, it would increase the number of new matter starts available to deal with the Government's dispersal policy.
402. He said that this sort of situation would not be uncommon in the first year of contracts. The Board stood ready to make the decisions that were needed. The opportunity for these might arise if more organisations lost their contracts as a result of audit failure, or as the Board becomes more certain about the amount of its diminishing liability to non-contracted firms.
403. He explained that the Board had initially held back 15,000 new matter starts in immigration in order to respond to the Home Office's policy on the dispersal of asylum seekers. Interim arrangements came into effect two months ago, and the formal policy will come into effect in two months' time. 7,500 of these were, in the event, allocated to provincial regional offices before the end of January 2000. The Board was holding the remaining 7,500 in reserve.
404. In his fifth statement Mr Orchard told us that immigration suppliers in most of the regions were unhappy with their contract awards on the grounds that they did not reflect their current workload. He was confident, however, that the reallocation of the 9,000 spare starts in London (which had now been made) and the allocation of the 7,500 new starts outside London would result in all fully franchised firms receiving additional new matter starts to take them above their baselines. The Board intended that every firms undertaking immigration work which had passed a preliminary audit only would be treated in the same way once it had become fully franchised.
405. He was concerned, in fact, about the ability of quality practitioners in immigration to absorb all the matter starts that would become available. He was therefore in discussion with the Immigration Law Practitioners' Association and others about ways in which the Board could do more to encourage quality practitioners in immigration work, given the number of asylum seekers and the Home Office's intention to increase the rate of disposal of appeals.
406. He invited us to bear in mind that Home Office statistics showed that the number of asylum seekers last year was 70,000, well below the total number of new matter starts (100,000, including the reserve) to be allocated for the coming year. Nevertheless, the Board realised that not all legitimate immigration matters are asylum cases. It would also be watching carefully the rate at which the immigration appellate authorities were dealing with cases, given the Government's stated intention of reducing the backlog of appeals.
407. Mr Orchard also told us in his fifth statement that if one measured what had been achieved in the contracts against the position of the public if the green form scheme were to be reintroduced alongside the contracting scheme, there was one clear example where the benefits to the public and their ability to get better access to justice could be demonstrated. In immigration cases, contracted firms can now represent clients before adjudicators and the Appeal Tribunal whereas a non-contracted firm would be likely to do what, sadly, so many of them had done up until now, which was to cease acting just before an appeal hearing and claim for the work done up to that point. He said that it would be fortunate if clients then found their way to a contracted firm, and even if they did, the Board would end up paying twice for the same work. This would put asylum-seekers, in particular, at a real disadvantage.
408. Ms Mackintosh's fourth and fifth affidavits, and some of the letters from immigration practitioners we have read, reflected many of the worries which Mr Orchard described. She also identified a concern by some practitioners that they had not received any controlled work starts, although they were licensed to undertake civil legal aid work (mainly in the field of judicial review). Although Mr Orchard said that some firms did not claim for the preparatory work on cases, she said that this was not the case with immigration work, and that it was irrational for firms to be able to carry out unlimited expensive judicial review cases when they could not undertake any preparatory work for clients, including representation before an immigration appeal authority, before a case reached judicial review stage. We simply did not have the evidence on which to express any views on this topic. We were told about one firm which had been treated in this way. Mr Orchard said that it was because the firm had not submitted a valid bid for a controlled contract on the Section A bid panel. Ms Mackintosh retorted that it had not been invited to bid, but this was hardly surprising in the circumstances, since it had been moved to the Section B panel, and had not been invited to bid in that capacity.
409. Ms Mackintosh added that she had been told by one of the executive members of the Immigration Law Practitioners' Association that at a recent meeting with the Board practitioners had expressed their extreme disquiet at the contract awards. This is, of course, consistent with Mr Orchard's evidence. She described the situation in these terms:
" A number of contracted firms would be forced to close down. Others were making redundancies, having been told by the Board to expect that they would receive higher awards and should recruit more staff to cope with the influx of clients from non-franchised firms than actually materialised in their contract awards. One branch of the Refugee Legal Centre was making redundancies. There was complete confusion as to the scope of the controlled work, and concerns as to their ability to continue to advise clients in the light of the Home Office dispersal policy, given the new limits on travelling to clients. The Board's representatives were unable to provide adequate guarantees and answers to these matters."
410. Mr Orchard has now, of course, made the Board's response to a number of these concerns quite clear in his evidence to the court.
411. Ms Mackintosh welcomed the extension of the scope of publicly funded legal representation before Immigration Appeal Tribunals and Adjudicators. She said, however, that the suggestion that this could only have been achieved through the new contracting regime was misplaced. She asserted that the scope of legal advice and assistance/representation could always have been extended under the "old" regime, much in the same way as ABWOR for other tribunals (including MHRTs) was included in the legal aid scheme.
412. She showed us a letter from a firm of immigration practitioners which expressed the same worries as her firm had expressed in their own specialist field about the way it was unable to plan for expansion. This firm was heartened by the Board's indication that there might be extra matter starts in immigration. It said, however, that this did not address the problem, which was the schedule payment limit. It said:
"We are absolutely inundated with clients. We have had to turn clients away. Ideally, we would have preferred to expand at this stage as per the Board's positive encouragement to do so. It is difficult for us to continue to take on new clients as we do not know what the Board's position will be in 6 months' time. Should we spread out all of our case starts thus ensuring full time employment for two members of staff or should we exhaust all of our new case starts now? If we do, will we have to make the whole department redundant if the Board does not increase the number of new case starts? How can we comply with the franchise criteria in terms of business planning on the basis of the above? ...We have been unable to take on....clients and unable to refer them elsewhere."
413. It appears to us that this evidence illustrates the enormity of the task that confronted the Board in the immigration field. Ms Mackintosh's suggestion that Parliament could simply have voted more funds to provide ABWOR before the immigration appellate authorities without addressing the deep-seated defects in the green form scheme is, in our judgment, completely unrealistic. She also skates over the formidable problems that now exist in a field of law which is just as specialised as her own, in which many of the clients are just as vulnerable, in a different way, as her own, and in which many practitioners are as unsuitable as the recipients of public money for this specialist work as many of those who are permitted under the Board's policies to give advice on community care law under tolerances.
Part 20. The Law Society and the Legal Aid Practitioners' Group
414. We have read the two affidavits sworn by the President of the Law Society. We do not consider that it is necessary to summarise their effect in any great detail, except in so far as he covered ground not otherwise covered in this judgment. He told us that the Society believed that the issues raised by the applicants were applicable to other firms in a similar position. It was raising its concerns on behalf of those firms. The Society had, of course, been heavily engaged in the consultation process, and many of the points Mr Sayer made were points which had been considered and rejected (or only accepted in part) when the Board was designing the scheme which is now under challenge. Apart from attacking the whole basis of the new scheme, the Society felt it had been introduced in too much of a rush. The frequent amendments made by the Board to its massive documentation had made the process of change too confusing, given the unrealistic timetable. He told us that the Society's concerns about what he described as the iniquities in the system only crystallised at the beginning of December 1999 when offers of contracts were received by individual firms.
415. His evidence, in part, consisted of summaries of the Society's earlier responses during the long consultation process, some of which had resulted in a number of significant changes in the Board's original proposals. For instance, the Society had been critical of the Board's suggestion in April 1998 that only 2,000 - 3,000 contracts would be let in the family category, and that there would be only a further 100-200 contracts awarded to non-family practices. In the event, the number of contracts was significantly higher. The Society was also critical of the Board's belief that current expenditure mainly reflected the "genuine need of a range of legal services" since it believed that there was a considerable amount of unmet need in the community. On 2nd December 1999 he had written to the Lord Chancellor to articulate the Society's deep concerns about the speed at which the changes were being introduced. He also reiterated the Society's concerns that the new system would seriously reduce access to legal services for the most vulnerable proportion of society, and that it would be inflexible and bureaucratic, and would therefore fail to meet people's needs.
416. He claimed that it was a result of pressure from the Society that the Board had introduced into its contract documentation rules about the approach that would be adopted when new firms sought contracts in the second and subsequent annual rounds of awards. This new guidance was designed to cover not only new firms, but also firms whose composition changed during the term of a contract, and firms which moved into a different bid zone. He repeated the concern expressed to us by the applicants in this regard. He said that a firm cannot apply for a franchise without first having office premises and a legal aid account number, but it would need the guarantee of a contract before it could set up an office. Because new firms are not guaranteed that they will be offered a contract even if they have a franchise, they will be prevented from setting up. This will result, in the Society's view, in a freeze of legal aid outlets.
417. In paragraphs 31 to 36 of his first affidavit Mr Sayer described how the Law Society had been inundated with telephone calls from solicitors, a number of whom had put their concerns in writing. By the time the evidence closed, we had been shown letters from nearly 40 such firms (or other worried agencies) and it was possible to derive a good idea about the central matters of concern from those letters. They were largely from firms practising in the social welfare field (including immigration), and not from the family firms to whom the vast majority of the contract awards were made.
418. In his second affidavit, Mr Sayer expressed the Society's belief that the documentation was too heavily weighted in the Board's favour, with the Board having excessive discretionary powers to amend contracts at almost every point. In particular, the Society was concerned about one point so strongly stressed by Ms Mackintosh. The Board's powers to amend the number of new matter starts, schedule payment limits, standard monthly payments, and tolerances, at any point during the life of a contract provided very little certainty for practitioners. Certainty was needed, in particular, for firms to plan for the future of their practices. If, as the Board reasonably requires, firms are expected to adopt a business approach to participation in the Community Legal Service and the Criminal Defence Service, the Law Society considered that they were in turn entitled to expect that reasonable degree of certainty that would enable any small business to plan its business strategy and future. It was the Society's view that banks would simply not deal with firms whose future was uncertain.
419. Mr Sayer told us that the speed of consultation, the increasingly tight timetables, the timing of notification to the profession and the sheer weight of information, and the sometimes inadequate explanations had resulted in widespread confusion and lack of clarity about how the new system would operate.
420. In paragraph 21 of his second affidavit Mr Sayer told us that an issue in London about the number of firms which carried out national work had been raised at a meeting between the London RLSC on the one hand and solicitors' firms and the nfp sector on the other, and the RLSC had accepted that it had not had time to consider this issue properly. We do not believe that the Board disputes this evidence.
421. There was a sophisticated dispute between the Law Society and the Board about the appropriateness of the method the Board had adopted for assessing need in the social welfare field. This controversy did not form any material part of the applicants' contentions in these proceedings, and apart from noting its existence, it is not necessary for us to take it any further.
422. Mr Richard Miller, a practising solicitor who chaired the Legal Aid Practitioners' Group last year, gave evidence on behalf of the group which supported many of Ms Mackintosh's concerns. He showed us a number of articles he had written as the Board's proposals developed, and the group was fully involved in the consultation process. In early 1999 it had made the point, among others, that although LAFQAS was immensely useful in terms of both firm and file management, it was not able to measure the quality of the legal advice given by a firm. The group, too, was sharply critical of the Board's heavy reliance on tolerances.
423. In the social welfare fields of law, the group was very worried about the rigidity of the Board's proposed arrangements. It pointed out that in most of these fields there was insufficient private work available for firms to achieve the necessary levels and breadth of experience. It feared that if franchises were awarded on the limited work which would be available to organisations which had not received an award first time round, the franchise standard would become seriously devalued.
424. The group was also concerned about what they saw as an over-reliance by the Board on past records. It said that due to changes in personnel within firms, alterations in the local and national economy and, perhaps more importantly, changes brought about by all the upheavals in civil procedure, family law and funding options, the past was unlikely to be a good guide to the future. Even if patterns had emerged in previous years, in this time of revolution this could not be anticipated to continue.
425. Mr Miller told us that one question kept cropping up from an early stage. How does a new firm set up once the contracted regime is in place? He showed us an article in Legal Aid News last spring in which a practitioner had highlighted the "chicken and egg" situation created by the Board's proposals:
"A new firm could only carry out work if it had a contract. It could only get a contract if it had a history of carrying out the work. That is fine at the outset of the scheme, but as soon as the scheme is up and running its is impossible."
426. He told us that although the Minister of State and the Board had assured the group that this was a problem of which they were well aware, the group could see no evidence in the amended contract documentation that this problem had been addressed.
427. Mr Miller supported the evidence given by the applicants and the Law Society to the effect that the Board had come up with figures based on incomplete, out of date or unreliable data, unwarranted assumptions, and unreasonable restrictions on the numbers of matter starts which the Board was prepared to pay for. He added that the timetable within which the scheme had been introduced was one that he would characterise as ridiculous. In the final paragraph of his affidavit he was very sharply critical of the new regime. He told us how the group was unable to see how the flaws they had highlighted could be remedied without a rethink of the whole basis of the regime and the assumptions on which it was based.
428. It is not necessary for us to say much about the rather acerbic way in which Mr Orchard responded to Mr Miller's affidavit, since many of the points he made in response are set out elsewhere in this judgment. He noted, however, that in paragraph 15 of his affidavit Mr Miller endorsed the Board's position that "Given the unique nature of this initial switch to a contracted scheme, there is an obvious need for rules on this occasion which will not be relevant in future contracting rounds".
429. Mr Orchard reminded us that in his second statement he had himself drawn attention to the degree of uncertainty that was inherent in such a major change. He had said:
"At the heart of this change and the concern about it is the move from the green form scheme being supplier-led to a scheme where work is, effectively, commissioned by the Board to meet targeted and prioritised need within a controlled budget. That brings with it a need for a change of thinking within the profession and all of us involved in the system.
This can be illustrated by the terms of the debate concerning the emergence of new firms. In the future new firms depending on advice and assistance income from public funds will need to work far more closely with the Board than hitherto. We expect emerging practices to discuss proposals with their Regional Office in advance in order to see what sort of work would be considered a priority for funding and whether funds are available. In principle decisions can be made which will lead to the award of a contract on setting up an office and satisfying the Board on a preliminary audit. Provision will not be "frozen" as alleged by Mr. Sayer in paragraph 26 of his affidavit, but it will be planned."
430. Mr Orchard said that the key to success would be the Board's ability to manage a fast changing and developing environment. He gave as an example the way the Board had responded to the fact that 9,000 allocated new matter starts in the immigration category in London had suddenly become available for reallocation in January. It had decided to reallocate them all to franchised firms in London before the end of the month.
Part 21. The complaints by other practitioners
431. Ms Mackintosh and the President of the Law Society exhibited to their affidavits 36 letters from practitioners in the field who complained about the effect of the new controlled work contract system on their practices and their clients. We were originally supplied with this material in a raw form, some complaints running over a number of pages. The Board was initially reluctant to respond to the detail of these individual complaints on the grounds that it would be responding to them individually during the review process. We succeeded in persuading the parties, however, to reduce this material to a more manageable form. As a result of this request, the applicants provided us with a very valuable table showing the name of the firm, when identified, the nature of the complaint(s) in condensed form, and the page or pages in the 2,300 pages of documents where we could find it. In response, the Board described the policies or other considerations it would apply when dealing with complaints or applications from contracted organisations of the type illustrated in the applicants' schedule.
432. We are very grateful to the parties for the immense trouble they took, at very short notice, to produce these schedules. They revealed the following picture.
433. Eleven of these firms had expanded since their baseline figures were calculated. The Board's response was that they should approach it if more clients come to them in the early months of the scheme than they have available case starts; that they are likely to benefit at the second quarter review; and that if the extra case starts come, their schedule payment limit will be adjusted upwards. (Emphasis added). This was an unequivocal statement, from which the applicants and other firms who say that it is no use the Board increasing matter starts unless they receive an adjustment to their schedule payment limits should take considerable comfort. (See the Board's responses 2, 4, 6 etc. The Board did not commit itself to increasing schdeule payment limits before the review took place unless it was satisfied that a firm was in financial difficulty, for which see para 279 above).
434. Ten had contracts in the immigration category, and complained that the matter starts they had been awarded were insufficient to enable them to provide a service to all their clients. The Board responded by referring to its decisions, taken before the end of January 2000, to reallocate the newly available 9,000 London matter starts to franchised immigration organisations in the London region and to release 7,500 new immigration matter starts from its reserve to regional directors to help non-London immigration organisations in the relevant areas to prepare for the Home Office's dispersal policy for asylum-seekers which will take full effect in April 2000.
435. Four were new firms, two had expansion plans, and one said that its baseline figure was unrepresentative because of a staff reduction at the relevant time. One was a mental health lawyer of vast experience who complained that the Board's new franchise policies prevented him from ever making his services available at MHRTs to legally aided clients, and another, a trust looking after the welfare of prisoners of war, complained about the need to satisfy LAFQAS requirements before it could obtain a franchise.
436. Two of the complaints were made by London law centres. Although there was plenty of material in those letters (at pages 1727-1732, 1737-1738, 1960-1961, and [2334-2335] (in "NM5")) that should be of great interest to those advising the Lord Chancellor, this litigation is not concerned, except peripherally, with the nfp sector. Indeed, one of the applicants' initial complaints, not pursued before us, was that the nfp sector should not have been awarded a minimum of 10% of the Board's total annual budget for the first year of controlled contracting. We have noted the tribute paid by one of these law centres to the applicants' "significant and impressive experience in the field of community care" (p 1960) and the very serious concerns expressed by the other about the total inadequacy of specialist social welfare provision in the whole of the south-east London borough of Bexley. Bexley is not very far from Southwark, for whom we have set out the Board's miniscule figures for specialist provision in mental health and community care work earlier in this judgment.
437. The Board made a number of responses to the solicitors' complaints that are worth recording. It observed that there was a visible trend in family work: work in this field was reducing, so that any increases in the starts awarded to one family firm would be likely to be matched by a complementary reduction in a start taken up by another. It considered that its "in-year" powers to vary an expanding firm's matter starts upwards provided a preferable method of catering for expansion rather than responding immediately with generous matter starts (not justified by actual starts) if a firm told it that it intended to expand. It said on four occasions that if a firm was in financial difficulties pending the second quarter review, it should not turn clients away, but should approach the Board with a description of its problems. It said that some firms would be helped with their cash-flow in the early months because the payments they received for claims submitted before the end of December 1999 would be paid quite separately from the monthly (or other) payments under the controlled contract. Finally, they were uncompromising in their insistence that LAFQAS represented the way forward for any firm which wished to receive public funds for legal advice, assistance and representation. If a firm could not comply with that standard on an audit, it was right that it should not continue to receive public funds (however talented a one-man firm who wished to act on a part-time basis might be).
438. It will be seen that practitioners' immediate worries, as Mr Orchard acknowledged, fell within a comparatively narrow compass, considering the scale of the reforms undertaken by the Board. The details shown in some of the complainants' letters show, however, that they were very real worries in the minds of dedicated solicitors trying to maintain a quality service to clients with comparatively little means. It may be useful to bring these to life with two examples.
Complaint: Hecht and Co is a high street practice in Shepherd's Bush, with clients coming in off the street to ask for assistance in a variety of matters. It says that the assistance it can offer is now extremely limited. The number of case starts awarded to them is too low, and it has no idea how the award was worked out. It considers it would be financially better off to opt out of the advice and assistance scheme altogether.
Response: This firm reported a baseline of 44 cases in the family category but said that it expected more staff to be working on family matters in future than had done so during the six month period for the calculation of baselines. It was awarded a contract for 105 matter starts with a tolerance of 10 matter starts in other categories.
The firm says that its family award is too low and that the Board's Regional Director should have exercised his discretion to increase it given the firm's comments about its intention to use more staff for family matters.
The firm's other principal complaint is that the Board's Regional Director should have exercised his discretion to award more than the minimum 10% number of tolerance cases, in order to enable it to undertake the "variety of matters" described in the Applicants' summary. This, of course, directly contradicts one of the main principles of which the Applicants have sought to persuade the court, that tolerances for family firms either should not exist or should be kept to a minimum.
In general, discretion was not exercised to meet comments from firms about future plans for recruitment or matters which it was alleged meant that the firm's baseline was unrepresentatively low. This is because it would have been impossible for us to reach consistent and objective decisions about firms' circumstances in the light of such comments; and in attempting to do so, we would have been likely to have prejudiced the position of other bidders. In year powers to vary are the preferred mechanism to deal with expansion as they will be based on objective evidence of actual starts and claims. This is particularly so of family work where the trend in the number of cases is downwards. It is likely that increases in work for one firm will be compensated by decreases in others.
Applicants' Rejoinder: The Board is incorrect in stating that our position is that firms should not be able to carry out work on a holistic basis. The objection is simply to the fact of the decision to allocate tolerances (and funds) to family firms (with high need assumed) on the basis of assumed quality whilst at the same time, niche firms have not been afforded equal treatment. A letter from Hecht and Co in response to the Board's comments is [attached]. I note that the Board did not take into account changes in a firm since the baseline was monitored. This has resulted in the firm being reluctant to take on any new advice and assistance cases without knowing whether it will actually be paid for the work. The firm states "The difficulty is that there is no guarantee whatsoever that contracts will be increased to meet the demand of new matter starts....it seems that there was no real `bid' taken into account at all......Whereas this clearly does not serve my business interests or reconcile with my budget, I am concerned where the clients will go. Why were we not given more warning that we would not only have no new clients in immigration but have to terminate our retainer in relation to the old ones?" [The firm complained in its letter that the consequences of not making a bid in the immigration and housing categories were not adequately explained when it made its Section A franchise application in March 1999. It was now going to lose its existing client base in an borough with few firms which undertake immigration work.]
(2) Complaint: Darwen Law Chambers is a specialist mental health firm in Darwen, Lancashire, It says its award fails to take account of the expansion in its work. The number of cases allowed it was significantly less than actual figures for the previous year (let alone any likely increase). Its schedule payment figures are wholly inadequate. It has used up its first month's contract allocation halfway through the first month. It will be laying off staff from 1st February 2000.
Response: The firm says in its letter that its gross annual billing
is £265,000, and that 80% of their business is accounted for by controlled
work. The firm's controlled work billing, therefore, is equal to about
£212,000 per annum, or £17,600 per month. We can confirm that this
is the firm's current billing rate.
The firm's monthly contract payment commencing in January is £13,886. The
first contract payment was made in mid-January, and further payments will be
made at the beginning of each subsequent month. Payment for claims submitted
by the end of December 1999 will be made separately from payments under the
contract. This will result in payments during January and February which could
significantly exceed the amount the firm would normally get.
The effect of this "extra" cash payment in January extends beyond Darwen Law
Chambers; it will apply to the majority of contracted firms and will help them
with any cash flow problems they may have in the early months of the
contract.
Assuming that the firm submitted bills in December at its normal number and
value, they will receive in January or early February a sum roughly equivalent
to their current monthly billing rate (about £17,600). On this
assumption, over the first three months of the contract, the firm will receive
3 contract payments of £13,886 and a further estimated £17,600. The
total is more than £59,000, or £19,700 per month. This is more than
£2,000 per month more than the firm's current rate of claims.
The firm has clearly expanded, and this will need to be considered in the
review if its contract payments fall short of its claims. It is unlikely to
fall into financial difficulty in the first three months of its contract, and
this will give us time to discuss any necessary increases.
Darwen Law Chambers represents the high water mark of the Applicants' claim
concerning the financial crisis allegedly induced by the contracts. It is a
firm fully dependent on legal aid, mostly doing controlled work and operating
without an overdraft facility. Yet on inspection of its figures, there is
unlikely to be financial difficulty in the first three months. After that, if
claim rates exceed the standard monthly payments, this can be met by an
increase in the firm's Schedule Payment Limit.
Applicants' Rejoinder: The Board's view is that the firm's drastic
financial difficulties will be alleviated by the extra funds injected in
January and February 2000 to take account of "old" matters claimed. In fact,
as can be seen from the letter from Darwen Law Chambers, their billing is so
efficient and prompt that this will not, in reality, affect the severity of the
firm's financial position post 1 January 2000. They cannot fund disbursements
and will close within three months. They state "We have already had a number
of crisis staff meetings - this is a team effort here to resolve the issue. We
have already imposed short time working from 1 February 2000 for all staff in
an effort to keep the firm alive. ...the team here is dedicated and committed
but we appear to have been penalised....The rules therefore adversely affect
specialist legal aid practices...."
In its letter the firm said that in January 2000 it received fees of
£3,823 (net of VAT) plus £8,371 (net of disbursements of £4,050
on medical fees). The total of £12,194 compared badly with £17,000
per month in 1999. In February it would no longer receive any fees for 1999
claims because its billing system was so efficient, and it was likely to
receive a total of £8,500 net, depending on the level of disbursements.
On present form, their fees for the first three months would be £25,000
plus £4,000 for 1999 billings. [This] equals £29,500. "At that rate
we close! ... If only...we could get payment on account of disbursements as
before then we could survive. Without a resolution of the disbursements
problem we effectively go under."
439. In our judgment, the general effect of all this evidence is that, for most
of the market, the transition to the new controlled work contracts has gone
smoothly, no doubt because most firms will have received plenty of family law
matter starts, plus their extra tolerances, will receive a guaranteed monthly
cash flow which represents actual baseline figures that are a good
representation of their continuing level of work in a stable (or contracting)
market, are not heavily dependent on the income from controlled work as a
proportion of their total practice, and have nothing really to complain about,
at any rate until the second quarter review comes along.
440. On the other hand, there are very serious difficulties in a few specialist
corners of the market, which the Board is doing its best, within the
discretions available to it, to resolve through a number of the different
mechanisms we have described in this section. The bulk of the worries of
reputable immigration practitioners must have been alleviated by the decisive
steps the Board took, or was about to take, at the end of January. Very real
hardship is likely to continue to be suffered, unless the Board acts equally
decisively, by a few small specialist contracting firms in other fields which
are new or which have recently grown in an expanding market. For them, their
monthly payments (where they exist at all: new Section B firms like the
applicants do not qualify until April 2000) are completely unrepresentative of
the cost of their current work in progress.
441. Darwen Law Chambers, for instance, told the Board that in its last
financial year they had been phenomenally successful at service delivery,
showing a 100% increase against budget in 12 months which had resulted in a
100% increase in full time staff. They were finding that the reward for that
success was that they were having to reduce staff suddenly because the contract
they were offered was about 50% of their actual performance. They said that
they were one of the most efficient and effective service providers in the
field in the Manchester area, and they were totally committed to legal aid
contracting and public service law. It appears to us that the Board needs to
address the issues raised by that firm in its letters as a matter of real
urgency.
442. Many of the severe transitional difficulties that have now come to light
must have resulted from the fact that the Board's timetable was so seriously
knocked off course last autumn, and it decided (or was not permitted: we do not
know) not to change the fixed date for the start of the new scheme. It ill
befits the representative body of the solicitors' profession to complain when
the Board's plans were so badly affected by the fact that so many of the
baseline figures submitted by firms of solicitors to this statutory body were
inaccurate, incorrect, or possibly, in some cases, dishonest.
443. The Board was in the event unable to respond with the speed with which it
would have wished to the worries raised by the small numbers of new or
expanding specialist firms that were badly affected by the unrepresentative
number of matter starts and schedule payment limits of which they complained.
We were told that this slowness of response was caused, in no small measure, by
the existence of these court proceedings. They have demanded the full-time
attention of a number of the Board's most experienced headquarters personnel
over a number of days. As a consequence, the timetable the Board had hoped to
achieve for completing the initial contract award reviews was set back. These,
however, are transitional problems (unless the Board is unable to respond with
the swiftness the crisis demands to dedicated specialist firms which are in a
real plight, like the firm in Darwen). Our principal task is to consider the
robustness of the scheme as a whole, when considered against the standards
required by public law. We turn therefore to consider the applicants' grounds
for challenging the lawfulness of the scheme.
Part 22. The applicants' submissions: (i) The common law right of access
to the courts
444. The applicants seek a declaration that the exclusive contracting regime
which came into effect on the 1st January 2000 is, in its current form,
unlawful. They also ask for an order of prohibition to restrain the Board from
implementing the regime in its current form. Their first ground of challenge
is that the regime is unlawful both because it infringes a fundamental common
law right of access to the courts and because it is contrary to Section 32(1)
of the 1988 Act.
445. In so far as the applicants' submissions on the illegality of the regime
were founded on the infringement of fundamental common law rights, they have
been refined as the case has progressed. These submissions arrived at their
most compelling formulation in Mr Gordon's reply, when counsel and the
applicants had had the advantage of having heard arguments presented by counsel
for the respondents.
446. The submission is that every person in England and Wales is accorded by
the common law a fundamental right of access to the courts, and that no
impediment to that right will be lawful unless expressly and necessarily
authorised by statute. The right of access to the courts will be assured by
the state, with financial assistance where necessary; see R v The Lord
Chancellor ex p Witham [1998] QB 575. In that case Article 3 of the
Supreme Court Fees (Amendment) Order 1996 had purported to repeal provisions in
the Supreme Court Fees Order 1980 which relieved litigants in person who were
in receipt of income support of the obligation to pay fees for issuing legal
process in the Supreme Court. This provision was held to be ultra vires
Section 130 of the Supreme Court Act, 1981 and therefore unlawful. The
decision means that such fees are waived by the state for those who cannot pay
them, so that there is no impediment to their access to the courts.
447. One facet of the right of access to the courts is the ability to obtain
advice and assistance, see R v Secretary of State for the Home Department ex
p Anderson [1984] 1 QB 778. That was a case in which the simultaneous
ventilation rule contained in Prison Standing Orders issued under the Prison
Rules, 1964 imposed a restriction on the ability of a prisoner to consult his
legal adviser on potential legal proceedings concerning his treatment in prison
until he had lodged a complaint with the prison authorities. The Divisional
Court held that the rule was ultra vires because access to the legal adviser to
receive advice and guidance in connection with possible future legal
proceedings in the courts was an inseparable part of the prisoner's right to
unimpeded access to the courts. No issue arose in that case about the choice
of legal adviser.
448. The importance of the right to advice and assistance from a legal
representative is emphasised by the principles of "equality of arms" and
"equality of treatment". Once the relationship of client and legal
representative is established, then both the common law (in cases such as
Self v Self [1954] P 480) and Parliament (in Section 31 of the 1988
Legal Aid Act) seek to place the legally aided litigant on the same footing as
an unassisted litigant with reasonable means with which to pursue his remedies
and defences. Consequently in Self v Self it was not lawful for a
county court registrar to overrule an assisted party's choice of counsel where
counsel had been selected by the assisted party from the appropriate panel. At
common law a litigant who has reasonable means has the ability to choose his
legal representative. This principle is stated in Halsbury's Laws of England
4th Edition Vol. 44 para 99 in this way:
"As a general rule, a person has the right to retain the solicitor of his
choice, provided the solicitor is willing to act and is not precluded by the
law or by professional rules from so doing."
449. Equality of arms and equality of treatment requires that a legally
assisted party should likewise have the ability to choose his/her legal
representative. If that is denied the legally assisted person, the result will
be that the legally assisted person may well be forced to act through lawyers
in whom he/she has no confidence and, for that reason, be at a grave
disadvantage.
450. The second limb of the applicant's case on the illegality of the regime is
based on Section 32 of the 1988 Act. Section 32(1) of the Act, as amended by
the Courts and Legal Services Act 1990, reads:
"Subject to the provisions of this section a person entitled to receive advice
or assistance or representation may select the legal representative to advise,
assist or act for him from among the legal representatives willing to provide
advice, assistance or representation under this Act."
451. Mr Gordon pointed out that Section 32 is contained in Part VII of the 1988
Act, that is to say it is one of those provisions which are general and
supplementary. It must, therefore, apply to all the preceding parts of the
Act, including Part II.
452. Mr Gordon relies in particular upon two of the sub-sections of Section 32.
Section 32(2) provides:
"Where the Board limits a grant of representation under Part IV to
representation in pursuance of a contract made by the Board, it may, as it
thinks fit, assign to the legally assisted person one or more legal
representatives or direct that he may only select a legal representative from
among those with whom such a contract subsists."
453. Mr Gordon submits that this sub-section makes clear the scope of the right
to select one's legal representative given by Section 32(1). He says that this
right of selection cannot be limited to persons with whom the Board has a
contract unless there is express provision to that end, as there is in relation
to representation granted under Part IV of the Act. There is no such
restriction laid down by the Act in respect of choice of legal representative
to those who are contracted to the Board under Part II, in respect of advice,
assistance and representation.
454. Finally, Mr Gordon drew our attention to Section 32(7) which enables
regulations to be made limiting the right conferred on a legally assisted
person by Section 32(1) to legal representatives who are for the time being
members of a prescribed panel. Mr Gordon submits that that is the only way in
which Parliament has allowed the right of assisted persons to choose their
legal representatives to be limited. Moreover this sub-section makes clear
Parliament's intention in Section 32(1) to confer a right to choose on legally
assisted persons.
455. He accepts that Section 32 will be repealed on the 1st April 2000 by the
1999 Act which will not contain a similar provision. Nevertheless Section 32
is in force at the present time and, he submits, the regime is in conflict with
the section.
456. Compelling though the submissions made on behalf of the applicants were,
we cannot accept them, based, as we believe them to be, on fallacies both as to
the nature and extent of the claimed common law rights and the nature and
extent of the legal aid scheme. We accept that there is a common law right of
access to the courts which is of fundamental importance in our legal system.
We do not accept that that right is absolute or unlimited. Access to the
courts can be and is limited by statute, for example by Section 42 of the
Supreme Court Act 1981, which requires a vexatious litigant to obtain the
permission of a high court judge to begin proceedings. Thus the act of the
prison governor in Raymond v Honey [1983] AC 1 in stopping documents
being sent to the Crown Office at the Royal Courts of Justice by a prisoner was
a contempt of court because the court found nothing in the Prison Act 1952 that
conferred powers to make regulations which would deny or impede a prisoner's
right of access to the courts. Access to the courts, in the sense of being
present at a hearing to present his case, in respect of a person serving a
prison sentence can be limited by requiring that person to apply to the Home
Office to be brought before the court. The Home Office may in an appropriate
case refuse such an application, or grant it subject to the prisoner
contributing towards the cost of his being brought, if necessary under guard,
before the court to present his case, see R v Secretary of State for the
Home Department, ex parte Wynne [1993] 1 WLR 115.
457. The position in the law of England and Wales is in line with the
jurisprudence of the European Court of Human Rights, as is shown by the
judgment of that court in Ashingdane v United Kingdom [1985] 7 EHRR 528
where the court said at p 546, para 57:
"Certainly, the right of access to the courts is not absolute but may be
subject to limitations; these are permitted by implication since the right of
access `by its very nature calls for regulation by the state, regulation which
may vary in time and place according to the needs and resources of the
community and of individuals'. In laying down such regulations, the
contracting states enjoy a certain margin of appreciation. Whilst the final
decision as to observance of the convention's requirements rests with the
court, it is no part of the court's function to substitute for the assessment
of the national authorities any other assessment of what might be the best
policy in this field.
Nonetheless, the limitations applied must not restrict or reduce the access
left to the individual in such a way or to such an extent that the very essence
of the right is impaired. Furthermore, a limitation will not be compatible
with Article 6(1) if it does not pursue a legitimate aim and if there is not a
reasonable relationship of proportionality between the means employed and the
aims sought to be achieved."
458. As Laws J observed in R v Lord Chancellor ex p Witham at p 585B:
"As regards the ECHR jurisprudence I will say only that as it seems to me the
common law provides no lesser protection of the right of access to the Queen's
courts than might be vindicated in Strasbourg."
459. Equally, the right to choose a legal representative at common law is not
and never has been absolute. It has always been limited in practice, amongst
other things, by the client's ability to pay. The lawyer has never been
obliged to give his/her services free. The nature of the right to choose a
legal representative has been considered by Neuberger J in a recent case
Maltez v Lewis [unreported: 27th April 1999]. This was an application
by a plaintiff, who was to be represented by junior counsel of 7 years' call
that the defendants be barred from instructing leading counsel. It would seem
that both sides were legally aided and that the Legal Aid Board was considering
whether to continue to assist the parties. Neuberger J declined to make the
order sought on the ground that he did not have jurisdiction to make such an
order. Alternatively he decided that if there was jurisdiction, then in his
discretion he should refuse the application. In the course of his judgment the
judge said:
"However, it has always been a fundamental right of any citizen to be
represented by advocate and/or solicitors of his or her choice. That right is
not of course absolute; circumstances may cut it down. Thus a person's chosen
lawyer may be ill or engaged elsewhere or conflicted out. A legally aided
party may find that the Legal Aid Board is not prepared to fund his or her
particular selection of legal representative. Further it is clear that no
party has the right to expect a hearing date to be fixed on the basis of the
availability of his or her choice of advocate or solicitor. Subject to that
type of consideration, it seems to me that there is a fundamental right to a
choice of legal representative; indeed, I would go so far as to say it is an
important feature of any free society."
460. We would agree that there is a right with which the courts will not
interfere for a person to choose his/her legal representative if that person
can afford to pay the legal representative he/she wishes to retain. There is
no fundamental right to chose a legal representative whom the potential client
cannot afford to pay, because there is no duty on the lawyer to give his/her
services free of charge or at a fee at a level the potential client can afford.
Still less is there any general duty on the tax payer to supplement the means
of the potential client so that the potential client is able to meet the fees
of the legal representative that he/she would wish to choose. As Neuberger J
said:
"That right is not of course absolute. Circumstances may cut it down."
461. The judge was, in our view, correct to say that one of the circumstances
that may limit the choice of the potential client is the fact that he/she is
legally aided.
462. Whether the right is a fundamental right in the sense that the courts have
held the right of access to the courts to be a fundamental right is doubtful.
Neuberger J held that the court did not have jurisdiction to grant the
plaintiff's application. We agree. That conclusion was sufficient to dispose
of the matter that was before the judge on that occasion. If the right to
choose a legal representative is a fundamental right, on whom is the
correlative duty? No doubt a lawyer is under a duty to represent a person who
wishes to retain him/her and who can pay for his/her services, if there is no
proper reason for refusing to act for that person, such as a conflict of
interest or unavailability. If the person cannot afford the fees of the lawyer
he/she would choose, there is no duty on the lawyer to act, nor is there any
duty on the state or the taxpayer to engage that lawyer for that person outside
the legal aid legislation.
463. In R v Lord Chancellor ex p Witham Laws J adopted at p 585B the
principles stated by the authors of de Smith, Woolf and Jowell, Judicial
Review of Administrative Action, (5th Edition) at para 5-017:
"It is a common law presumption of legislative intent that access to the
Queen's courts in respect of justiciable issues is not to be denied save by
clear words in a statute."
464. Laws J then went on at p 586B to find that Section 130 of the Supreme
Court Act 1981 contained nothing
"to alert the reader to any possibility that fees might be imposed in
circumstances such as to deny absolutely the citizen's right of access to the
Queen's courts."
465. He concluded at p 586D-E:
"[Counsel for the Lord Chancellor] submitted that it was for the Lord
Chancellor's discretion to decide what litigation should be supported by tax
payers' money and what should not. As regards the expenses of legal
representation, I am sure that is right. Payment out of legal aid of lawyer's
fees to conduct litigation is a subsidy by the state which is in general well
within the power of the executive, subject to the relevant main legislation, to
regulate. But the impost of court fees, is, to my mind, subject to wholly
different considerations. They are the cost of going to the court at all,
lawyers or no lawyers. They are not at the choice of the litigant, who may by
contrast choose how much to spend on his lawyers."
466. Prior to 1949 and the coming into force of the Legal Aid and Advice Act,
1949, there was no state assistance for those with legal problems. The
earliest statute, that of 1495, which admitted such persons as were poor to sue
"in forma pauperis", provided that poor persons were not to be charged fees for
the issue of writs. Lawyers were to be assigned by the Chancellor to prepare
writs for poor persons without reward and, at the return of the writs, justices
were to assign to the poor persons counsel who should act without reward.
After that Act was repealed in 1883, the representation of poor persons was by
solicitor or counsel to whom the poor person was referred and who were prepared
to act for the poor person without fee. The poor person did not have the right
to choose solicitor or counsel, although there were lists of those lawyers
willing to act for poor persons. The solicitor or counsel was either one to
whom the poor person was referred by one of the "prescribed officers" who
constituted "a poor persons' department" or, if the matter reached a court, the
solicitor or counsel assigned by the court to act for the poor person.
467. Since the 1949 Act came into force, the granting of state assistance to
those with legal problems has been subject to limitations contained in the
various legal aid schemes. We have described the essential features of these
earlier in this judgment. We have shown that legal aid has never been accorded
to a person coming within the legal aid scheme an unlimited ability to choose
his/her lawyers, wherever they may practise. Those limitations have never been
considered as impediments in the way of the impecunious individual's access to
the courts. On the contrary, the impediment to such a person being represented
before the courts was that person's lack of means. The legal aid schemes,
albeit they contain limitations, have been a facility designed to help those to
obtain legal services when they might otherwise be unable to obtain them on
account of their means.
468. In our judgment, in so far as the applicants' case on the illegality of
the new regime is based on the infringement of a fundamental common law right
of those eligible for legal aid, it fails because there is no common law right
to choose one's legal representative of the kind which the applicants would
have to establish in order for this part of their case to succeed.
Part 23. The applicants' submissions: (ii) The right conferred by Section
32(1) of the Legal Aid Act 1988
469. We turn to consider the second limb of the first ground on which a
declaration and an order of prohibition are sought, namely that the regime is
unlawful because it is contrary to Section 32 of the 1988 Act. We have already
set out the parts of that section on which Mr Gordon relied.
470 We have set out at the beginning of this judgment a description of the
general structure of the 1988 Act.
471. As we have seen, the effect of the the Legal Advice and Assistance (Scope)
Regulations 1989, as amended, including the amendments made by the Legal Advice
and Assistance (Scope) (Amendment) Regulations 1999, is that regulations have
now provided for all descriptions of advice and assistance (other than in
criminal proceedings and personal injury and clinical negligence cases),
together with ABWOR in MHRTs, to be excluded from Part III of the Act (see para
49 above).
472. It is against this background that we turn to Section 32(1) and to the
submissions made on behalf of the respondents in answer to this part of the
applicants' case. It is perhaps convenient to set out the sub-section
again:
"Subject to the provisions of this section, a person entitled to receive
advice, assistance or representation may select the legal representative to
advise, assist or act for him from among the legal representatives willing to
provide advice, assistance or representation under this Act."
473. "Legal representative" is defined in Section 43 of the Act by reference to
Section 119(1) of the Courts and Legal Services Act 1990, which in turn refers
to Section 28 of that Act. The term covers members of the Bar, solicitors and
qualified legal executives.
474. The first submission made on behalf of the respondents is based on the
phrase "a person entitled". The submission is that Parliament did not use the
phrase "a person eligible". The only persons entitled to receive advice or
assistance are those persons receiving advice or assistance under Part III of
the Act who are eligible to receive such advice and assistance. That
entitlement is based on Section 9(1) of the Act. Now that advice and
assistance of all the descriptions with which we are concerned in this case
have been excluded from Part III of the Act by regulations laid before both
Houses of Parliament and approved by both Houses of Parliament, Part III of the
Act no longer has effect in those respects (see Section 8(3)). It has to
follow that Section 9(1) ceases to have effect in this context, and although
there may now be persons eligible to seek advice or assistance in relation to
the matters now excluded from Part III under the legal aid scheme, there is no
longer any person entitled to such advice and assistance. Section 32(1) gives
the power to select the legal representative to advise or assist, only to
persons who are entitled to receive advice or assistance or representation, and
not to those who are merely eligible under the Act to receive advice or
assistance or representation on legal aid.
475. The second submission made on behalf of the respondents is that the power
to select the legal representative to advise, assist or represent the legally
assisted person is limited to those legal representatives "willing to provide
advice, assistance or representation under this Act". The phrase "under this
Act" means that the only legal representatives who are now capable of being
willing to provide advice, assistance or representation under the 1988 Act, in
the light of the new scheme, are those who have contracts with the Board to
give such advice, assistance or representation and who still have case starts
available to them, or can obtain further case starts from the Board.
476. In our judgment the first submission made on behalf of the respondents
represents the correct interpretation of the Act. Section 32(1) has no
application to Part II of the Act. That this is so is confirmed by the fact
that it refers to the selection of legal representatives, whereas Section 2(6)
provides that in the case of advice, assistance or representation being made
available under Part II of the Act, those services may be provided by persons
other than legal representatives.
477. In view of our conclusion on the first submission made by counsel for the
respondents on the correct interpretation of the Act, the second point does not
arise. Nevertheless, we would indicate that we accept that the expression
"legal representatives willing to provide advice, assistance or representation
under this Act" can only apply to legal representatives who are willing to
provide those services under the new regime and are contractually able to do
so.
Part 24. The applicants' submissions: (iii) The treatment of the not for
profit sector
478. A further point concerning the legality of the proposed scheme was raised
in Form 86A at paragraphs 65 and 66. The complaint is that the contracts with
the nfp sector are significantly different from the contracts with solicitors
in private practice in that they permit advice and assistance to be given by
those working in the nfp sector to persons who may not be financially eligible
for legal aid. The reference here is to the provisions in the General Civil
(Not for profit) Contract Standard Terms which enable nfp organisations to
provide "Initial one-off advice without establishing eligibility." These
contracts permit work of that kind, subject to a total limit of 10% of contract
time. The contracts provide that an eligibility test must be carried out in
all matters after 20 minutes' work except in specified circumstances, and that
further work may not be counted as contract work where the eligibility test is
carried out and the client is not eligible for legal aid. The specified
circumstances in which an eligibility test does not have to be carried out
after 20 minutes' work are, first, where the matter can be resolved with a
further 15 minutes or less advice; or secondly, where there are exceptional
circumstances which justify more than 20 minutes being spent with the client
prior to establishing eligibility, for example where the client is distressed
or has learning or language difficulties.
479. On behalf of the applicants it is submitted that those terms in the nfp
contracts breach Section 1 and 4 of the Legal Aid Act 1988 and are outside the
scope of the direction given by the Lord Chancellor on 4th December 1999. They
are said to be in breach of Section 1 of the Act in that they enable publicly
funded advice or assistance to be given to those who do not come within the
terms of the Act. Section 4, for its part, empowers the Board to do anything
it considers necessary or desirable to provide or secure the provision of
advice or assistance "under this Act". It is said that the giving of advice or
assistance to those who are not eligible for legal aid under the Act cannot
amount to the giving of advice and assistance "under this Act".
480. The applicants further submit that those terms in the nfp contracts are
contrary to the direction given by the Lord Chancellor, which provides in
paragraph 2(d):
"contracts for the provision of controlled work shall set financial eligibility
for work provided at the same levels as financial eligibility is set under Part
III of the Act."
481. Section 4(4) of the Act provides that powers to provide advice and
assistance under Part II of the Act shall not be exercisable unless the Lord
Chancellor so directs and then only to the extent specified in the direction
and, if exercisable, shall be exercised in accordance with any directions given
by the Lord Chancellor. The submission is that in paragraph 2(d) of his
direction the Lord Chancellor has directed that the provision of controlled
work shall be for those who are financially eligible for legal aid.
482. It is to be observed that even were the applicants to be correct in their
submissions on this point, it would not be a ground for declaring the whole of
the new regime illegal. The second observation is that the submission that
these terms in the nfp contracts are contrary to sections 1 and 4 of the Legal
Aid Act is surprising in view of the fact that, as we have already set out, no
one has suggested that the provision that Legal Advice and Assistance
(Amendment) Regulations 1994 were ultra vires the Act because they inserted
into the Legal Advice and Assistance Regulations 1989 a new regulation 5A which
provided that ABWOR in MHRTs "shall be available without reference to the
client's financial resources,"
483. The practical justification for these terms in the nfp contracts is to be
found in Mr Orchard's fourth statement at paragraphs 66 to 70. Mr Cogbill in
paragraph 35 of his statement explains that the civil contract documentation
for the nfp sector was available to the Lord Chancellor when he made his first
direction on 4th December 1999. Paragraph 2(c) of that direction reads:
"Contracts may secure the provision of:
(i) controlled work (that is advice, assistance and representation under Part
II of the Act, to which Part III of the Act does not apply); and
(ii) licensed work (that is representation under Parts III and IV of the Act);
in accordance with the Board's general civil contract documentation."
484. In making this direction the Lord Chancellor must have had in mind the
general civil contract documentation, including the provision by workers in the
nfp sector of 20 minutes' advice before an eligibility check had to be made.
Consequently, paragraph 2(d) of the direction, on which the applicants rely, if
it is to be read consistently with paragraph 2(c), must be read so as to mean
"where financial eligibility is set, it shall be set at the same levels as
under Part III of the Act." It is not to be read, as the applicants would have
it read, "No one can be given advice under the contracts unless they are
financially eligible on the same terms as under Part III of the Act".
485. This was the reading of paragraph 2(d) of the Lord Chancellor's direction
urged upon us by counsel for the Lord Chancellor and counsel for the Legal Aid
Board. We consider that that reading of the direction is correct. We do not
consider that the terms of the contracts in the nfp sector which contain the
provisions for the giving of advice to certain persons prior to an eligibility
check being made, render those contracts illegal. The drafting of those
contracts in that way falls within the Board's powers under Section 4(1) of the
1988 Act, and the power it used was a power properly exercisable in that way
because the Lord Chancellor had given the necessary direction.
Part 25. The applicants' submissions: (iv) Wednesbury irrationality
486. We turn finally to Mr Gordon's contention that the whole new scheme of
controlled contracts was unlawful because it was irrational, or because those
who framed it had failed to take into account relevant considerations. He was
at pains to explain to us that this was not a challenge to the principle of a
controlled budget or, indeed, to the need to prioritise resources. His
clients' challenge was to the regime actually devised by the Board, and not to
any other scheme which might have achieved the statutory purposes of the 1988
Act or the 1999 Act, while taking into account that principle and that need.
487. He complained that the vice underlying the present scheme was that -
despite its stated objectives - it did not differentiate between (for example)
a MHRT case on the one hand or a family dispute between a husband and wife over
personal possessions on the other. It also failed completely to embrace the
dynamic and fast-moving scene in particular fields of social welfare law, and
the solicitors who, during the 1990s in particular, had achieved incomparable
expertise and excellence in these fields. Fields of law like community care
were being treated as add-ons, whereas, in order to achieve the express
objectives of the Government and the Lord Chancellor, as well as the Board,
social welfare legal services should have been the centrepiece of the regime.
He said that this was not a question of political judgment immune from review,
as Mr Pleming had argued, because the relevant political judgment had already
been made in the December 1998 White Paper (see paras 9-10 above). Instead, it
was a question of the reality failing to match the avowed policy.
488. He said that he was not arguing that the court should strike down the
entire scheme because some of its component elements, such as tolerances, might
possibly lead to the result that some citizens might possibly not be able to
have a legal representative of their own choice and might possibly find it more
difficult to seek legal assistance. Nor was he asking for the scheme to be
struck down because they might receive publicly funded advice and assistance
on, say, community care from a local solicitor rather than one of the few firms
with acknowledged expertise like his clients' firm.
489. His submission in this context was that the scheme offended against
elementary principles of public law. The reason for this was because it ran
counter to the Board's own objectives. He described these objectives as
transparency and fairness; achieving the greatest possible level of quality
assurance by ensuring that as much work as possible was delivered through
category specific contracts; and giving the greatest priority to social welfare
cases, especially those engaging a public law element.
490. He added that the scheme was in conflict with the Lord Chancellor's
objectives as set out in the White Paper. He said that pursuant to those
objectives the highest priority had to be accorded to social welfare law, and
to the rescuing of the disadvantaged and vulnerable from social exclusion (see
paras 8 and 10 above).
491. He said that it was important for us to understand that the scheme itself
had never received Parliamentary scrutiny. Parliament had merely considered
the regulations which removed the relevant advice, assistance and ABWOR from
the scope of Part III of the 1988 Act. It did not consider the directions or
the contract documents, far less the detail of the scheme itself. Counsel for
the Board and for the Lord Chancellor had suggested in the course of their
submissions that it was not for the court to interfere with the will of
Parliament and that the scheme had been approved by Parliament. This, Mr
Gordon argued, was simply wrong. There was no constitutional impropriety
whatever in the court determining whether, in fact, the scheme achieved the
objectives set out in the White Paper.
492. He reminded us that the principles enunciated by Lord Greene MR in the
Wednesbury case went far wider than mere perversity. He said that a decision
would be irrational not merely if it was perverse but also if it failed to take
relevant considerations into account, or if it took irrelevant considerations
into account.
493. Mr Gordon said that the Board's first two relevant objectives appeared on
the second page of its Guidance on Fund Allocation (see para 101 above). The
first and fifth out of the eight objectives the Board had set out there for the
allocation process were to provide a mechanism for determining the value of
contracts which was efficient, transparent and fair; and to achieve the
greatest possible level of quality assurance by ensuring that as much work as
possible was delivered through category specific contracts. For the Board's
third relevant objective he relied on the whole of the contents of paragraph
3.7 of the 1998 White Paper (see para 10 above).
494. Mr Gordon said that it was difficult to see how the first objective could,
sensibly, be complied with if the Board deliberately refrained from
disseminating its Guidance on Fund Allocation more widely on the grounds that
it would be too confusing to practitioners, a matter which emerged from the
evidence. Nor could it be thought to have been complied with if we were to
conclude that the written attempt the Board had made to simplify the allocation
process for our benefit had failed to demonstrate transparency. In any event,
he submitted, the temporal touchstone for transparency to be achieved must be
prior to the implementation of the new regime rather than subsequent to its
introduction; and certainly not in outline submissions in contested judicial
review proceedings brought to challenge the scheme's lack of transparency, or
in evidence produced during the course of such a hearing.
495. Mr Gordon argued that the Board's second relevant objective was stifled at
source if the regime failed to detect excellent quality providers and, indeed,
virtually ignored the existence of such suppliers. Mr Hamilton had accepted
that excellence was missed by the scheme at the meeting on 20th December (see
para 233 above). Mr Gordon suggested that it appeared that the Board had no
belief that it could foster expertise at all. We do not, however, accept that
the passage of Mr Orchard's evidence on which he relied for this suggestion in
fact supported it at all.
496. Mr Gordon argued that the difficulty was, of course, that if the Board
failed to take into account the excellent provider in a niche area, such as
community care (or education), it would, because of the scarcity of suppliers
in those fields, seriously fail the client base in a new and dynamic area of
law. It would thereby fail to meet its own quality objectives. He submitted
that one of the very justifications for tolerances (the holistic treatment of
clients) had a rather hollow ring when one examined the Board's attitude to a
firm like the applicants which wished to expand its social welfare services by
treating clients holistically. This was quite impossible without including
realistic case-starts (and funds) in employment law. The firm could not invest
the necessary time and resources in seeking to attract clients in disability
discrimination cases in the absence of any prior commitment from the Board that
they were permitted to undertake such cases.
497. He observed that the Board possessed virtually no data on a subject like
community care, or on the holistic needs which it could help to serve in
conjunction with other areas of law. He also said that the Board had used
inadequate methods of inquiry (the questionnaire) to obtain information as to
need. In such circumstances (and following its own policy of responding to
bidders), the Board could not, sensibly, simply first shower case-starts on the
franchised family firms under tolerances without more inquiry. To do so was
to ignore the objective of securing access to quality providers, by treating
access to any franchised supplier under a tolerance as being more important
than securing access to an experienced solicitor under a category specific
contract like community care.
498. Mr Gordon then argued that the importance of social welfare law had been
undermined by the new regime. Mr Pleming had devoted much of his closing
address to the importance placed by the Board on mental health because of the
pivotal importance of liberty of the subject. It was for that reason, of
course, that he had accepted as arguable the proposition that criminal law
carried with it, in relation to any charge which might result in a custodial
sentence, a positive funding obligation on the part of each member state of the
Council of Europe.
499. But if mental health was so important (as it is) and deserved such
priority (as it does), it was wholly inexplicable that the Board should have
removed (if it has removed) entitlement to legal representation for detained
psychiatric patients: all the more so when it seemed to be the case that
eligibility levels for ABWOR was removed in consequence of this country's ECHR
obligations: see the Megyeri case.
500. We were also reminded that the Code of Practice issued by the Secretary of
State last year under section 118 of the Mental Health Act 1983 states at para
1.1:
" The detailed guidance in the Code needs to be read in the light of the
following broad principles, that people to whom the Act applies (including
those being assessed for possible admission) should receive recognition of
their basic human rights under the European Convention of Human Rights ..."
501. Despite this, the Board's (and the Lord Chancellor's) position was both
that all entitlement to ABWOR had been lawfully removed and also that there was
no guarantee of funding under the legal aid system. Nothing in the evidence
suggested that case-starts to mental health firms would automatically be
increased throughout the contract to meet client need, or that there would be
commensurate funding. Mr Pleming had said that the reason for the absence of
any such guarantee was to discourage unmeritorious applications by patients,
but Mr Gordon asked rhetorically: how could an application by a patient under
ABWOR ever be unmeritorious? We would comment that he appears to have
overlooked the fact that even under the old scheme the Board possessed a
discretion to refuse ABWOR at a MHRT if it appeared unreasonable that approval
should be granted, and that we have little difficulty in imagining a vexatious
renewed application being made in circumstances that do not warrant public
funding.
502. The applicants placed emphasis on the fact that until 31st December 1999
clients were entitled to state funding for ABWOR and for many other categories
of advice and assistance relating to the vulnerable and disabled and to their
problems of social exclusion. Now, less than nine months before the Human
Rights Act 1998 was to come into force, and against the background of the
Government's and the Board's own stated objectives of increasing socially
excluded persons' access to justice, both respondents were contending that all
entitlement to relevant legal advice, assistance and ABWOR had disappeared.
503. Mr Gordon also said that it was inexplicable that important areas of
advice and assistance for formerly detained psychiatric patients should have
been overlooked. Much of community care law is concerned with after-care
services under section 117 of the Mental Health Act 1983 (being a "community
care" service under section 46(3) of the National Health Service and Community
Care Act 1990). He submitted that the provision of community care and health
services was designed to ensure that vulnerable people (including discharged
former psychiatric patients such as conditionally discharged restricted
patients and former patients liable to after-care under supervision) were
supported in the community. If they are not so supported, they are likely to
end up being detained in hospital again, or being recalled to hospital by the
Secretary of State under section 42 of the Mental Health Act 1983. The
revolving door client is not just a "mental health problem"; the same client
will raise important issues of community care law. Indeed, the Coughlan
decision demonstrated that the borderline between health and social care is a
fine one.
504. Mr Gordon then turned to his clients' complaint that overwhelming priority
had been given to the whole of family law, contrary to the Lord Chancellor's
and the Board's policy objectives. Mr Pleming had said that the new regime was
concerned with the active direction of funds into areas and work that had been
prioritised according to the needs of people. Mr Gordon maintained that no
such exercise had been carried out. He said that the real vice of the Board's
thinking on family law was that it had assumed that because a lot of money was
currently spent on family cases, this led inexorably to the conclusion that the
need for family law services was paramount and that it required a similar form
of continuing expenditure. It appeared from the evidence that the RLSCs had
never investigated the need for family law. Nor were any such investigations
undertaken by the Board. The Board had simply directed the RLSCs to treat all
family law as high priority nationwide, and guaranteed all franchised family
firms a contract, with funds being allocated on the basis of current spend. We
would comment that we are satisfied that this was, indeed, the effect of the
evidence.
505. Mr Gordon submitted that this prioritisation of family law was
antithetical to the regime's objectives. The Board had told us in its
evidence that it "always knew" that the vast majority of contracts would be let
in family law. It appeared to consider that large numbers of cases in family
law were a necessary indicator of need, but that this was not the case in other
areas of law. It was unclear why it adopted this approach. On this point, in
our judgment, the reasons why the Board considered that it could not rely on
the numbers of cases in fields of law other than family and mental health as an
adequate indicator of need are comprehensively and satisfactorily explained in
Mr Orchard's evidence.
506. Mr Gordon also submitted that it was unclear why previous high levels of
expenditure were thought to be indicative of a high level of need for family,
but not for other areas. He said that this was even more extraordinary given
the Board's avowed intention to move from what it termed a "lawyer-led" system
to a regime based on assessed priority and identified needs. The Board had
said that family clients had adequate access to legal services, whereas it
acknowledged that access to mental health and community care solicitors was
insufficient. Why, then, Mr Gordon asked, was priority given to a well-served
area of law such as family over other areas with a dearth of practitioners such
as community care (or public law). On this point, Mr Orchard was, in fact,
satisfied that there was a national network of mental health solicitors which
ensured reasonable coverage and access (see para 341 above) Access to
specialist advice in community care law, on the other hand, raised different
issues, to which we will return later.
507. Mr Gordon argued that there was in fact no basis, in terms of the
Government's and the Board's objectives, for regarding the predominance, or
such predominance, of family law as an axiom. He said that certain areas of
family law might assist with the prevention or reduction of social exclusion
(the apparent object of much of the regime). However, it was, he claimed,
self-evident that many areas of family law had no such obvious priority. There
was no clear comparison that could be made between family law in terms of its
relevant social welfare objectives and those of any other area of social
welfare law (for example, community care). The Board recognised that the poor
were more likely to suffer problems in relation to debt, housing, welfare
benefits and employment. Mere numbers of practitioners in family law bore no
necessary relationship to the need for services to prevent social exclusion.
508. One of the difficulties Mr Gordon and his clients faced was that as the
hearing progressed, they showed that they had little real knowledge of the
content of the caseload of a family law practitioner under the new controlled
contract. The extent of their ignorance was displayed by their failing to
appreciate that modern family law policy has encouraged clients to access the
magistrates' court rather than the county court for many matters. Equivalent
remedies are available in each, and the choice of venue should depend on
whether the issues in a case are concerned principally with questions of fact,
or with questions of law. It would therefore have been quite unreasonable, as
the Board appreciated, for ABWOR in magistrates' courts and certificated (or
licensed) work in county courts to have been dealt with in different parts of
the new contracts.
509. There was also a failure to appreciate how much family work is concerned
with easing the pain that is caused when relationships break up, protecting the
vulnerable from violence in the home or from threatened homelessness, or
protecting children from the fecklessness, irresponsibility or cruelty of
adults. All these matters come fairly and squarely within the Lord
Chancellor's and the Board's priority objectives. When one looks for the
causes of crime and social exclusion, none of these matters are very far away
from the minds of any responsible analyst. When we pressed Mr Gordon to
identify the areas of family law that did not come within these priority
objectives when the Board was concerned only with people who were so poor, both
in income and capital, that they qualified for help under a controlled work
contract, he referred in engagingly vague and general terms to disputes over
the division of property. He did not have any statistics to support his
contention that this formed any significant part of the Board's expenditure on
green form family law work. At that level of poverty, there would not be much
property to divide, and any unfairness in the division could bear heavily on
the ability of a one-parent family to provide for itself adequately on income
support in future.
510. Undeterred by the points we had put to him, Mr Gordon submitted that the
prioritising of family law over and above other areas of legal aid service
brought with it a heavy price in terms of the expertise permitted to be
available to clients in other areas of law in which they should be allowed
expert access. He said that this was particularly the case where there were
few expert practitioners (for example, in mental health or community care),
although these were services designed to assist the socially excluded. If
family firms were given such priority, it meant that funds were not available
at source for non-family work such as housing, community care and so on. He
submitted that such a policy violated the Board's objectives of focusing funds
on areas of priority need, such as social welfare law, to prevent social
exclusion.
511. In those circumstances, he submitted that any discretion that might be
exercised on a temporary basis by the Board over the next few weeks could not
possibly cure these intrinsic defects, which would influence the scheme over
the next three years and probably beyond, given the 80% guarantee of work under
any new contract schedules. The priority afforded to family law, together with
the mandatory provision of extra tolerances that were unique to firms
undertaking family work, meant, he said, that most of the Board's money was
committed from the very outset before the consideration of anything else.
512. Next, he summarised the applicants' challenge to the Board's chosen policy
on tolerances. He said that if there were insufficient providers of specialist
services, it made little sense to deny such specialist practitioners as did
exist the volume of work which they wished to undertake, whilst, at the same
time, allocating funds to non-specialists who might have no desire to undertake
such work, and who were, by definition, not so expert in the area of law in
question. He also said that there could be no justification, either, for the
automatic allocation of tolerances to family firms in addition to their own
case-starts across the board, whilst at the same time permitting non-family
practitioners to undertake tolerance work only in place of existing
case-starts.
513. He said that if the rationale behind the allocation of additional
tolerance cases to family firms was that this ensured access, there was no
justification for such a blanket policy (applied to cities and rural areas
alike), since the need for such access had never been assessed. In any event,
the amount of tolerance cases to be added to a family contract was dictated not
by any kind of access requirement, but by the number of family cases that the
firm had and the other areas in which it had a franchise. We would observe
that this contention is not supported by the evidence. Although it is correct
that a minimum 10% additional tolerance was awarded in respect of all family
matter starts, the average figure for all tolerances was 13.5%, and the Board
made it clear that tolerances only reached as high as 100% (or £20,000,
whichever was the lesser amount) where there were problems about access (see
paras 148-149 above).
514. Mr Gordon complained that the non-family firms were prohibited from ever
being able to offer a holistic service unless they used up one of their
available case-starts. Tolerances only allowed the development of new areas of
practice within family franchised firms. Thus, for example, his clients might
well wish to expand into public law or education law which, he said, was highly
complementary to community care law. They might, however, on their present
award, undertake a maximum of three cases under their inclusive tolerances and
they would not achieve LAFQAS standard (350 hours). In order for the firm to
achieve the 30 generic cases which the Board had indicated would justify a
category-specific contract in education, the firm would have to be allocated
300 extra cases to achieve the 30 cases in education. We would comment that
the Board's evidence showed that it had become less prescriptive during the
course of 1999 towards an absolute requirement on the part of a specialist firm
to show a track record of 30 cases before it could be awarded a category
specific contract. Mr Pleming also made it clear during argument that there
would be nothing to stop a firm like the applicants asking the Board to permit
them to undertake a case start in education, say, outside the four corners of
its existing contract schedule and outside its existing permitted tolerances,
and the Board would then consider that application on its merits under Clause
B17 which gave it a complete discretion.
515. Mr Gordon's next complaint was that in allocating both category-specific
contracts and tolerances to Section A firms, the Board wholly ignored the
existence of section B firms. He said that in relation to generic contracts,
given that the emergence of a suitable bidder was the Board's preferred
criterion for allocation, it was bizarre that the position of firms such as the
applicants was overlooked at that initial stage. We would reject this
criticism. As Sullivan J suggested in ex p Elton at pp 7-8, when it was
concerned with reform on this massive scale, the imposition of a timetable of
some kind was both necessary and reasonable. The Board was entitled to set
deadlines and to consider first the allocation of funds and matter starts
equitably between the firms that were able to meet the deadline. The
appropriate treatment for firms which were unable to meet the deadline raises a
quite different set of issues.
516. Mr Gordon rejected a point made in the course of argument which was to the
effect that the tolerance system meant that fewer non-specialists would advise
on generic categories. He said that this did not meet the reality of client
demand in those areas of law. The Board accepted that solicitors in generic
areas had a national client-base because of their expertise. The reality was,
therefore, that by placing severe limits on the ability of those solicitors to
maintain their client-base, the tolerance system allowed more non-specialists
than before to advise in such subject areas. We would comment that it would be
very easy for us to be distracted by the fact that the present application is
made by an exceptional small firm which has attained a national reputation for
its expertise and the quality of the services it provides. The evidence we
received certainly did not support the proposition that all, or indeed many,
community care firms had a reputation wider than their local region.
517. Mr Pleming had asserted that it was the Board's view that a family
practitioner should be able to advise on community care, education and public
law. Mr Gordon inferred from the scheme as it was constituted at present that
it was also the Board's view that other practitioners should not be able so to
advise on such topics (including the very specialists that had formerly
advised). He said that this was absurd. A housing practitioner (or an
education practitioner), for example, was far better equipped in expertise to
advise on community care than a family practitioner. Again, we consider that
this sweeping proposition is not supported by the evidence, or indeed by the
court's wide knowledge of the ability of many non-specialist firms which
provide a "general practitioner" service to their clients. The Board showed
that it was right to be sceptical about the skills, and indeed in some cases
the professional integrity, of a substantial number of practitioners holding
themselves out as specialists in fields of social welfare law (see, for
example, paras 58 and 103 above). There can of course be no doubt that some
First Division specialist firms, of which Mr Gordon has personal knowledge,
would be as good at advising on community care law (and in some cases better),
when compared with the GPs of the system, but other specialist firms might well
be worse. We use the word "First Division" to distinguish such firms from the
Premier League firms like the applicants in their specialist fields of mental
health and community care, and also from the bad non-league firms which the
Board said it had little difficulty in identifying (see para 233 above).
518. Mr Gordon then turned to the position of new firms seeking to break into
the controlled contract market in the second and subsequent years of contract
awards. He said that although Mr Pleming had shown us the detailed provisions
set out for such firms in Rule 6 in the Terracotta book, he had not addressed
the practical problems raised by others in the course of the evidence, which
had never been effectively rebutted. He forecast that few, if any, new firms
would set up and make the necessary financial commitment without a prior
commitment from the Board.
519. We agree with Mr Gordon that on the evidence before us there is a good
deal of force in the anxieties raised by Ms Mackintosh and others (see paras
215-6, 368 and 416 above). If the Board does not address these issues
successfully in the period now available to it before it embarks on inviting
bids for awards in the second year of the scheme, the result is likely to be
adverse to the public interest. We accept Mr Gordon's submission that the
history of the last 20 years has been marked by solicitors (and, indeed,
barristers) splitting off from larger units in order to provide a quality legal
aid service to clients in specialist corners of the market. It would be a
serious disadvantage if any avoidable rigidity in the new scheme inhibited
these natural, and usually admirable, developments in the market for the supply
of legal services. We do not consider, however, that this concern should lead
us to declare now that the scheme as a whole is unlawful, and it would be
useless to strike down the present Rule 6 (so far as it affects new firms)
without replacement. So far as the detail of Rule 6 is concerned, these
worries are at present hypothetical, but the Board would do well to address
them more effectively before any of them become a reality.
520. So far as the 1999 round of contract awards is concerned, Mr Pleming had
accepted, as indeed the evidence showed, that no account was taken of expansion
(actual or planned) and that the Board looked only to the allocation to the bid
zone and the base-line. Mr Gordon submitted that this constituted a failure to
take account of self-evidently material considerations, especially in areas
where it was already accepted that there were few quality suppliers and no
relevant data, other than that produced by the emergence of such suppliers
through the bidding system. We reject this submission. The Board's evidence
shows that it is being astute to meet the needs of firms whose business has
expanded since the baseline period, and to encourage firms in financial
difficulties to contact it immediately so that they can talk through the causes
of those difficulties. It has also said unequivocally (see para 433 above)
that in relation to the period leading up to the second quarter review it will
increase schedule payment limits, as appropriate, if it increases a firm's
matter starts in order to respond to expanding demand since the baseline
period, although it will only put adjusted schedules into place before the
review if it is satisfied that a firm is in financial difficulty. Although we
have made it clear that we consider that there are still unresolved
difficulties in the way of new firms seeking to enter the market for controlled
contracts, we see no reason to fault, as a matter of law, the approach the
Board adopted in its first round of contract awards. It was certainly open to
it to prefer to place more weight on the record of actual matter starts for
firms during the first round of contract awards than to award more starts to a
firm based on what it told them about its plans for expansion.
521. Mr Gordon then submitted that the contract awards were also flawed in two
further critical respects. First, firms were only ever invited to bid for a 12
month period and their bid was the maximum that the firm could be awarded. Yet
the contract was for 15 months. We were categorically assured by Mr Pleming,
even if this did not appear clearly in the evidence (in which this point was
never raised, so far as we can recall, as a serious issue), that the Board's
calculations were always adjusted to take account of the contract period. A
supplementary criticism was that firms were never being asked to estimate for
more than the next 12 months, so that any adjustment could never encompass
expansion since the historic monitoring period or any intention to expand to
meet client demand in the future. Once again, we are satisfied that the
Board's preference for historic records, coupled with a willingness to respond
swiftly to evidence of increasing demand in relation to the first six months of
the new contracts, cannot be assailed as a matter of law.
522. Mr Gordon then argued that if the bid numbers were ignored, there seemed
to have been little point in asking firms for a maximum bid, save only to the
extent that the Board intended to limit firms to that figure for years to come.
The answer to this is that the bid numbers were not ignored. They formed a
ceiling above which an award for the first schedule period could not be made.
If a firm would have made a higher bid in the first contract round but for
being misled by a suggestion that it was only being invited to bid for a
12-month period, we would respond that this has little to do with the
applicants' case, and that the evidential basis for such a complaint has not in
any event been made out.
523. Mr Gordon then mounted an attack on the contents of the note prepared by
counsel which described the Board's approach to changes in controlled work
contracts. He submitted, correctly, that the present application could only be
determined on the basis of the evidence before the court, and we have already
described how we refused an application by the Board to submit further evidence
following the end of counsel's submissions (see para 268 above).
524. Mr Gordon accepted that the Board had always said that practitioners
should not turn away clients (within the first six months of the contract) but
should approach the Board first. Critically, however, the Board has never said
what it would do if practitioners did approach it. What it did say, on page 6
of the Burgundy book, was that it would have the flexibility to increase the
maximum number of case starts and the schedule payment limit if it could do so,
given the financial allocation to the zone and the performance of other
contractors. What it was now attempting to say, through counsel, was not
clearly supported by its own contract documentation, and it was on the basis of
that documentation that the Lord Chancellor had directed the Board to enter
into contracts by his direction dated 4th December 1999.
525. Mr Gordon added that the status of the information contained in counsel's
note was wholly unclear. When did the Board decide to exercise its discretion
in this fashion? Why was this material not in the seven statements of evidence
before the court? If guidance has been produced by the Board, why has that
guidance not been exhibited to any of the statements? The issue to which the
note was directed was hardly a new issue. He assumed that the note had not
been sent to practitioners. He said it had not been seen by the Law Society.
He asked whether it had even been circulated to the relevant regional offices.
How, he asked rhetorically, could the Board's own objectives of efficiency,
transparency and fairness even begin to be met when such information was
presented for the first time in this fashion?
526. He went on to complain that the note offered little comfort to
practitioners or to their clients for a number of reasons. First, there was
the procedure which the Board proposed to go through in order to decide whether
to give increased matter starts to an office. It would inevitably take time
for the Board to obtain the information it required from the firm and from its
own records before it was satisfied as to all the matters about which it needed
to be satisfied. If a solicitor had a client in the office who needed advice
and assistance, or representation before an MHRT, and needed that advice and
assistance there and then, the procedure proposed by the Board did not allow
for the kind of response that the solicitor and client required. Mr Gordon
asked: what is the solicitor to say to his/her client, who may be vulnerable
and in urgent need of help? Perhaps: "Previously I could have given you the
advice and assistance you needed immediately, but now I have to wait for the
Board to assess how many other clients I have seen, assess how I obtained those
clients, and assess the nature of advice and assistance that I have been
providing to them. Once it has done that it might let me help you."
527. Secondly, and critically, even if the Board increased the number of case
starts for solicitors, it was not proposing to increase the schedule payment
limits correspondingly or at all. This, he said, was clear both from the terms
of the note, which significantly omitted any reference to schedule payment
limits, and from the Board's own evidence, which evinced an intention to delay
revising schedule payment limits until after the second quarter review. He
submitted that an increase in the number of case starts was a hollow gesture in
the absence of a revision to the schedule payment limits. To allow firms to
undertake more cases without paying more money effectively required the firm to
subsidise the Board, particularly in relation to any disbursements they had to
pay. Moreover, firms were prohibited under the contract from exceeding the
schedule payment limits, and exceeding the limit entitled the Board to reduce
the number of case starts: see Clause B16(c) in the Burgundy book (for which
see para 133 above).
528. If, by way of example, a firm was initially allocated 10 education cases
with a total schedule payment limit of £1,000, there was little point in
it being permitted to undertake a further 10 cases if the schedule payment
limit was not correspondingly increased. If it did undertake all or any of
those further cases, its work in progress and disbursements (which it has a
duty to incur) would exceed the schedule payment limit and it might therefore
have its future matter starts reduced.
529. Mr South had said in his second statement at paragraph 23 that even if the
number of case-starts was increased in the first six months of the provisional
award, the schedule payment limit would not be altered. He gave two reasons
for this policy. The first was that any additional cases which were awarded
were unlikely to be billed within a few months and would therefore have no
impact on the firm's income during that period, and the second was that only a
small minority of firms relied substantially for their income on advice and
assistance cases. We would note that Mr South qualified his initial assertion
by the use of the word "generally".
530. Mr Gordon argued that all the evidence showed that many types of advice
and assistance cases were started and finished within a short period. This
frequently happened within days: for example, an urgent community care case
might start as an advice and assistance matter and then, following an
unsatisfactory (if any) response to the letter before action, be followed by an
application for full civil legal aid. In the area of mental health patients'
applications for MHRTs under section 2 of the Mental Health Act 1983 must be
listed within seven days. He said (although we do not remember this being in
evidence) that the solicitor is often contacted at extremely short notice,
sometimes even on the day of the tribunal hearing.
531. He said that the Board's second reason showed that it assumed that firms
would be undertaking private work in order (effectively) to subsidise their
legal aid work. He argued that this was an unjustified assumption in areas of
social welfare law, since the clients were unlikely to have any money and the
firm might well not combine such work with private client work.
532. The discretion to increase the schedule payment limits, to which Mr South
referred in his evidence, only engages where a firm is in "serious financial
difficulty". Even then he said that it was only "where appropriate" that any
further funds would be awarded by way of an increase in the schedule payment
limit to the firm. Extra cases should result in extra payment, since if they
did not, a firm could not incur disbursements such as experts' reports,
independent psychiatric reports for MHRTs or travel fares, and it would have
difficulty in paying staff salaries.
533. Importantly, Mr Gordon said, the Board was not guaranteeing that
solicitors will not have to turn clients away, and with its attitude to
schedule payment limits it clearly could give no such guarantee. The Board's
emphasis on the need to have regard to the capacity of other suppliers in the
relevant zone diluted any assurance that might be given to practitioners
seeking an increase in their case-starts.
534. In any event, what the Board was proposing in its note could not and would
not cure the underlying defects in the regime. These arose from the flawed way
in which the funds and case starts were allocated in the first place. The
reason for this was that the vast majority of the Board's funds had already
been allocated - to family contracts (based on the assumption that high spend
for family equals high need), and to tolerances and so on, with no sensible or
coherent or informed allocation for the specialist niche categories at all.
535. Mr Gordon submitted that it was essential that the Board got the
allocations right (in terms of a rational and fair allocation of funds in
accordance with its identified priorities and objectives) at the outset. He
said that this was envisaged in the former Government's White Paper in 1987 and
also in the 1999 Act, where funding was based on a prior assessment of need.
Once the allocation has already taken place (as occurred in November-December
1999) only the reserve can be drawn on by the Board. The review in the second
quarter of the year 2000 would not be a review of the Board's priorities or of
its original allocations, nor of the overwhelming priority given to family
firms, including the provision of mandatory tolerances, but merely a
consideration of the work that had actually been done as against that which the
contracts permitted. The outcome of the review would be dictated, therefore,
by the allocation that has already been taken place. In turn that will dictate
what will happen in the second and third years of the contract, and probably
beyond. The contracts were therefore already largely determined for several
years.
536. Mr Gordon said that it was important for us to note that the Board was not
proposing that it would act to increase new matter starts to enable firms to
take on new clients throughout the life of the contract, but only over the next
few months. No long term assurances or guarantees were proposed. What, he
asked, would happen in September or November or in January 2001? He said that
it was significant that the Board did not even guarantee legal representation
in MHRTs, but had merely noted that it should be accorded a priority. Although
the Board had stated that it would spend more in 2000/2001 than in the previous
year, the question as to the timing of the financial year remained unanswered,
and Mr Gordon said that he and his clients did not know if the £13 million
allocated for mental health was for 15 or 12 months. We can respond to that
uncertainty immediately. Although the Board's evidence did not always explain
very clearly the adjustments it was making in relation to the first period of
contract schedules, it did make it clear that it was talking about an
allocation of expenditure of £13 million for mental health in respect of
the twelve month financial period which would start in April 2000. This
related to payments to be made in that financial year, and not the cost of all
the cases that might be started in it.
537. Mr Gordon invited us to remember Mr Hamilton's refusal on 20th
December 1999 to give any kind of guarantee to his clients that it would
receive an adequate number of case starts during the term of the contract (see
para 234 above). This was the more remarkable, he said, given that the Board
had acknowledged the lack of adequate suppliers in the areas in which the
applicant firm practised, and its own lack of information on those areas
(particularly community care), and that it had also acknowledged the
applicants' expertise in the field. It was, he submitted, striking that the
Board was wholly unable to provide the applicants (or any other practitioner)
with any kind of assurance that they would be able to continue meeting their
clients' needs throughout the whole term of the contract.
538. It was argued that it was no answer to say that the regime was "flexible".
The suggested flexibility of the scheme was irrelevant for two reasons, because
the Board's contract discretion was open-ended, and because the only way in
which Section B firms could receive extra money would be through firms dropping
out, or from the £9 million reserve. The reserve, however, had to meet
rather a lot of things, and no details had been provided as to how the Board's
discretion to release funds from the reserve to cover all the matters mentioned
by Mr Orchard would be exercised.
539. Mr Gordon complained, in effect, that the contract provided no guarantee
whatsoever. It might be varied at any stage by the Board, even (apparently) to
the extent of removing areas of work from the scope of contracts on a national
basis. This was very different to the Parliamentary scrutiny which was
required under Part III of the 1988 Act before the actual scope of the legal
advice and assistance scheme could be restricted by a contract-led regime.
540. He added that nothing in the contract documentation suggested that any
additional allocation, through discretion, which resulted in further
case-starts being awarded could ever exceed a firm's maximum bid. For Section
A firms the relevant date for the bid was July 1999, and for the 34 Section B
firms invited to bid it was December 1999. The contract period would not end
until March 2001. During that time firms might gain or lose departments;
people might leave, people might join and so on. It was, therefore,
unrealistic in the extreme for the Board to expect firms to provide an accurate
estimate of the likely number of cases that they would undertake two years in
advance. Even then, (as already submitted) the firm would only have bid for 12
months.
541. In addition, firms were, in any event, only given a guarantee that they
would be awarded 80% of their Year 1 allocation when it came to Year 2. For
Year 3, the guarantee was further diminished because the only assurance the
Board has given to contracting firms is that they would receive 80% of the
case-starts for year 2. It has also said (see page 10 of the Burgundy book)
that after the first year of contracting it would only be making changes to
case-starts and schedule payment limits where long-term trends were clear.
From this was derived an argument that a firm's initial bid maximum as
estimated in July 1999 would bind it for almost four years, as being the most
that it could ever be awarded by the end of Year 1. Moreover, what it was
awarded by the end of Year 1 would dictate what it would receive for the next
two years. Mr Gordon described this as a flexibility which was, on analysis, a
tourniquet.
542. Mr Gordon then addressed an argument he attributed to Mr Pleming which was
to the effect that under the old regime firms still had to be authorised before
they could take on cases and that there was therefore no material difference in
this respect between the new regime and the old. This, he said, was simply
wrong. Under the new regime, solicitors who run out of case-starts or reach
their schedule payment limits must approach the Board for permission to take on
another client. Under the old regime, any client could approach his/her
solicitor and the solicitor did not have to go through further steps in order
to be able to advise the client (at any rate for the first two hours, in
non-family cases).
543. Mr Gordon was also anxious to stress the fact that it was client demand
rather than lawyer demand that drove the old system. In the absence of fraud,
solicitors simply gave advice and assistance to clients who came to them
seeking such advice and assistance. (We would note that he has wholly
overlooked the Board's evidence about firms touting for unmeritorious business
on housing estates, which no doubt led to its prohibition on "cold calling" in
the new contracts: see para 58 above). He said that when we considered the
drastic change that has taken place, we should appreciate that (for the most
part) lawyers who responded to client demand and to the franchise quality
standards were committed to undertaking work for the disadvantaged in society
at significantly lower rates of pay than the vast majority of firms doing
private work. This was, indeed, recognised in the December 1998 White
Paper.
544. He ended his submissions by saying that if the Board had transparency and
fairness among its principal objectives, it followed that its new regime could
not leave open and unanswered important questions that raised concerns as to
the administration of justice and access to the court for all citizens without
means. These questions included (but were not limited to) the following:
(1) Were baselines increased pro rata to 15 months?
(2) How many offices have been given a contract award in mental health (or any
other subject area) that exceeds their baseline number of case-starts?
(3) What are the discretionary principles by which the Board departed from the
Guidance in deciding which invitations to bid for generic contracts were
issued?
(4) What are the discretionary principles by which the schedule payment limit
may be increased or decreased?
(5) Has the guidance note now been sent to all regional directors and
practitioners?
(6) Why were all firms undertaking community care or other generic work not
invited to bid for a contract?
(7) For those invited to bid for a generic contract what were the discretionary
principles by which decisions were made not to award the full bid given the
absence of any relevant data and the dearth of practitioners?
(8) Are case-starts automatically increased upon application to the number of
case-starts applied for?
(9) If and when case-starts are increased can they be increased to a figure
exceeding the amount of case-starts originally bid for?
(10) Do firms like the applicants have a guarantee of increased case-starts
and/or increased schedule payment limits to meet client-demand in: (i) the
first 6 months of the contract award; (ii) thereafter?
(11) Do firms have to wait until the last case-start has evaporated before
being able to approach the Board? If not, when should they approach the Board?
How long will the Board take to process the claim? Will the Board guarantee
that the request (if urgent) will be dealt with immediately?
(12) How do new firms of quality and aspiration to meet client-demand ever
break into the system?
(13) Why were firms only invited to bid for one year rather than for the whole
of the contract period?
(14) How do firms like the applicants develop new areas of law such as public
law (human rights) and education when they must first have a contract in order
to be able to take on clients in the first place?
545. Mr Gordon submitted that a regime that continued to raise such questions
was hardly transparent, and that the questions remained unanswered despite
seven witness statements from the Board in these proceedings.
546. For these reasons he encouraged us to quash the entire new regime of
controlled contracts, or, in the alternative, to make a declaration that it was
unlawful.
Part 26. The court's conclusions
547. We have set out Mr Gordon's arguments at length in order that they can be
read and studied carefully by everyone, and in particular the Board and the
Lord Chancellor, who is concerned about the future of this scheme. We do not,
however, consider that it is necessary to set out our conclusions at equal
length.
548. We have already explained why we do not regard this as a case concerned
with an interference with what English judges are increasingly calling
fundamental or constitutional rights. Mr Gordon's arguments were full of
hypothetical worst case scenarios. In our judgment it would be wrong for this
court on the present application by a firm of solicitors, which makes no
suggestion that any of its own rights are being violated, to be distracted by
the possibility of what might transpire if a worst case scenario did occur. If
one of Ms Mackintosh's severely disabled potential clients (or former clients)
made a complaint to the effect that he/she was quite incapable of accessing a
court (or a MHRT) without competent help, that there were reasonable grounds
for challenging some act or omission which significantly affected his/her
interests (there are plenty of examples of these in Parts 16 and 17 of this
judgment), and that the Board's new scheme meant that he/she (or a proxy, if
capacity was lacking) could not find an adviser competent enough to protect
his/her interests adequately with the degree of immediacy that the particular
dilemma warranted, then the court would have the opportunity of considering a
real situation by someone claiming to be a real victim. Each case would, of
course turn on its own facts.
549. In this context the information services being prepared by the Board,
which are in an embryo form at the moment, would appear to play a particularly
important role in combating the danger of such a situation occurring,
especially if they are capable, as a reliable electronic information kiosk
would be, of giving immediate, accurate information about suitable firms or
agencies with available case starts. The Foreword to the Government White
Paper shows that it is an objective of Government that people must be confident
that they can enforce the rights they have, if need be. Before January 2000
there were 11,000 solicitors' offices in this country bearing the familiar
legal aid logo, and every financially eligible citizen was entitled as of right
to up to two hours of free legal advice. If the problem was not within the
solicitors' field of competence, or there was some good cause (see Legal Advice
and Assistance Regulations 1999, regulation 18) why the solicitor should refuse
to advise, the solicitor would refer the client to a list of other green form
solicitors, none of whom would be inhibited from advising by esoteric problems
like exhausted case starts or the possession of a licensed, as opposed to a
controlled, contract.
550. There was, in our judgment, a good deal of force in Mr Gordon's argument
that a vulnerable client of the type vividly described in Ms Mackintosh's
evidence needs a good deal of courage to approach a solicitor with a legal
problem, and particularly a problem of an intimate kind. The prospective
client is likely to be bewildered if the solicitor has to say that he/she would
like to advise, is willing and competent to advise, but cannot advise. We were
told that there has already been one story published in the legal press by a
solicitor who spent 35 minutes trying to explain to two clients of limited
mental capacity why he could not advise them on the present occasion, much as
he would like to do so. That solicitor would not necessarily know what other
solicitor or nfp agency still had a case start (or a tolerance) available in
the relevant field of law, particularly in the closing months of a legal year
when the state of the Board's budget might not permit it to respond immediately
to a solicitor's request for a new case start to be allocated.
551. These issues - and the likely response of a court of law if the current
difficulties over the provision of information are not effectively resolved -
lie, in our judgment in the future.
552. We have also explained why the continued presence of Section 32(1) of the
1988 Act on the statute book creates no impediment to the lawful introduction
of the controlled work scheme, and why we do not consider the special rules for
the initial period of advice by nfp agencies are ultra vires. For the sake of
completeness, we would add that the applicants also advanced an argument based
on Section 31 of the 1988 Act at the beginning of these proceedings. We
believe that they no longer urged it on us at the end of the case, and they
were right not to do so. The live issues in this part of the argument related
to the client's alleged right to select the solicitor of his/her choice under
the Legal Aid Act, and not to the nature of the client-solicitor relationship
once it was created.
553. What is left for us to consider, therefore, is Mr Gordon's frontal
challenge on the lawfulness of the scheme on the grounds that it is irrational.
In the final version of their Form 86A the applicants picked out eight matters
for specific attack (see paragraph 65-83). These were tolerances; the priority
given to family work; the allocation of cash to bid zones on the basis of last
year's spend; the same issue in relation to community care; the allocation of
case starts in contract awards; funding levels; the effect of the new generic
franchises; and transparency. The relief they sought was based on a global
challenge to the lawfulness of the whole regime. They did not seek
declarations that any individual parts of it were unlawful. Since they were
challenging the whole regime, they also challenged the lawfulness of the
directions that triggered off the scheme and the regulations, introduced in the
wake of the Lord Chancellor's first direction, which excluded so much work from
Part III of the Act with effect from 1st January 2000.
554. Mr Gordon reminded us of the way Lord Greene MR had set out the four
corners of the court's powers in Associated Provincial Picture Houses Ltd v
Wednesbury Corporation [1948] 1 KB 223 at pp 233-4:
"The court is entitled to investigate the action of the local authority with a
view to seeing whether they have taken into account matters which they ought
not to take into account, or, conversely, have refused to take into account or
neglected to take into account matters which they ought to take into account.
Once that question is answered in favour of the local authority, it may still
be possible to say that, although the local authority have kept within the four
corners of the matters which they ought to consider, they have nevertheless
come to a conclusion so unreasonable that no reasonable authority could ever
have come to it."
555. Because we are of the opinion that these proceedings are not concerned
with fundamental rights, we do not need to apply the more rigorous test of
anxious scrutiny (which Mr Gordon described as the "super-Wednesbury" test)
which has been developed by the courts in recent years. Our attention was,
however, also drawn to a recent dictum of Sedley LJ , giving the judgment of
the Court of Appeal in R v North East Devon Health Authority ex p
Coughlan [1999] 2 CCLR 285, when he said at pp 310A and 311C:
"One approach is to ask not whether the decision is ultra vires in the
restricted Wednesbury sense but whether, for example through unfairness or
arbitrariness, it amounts to an abuse of power.
This approach ... recognises the primacy of the public authority both in
administration and policy development but insists, where these functions come
into tension, upon the adjudicative role of the court to ensure fairness to the
individual."
556. In considering any challenge on Wednesbury grounds, the court has to
understand the subject-matter of the challenge. In the present case the
applicants mounted this attack on the totality of a scheme which had been
prepared over a two-year period and in which the Board had involved itself in
substantial processes of consultation at every stage.
557. The Legal Aid Board is a statutory body which derives its funding from the
Lord Chancellor and is obliged to follow the guidance given to it from time to
time by the Lord Chancellor. In January 1998 the Lord Chancellor required it
to prepare proposals for a new system for advice and assistance for all civil
and family matters based exclusively on contracts which he wished to implement
by the end of 1999. The Lord Chancellor approved the Board's proposals in
October 1998 and requested it to implement them. He had, in the meantime, told
Parliament in July 1998 that legal aid was in urgent need of reform. The
Board was therefore bound to comply with his wish that the new scheme should be
in place on 1st January 2000, unless insuperable and unforeseeable problems
stood in its path.
558. Governments are entitled to govern. It is clear from the evidence that
the present Government, like its predecessor, was deeply concerned about the
uncontrolled and uncontrollable haemorrhaging of public money under the old
green form arrangements, and wished the Board to complete all its preparatory
work in connection with the new scheme within a two-year time frame. The Board
therefore did not have an unlimited amount of time to prepare its scheme.
559. In the event it put its proposals out for consultation again and again
during the two year period between January 1998 and January 2000. It listened
to what it was being told, and from time to time it modified its proposals
accordingly. Indeed, one of the criticisms made of it by the applicants and
the Law Society was that it altered its proposals so much. We believe that
they would have been even more critical if the Board had showed itself
impervious to well-informed and constructive suggestions.
560. It will be obvious to anyone who reads this judgment that there are some
significant weaknesses in the way the scheme is operating at present. We are
sure that when the Board is able to consider the evidence in this case (and all
the other evidence now available to it) dispassionately, at one remove from the
forensic hothouse of these court proceedings, it would be the first to admit
this. It is one of the strengths of good management to be self-critical, to be
ready to recognise practical problems when they arise, and to take effective
steps to resolve them once they have been identified and analysed and their
nature properly understood.
561. Whatever Mr Gordon may say about the requirements of public law, some
weaknesses were bound to become evident in the early days of a revolution in
the provision of publicly funded legal services on this scale. It appears to
us that the test we should apply to his clients' complaints is not to ask
ourselves whether the Board ought to have obtained a better understanding more
quickly of the nature of legal practice in one or two quite small corners of
this very large market, and whether in that context it made errors of law in
not taking into account the additional considerations Mr Gordon urged upon us.
That would have required us to consider in detail the whole course of the
consultation process, and nobody asked us to undertake that task. In our
judgment the test we should apply in these circumstances is to ask ourselves
whether, given the externally imposed time-frame, the scheme the Board devised
is robust enough to accommodate the possibility of changes of tack once
weaknesses in the scheme of the kind that are evident in this judgment are
brought to its attention.
562. The management of major change is never easy. On the evidence before us,
the Board appears until now to have managed this particular change with
considerable skill. In particular, what the Board's regional offices told Mr
Orchard in the fourth week of January about the way this part of the legal
services market had adapted itself, on the whole, to these changes constitute a
tribute to the Board's management expertise (see paras 252-4 above).
563. We do not consider that the Board was irrational in devising the system of
tolerances which was so fiercely attacked by Mr Gordon, or the way in which
those tolerances were first distributed. The Board was, in our judgment,
entitled, if it saw fit, to take into account the evidence before it of past
extravagance among some of the suppliers of social welfare law services, and to
be cautious about the way it initially assessed need and distributed matter
starts and tolerances in that area. Of course it would have been tidier if it
had had more time before 1st January 2000 to identify the premier league and
first division suppliers in specialist areas (which is what this case is all
about), and to ensure that it made the best possible use of their skills. The
simple fact is that it was not given sufficient time to iron out all the
wrinkles before the scheme started. Government, as we have made clear, was
entitled to impose the timetable it did.
564. One of the most powerful criticisms we received was that the Board did not
make transparent from 1st January 2000 the principles on which it would be
exercising its discretion when responding to applications by suppliers for
increases in matter starts and payment limits under Clause B17. We also
received the powerful criticism that as soon as the Board sanctioned any
increase in matter starts it should have simultaneously sanctioned a
corresponding increase in the supplier's schedule payment limit.
565. In our judgment the Board was entitled, if it saw fit, to adopt the more
controlled, systematic approach it chose to adopt until it had had the chance
to review the workings of the whole scheme carefully and to measure the way
things were going so far against the budget it had been allowed.
566. The evidence shows that in these early days the Board is willing to move
swiftly to accommodate any of its contracted suppliers who are experiencing
difficulties. On the other hand, many of the early difficulties have been
experienced by contractors who have not read the contract carefully.
567. We are satisfied on the evidence that the Board is prepared to move
swiftly and decisively when it identifies a real problem. This is clear from
the way in which it dealt with the crisis in the immigration law field when it
became evident in January. We would hope that it will move with equal energy
to address the problems which these proceedings have identified in the mental
health and community care fields.
568. In mental health, the Board asserts, contrary to the beliefs of Ms
Mackintosh and Mr Foster, that it has achieved good coverage throughout the
country as a result of the initiatives it has taken over the last 18 months.
569. We are worried, however, that the Board has not yet appreciated how
difficult mental health law is, and how generalist solicitors cannot pick up
the expertise needed to serve their clients effectively unless they have a
strong educational and practical grounding in this field of law. We hope that
the Board will now take urgent steps to identify the really skilled solicitors
who are willing to serve their clients in this field at legal aid rates of pay,
and once it has identified them by a transparently fair process, to ensure that
they have the same freedom to serve their clients as the Board is willing to
afford to solicitors in the equally complex field of clinical negligence. It
may be that the Board will have to seek some middle path between affording all
mental health solicitors that freedom (which could not possibly be justified by
the evidence we have read) and affording it to none of them, but this task
should be attempted.
570 As things stand at the moment, a solicitor with Ms Mackintosh's
unquestioned skills in this field cannot travel for more than an hour from her
office in Southwark to see a client in a psychiatric unit of a hospital without
making a special case, and more than two hours travel is for all practical
purposes out of the question (see paras 194-6 above). A circle drawn at one
hour's travelling distance from the applicants' offices in Borough High Street
would demonstrate the extent to which the Board is at present depriving
mentally ill people of the services of one of the most skilled solicitors in
the country. The obverse side of the coin, to set against the demand for her
services from a much wider catchment area, is that because she understands
mental health law so well, she will not be charging the Board the hours a less
experienced lawyer would charge it in identifying the principles of law he/she
should apply to a client's problems.
571. In this context we would also draw attention to an important part of Mr
Foster's evidence. Mental health law is difficult enough today. Reading the
report of a psychiatrist, identifying its areas of weakness, commissioning
evidence from the appropriate expert to challenge it, and representing a client
at a tribunal requires expert professional skills born, as we have said, of
education and practical experience. It is not like going down to the
magistrates' court as a duty solicitor, arduous though those duties are.
572. In the fairly near future the demands made on skilled solicitors in this
field are going to increase exponentially. Professor Genevra Richardson's
report on the reform of the Mental Health Act 1983, the Law Commission's long
report on mental incapacity, and the Home Office's plans to detain people with
dangerous severe personality disorders when they have not committed a criminal
offence are all in senior civil servants' in-trays today and may all go to
Parliament for approval in the next five years. In addition, the Human Rights
Act 1998 becomes law next October and will also shine a bright light on this
corner of the law. Everyone, including the mentally incapacitated, will have
the Convention rights mentioned in Section 1(1) of that Act, and it will be
unlawful for any public authority to act in a way which is incompatible with a
Convention right (see Section 6(1). The rights and freedoms identified in the
Convention may not be limited or restricted or interfered with except on one or
more of a number of clearly defined grounds, and any such restriction or
limitation or interference will have to be objectively justified (see Schedule
1, Article 8(2), 9(2), 10(2) etc). Unless the Lord Chancellor tells the Board
that it need no longer concern itself with the provision of legal services of
high quality to these socially disadvantaged people, a lot still needs to be
done to empower premier league mental health solicitors to expand their
practices and to make their skilled services more readily available without the
present constraints whose existence these proceedings have illuminated.
573. In other words, the Board's present arrangements provide a good nationwide
spread of solicitors with an acceptable level of competence in mental health
law (as evidenced by their passing at least one level of the LAFQAS tests and
being members of the Law Society's MHRT Panel). What the Board needs to devise
now, unless it is permitted by some means to abandon the White Paper objective
of providing high quality services that provide the best value for money (for
which see para 9 above), are mechanisms for liberating the most skilful and
experienced mental health solicitors in this field from the constraints that
are so obviously needed for the generality of local practitioners.
574. Community care law poses a different set of challenges. The evidence
shows that the Board simply did not have the time or resources in 1998-99 to
study carefully what is happening in solicitors' practices in this field. We
were not, for instance, shown how many of the 29 holders of community care
contracts were solicitors' firms which provided advice in 30 community care
matters a year as part of their much wider general practice or how many firms
specialised in this field alone. The average cost of £136.10 per case
speaks volumes for the average level of service, given Ms Mackintosh's
unchallenged evidence of what her clients need and of what their problems are
likely to consist (compare paras 142-7 with paras 375-7 and 387-9 above).
575. At one point in argument (although not in evidence) it was suggested that
Ms Mackintosh was one of a handful of solicitors in the country today in this
very specialist field who had the skill to handle a case a complex as the
recent Court of Appeal case of Coughlan, where the client lived in
Devonshire. The Board's present arrangements confine her availability, for all
practical purposes, to clients who live within an hour's travelling distance of
Borough High Street.
576. We considered many of Mr Gordon's arguments to be over-rigid in their
challenges to the scheme. Of course, for the great majority of the local
solicitors in the scheme, the availability of funds in their bid zone is bound
to be a very important factor if they apply for more case starts. The Board's
evidence, however, shows that the scheme has an inbuilt flexibility, and Ms
Mackintosh has been told repeatedly that if she needs more case starts in the
early months of the scheme, she has only to ask, and the Board will pay, on a
proper assessment, for the work she does on each authorised case. She has also
been told that the monitoring of firms' schedule payment limits will continue
after 31st March 2000, so that if there is a significant discrepancy
between the rate of claims and the monthly payments which looks to be more than
a temporary or minor disparity, the powers in the contract will be used to
correct it. This unequivocal statement (see Mr Orchard's fourth statement,
para 111) ought to allay her concern that the Board will be fixing her firm's
schedule payment limit on the basis only of the matter starts achieved between
1st January and 31st March 2000 (when she is heavily engaged on this and other
judicial review cases) but is willing to be more flexible. (See also, in this
context, Mr Hamilton's statement at para 230 above).
577. In our judgment, this part of the litigation is not concerned with issues
of law as much as it is with issues of management. We have already rejected Mr
Gordon's attack on the scheme on the clearcut issues of pure law he argued
before us.
578. This is not to say that a court would necessarily be disposed to be so
charitable if similar complaints were made, say, in the autumn, and if there
was evidence to show that the sort of matters of which Ms Mackintosh now makes
complaint were still impeding her service to her clients. It is obvious in
this context that the Board needs to consider carefully the need for skilled
community care solicitors to have just as many tolerances available to them as
a family lawyer, because they are just as likely to be called upon to provide a
holistic service to their clients in the way Ms Mackintosh described. It would
be absurd for a solicitor of her skill and experience to have to send one of
her clients to another adviser for advice on housing or welfare benefits or
debt, for fear of losing one of her precious hoard of permitted matter
starts.
579. Given the flexibility which is inherent in the scheme, we can see nothing
irrational in the Board's choice of the periods from which baseline figures
were obtained, and the Board has made it clear that if it is satisfied that
those figures are no longer reliable because a firm has expanded since May
1999, it will respond to requests for increased matter starts as soon as the
need arises. We can also see nothing irrational about the priority given to
family work, in the light of the Government's objectives in the White Paper.
During the reviews it will undertake, the Board will no doubt look critically
at the content of the family law cases it is funding, if there are competing
challenges from other areas that profess a higher priority need. Cases
involving children, or domestic violence, or the loss of a home, will obviously
require priority, but analysis may show, for all we know, as Mr Gordon
suggested without any evidence to support his argument, that there are parts of
family law which should not always be accorded as high a priority as they are
at present given.
580. So far as the new generic franchises are concerned, we have already
expressed the opinion that the Board needs to take a long, careful look at the
arrangements it is making for provision in community care law. We did not
receive evidence about the other three categories. Education and actions
against the police are fairly self-contained categories, but we would not be
surprised if the late identification of a public law category has not caused
practical difficulties, not apparent in the evidence in these proceedings,
which will warrant very careful study during the forthcoming review.
581. Finally, we do not consider that it was irrational for the Board to have
launched its scheme without spelling out even more clearly the principles on
which it was going to exercise its discretion in one corner of this massive new
contractual scheme. We agree with Mr Gordon that transparency in
decision-making is always desirable, and under pressure from the court the
Board had nearly completed a clear statement of the principles it intended to
follow in the area of which he made complaint before time ran out and we could
no longer receive any more evidence. It would be very desirable, in our
judgment, for the Board to complete this process and to publish the principles
which counsel endeavoured to explain to us, not always backed by evidential
support, so that in these anxious early months everyone can know how the
Board's policy in relation to requests for increases in matter starts will be
operated across the country. We see no reason to criticise the Board's
intention to review, refine and possibly change these principles in relation to
the last nine months of the first contract period, when the scheme will have
settled down and the Board will have a better idea of each contractor's current
performance.
582. There is one final matter about which we would express anxiety. We have
considerable sympathy for the points made by Ms Mackintosh and the President of
the Law Society about the difficulties any new firm is likely to encounter if
it seeks to enter the market of controlled contracts in the second or
subsequent year of the scheme, and we were not wholly satisfied by Mr Orchard's
current view that this would not be likely to cause difficulties in practice.
Mr Gordon was correct when he described how the supply of specialist legal
services has been revitalised in recent years by movements in the market and
the emergence of skilled new specialist suppliers like the present applicants.
Although we have not considered the issue in depth, we are not at present sure
that paragraphs 6.4 and 6.5 of the Rules for Bidding in the Terracotta book are
likely to resolve satisfactorily all the practical concerns voiced by Ms
Mackintosh in her evidence. We note that on page 13 (paragraph 36) of that
book the Board has made it clear that it will be revisiting those rules in the
autumn of this year in advance of next year's contract awards, and we hope that
it will be able to move a considerable way in providing a skilled would be new
entrant into the market with the bankable assurances it will need before it can
commit itself to the acquisition of offices and computers or the employment of
staff.
583. This, however, is for the future. For the present, we are completely
satisfied that there are no grounds for setting this scheme aside on grounds of
irrationality, in the sense in which Mr Gordon used that word. It follows that
we also dismiss the applicants' challenges to the Lord Chancellor's directions
and to the December 1999 regulations.
584. For these reasons, while we believe that the applicants have performed a
public service in exposing this new scheme to the intense public scrutiny these
proceedings have demanded, we grant them leave to apply for judicial review -
because the points they raise are clearly arguable and they themselves applied
to the court as swiftly as they could - and dismiss their application.
Wednesday, 16th February 1999
LORD JUSTICE ROCH: For the reasons given in the judgment handed down this application will be dismissed.
MR GORDON: May I first of all express our gratitude to the Court for producing an astonishingly detailed judgment in such a short time. I have handed up to the Court a note which addresses two questions: the first is the question of costs and a little later in the note, as your Lordships will see, there is a note on permission to appeal. I wonder if I might deal with the costs issue alone and then let my learned friends respond to that?
LORD JUSTICE ROCH: Who is asking for what?
MR GORDON: We are both asking, I suspect, for different things, but we are both making applications in relation to costs.
LORD JUSTICE BROOKE: What about the position of the Lord Chancellor?
MR GORDON: I do not know.
MR CROW: Subject to your Lordships I had understood I was going to be speaking first on the subject of costs. Since the application has been dismissed it was going to be my request to make an Order for costs in favour of the Lord Chancellor. I am surprised my friend is opening having lost the application. I was going to address your Lordships first on costs and then perhaps let my learned friend reply to that since one would have thought one starts with the presumption that costs might be following the event. I would obviously want to make submissions along those lines.
LORD JUSTICE ROCH: There would be no point in hearing Mr Gordon if you were not making an application. I think, Mr Gordon, we ought to hear the application for costs first.
MR GORDON: I am certainly not going to claim the Court's attention first. I do wish to make the point that we are also making an application for costs in this case despite the fact that we have lost. Although it sounds unusual we do develop it fairly carefully in the note. I would have thought logically having prepared this note it might be helpful for the Court to see our general approach and then to hear my learned friends, but I am entirely in the Court's hands.
LORD JUSTICE ROCH: If you sit down we will read the note and then we will hear applications from the Respondents.
MR GORDON: I am very grateful, my Lords. (Pause)
LORD JUSTICE ROCH:. Yes, Mr Crow?
MR CROW: I am obliged. May I just remind you very briefly of the outline of the issues of the relevant advance of your Lordships' judgment in order to give some structure to my submissions on costs? As your Lordships are well aware there were broadly two aspects of the challenge. The first, I think, in the course of the judgment, was referred to as the issues of pure law. The second aspect was a matter more of management. So far as pure law is concerned, the first ground of challenge was based on the common-law right to representation and choice. This obviously had, from the Lord Chancellor's point of view, not only significance in relation to the 1988 Act but the knock-on significance in relation to the 1999 Access to Justice Act. As your Lordships will remember, the thrust of my learned friend's submissions, at least in opening, was that if there was common-law right, which it is said there was, it could only be cut down by express statutory wording. There was no such express statutory wording in the 1999 Act. So whether the Lord Chancellor had a wider interest in contending the issue in relation to the common-law right, your Lordships were able to deal with that fairly summarily in paragraphs 4, 5, and 6 of your Lordships' judgment, which simply referred to the Applicant's case as being based on fallacies both as to the nature and extent of the claimed common-law rights and the nature and extent of the legal aid scheme.
The claim, as far as it is based on the common-law right, failed in limine on that basis. The second aspect of the pure law claim, the section 32 of the Legal Aid Act (and again this obviously had to have serious implications from the Lord Chancellor's point of view as it went to the very root of the Lord Chancellor's ability to make the directions and the regulations that we did) your Lordships were again able to deal with my learned friend Mr Gordon's submissions on this very briefly at paragraph 476. I think the numbering has not changed and your Lordships dealt with it as a short point of interpretation. Your Lordships accepted, as a matter of interpretation, that what became known as the "entitled argument" is correct. Our interpretation of the effect of section 32 and its relevance in Part II was correct. Simply as a matter of interpretation that argument of pure law failed outright. Your Lordships kindly went on, in fact, to put the second nail in paragraph 477 and indicated that even if we had been wrong on the entitled argument we were right on the willing to act argument as well. On both issues of interpretation the second of the pure law points failed outright.
The second broad aspect of the claim related to what I think was in the later stage of the judgment, and your Lordships referred to as the "management issues". Without going through it, in any great detail, the first was the treatment of a 'not for profit' sector and that, of course, occupied a certain amount of Court time. However, as your Lordships recognise in paragraph 482 it is important to bear in mind just the context in which this point arose. Your Lordships said:
"It is to be observed that even were the applicants to be correct in their submissions on this point, it would not be a ground for declaring the whole of the new regime illegal."
As your Lordships will be aware the application was, and only ever was, a challenge root and branch to the entirety of the scheme. It at no stage attempted to amount a selective attack. The Form 86A sought declarations that the entire scheme was unlawful. Your Lordships indicate that even if that point was right it would not have helped them home. Your Lordships, in any event, dismissed that point at paragraph 485 and found again our interpretation of the relevant provision of the direction was correct.
The rest of the judgment deals in some considerable detail with the Wednesbury irrationality complaint. There were just, I think, three aspects of the judgment that I wanted to remind your Lordships about in relation to costs because they go to the root of the issue. The first, my Lord, is in paragraphs 508 and 509 where your Lordships will remember that you criticised the Applicant's attack on the scheme because it appeared to be based, to a substantial extent, on a want of understanding of the content of the case load of a family law practitioner under the new control contract:
"The extent of their ignorance was displayed by their failing to appreciate that modern family law policy has encouraged clients to access the magistrates' court rather than the county court for many matters. Equivalent remedies are available in each, and the choice of venue should depend on whether the issues in a case are concerned principally with questions of fact, or with questions of law. It would therefore have been quite unreasonable, as the Board appreciated, for ABWOR in magistrates' courts and certificated (or licensed) work in county courts to have been dealt with in different parts of the new contracts.
There was also a failure to appreciate how much family work is concerned with easing the pain that is caused when relationships break up, protecting the vulnerable from violence in the home or from threatened homelessness, or protecting children from the fecklessness, irresponsibility or cruelty of adults."
Your Lordships go on to criticise the whole thrust really of the Applicants understanding which conditioned their approach to the rationality of the Court's decision.
The second point that I just wish to remind your Lordships of, in relation to your own judgment, is at paragraph 505 where having identified the substantial number of the complaints your Lordships say at the very end of that paragraph in the last four lines on this point:
"... in our judgment, the reasons why the Board considered that it could not rely on the numbers of cases in fields of law other than family and mental health as an adequate indicator of need are comprehensively and satisfactorily explained in Mr Orchard's evidence..."
so not in submissions, late notes or anything of that sort. It is plainly set out in the evidence.
The third general point I wanted to remind your Lordships of is the specific instances where assertions and submissions were made that were not, in fact, supported by the evidence. Without taking your Lordships through the detail I picked up three references (if I can just remind your Lordships) are at paragraphs 495, 513 and 516. There were instances where your Lordships, in our submission, correctly recognised that submissions being made on behalf of the Applicants were not supported by their own evidence. As to the specific points your Lordships may remember that one of the complaints was the division into section A and B firms. That was dismissed as a matter of principle in paragraph 515. In conclusion, if I can just remind your Lordships, having expressed some sympathy with some of the criticisms in relation to the entry of the new firms, your Lordships then start to wrap up this whole area of the attack at paragraph 548 where your Lordships say:
"We have already explained why we do not regard this is as a case concerned with an interference with what English judges are increasingly calling fundamental or constitutional rights. Mr Gordon's arguments were full of hypothetical worst case scenarios. In our judgment it would be wrong for this court on the present application by a firm of solicitors, which makes no suggestion that any of its own rights are being violated, to be distracted by the possibility of what might transpire if a worst case scenario did occur."
So although your Lordships do express a certain amount of concern on some aspects when approaching the whole thrust of the Wednesbury challenge, your Lordships make that observation and we would submit that that is highly significant. So for those reasons your Lordships quite plainly have not only dismissed the Applicants' arguments on pure law, but your Lordships have entirely dismissed the challenge on grounds of the management challenge: the Wednesbury challenge.
Your Lordships expressed a certain amount of concern in relation to two aspects: one is the problems facing new entrants and the other is the basis upon which the Board might choose to vary contracts in order to meet factual situations as they arise. Neither of those were in fact the factual basis for the challenge. The challenge itself was being mounted to the lawfulness of the entire scheme and that application has failed in its entirety. Although the Lord Chancellor was joined at a somewhat late stage at the hearing in front of you on 11th or 12th January, the matter was adjourned so that the Lord Chancellor could be separately represented which he was through me and the application has failed in its entirety. That being so, in our submission there is no basis upon which your Lordship should exercise any discretion other than to make the usual award which is that costs follow the event.
In anticipation of the short points that my learned friend seeks to make, could I just refer your Lordships to his note on costs picking it up at paragraph 3? At 3A, the foot of the first page, he says: "The Applicant has performed a public service in bringing these proceedings." He refers to a phrase in the very final paragraph of the judgment. My Lords, it is certainly true that your Lordships have had the opportunity of considering a number of criticisms in relation to operational aspects of the scheme. Those criticisms have provided an opportunity for a critique of some aspects of the operational side of the scheme.
Our submission is quite simply that if that is the public service which has been provided it did not have to be provided at the cost of six days in Court. If there were concerns that the Applicants had they could and should have been brought in the form of the dialogue with the Legal Aid Board. The fact that a public service has been provided in the sense of a spotlight being turned on certain issues in our submission does not alter the fact that that public service could equally well have been provided by a form of dialogue with the First Respondent. It does not justify depriving the Lord Chancellor of his costs, not least because the issues in which your Lordships have found some concern were not the issues that were being run against the Lord Chancellor. The Lord Chancellor is effectively here substantially to meet the issues of pure law and the Wednesbury challenge to the rationality of the scheme had the knock-on consequence of the challenge to the directions, but it was not the main substance to the challenge of the Lord Chancellor's position.
Our submission is that the public service did not simply have to be provided in the form and at the cost that it was. That, in our submission, is not a relevant consideration when your Lordships come to decide the question of the apportionment of the costs in this matter.
The second point under paragraph 3B at the top of page 2 is that the Applicants indicate that they will be suffering some financial prejudice if a costs order is made against them. It is a rather difficult tightrope for my learned friend, Mr Gordon, to walk on this one because it is in evidence that the Applicants will, in fact, be indemnifyed by the Law Society in relation to any adverse Costs Order.
LORD JUSTICE ROCH: I do not think that is a prejudice being referred to.
MR CROW: No. They say the prejudice that they have suffered is in fact the prejudice that they have inflicted on themselves by devoting time to a case which has failed. In my submission that is simply not a relevant consideration that should influence your Lordships in order to insulate them from the costs consequences of that failure.
LORD JUSTICE BROOKE: Five years ago the Law Commission made a strong recommendation that there should be provision for costs out of Central Funds in a situation like that. As far as I know that recommendation has never been brought by the Lord Chancellor before Parliament: as to what extent do we take into acount the fact that the important public body,, Government's main advice on law reform, has recommended law reform accommodate the anxiety expressed in item B, and nothing has been done about it.
MR CROW: I hope it would not be too fascile if I answer your Lordships by saying your Lordships are constrained by enforcing the law as it stands rather than it might be.
LORD JUSTICE BROOKE: I appreciate that. My next question is: when I appeared in your type of shoes regularly before Lord Parker it was only in exceptional cases that this Court awarded two sets of costs. To what extent has practice changed since those day?
MR CROW: As a matter of general practice I am not sure that the principles have changed. Your Lordships have a discretion to award one or two sets of costs, depending on the circumstances of the case. The reasons why I would submit that the Lord Chancellor is entitled to his costs independently are that he was quite separately and independently joined as a party, as I understood, from some skeleton argument I have seen that was put in front of you on 11th January. The adjournment that was then being sought was partly on the basis that having been joined the Lord Chancellor would need to instruct separate legal representation.
LORD JUSTICE BROOKE: The Lord Chancellor wished to instruct separate representation. That is a matter which exercised before my Lord Chief Justice. To some extent it is belt and braces. The Lord Chancellor wished to have his case separately argued and to separate his representation from that which Mr Pleming has been advised up until now.
MR CROW: All I think I can gain from that is simply this, that if it was inappropriate for the Lord Chancellor to be separately represented presumably that would not have been a consideration in favour of granting an adjournment at that stage. I cannot make much more of that. The attack on the regulations and on the directions themselves was an attack directly on the instruments that the Lord Chancellor himself had made. Your Lordship may remember one of the particular arguments that was directed against the directions was that by the form of the direction which approved the Legal Aid Board's general contracts, which themselves had built into them a mechanism for amendment of those contracts, one of my learned friend Mr Gordon's submissions was that the direction itself subverted the system under which contracts by the Board should be provided pursuant to directions given by the Lord Chancellor. There were discrete points which were open to the Lord Chancellor. Your Lordship may remember out of six days of hearing I was on any feet for 45 minutes. I do not think this is disproportionate representation of separate and distinct interests which the Lord Chancellor held in defending those two instruments.
Just to finish the submissions in anticipation of what my learned friend, Mr Gordon, is going to say, at page 23C he says that the Applicant had no option but to bring the proceedings. My Lord, several things can be said about that. They certainly have an option not to bring the proceedings. They were not obliged to bring the proceedings. I had read the relevant paragraph in your Lordships' judgment as meaning that they could not have brought them before December. They had to bring them in December in that sense but they did not have the imperative to bring them any earlier. The main point is that the Applicants were not forced to bring proceedings in any sense.
Secondly, and perhaps more importantly in relation to costs, having brought them and having received all the evidence in response they did not have to continue with them. They did continue with them seeking an absolute challenge from the entirity of the scheme and throughout the entire hearing on grounds all of which have failed.
The final point D relates to a point and blurring distinction between the two Respondents. It simply says: ^^Quote unchecked
"R only produced a note on the...(read into the words)... which the discretion was to be exercised."
I can say two things about that: it is not a point against the Lord Chancellor at all----
LORD JUSTICE ROCH: Perhaps you can leave that to Mr Pleming?
MR CROW: I am obliged. For those reasons, and subject to anything that your Lordships may want to hear in reply, I invite your Lordships to make an Order that the Lord Chancellor's costs follow the event.
MR PLEMING: We start from the position also that the normal position is that the costs follow the event.
The complication in this case is because of the split of representation from 12th January: to begin with the Board and the Lord Chancellor together and then the Board in the end which had to lead on the main legal arguments. It is the main legal arguments that we draw attention to as does Mr Crow: the common-law principles, access to justice and the construction of the legislation. We have spent a considerable amount of time and effort in responding to a whole series of arguments, none of which have succeeded before your Lordships. To that extent there is an overlap between the parties but it is inevitable that the Board has itself expended a considerable amount of costs resisting the claim. The issue probably then concentrates on passages in the judgment of your Lordships which talk in terms of obligations to bring the proceedings and the performance of the public service. I will not go through those paragraphs again. If such proceedings are brought, even with comments by the Court that a public service has been performed by shining a light on the emerging scheme, it does not follow that the taxpayer should be required to pay for that. My Lord, by this application the Board is seeking to protect the interest of the taxpayer on the costs issue.
LORD JUSTICE ROCH: Why not if the result is that people will receive legal advice and assistance which otherwise they might not have done because solicitors will now know the principles on which the Board is going to operate the scheme, particularly in relation to the granting of a fresh start?
MR PLEMING: Could I deal with the notes?
LORD JUSTICE ROCH: I think you need to deal with paragraph 3D in Mr Gordon's note?
MR PLEMING: Could I leave that general submission. What we have when it comes to costs is the Law Society on one hand and the public purse on the other because indemnity is before your Lordships. It is whether the Law Society should pay or the tax should pay. Dealing with the note, your Lordships will recall how that note emerged. Your Lordships expressed concern about the emerging policy in relation to dealing with applications for increasing case (inaudible). We sought to respond to that by bringing together material and producing a note. What we have sought to emphasise throughout is that this is a process which would lead to a review in the April and June period.
In the course of that review the principles which we have been driven to produce in haste during the proceedings would also have been emerged (?). What has happened is that in the course of extremely complex submissions, and extremely complex emergence of evidence, the Board has had to concentrate all its efforts on this litigation rather than on producing its own process towards dealing with the scheme. Lessons have emerged by dealing with exchanges with your Lordships and we have done what we can to meet those concerns. There is reference in 3D to a number of paragraphs. I have not attempted to go through all the paragraphs. I note there are some notable omissions. One of the problems is that this note by my learned friend was handed to me as your Lordships came into Court. I have not had a chance to produce any detailed response. The slip of authorities which goes with it was also handed to me at that time.
If your Lordships go back through your Lordships' the judgment the emergence of the note is there dealt with. It should not itself be a reason to deprive the Legal Aid Board of its costs and if it does have the effect it can only have the effect of reducing, to a limited extent, that entitlement to costs. There is nothing else one can say because this is a frontal challenge, as your Lordships emphasise at paragraph 577, for example, to the entire scheme. It is not a challenge which at the end of the day is about that note. The note, of course, is an importance, but, in any event, the Board have to have dealt with all the other issues.
My Lord, if your Lordships have a moment to reflect over the argument, and indeed the skeleton argument that we have prepared, the first 25 or so pages of our written submissions concentrated on construction of statutes, common-law principles of access to justice, fundamental human rights: all the issues which were raised and fell away. In the rationality challenge there was a moving debate. Your Lordships refer to the evidence put in remembering that much of the evidence came in through the Law Society and through their 40 or so solicitors. The main reason for the adjournment on 12th January, when your Lordships reserve the question of costs save to reserve that the Applicants will not receive any costs when they succeed at the end of the day, is because of the late production of evidence. We say the note itself should not be, and cannot be, determinative of the issue of costs and we go back to fundamental and basic principles. Unless I can assist you further that is all I want to say?
LORD JUSTICE ROCH: Mr Gordon?
MR GORDON: We recognise that this has been, as the Court acknowledges, a case that raises important and sensitive issues and quite often costs issues are brushed under the carpet at the end of the case, but it is our submission that the costs issues here are equally important. May I differentiate between my response to the submissions of Mr Crow and Pleming? My learned friend Mr Crow in our submission has stated, with respect, the obvious and ignored the relevant. It is obvious, and we face it immediately, that we have lost the case. It is obvious that we have lost the issues of statutory construction and fundamental rights. What is less obvious, so far as the Lord Chancellor is concerned, is why Mr Crow develops quite detailed submissions before this Court relating to rationality. He never addressed the Court on rationality issues at all. It was no part of his case. He only addressed your Lordships on the points of law.
So far as the points of law are concerned, he made no separate point whatever that was not made by my learned friend, Mr Pleming. In other words, the brutal reality of the Lord Chancellor's intervention is that your Lordships heard from Mr Crow for 45 minutes, as he himself indicates, on points which were repetitions of arguments and submissions quite clearly advanced by my learned friend for the Legal Aid Board. It is highly unusual for two sets of costs to be awarded. Of course the Lord Chancellor is entitled to be represented if he wishes, but I do submit, quite apart from the point that I am going to come to in a moment: public interest, that even following a normal case, leave alone a case such as the present, as a matter of discretion Courts do not generally award two sets of costs in circumstances where the advocate for the second public body is, with the greatest deference to the submissions made, largely repetitive.
MR BROOKE: That is your understanding of what the practice is?
MR GORDON: Yes absolutely. So far as my submissions made by my learned friend, Mr Pleming, are concerned, again he states that which is a true issue, and with which I agree, that the note should not be determinative of costs. When your Lordships come to this note that we have prepared the Court will see that we are not suggesting that the note should be determinative of costs. Behind everything lies a really important issue which it is that these Applicants have advanced a case before the Court on a permission application, which incidentally they have won because permission was granted with the utmost expedition. Your Lordships recognise that in the early part of the judgment the Court time was not needlessly taken up, it was taken up as fast as possible with really complex materials. The scheme in the end has survived, but it has survived with clear warnings from the Court as to the need to consider, with the greatest possible care, all the points that the Applicants have made.
Indeed your Lordships set out in extenso my submissions for the express purpose that those concerned with the future of the scheme, including the Lord Chancellor, should read them with the utmost care. It is our submission (and there will not be many cases like this) that as a matter of discretion it is not a question of future law it is the law as it is at the moment, where general public service is performed by an Applicant in raising issues which will not otherwise have been clarified and scrutinised and in the end result, I will submit, in a saving of public funds and an increase to access to justice, that the Court has a discretion and exercises it not to make an adverse award of costs.
There is an example with Potts J in the Greenpeace case. We tried to obtain the transcript on costs but failed to do it but in that case no costs are brought against Greenpeace because they have brought a public law challenge. If the Court looks at the very first authority in this bundle at page 485, the Privy Council case, it is the last passage in the speech of Lord Woolf where right at the bottom of 485 (page 20 of the authority's bundle) his Lord said this:
^^Quote unchecked
"There remains the question of costs although the appeal is to be dismissed the Applicants were not bringing proceedings...(read into the words)... Important that their Lordships examine and in the circumstances there Lordships regard it as just that there should be no order as to the costs on this appeal."
There is a second principle that we also extract from the authorities which is set out at 2B of the note. If your Lordships then turn the page to pages 22 and 23 again Lord Woolf this is the unreported part of the Coughlan decision. The reported part is already before your Lordships. This is a case where a very important challenge was brought to the constituent elements of the National Health Service. My learned friend, Mr Pleming, appeared against me in that. We lost on a number of issues but won the overall case. At page 22 Lord Woolf in the first paragraph sets out the general rule. We know the general rule. I accept the general rule, but said in the second paragraph: ^^Quote unchecked
"This case undoubtedly does not fall within the generality of cases...(read into the words)... that it was very important that the difficultish issues were to be considered if full."
Then the next paragraph: ^^Quote unchecked
"This is clearly a case where public interest issues arose...(read into the words)... As a consequence of the wider implications in litigation of which she is involved."
The principle we extract at 2B is that: ^^Quote unchecked
"It is also considered by the Courts to be important...(read into the words)... Public interest are not prejudiced and then I repeat that extract"
LORD JUSTICE BROOKE: This is a case in which a legally aided Applicant has won, is it?
MR GORDON: The claimant won but lost on about four issues. The other side asked for costs and apportionment and the problem with the Coughlan case was that the Applicant had actually sunk her funds: her life savings into the first part of the case. It was on that basis that we said she should not be prejudiced because after all she had brought a case, true enough partly for herself but also in the wider public interest.
The last principle, which we set out at 2C, is the obvious principle. I do not need to take your Lordship to the references whereby costs can obviously be effective by a party's conduct before or during the litigation. Then we apply, or seek to suggest, an application of those principles and these are really uncontroversial points. It is not a case of my learned friend making submissions on them. We recall what the judgment actually says. The Applicant has performed a public service in bringing the proceedings. There is a funding of the entire proceedings save for the indemnity and your Lordships do not need me to spell out the prejudice, it is there in the note. We had no option but to bring the proceedings.
The words used in paragraph 14 are slightly different but the words, I think, "was obliged to bring the proceedings", but most importantly the whole point of this is that what we now have, to use my learned friend Mr Pleming's language, is 'light shining upon a scheme' that before caused the Court to have grave anxieties and which was clarified during the evidence as the case proceeded. I will not take your Lordships to all those passages but I have asterisked a few. Can I show your Lordships the paragraphs that we have asterisked first of all at 16?:
"At this point, however, we would mention that, as the argument developed, it became increasingly obvious that the applicants' main concerns about the details of the scheme were focused on a very few, very important, areas of complaint. The documentation we had seen did appear to be rather rigid... It was clear to us that we needed to know more about the principles on which the Board intended to exercise the extensive residual discretions it had retained for itself."
This is not a question where a "dialogue", to use Mr Crow's words, could have any sensible effect. It needed the public scrutiny that these proceedings had subjected it to. Then at paragraph 251 under Part 14 of the judgment:
"It will be readily apparent that there was a chasm between the applicants' perception of the effect of the new scheme on a small, specialist firm... and the responses they and we were receiving from the Board. A continuing dialogue, full of creative tension, ended with..."
and your Lordships praise the high quality of the evidence, but it is wholly artificial to say this kind of exercise could ever have been conducted in a non-forensic forum.
Your Lordships will also see the anxieties expressed and recorded in the next paragraph of the judgment.
My Lords, paragraph 267 we do regard as important where the Court says this:
"The applicants contended that this statement about the Board's policy was not contained in its evidence at all. We would comment that if this is indeed the Board's policy, it is a legitimate criticism that it has not been spelled out until it produced this statement by counsel, largely unsupported by evidence, on the fifth day of the hearing under pressure from the court. Merely to say, as Mr Orchard did in one of the Board's three cross-references on this topic, that extensions would be forthcoming in appropriate cases, does not advance matters at all..."
Then paragraph 563 near the end of the transcript my Lords we submit an
important paragraph. I think it is now, in fact, 564 but your Lordships at 563
do indicate that:
"We do not consider that the Board was irrational in devising the
system of tolerances..."
and to be cautious about the way it expressed its assessed need. Then at 564
your Lordships will see:
"One of the most powerful criticisms we received was that the Board
did not make transparent from 1st January 2000 the principles on which it would
be exercising its discretion... We also received the powerful criticism that as
soon as the Board sanctioned any increase in matter starts it should have
simultaneously sanctioned a corresponding increase in the supplier's schedule
payment limit."
The last paragraph is 581. It is really the second sentence. Of course I
accept we lost on irrationality at the end of the day, but in that second
sentence your Lordships say:
"We agree with Mr Gordon that transparency in decision-making is
always desirable..."
And then this:
"... and under pressure from the court the Board had nearly completed
a clear statement of the principles it intended to follow in the area of which
he made complaint before time ran out and we could no longer receive any more
evidence."
This is not a question of forensic point scoring. We have lost but we have
raised matters which, in our submission, it is not right that these Applicants,
or indeed the Law Society, should have to pay for in its entirety at least
because the public service which has been produced will actually benefit the
public.
So my Lords in terms of how we respectfully submit that this Court should look
at costs, we raise four suggestions: first of all, we do respectfully submit
that the Applicants in this case should not be ordered to pay any of the
Respondents' costs. Secondly, we submit that there should be an apportionment.
We do not suggest that the note should be determinative. We do accept that we
have lost, but we do say there should be an apportionment to reflect the fact
that we did perform a public service, that there will be financial prejudice to
the Applicant, in any event, and that unless the Respondent had produced this
note the Court's extreme disquiet would not have been allayed. As a matter of
fact we now know, because of this note, and practitioners will know that they
can go to the Board and that they will get extra case notes. That emerged
really right at the end of the hearing and that is important.
Therefore we do submit, and I prefaced it in the begining, that in the highly
unusual circumstances of this case the Applicants should receive some costs
from the First Respondent, discounted, of course. Either they should receive
a percentage, and your Lordships see how we have put a suggested percentage, or
we should receive a percentage with an equivalent percentage of costs in the
First Respondent's favour. Your Lordships see at page 3 of the note the effect
in terms of the Applicants being recompensed for some of the effort that they
have put into this challenge. At the end of the day whatever your Lordships'
decide I simply invite the Court to put the point that Mr Pleming put before
the Court: 'We say the taxpayer should not have to pay' but I say, with the
greatest respect, 'Why not?' Those are our submissions on costs.
MR CROW: Can I just make two short points in answer? The first is simply this,
my learned friend, with respect, has drawn your Lordships' attention to nothing
to support his proposition that the public benefit that has been derived from
this case could not have been derived without litigation. Can I just remind
your Lordships what you said in paragraph 560 of the judgment where we would
gratefully adopt this in this context:
"It will be obvious to anyone who reads this judgment that there are
some significant weaknesses in the way the scheme is operating at present. We
are sure that when the Board is able to consider the evidence in this case...
dispassionately, at one remove from the forensic hothouse of these court
proceedings, it would be the first to admit this. It is one of the strengths of
good management to be self-critical, to be ready to recognise practical
problems when they arise, and to take effective steps to resolve them once they
have been identified and analsyed and their nature properly understood."
In my submission there is absolutely nothing that has been deployed before you
to suggest that the Board would have shut its eyes to the points that have been
made in Court if they had been made by way of submission to it without the need
for litigation. In our submission the fact that there may have been an
incidental public benefit does not mean that any unusual Costs Order should be
made. The second is the simply in relation to Coughlan (1999 2 CCLR
285). In our submission this is not an authority that supports my learned
friend at all. Indeed it is apparent that it does not support his position
from the sentence just after when he stopped reading on page 22 on the last 4
lines of the penultimate paragraph, because what Lord Woolf said there was:
"In general it can be said that Miss Coughlan was right to bring the
proceedings and right to contest the appeal."
The case had been substantially won. The issue that was being debated there
was: should there be a severance on the costs order to reflect the fact that
some issues had been lost? Overall Miss Coughlan had been substantially won.
That was the context of that judgment. It has no impact on this case whether
it has been outright lost in relation to all issues which are deplored before
you. I am grateful.
MR PLEMING: Can I deal with the three cases very briefly? The New
Zealand case is strikingly different. Of course there are public issues
here, this is page 485 of the Appeal Cases, page 20 of the bundle. We have not
to suggest otherwise. There is a commercial element in this case and that
reflects in the Law Society's intervention. Also there are special
circumstances where it was necessary to go to the higher court because of
uncertainty in the decision of the Court of Appeal. Coughlan is a
particular case in what was being debated there, although what does not clearly
come out from page 22, is that Miss Coughlan who had won was concerned that if
she did not receive the costs of dealing with the expense incurred by
interventions, including the intervention by the Secretary of State who had won
on his argument as to nursing in care, then she might be out of pocket. There
were special circumstances which do not impact on this case.
Could I then turn to the question of the note we put in in the course of
submission? As I said, Mr Gordon's note was handed to me very late in the day.
If it had been handed in earlier I would have produced a response paragraph by
paragraph. However if one goes through 3D and the paragraph there selected
from your Lordships' judgment, without inviting your Lordships to read your
Lordships' judgment again, the selection is indeed selective. Your Lordships
have been taken to some passages from some paragraphs. The flavour of your
Lordships' judgment is, however, reflected in other paragraphs, not just 267,
for example, you get double asterisk 269 which follows.
Let me give your Lordships' another example without spending too much time on
it. Paragraph 560 has been drawn to your attention by my learned friend, Mr
Crow. Would your Lordships kindly read on to 561 which emphasises that in a
scheme such as this: a revolution in the provision of legal aid:
"... some weaknesses were bound to become evident in the early days of
a revolution in the provision of publicly funded legal services on this
scale."
You go on in that paragraph, I am now using the draft not the approved
version:
"In our judgment the test we should apply in these circumstances is to
ask ourselves whether, given the externally imposed time-frame, the scheme the
Board devised is robust enough to accommodate the possibility of changes of
tack once weaknesses in the scheme of the kind that are evident in this
judgment are brought to its attention."
You then say:
"The management of major change is never easy. On the evidence before
us, the Board appears until now to have managed this particular change with
considerable skill. In particular, what the Board's regional offices told
Mr Orchard in the fourth week of January about the way this part of the legal
services market had adapted itself, on the whole, to these changes constitute a
tribute to the Board's management expertise."
The significance of that passage which comes immediately before the paragraph
upon which my learned friend,
Mr Gordon, relies is that we were here dealing with a changing state of
affairs, a scheme which is only just being introduced and that there were
inevitably teething difficulties which we described. The final paragraph is
581, and again I will not deal with it in detail. It was read by my learned
friend as being an asterisk star paragraph. He only read the first sentence.
If your Lordships read it (I am sure you know it well) and if you continue to
the end of the paragraph:
"We see no reason to criticise the Board's intention to review, refine
and possibly change these principles [those are the principles which we
attempted to put together in response for your Lordship's concerns] in relation
to the last nine months of the first contract period, when the scheme will have
settled down and the Board will have a better idea of each contractor's current
performance."
We emphasise paragraph 583:
"This, however, is for the future. For the present, we are completely
satisfied that there are no grounds for setting this scheme aside on the
grounds of irrationality, in the sense in which Mr Gordon used that word. It
follows that we also dismiss the applicants' challenges..."
Going back to my learned friend's, Mr Gordon's note, when he comes to his
suggestive solution for the costs, you are being asked to depart from what is
the normal provision on costs: whether it be for one Respondent or to be shared
between them. We say that it cannot be right that in a case such as this the
Applicant should be awarded its own costs, be it 50 per cent or some other
proportion. The question really is how much of a contribution should be made
towards the Respondents' costs which at the end of the day we emphasise will
not be paid by the firm but by the Law Society. Those are the submissions we
make. I have not made separate submissions on the adjourned hearing. We had
those on 12th January.
LORD JUSTICE ROCH: Thank you. We will retire.
© 2000 Crown Copyright