Lipman, R (On the Application Of) v The Director of Legal Aid Casework

For capital-contribution purposes under the Criminal Legal Aid (Contribution Orders) Regulations 2013, specified capital is calculated by valuing each resource separately and aggregating the resulting values. The scheme does not require a general balance-sheet calculation or the netting of a deficit on one property against equity in another. A secured debt is relevant only to the value of the particular property securing it. Property cannot acquire a negative value because the secured debt exceeds its value; its value is zero, and the surplus debt remains irrelevant to the specified-capital calculation. An unencumbered property interest therefore remains available to meet a capital contribution. The claim was dismissed.

Paul Lipman sought judicial review of the Director of Legal Aid Casework’s decision calculating his capital contribution towards the cost of his criminal legal aid. He owned his home, sixteen investment properties subject to substantial borrowing, and money in a bank account. The investment properties were in substantial negative equity, while his home and bank balance exceeded the cost of his representation.

The issue was whether the negative equity in the investment properties could be set off against the equity in his home under regulation 28(4)(b) of the Criminal Legal Aid (Contribution Orders) Regulations 2013.

1. Claim dismissed. Regulation 28 required calculation of one aggregate figure representing the values of the individual resources comprising the claimant’s specified capital, followed by the prescribed deduction of £30,000. The regulation did not establish a general balance sheet of assets and liabilities. (paras [13]-[15])
2. Each resource had to be valued separately. Under regulation 28(4)(b), the value of a particular interest in real property was its sale value less the debt secured on that property. The provision did not authorise aggregation of all property interests and deduction of all secured debts from the aggregate. (paras [16]-[17])
3. The statutory purpose was to identify capital resources available to meet legal-aid costs. Equity in an unencumbered home was therefore available notwithstanding an unrelated debt secured on other properties. The claimant’s proposed construction would produce anomalous results and improperly introduce a balance-sheet approach. (paras [18]-[20])
4. A property interest could not have a negative value merely because the secured debt exceeded the property’s value. Its value was zero. For the purposes of regulation 28, a debt was secured on the property only to the extent of the property’s value; the balance was not relevant to the valuation exercise. (paras [21]-[22])
5. The wording of regulation 28(4)(b) was clear and unambiguous, so the principle against doubtful penalisation did not arise. The judge observed that the principle might have applied if the provision had genuinely been ambiguous, referring to ESS Production Ltd v Sully [2005] EWCA Civ 554. That observation was unnecessary to the decision. (para [23])