Legal Services Commission v Banks & Anor

A statutory legal aid charge extends to property recovered or preserved in the assisted proceedings. A money judgment is property recovered, even where it is a chose in action rather than money actually received. The question whether property was recovered or preserved is determined by examining whether its ownership or transfer was in issue, having regard to the pleadings, evidence and judgment. Rent withheld under a separate injunction is not recovered property where payment of the rent was never in issue in the funded proceedings. A temporary postponement of payment does not discharge the rent liability or create monies payable to the Legal Services Commission.

The Legal Services Commission claimed under the Legal Aid Act 1988 and the Civil Legal Aid (General) Regulations 1989 that a statutory charge arose over rent retained by the defendants after they obtained a damages judgment in proceedings funded by legal aid. The Commission alternatively claimed damages for breach of the statutory obligation to pay recovered money to the Board.

The defendants had obtained judgment against property sellers for fraudulent misrepresentation. They subsequently withheld rent under an injunction restraining re-entry, pending satisfaction of the judgment. The central issue was whether the withheld rent constituted property recovered or preserved in the funded proceedings, and whether it was money recoverable under regulation 87.

1. Claim dismissed. The defendants had recovered property within section 16(6) of the Legal Aid Act 1988 in the form of their judgment against the sellers. That judgment was a chose in action subject to the statutory charge.
2. The governing approach, derived from Hanlon v Law Society [1981] A.C. 124, is to ask whether ownership or transfer of the property was in issue in the funded proceedings, having regard to the pleadings, evidence and judgment. The principle applies to a money judgment as recovered property.
3. The withheld rent was not property recovered or preserved in those proceedings. Payment of rent was never in issue in the claim against the sellers. The injunction restraining re-entry was obtained in separate proceedings, and it was unclear whether a claim form had been issued in them.
4. The undertaking given in connection with the injunction had the practical effect of temporarily releasing the defendants from payment of rent pending satisfaction of the judgment. It did not discharge their liability. The rent remained payable to the sellers, and the funded proceedings produced no financial gain in respect of it.
5. Accordingly, the defendants were not required to pay the rent, or its monetary equivalent, to the Commission under regulation 87 or otherwise account for it. The approach was consistent with Davies v Eli Lilly & Co [1987] 1 W.L.R. 1136 and the treatment of a judgment as a charged chose in action in Cavaliere v Legal Services Commission [2003] All E.R. (D) 353.