What is the Statutory Charge?
Legal Aid is a scheme in which the Government helps individuals who are financially eligible meet the costs of receiving legal advice, in certain types of cases.
When an individual (a Claimant) pursues a claim by way of Legal Aid, this means that the Legal Aid Agency (a government agency) agrees in principle to pay the fees of the solicitors’ firm carrying out the legal work on that case, even if they lose.
However, if the Claimant is awarded any money or property in relation to those legal proceedings, they may be required to pay back some or all of their solicitor’s legal costs at the end of a case, where those costs are not paid by the other side (a Defendant).
To explain this further, ordinarily, if a Claimant wins their case, in addition to any damages, a Defendant will be required to pay the Claimant’s legal fees to the firm that carried out the work, instead of the Legal Aid Agency. However, sometimes, firms are not able to recover their full legal fees from a Defendant. This may be due to the type of work carried out or the negotiation process. When this happens, there will be a shortfall between the firm’s costs of carrying out the legal work and the costs actually paid by the Defendant (which would otherwise have been paid by the Legal Aid Agency).
In such a case, the Legal Aid Agency is entitled to recover that shortfall in costs from the money or property recovered in the proceedings. This means that money or property awarded to a Claimant can be taken by the Legal Aid Agency and applied in payment of the Claimant’s solicitor's fees. This is called the “Statutory Charge”. Accordingly, the Legal Aid Agency may require solicitors’ firms to retain part of the money or property, before paying it out to the Claimant, until the legal fees of the firm carrying out the work have been paid. This process can cause delays in Claimants receiving their damages and may, in some exceptional circumstances, mean they do not receive any damages at all.
The maximum sum the Legal Aid Agency can recover or claim is the total sum of damages or property awarded to a Claimant. This means the Legal Aid Agency will never seek to recover any sums from a Claimant which exceed the money that Claimant has actually gained through the proceedings.
This also means that Claimants have a financial interest in the costs incurred by their solicitor in their case and this is why solicitors will regularly write to Claimants to update them on the costs incurred in their case. Accordingly, when solicitors’ firms make a claim for their costs, for example by sending a bill to a Defendant, if the Statutory Charge applies, Claimants have a right to make representations on that claim, since it may affect the amount of damages they receive.
The Statutory Charge ensures that any awarded damages or property is used first to repay the cost of providing legal services to a Claimant and is a way of recouping some of the costs spent on a Legal Aid case by the Legal Aid Agency, so that more people can have access to Legal Aid. In this regard, it may be useful to consider Legal Aid more as a loan, rather than a benefit, which you may be required to pay back at the end of your case.
Whilst this may sound daunting to some, it is not meant to worry clients or deter them from pursuing cases. In practice, solicitors’ firms will do their absolute best to keep their costs to a minimum and only what is strictly necessary, and, where a Claimant wins their case, they will seek to recover the maximum amount possible from the Defendant, in order to reduce or, if possible, eliminate the applicability of the Statutory Charge entirely. However, this cannot be guaranteed and will always depend on the facts of the individual case. Where the Statutory Charge is likely to arise, your solicitor will always discuss this with you as early as possible in your case.
The Legal Aid Agency state that the reasons for the Statutory Charge are as follows:
- It puts legally aided individuals as far as possible in the same position as successful non-legally aided individuals (who are responsible at the end of their cases to pay their own legal costs if their opponent does not);
- It ensures that legally aided individuals contribute towards the cost of funding their cases so far as they are able; and
- It deters legally aided individuals from running up costs unreasonably by giving them a financial interest in how much money is spent.
There are some limited exceptions where the Statutory Charge does not apply however, your solicitor should advise you at the outset and throughout your case if the Statutory Charge will apply to your case.
For further advice and information on the Statutory Charge and when it applies, speak to a solicitor to discuss whether or not it is likely to be relevant to your case.