Handbooks Index

Part 7: Clawback and expenses


Chapter 3

Expenses 

3.1 Expenses in favour of an assisted person
3.2 Factors you should consider in deciding whether to seek award of expenses
3.3 Is the opponent likely to drop their defence to the case if expenses are not sought?
3.4 Might the assisted person be entitled to a refund of contribution if expenses are recovered?
3.5 Is property or money likely to be recovered or preserved?
3.6 All expenses to be paid to the Board
3.7 Board may enforce payment of expenses
3.8 Expenses against the assisted person
3.9 Assisted person personally liable for expenses due to opponent
3.10 Modification of assisted person's liability
3.11 Reassessment of amount of expenses due
3.12 Expenses of unassisted party out of the Legal Aid Fund
3.13 Statutory provisions
3.14 Procedural rules: for all section 19 motions lodged prior to 11 December 2017

3.14A  Procedural rules: for all section 19 motions lodged on or after 11 December 2017
3.15 Expenses to be assessed on party and party basis at non-legal aid rates
3.16 Judicial expenses
3.17 Opting to accept judicial expenses
3.18 Opting not to accept judicial expenses
3.19 General advice
3.20 Private charging for work done before legal aid was granted
3.21 Speculative agreement
3.22 Legal aid account submitted

 

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Unless otherwise stated, "the Act" or "the 1986 Act" means the Legal Aid (Scotland) Act 1986, and references to regulations are references to the Civil Legal Aid (Scotland) Regulations 2002.

 


3.1 Expenses in favour of an assisted person

3.2 Factors you should consider in deciding whether to seek award of expenses

We have no specific statutory power to require an assisted person to get an award of expenses, nor to authorise an assisted person to waive a right to seek an award of expenses.

It is your responsibility to decide whether to seek an award of expenses in a case. However, an inappropriate or incorrect decision about expenses in a legal aid case may prejudice your client, or result in loss to public funds. If, in a particular case, you would normally advise a private client to seek an award of expenses, you should consider very carefully whether there are any grounds for taking a different approach in a legal aid case.

An assisted person should, wherever possible and assuming there are reasonable prospects of recovery, get an award of expenses so we can recoup the public funds spent on their behalf.

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3.3 Is the opponent likely to drop their defence to the case if expenses are not sought?

In a legal aid case, as in a private case, you must weigh up whether insisting on a crave for expenses could mean further procedure, at a cost out of proportion to the expenses. Nonetheless, you should not necessarily decide against seeking expenses because the opponent states they will defend the action if expenses are not dropped.

A defender in, say, an interdict action may have an arguable case to defend on the merits, but may be content to live with the terms of an interim interdict, provided they do not have to pay expenses. If so, there may be some justification for dropping the crave for expenses to avoid the action becoming fully defended.

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3.4 Might the assisted person be entitled to a refund of contribution if expenses are recovered?

You must carefully consider the assisted person's contribution. Depending on the amount of expenses recovered from the opponent, the assisted person may be entitled to a full or partial refund of any contribution payable if expenses are recovered from the opponent. Even if the assisted person currently has a nil contribution, this could be re-assessed at some future date and a substantial contribution may become payable by the assisted person.

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3.5 Is property or money likely to be recovered or preserved?

You must consider the clawback provisions in deciding whether to seek an award of expenses. If expenses are successfully recovered from the opponent, the loss to the Fund will decrease. This will reduce the amount of clawback from any property recovered or preserved by the assisted person.

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3.6 All expenses to be paid to the Board

Under section 17(2A) of the Act, any sum of money recovered under an award of, or agreement as to, expenses in favour of any party who is, or has been, receiving legal aid for the proceedings must be paid to us. The requirement is for any sum recovered to be paid to us, even where the client has been assisted for only part of the proceedings.

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3.7 Board may enforce payment of expenses

Regulation 39(2) allows us to take any proceedings needed to enforce or give effect to any award or agreement as to expenses, in our own name or in the name of the assisted person.

Where expenses are paid directly to us, their receipt is a good discharge to the payer.

You must tell us promptly when a final order is made or an agreement is reached in terms of which expenses are recoverable from the opponent. At the latest, you should tell us when you send us your account, when you must produce a copy of the interlocutor disposing of the question of expenses. In most cases, we will seek payment of the expenses from the opponent ourselves, after settling your account.

We try to secure payment of the expenses on an informal basis. If this is impossible, we may ask you to frame a judicial account, have it taxed and extract decree for expenses. We will then enforce the decree against the party liable. (The exception is if property is also recoverable from the opponent, in which case, you should assume responsibility for ensuring that the opponent pays both the principal sum (or otherwise transfers property) and the expenses.)

You should tell us as soon as possible of the terms of the decree or settlement and of the steps being taken to finalise the matter. Where you propose to enforce a decree, you need our prior approval for each step in the execution of diligence. However, if there is a special reason you failed to get this, we can give retrospective approval (see regulation 22).

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3.8 Expenses against the assisted person

3.9 Assisted person personally liable for expenses due to opponent

A grant of civil legal aid covers only the fees and outlays of the solicitor and counsel acting for the assisted person. If expenses are awarded against an assisted person, they are personally liable for these. The party entitled to expenses must look to the assisted person for payment. However, in some circumstances an unassisted party may obtain an order of court allowing payment of expenses out of the Fund in terms of section 19 of the Act.

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3.10 Modification of assisted person's liability

Under section 18(2) of the Act, an assisted person found liable in expenses can apply to the court making the award for an order restricting their liability. This will be to an amount the court considers reasonable in all the circumstances of the case, having regard to the means of the parties and their conduct in the dispute. In many cases, the court will assess the assisted person's liability at "nil". This procedure is generally referred to as "modification".

This is a matter for the court’s discretion.

Rules 4(1) and (2) of the Act of Sederunt (Civil Legal Aid Rules) 1987 set out a number of steps that the court may require to be followed when considering a motion for modification of expenses.

We understand that the courts’ practice is that modification can only competently be sought before decree for expenses is granted (see Imrie v Love, Edinburgh Sheriff Court, 23 May 2002, unreported). Where the court decerns for expenses, modification is incompetent (Gilbert’s Trustee v Gilbert 1988 SLT 680 and Stewart v Stewart 1989 SLT 80).

In Court of Session cases, regard should be had to Rule of Court 42.6, which allows an assisted person who has been found liable for expenses to apply for modification of expenses within 14 days of the date of the Auditor’s report.

Modification can be sought where the assisted person has entered into a joint minute agreeing to be liable for expenses (see Jeffrey v Jeffrey 1987 SLT 488 and Clelland v Clelland 1988 SLT 674).

Modification is incompetent where civil legal aid has been terminated under regulation 32. Where legal aid was only available for part of the proceedings, modification cannot be sought for periods when legal aid was not in force (regulations 34 and 35).

Where work is undertaken under the special urgency provisions of regulation 18, modification cannot be sought unless civil legal aid is subsequently granted and covers these steps.

A decision of a lower court in relation to modification can be appealed, where it can be shown that the lower court has erred in the exercise of its discretion (Cullen v Cullen 2000 SC 396). However, if the appeal court interferes with the decision of the original court, any reassessment of the liability of the assisted person is carried out by the lower court.

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3.11 Reassessment of amount of expenses due

Any party concerned can competently apply to the same court to reassess the amount of an award of expenses made in terms of section 18(2), on the ground that since the award was made there has been a relevant change of circumstances. The court may then reassess the amount of the award as seems proper (section 20(4)).

It appears to be a prerequisite that the court originally made an order modifying the assisted person's liability for expenses. In other words, even if there has been a change of circumstances, reassessment is precluded if no application for modification was made prior to decerniture for expenses or if the court refused an application for modification.

The application for reassessment must be made within one year of the date of the award (regulation 38). It is unclear from the terms of section 20(4) whether a second or subsequent application may competently be made to the court for a reassessment on the ground of a further relevant change of circumstances within one year of a previous reassessment. The court procedure for an application for reassessment is by minute lodged in the original process, as set out in rule 4(3) of the Act of Sederunt (Civil Legal Aid Rules) 1987.

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3.12 Expenses of unassisted party out of the Legal Aid Fund

3.13 Statutory provisions

Section 19 of the Act makes provision for the circumstances in which an unassisted party may obtain a court order for payment of their expenses out of the Legal Aid Fund. Such an order will normally only be sought where the court has modified an assisted person's liability in terms of section 18(2). However, an order may be sought in the absence of modification where the decree for expenses cannot be enforced for some reason, perhaps because the assisted person has been sequestrated.

The main features of the statutory provisions are:

(a) an order for payment of expenses out of the Fund is competent only where the proceedings are finally decided (as defined in section 20(1)) in favour of the unassisted party;

(b) the whole or part only of the unassisted party's expenses may be awarded out of the Fund;

(c) the order may only relate to expenses attributable to any part of the proceedings for which the assisted person was receiving legal aid;

(d) the court must consider making an award of expenses against the assisted person before awarding expenses out of the Fund;

(e) the proceedings must be such that an order for expenses might be made, apart from the Act;

(f) in proceedings at first instance, an order may be made only if the assisted person instituted the proceedings and the court is satisfied the unassisted party will suffer financial hardship if the award is not made;

(g) in all cases the court must be satisfied that it is just and equitable in all the circumstances that the award should be paid out of public funds.

Section 20 contains provisions to clarify the stage at which proceedings may be regarded as having been finally decided in favour of an unassisted party. These provisions largely relate to the possibility of an appeal being taken against the decision concerned. The court may refuse to make an order under section 19 if an appeal may be taken against the decision. If an appeal is allowed to be made late, the court may order the unassisted party to repay any expenses paid to them to the Fund.

The question of the point in time when proceedings are finally decided was considered by the Inner House in the case of Moss -v- Penman, 1994 SCLR 15. The pursuer had raised an action of payment in the sheriff court and the defender had legal aid. After a debate, the sheriff allowed a proof before answer, and the defender appealed against this decision to the Court of Session. His appeal was unsuccessful and the Inner House remitted the case back to the sheriff to hear the proof. The pursuer, an unassisted party, applied to the Inner House for an award of the expenses of the appeal out of the Legal Aid Fund, and we opposed the motion.

It was submitted for the Board that the word "proceedings" in section 19 included the proceedings both at first instance in the sheriff court and in the Court of Session on appeal. Until a final interlocutor had been pronounced in the sheriff court and not taken to appeal, or until any appeal had been disposed of, the proceedings could not be said to have been finally decided in the pursuer's favour. It was argued for the pursuer that, because the House of Lords, the Court of Session and the sheriff court are listed separately in schedule 2 to the 1986 Act as courts in which civil legal aid is available, the proceedings in the sheriff court and the proceedings in the Court of Session should be seen as separate proceedings for the purposes of section 19.

In the court’s opinion, our argument was well founded. It was held that, since the case must be returned for further proceedings in the sheriff court, it was premature for an order to be made under section 19 at this stage. Giving the opinion of the court, the Lord President said it was clear that the effect of the statutory provisions, when read together, is that the court which is empowered to make the order under section 19 is the court before which the proceedings are being conducted when they are finally decided in favour of the unassisted party. It is empowered to do so in respect of the whole or any part of any expenses incurred by the unassisted party, whether or not they have been incurred in the court which makes the order. Thus, if the Court of Session is the empowered court, it may make an order under section 19 which includes the expenses incurred at first instance in the sheriff court. If the sheriff court is the empowered court, the sheriff may make an order which includes the expenses incurred in the Court of Session in an appeal following upon which the case was remitted back for further proceedings in the sheriff court.

The case of Moss -v- Penman was considered by the House of Lords in the case of Herd -v- Clyde Helicopters Ltd, 1997 SCLR 308. The Lord Ordinary upheld the defenders’ argument that common law negligence was excluded by statute and on a reclaiming motion the Inner House adhered to his judgement. The pursuers appealed to the House of Lords, which refused the appeal. The defenders sought an order for payment out of the Fund of the expenses of the appeal, although the case had to be remitted to the Court of Session for further procedure in relation to other matters.

The House of Lords decided that as the pursuers had been given legal aid for the appeal, which had been finally determined, there being no right of further appeal, that was the appropriate stage for an order under section 19 being made. In his speech, Lord Hope of Craighead relied on the case of Megarity -v- D J Ryan & Sons Ltd (No. 2), [1982] A.C.81, where it was held that on the true construction of the equivalent provisions for England and Wales in the Legal Aid Act 1974 all proceedings on appeal to an appellate court in any action, cause or matter were to be treated as separate proceedings from the proceedings in the same action in the court of first instance from which the appeal was brought. As Lord Diplock had pointed out in that case, where there was an appeal to an appellate court, the only court that could make an order for payment out of the Fund was the appellate court, as the statutory provision plainly contemplated that, in the event of an appeal, an order relating to the unassisted party’s costs at first instance might be made by the appellate court by which the proceedings were finally decided. Lord Hope of Craighead stated that, without wishing to cast doubt on the soundness of the decision in Moss -v- Penman [in which he himself had presided and delivered the opinion of the court] except to point out that the Inner House had not been referred to the Megarity case, he considered that the matter was resolved, so far as the House of Lords was concerned, by what was decided in the Megarity case.

 

NOTE
Paragraph (f) in this section was amended in May 2009 to remove the word “severe” – this was repealed by the Legal Profession and Legal Aid (Scotland) Act 2007, schedule 5 (in force from 1 October 2008).

 

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3.14 Procedural rules for all section 19 motions lodged prior to 11 December 2017

Where application is to be made for an order under section 19, you must take care to follow the court procedures set down in rules 6 and 8 of the Act of Sederunt (Civil Legal Aid Rules) 1987 as amended.

The main procedural rules are:

(a) Application is made to the court by motion.

(b) The court CANNOT grant the application at the first hearing.

(c) On hearing the motion the court may either:

(i) summarily dismiss the application;

or

(ii) order the applicant to lodge a statement on oath of their grounds for claiming payment out of the Fund, with an estimate of the expenses.

(d) Where the court orders the applicant to lodge a statement of grounds and an estimate of expenses, the court must also order the applicant to send us a copy of these.

(e) We may appear at any hearing to consider an application intimated in accordance with the court's order.

Under these rules, you should not intimate the motion to us before the first hearing. If the motion is dismissed, we do not need to be involved. Only where the motion is not summarily dismissed does the need for intimation arise. Rule 8 requires you to tell us not less than 14 days before the date fixed for the hearing of the motion. (You should address the intimation to the Director of Legal Services and Applications.)

The applicant’s statement of grounds, in the form of an affidavit, should:

You should give us details of all payments the applicant has already made on account of your fees and outlays, as this is a relevant factor in assessing their ability to meet the legal expenses incurred.

If the provisions of rules 6 and 8 are not adhered to, so that an award of expenses out of the Fund is made without our having the opportunity to be heard in relation to the application, we may, if necessary, take steps to have the order judicially reduced.

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3.14A Procedural rules: for all section 19 motions lodged on or after 11 December 2017

Where application is to be made for an order under section 19, you must follow the court procedure set down in Rule 6 the Act of Sederunt (Civil Legal Aid Rules) 1987, as amended by way of The Act of Sederunt (Civil Legal Aid Rules Amendment) 2017.

The main procedural rules are:

(a)          Application is made to the court by motion 

(b)          At least 28 days prior to the motion being enrolled or lodged

(i)  a mandatory pre-motion notice in prescribed form has to be completed;

(ii) where this form indicates a requirement for vouching, such documents as are required should be obtained and collated; and

(iii)          the completed form and vouching must be intimated to SLAB

 (c)           Intimate the motion to SLAB

(d)          Lodge the motion along with copies of the notice form and documents sent to SLAB.

The pre-motion procedure is to help ensure that the application can be determined at the court’s first consideration of the motion, with all relevant information having been collated for the court and intimated to SLAB.  To facilitate this, although not required to do so under the Rules, SLAB will provide a response to the applicant, normally within 7 days of receipt of the notice.  This response will detail SLAB’s initial position in relation to competency of the application, and identify what further information or vouching could be provided to assist the application and, in due course, the court.    

For all applications the notice will require the applicant to:

•             provide an estimate of the expenses

•             detail if there has been modification of the assisted person’s liability

•             address the basis on which it is considered to be just and equitable that an award be made, with reference to the circumstances of the case 

•             for applications where the court is called upon to apply the financial hardship test (see 3.13 above), relevant information about the applicant’s financial circumstances should be provided and be accompanied by proper vouching (including, where the applicant is self-employed, copies of recent business accounts). 

•             in addition, all payments the applicant has made on account of your fees and outlays must be disclosed, as this is a relevant factor in assessing their ability to meet the legal expenses incurred.

Where issues are raised or identified as a result of the intimation of the notice, the 28 day period allows time for further investigation, discussion and correspondence between SLAB and the applicant to help resolve these, with the intention that by the expiry of this period, both the applicant and SLAB will be sighted on whether any issues remain with the application, or if it can simply be left to the discretion of the court upon consideration of the motion, without any representations from SLAB.

After the 28 day period has elapsed, the motion, a copy of the notice form as intimated to SLAB with any vouching and related documents will require to be lodged at the relevant court.  This motion must be intimated to SLAB.  SLAB is entitled to make representations at the motions hearing, although SLAB will usually have advised the solicitor acting for applicant, prior to the motion being lodged, whether it intends to make representations.  

The form and supportive vouching can be intimated by email to SLAB at section19apps@slab.org.uk  or sent by post to Thistle House, 91 Haymarket Terrace, Edinburgh EH12 5HE.

If the provisions of Rule 6 are not adhered to, so that an award of expenses out of the Fund is made without our having the opportunity to be heard in relation to the application, we may, if necessary, take steps to have the order judicially reduced, and will reserve the right to seek expenses.

 

NOTE
Amended in May 2009 to remove the word “severe” before “financial hardship” (see note in paragraph 3.13).

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3.15 Expenses to be assessed on party and party basis at non-legal aid rates

If an order is made in accordance with the provisions of section 19 and rule 6 for payment to an unassisted party of their expenses out of the Fund, under section 19(6) we will assess these expenses on the party and party basis, and include the expenses of applying for the order for payment out of the Fund. We will calculate the expenses in accordance with the ordinary judicial tables of fees, not the legal aid tables.

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3.16 Judicial expenses

 

NOTE
Paragraphs 3.16 to 3.22 added in March 2010 .

 

The 2002 regulations commit to regulation the application of the previous “extra statutory concession” and enable us to create a clear framework within which the regulations can be applied. References to “the fees regulations” in paragraphs 3.16-3.23 are to the Civil Legal Aid (Scotland) (Fees) Regulations 1989 as amended.

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3.17 Opting to accept judicial expenses

The option to accept judicial expenses is only open to you where fees and outlays are recovered by virtue of an award of expenses or an agreement as to expenses in favour of the assisted person.

Where you opt to be paid the amount of the judicial expenses, you will be responsible for drafting the judicial account, having it taxed and recovering the judicial expenses.

You must pay us the recovered expenses in terms of section 17(2A) of the Act. This is a clear provision of the primary legislation unaffected by the 2002 Regulations. We will deduct any payments to account made in respect of the proceedings and pay you back the net balance.

Where you opt for judicial expenses you should not lodge an advice and assistance account. This is in line with the arrangement agreed by the Executive, the Law Society and the Board in connection with the question of aggregation.

The fees regulations provide [regulation 3(5)] that

The solicitor acting at the conclusion of the proceedings can still opt to accept the judicial expenses even if an earlier solicitor has lodged a legal aid account. We will tell the solicitor acting at the conclusion of the proceedings what fees we have paid to the previous solicitor to allow them to make an informed judgement as to whether to accept the balance of the judicial expenses or to lodge a legal aid account.

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3.18 Opting not to accept judicial expenses

Where you do not opt to accept the judicial expenses, you and counsel must be paid in accordance with the schedules attached to the civil fees regulations. The decision to opt not to accept judicial expenses and lodge a legal aid account is irrevocable.

Where you opt to lodge a legal aid account we will, if appropriate, arrange for the drafting of a judicial account, having it taxed and recouping the judicial expenses. We will need information from you to enable us to do so.

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3.19 General advice

Where it is reasonably anticipated that expenses will be recovered, especially where the new solicitor will not be providing civil legal aid, you should discuss the issue with the new solicitor. Expenses recovered after the transfer of agency must be paid into the Fund; a solicitor not providing legal aid is not in a position to opt to accept judicial expenses.

The regulatory framework is subject to a general statutory prohibition against solicitors and counsel taking any payment where legal aid is available to a person in connection with any proceedings, during any period where legal aid is so available, except in accordance with the 1986 Act (section 32 of the Legal Aid (Scotland) Act 1986).

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3.20 Private charging for work done before legal aid was granted

There has been a case in which a solicitor, in addition to recovering an award of judicial expenses (and, therefore, obtaining payment at a higher fee rate), entered into a private fee arrangement with a client. The justification for doing so was that the solicitor had entered into a speculative fee arrangement with their client, and the private fee related to work carried out before the grant of civil legal aid.

The rationale underlying section 32 is to prevent the supplementation of fees for work done during any period for which civil legal aid is in place. The effect is that a solicitor or counsel providing civil legal aid cannot take any payment in connection with the proceedings, other than in accordance with the 1986 Act, for anything done while civil legal is in place. This includes any period during which there was special urgency cover, if civil legal aid was subsequently granted.

Section 32 does not therefore prohibit charging a private fee, whether or not on the basis of a speculative fee arrangement, for work done before the grant of civil legal aid. Acceptance of judicial expenses represents a payment “in accordance with” the 1986 Act.

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3.21 Speculative agreement

Whether charging a private fee and/or a fee based on a speculative agreement accords with section 32 must depend on the terms of the agreement itself. For example, the payment may cover work wholly or partly done during the currency of the grant of civil legal aid, thereby amounting to a supplementation of fees and breaching section 32.

If you have a speculative fee arrangement with a person who is or was an assisted person in the proceedings, in terms of which they have to pay you, you must give us details of the agreement including information as to what work you have charged for and the period or stages of the case for which you are charging. You can include this in the account synopsis.

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3.22 Legal aid account submitted

Where, instead of accepting judicial expenses, you send us a legal aid account and you charge a private fee for work done before the grant of legal aid, whether under a speculative agreement or otherwise, again issues of duplication and possible breach of section 32 may arise.

Given that the initial block payments in the civil legal aid fees regulations deal with instruction and progress there may be an overlap with the private fee. You must, therefore, give us details of any such private fee, including what work you have charged for and the period or stages of the case for which you are charging. Again, you can include this in the account synopsis.

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