Solicitor hardship applications: difficulty or delay in recovering from the applicant

Definition: text of Regulation 16(3)(b)

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 –

(b) (i) the solicitor has taken all reasonable steps to obtain payment out of the property to which the requirement would otherwise apply; and

    (ii) payment to the solicitor out of that property could only be effected with unreasonable difficulty or after unreasonable delay.

Difficulty recovering from an award: the correct application form

You should make this application when you have difficulty or delay in recovering your fee and outlays from your applicant or are unable to determine if any property has been recovered or preserved. When applying to us to waive payment out of property under Regulation 16(3)(b), you should use form AA/HARDSHIP/2. This form must be fully completed and needs only to be signed by you. This does not require a signature from your clientand submitted via the online system.

Factors we will consider: reasonable steps, and difficulty in recovery

  • You should have taken all reasonable steps to get payment if a recovery has been made.
  • You must show you cannot be paid without unreasonable delay or difficulty.

Reasonable steps to recover the fee: actions and information you should provide

You should have taken all reasonable steps possible to recover the fee and give us details of these. If legal action has not been taken, you should explain why. There is not a requirement to take legal action, but you should be able to say why no such action was taken. You should provide:

  • Information to show there are no prospects for recovery
  • Details of how and when the fee was intimated to the applicant
  • Information about any correspondence you have entered into with the applicant to get payment.

We cannot give prescriptive or definitive guidance about the steps you should take, as we have to consider each case on its own merits. However, one factor we have to consider is the cost-benefit analysis of any potential steps to recover the fee.

Example 1: You have been unable to trace the client through tracing agents and have no bank information to place an arrestment. It is likely that we will grant the application in these circumstances.

Example 2: Client’s financial position indicates that any legal proceedings would be unsuccessful as the client is on low income or is in receipt of benefit and does not own any property. It is likely that we will grant the application in these circumstances.

The amount of the account and steps we will expect to be taken

In many cases where the solicitor’s account is small (under £100), we would accept a letter showing that you have written to your client seeking payment of your account, but they have not replied, or evidence or return of post from the last known address.

For accounts up to £500, we would expect to see evidence as above and a clear explanation of why it is not possible or practical to take legal action.

Steps we expect where you do not know the settlement terms or no longer act for the client

If your account is small (under £100), and you have not received any instructions from the client. We would accept a letter showing that you have written to the client seeking an update but no reply has been received, or evidence of return of post from the last known address.

For any other accounts we think it reasonable to expect to see evidence of more substantial steps having been taken such as two letters being sent to the client seeking information regarding settlement with one being sent by recorded delivery. Letters to the opponent or opponent’s solicitor seeking an update should also be consider.

Once you have undertaken the above and you are still unaware of the recovery position, you should submit your account to the Board for it to be assessed. No hardship application is required in these circumstances as you are not aware of a recovery being made.

Actions SLAB may pay for to enable you to recover the fee

We will pay you for sending a letter to your client seeking specific information about settlement or progression of the case in order to find out whether property has been recovered or preserved. The letter should be of a reasonable length and be no more than one sheet. We will also pay for a letter to the opponent and opponent’s solicitor.

If you do not receive a reply to this letter we will also pay you for issuing a final reminder letter before you decide to close your file. Again this letter should be no more than one sheet and will be paid at the formal rate.

Potential difficulties you may face in recovering property or expenses

Two aspects can lead to difficulty in recovering any property or expenses:

  • The nature of the property
  • The time it may take to recover some property

Difficulties in recovery: the nature of the property

We will look at how much the applicant would receive if they sold the property and the personal importance of the property to them if they were to keep it.  We do not expect the applicant to sell the property if the item does not have reasonable monetary worth or if it would be difficult to sell.

Example 1: If the applicant is successful in recovering items such as a mobile phone and their clothes which were kept by a previous partner, the items have a minimal value second hand and the Board would not expect the client to sell these to make payment of the fee.

Example 2: If the applicant is successful in recovering items such as jewellery, cars and paintings which were kept by a previous partner, these items could have significant value and so we would expect the applicant to sell the items to pay your fee. You could agree with the client to repay the sum due by instalments so they did not have to sell the items.

Difficulties in recovery: the time it may take to recover the property

If the applicant is unable to make payment of your account in a lump sum the Board would expect you to seek payment of your account from the applicant by way of instalments. You must show that you have sought payment of your account from the applicant.

  • For any accounts where instalments can be made, we will only consider an application for payment if payment has not been made in full by the applicant within 12 months.
  • If the applicant is not in position to pay any instalments, you must provide documentary evidence, such as up to date bank statements, verification of income and outstanding debts to show the applicant’s income and outgoings in order that the Board can assess their financial position.

For example:

If the property recovered is the applicant’s dwelling the Board would expect you to seek payment of you account by instalments. If the timescale is not reasonable you can submit an application under Regulation 16 3 (b). This must be supported by evidence of your client’s financial circumstances to show that if they paid your account by instalments it would cause undue delay.

If the recovery is a property that is not your client’s dwelling, the Board would expect the property to be sold to allow payment of your account to be made or for the applicant to raise/borrow funds against the property to make payment of your account.

If the recovery involves a pension, and the policyholder is within one year of pensionable age at the time of settlement, we consider it is reasonable for you to await the payment of the pension.

Where the parties are young at the time of the agreement and you will have to wait more than one year before the pension is payable, this would constitute unreasonable delay or difficulty.

Where a pension is paid by instalments and not by a lump sum, it may not be reasonable to expect you to wait for payment.

Where an investment, such as a bond, would not otherwise be encashed for four years, the applicant is accruing interest and therefore gaining advantage at the expense of the Fund. Normally, the only hardship to the client is that they would incur some form of penalty by loss of interest and we will refuse the application. However, we will consider the type of investment, any arrangements for surrender and the likelihood of capital being lost.

In this section