The regulation states:
16 (3) The Board may authorise that the requirement created by section 12 (3) (c) of the Act that, before recourse to the Fund, fees or outlays shall be paid to the solicitor out of any property which is recovered or preserved for the client shall not apply in relation to the whole or any part of any such property in any case where an application by the solicitor the Board are satisfied that –
(a) payment out of the property to which the requirement would otherwise apply would cause grave hardship or distress to the client;
You should make this application if paying the costs of the case from the property recovered or preserved would cause the applicant grave hardship or distress. To make an application under Regulation 16 (3) (a), you should use form AA/HARDSHIP/1. This form must be fully completed and signed by both you and your client and submitted via the online system.
Although applications made under Regulation 16 (3) are commonly referred to as “hardship applications”, applications under Regulation 16 (3) (a) require to demonstrate grave hardship or distress. We are not aware of any formal legal definition of “grave” in such a context and so believe it reasonable to apply the ordinary meaning of the word which we take from standard dictionary definitions to be “serious, important or crucial”; and the ordinary meaning of the word “distress” to be “extreme unhappiness or worry, upset badly or in dire need of help”. In other words, the standard to be met is extremely high and not met by inconvenience or disappointment.
We will look at each hardship application on its own merits and consider the impact on the applicant of paying your fee and outlays.
For applications based on grave hardship you must provide details and supporting documents showing your client’s financial circumstances at the time the settlement was reached.
Please note that being in receipt of state benefits is not indicative by itself of grave hardship. If your client was and continues to be on benefits before and over the course of the action, this will not be considered as grave hardship.
If there is evidence that the applicant has deliberately disposed of property or, for instance, left employment in order to avoid paying, we may refuse the application.
Specific financial evidence you should supply us with
Applicants should give us full and up-to-date details, including documentary evidence, of: their income, outgoings and any outstanding liabilities. This should enable us to assess the impact on them paying your fees and outlays and whether they are likely to suffer any grave hardship.
For example, we will take into account the costs of re/mortgage, council tax, gas and electricity, food, essential travel, and children’s clothing.
Our consideration of your client’s outstanding debts
When assessing your application, we will consider any debts such as arrears for rent, mortgage, utilities, and council tax which have accrued as a direct result of the action in which advice and assistance was granted.
The Board will consider non secured debts but payment of your account takes priority.
When an application is submitted you must state the desired use for the property your client has recovered or preserved and provide evidence of the costs involved.
Examples of essential costs that may be considered are:
Example 1: If the applicant is a lone parent, living in an isolated rural area and a motor vehicle is vital to travel to shops, schools or medical practitioner, the application is likely to be granted.
Example 2: If the applicant’s home was flooded and flooring damaged, redecoration is needed. We would consider allowing the client sufficient funds from any award made to fix the flooring and redecorate the damaged area. Quotes and/or receipts must be sent with the application.
Example 3: Following an employment matter the client wishes to repay a debt for Council tax. The debt is for 10 months of unpaid council tax. For seven months of this time the client was in employment, but for three months they were unemployed and the funds now awarded to the client are to compensate them for the period they were unemployed. We will allow the client to use sufficient funds from the award made to cover the 3 months of arrears that the client was in unemployed, but not the 7 months in which they were working.
Examples of non essential costs that will not be considered are:
Example 1: An applicant receives damages from the council because they had an accident. With the funds received the client wishes to purchase a new television and entertainment system. This would not be considered as an essential cost and the application refused.
Example 2: An applicant receives money from an employment action and wish to use the funds to renew a football season ticket that they could not afford to do previously. This is not considered an essential cost and the application would be refused.
We will consider the impact the sale of the property recovered or preserved will have on the applicant, including:
Example 1: Client recovers a television. If this had to be sold to repay the fee, the amount that would be received from the sale of second hand goods may be minimal and may not cover the cost of the account. Client would be left with no TV and no funds to cover full fee. The application would be considered.
Example 2: Client receives a policy which is not due to mature until a much later date. If the policy is surrendered now to cover fee the client will lose some of the value. This is not considered as grave hardship and the application would be refused.
Information you should provide about potential client distress
Where applicants claim they will suffer distress if they have to make payment of your fee, you should explain in detail the nature of such distress. Would they have to sell a treasured family heirloom or personal item of a close relative? If applicable, they should provide medical evidence to support the nature of the distress. The test is one of reasonableness, which we see as being fair, logical and sensible.
We will not make any specific provisions for types of case – for example, money received from the Criminal Injuries Compensation Authority and employment appeal tribunals.