Legal Aid Agency

3. Ms I complains that following her divorce, the LAA failed to correspond with her regarding a property charge, or the interest this accrued, between 30 October 1998 and 9 October 2019. She complains the LAA did not update her contact details, did not provide her with an annual statement, and did not inform her that the charge was interest bearing.

4. She says that finding out that she owed over £20,000 came as a considerable shock. She cannot pay this amount and it is causing a considerable amount of worry. She says that she is taking medication to help her cope and the stress this situation is causing is unbearable.

5. Ms I wants an investigation regarding why the charge could accumulate to the amount it has over 21 years, without the LAA informing her.

Administrative Background

6. The LAA provide civil legal aid and advice in England and Wales to help people meet the costs of legal advice, family mediation, and representation in a court or tribunal. Claimants usually need to show that they cannot afford to pay for help.

7. By law, which includes the Legal Aid Act 1988, if a legal aid funded party keeps or gains money or property from a court case, they will need to repay their legal aid costs to the LAA after the case ends. The LAA does this through a statutory charge against the recovered property.

8. According to section 6 of the LAA’s Statutory Charge Manual (the Manual), it has a legal responsibility to collect the charge and should do so ‘as soon as reasonably possible after the property has been recovered and the amount of the charge is known’. However, if the person is unable to pay immediately, the LAA can agree to postpone payment. This is provided that the property recovered is going to be used as the legal aid funded person’s home, as per Regulation 96 of The Civil Legal Aid (General) Regulations 1989 (the regulations). In that case, the LAA may agree to recover the debt only once the home is sold. In the meantime, the debt gains interest, which the LAA will also recover.

9. The regulations explain that in cases that fall under the Legal Aid Act 1988, the LAA must obtain the person’s written agreement to the postponement. This includes an acknowledgement that the debt will be interest bearing. If the person does not agree to pay the interest, the LAA must take steps to enforce the charge at once. The LAA has no power to waive or set aside the interest.

10. This agreement does not prevent the person from paying off the debt before they sell their home if they are able to. In those circumstances, the person will still need to pay the interest that has accrued on the debt until that point.

11. Simple interest is charged against the principal sum and is set by regulation. The rate varies from time to time and currently simple interest is charged at 8% per annum. The Legal Aid Act 1988 requires all clients to sign an interest agreement before interest can start to accrue.

Background to the complaint

12. In the mid 1990’s Ms I divorced her husband and used legal aid to fund proceedings. Her solicitor charged around £8,000, and the LAA lodged a statutory charge against the former matrimonial home.

13. Ms I moved out of this house and the LAA duly lodged the statutory charge against her new property on 30 October 1998. The LAA provided evidence of the contractual charge document, signed by Ms I the same day, which allowed the simple interest to accrue – as per the Legal Aid Act 1988. The LAA did not update its systems to reflect the change in Ms I’s contact details.

14. The LAA issued a letter to her previous address in 2004. This letter is likely to have asked if Ms I wanted the statutory charge to remain postponed and if she still lived at the address. Ms I did not receive this letter as she had moved out of the property in October 1998.

15. Ms I said that she repaid her mortgage in 2019, and she contacted the LAA about the charge. She said at this point the LAA wrongly informed her that the interest charged would be minimal as she did not materially benefit from the divorce proceedings.

16. The LAA issued a statement in October 2019 to explain the charge position. At that point, the charge stood at over £20,000 and was increasing daily.

17. The LAA explained it has no legal obligation to issue regular statements to its clients, but it will issue a statement when requested. It said it piloted sending regular statements in 2019 which is why Ms I received a statement.

19. The LAA rationale relies heavily on the fact it has no obligation to issue regular statements to individuals, as by the very nature of a statutory charge, payment is postponed. It uses this rationale to justify a 21-year gap in communications with Ms I.

20. The law does not require the LAA to send its clients any reminders or statement of debt, but on occasion it will do this out of courtesy. It explained that in the past it has piloted sending regular statements and there have been times when it generated and issued manual statements.

21. It said that Ms I was fully aware of both the statutory charge and the simple interest applied to the principal sum when she signed the contractual charge document in October 1998. However, the LAA did send correspondence to Ms I in 2004 albeit to an incorrect address. This letter is likely to have asked Ms I if she wanted the charge to remain postponed. It acknowledged and apologised that it failed to update Ms I’s contact details in 1998. It said that this did not materially affect her ability to manage the statutory charge.

22. This is a failing. Under our Principles of Good Administration, we expect organisations to get things right. Sending letters to an incorrect address is a failure to meet this expectation.

23. Ms I explained had she been aware of the charge’s position sooner, there was a possibility that she could have arranged alternative financing from family members, which she could have repaid with little, or no interest, compared to that of the simple interest annual rate. She said had she received the correspondence in 2004, she would not be facing such a large debt. She said that she feels the situation she faces is unfair and if she had known sooner, her situation would be very different.

24. Ms I also made it clear her shock at finding the LAA sent a letter containing highly sensitive information to the matrimonial home, where she had not lived for six years. She said she felt this violated her privacy and the letter could have been read by complete strangers.

25. We expect public bodies to be customer focussed. We expect them to aim to ensure that customers are clear about their entitlements, about what they can and cannot expect from the public body and their own responsibilities.

26. While we empathise with Ms I’s position here, we cannot say the LAA acted unreasonably. The evidence we have seen shows the LAA made the situation, regarding the charge and Ms I’s obligations, clear in 1998. She also signed the charge document to say she understood what would happen.

27. We appreciate that these conversations took place at a time of great upheaval in Ms I’s life. She has made it clear to us at the time of her divorce, she was physically and mentally unwell and it took a great toll on her. Equally, had she received the correspondence in 2004, she may have been able to enquire about the charge and its position sooner. However, we cannot ignore the fact that she knew the charge existed, and although she may not have fully realised the impact of the charge being interest bearing, she has always had the opportunity to enquire and make payments towards it. For that reason, we cannot say that Ms I missed an opportunity to pay the money back early.

28. However, we can see the merit in the LAA sending regular statements or reminders to its clients. This would serve as a useful prompt or tool to help its clients to consider the charge, the interest position, and the options a person has available to them to help manage the charge.

29. We appreciate Ms I’s view and concern that strangers were able to open the letter in 2004. It is likely that this letter did not set out the position of that charge at that time but instead asked if Ms I wanted the charge to remain postponed.

30. We also expect public bodies to put things right when mistakes happen. Public bodies should acknowledge mistakes, apologise, explain what went wrong, and put things right quickly and effectively.

31. We have seen in the LAA’s complaint correspondence that it acknowledged its failure to update Ms I’s contact details. It has updated its systems and apologised for failing to do so earlier.

32. Based on the information we have seen, we do not agree that the LAA’s failure to update Ms I’s contact details has had a tangible impact on the charge, or Ms I’s ability to manage the charge. When it became aware of what happened, it updated its records and provided an appropriate resolution. Therefore, we do not uphold this complaint.

33. We realise this is unlikely to be the outcome Ms I was looking for when she complained to us, but we hope we have clearly explained the reasons for our decision.

1. We have found failings in the way the Legal Aid Agency (the LAA) handled Ms I’s case. However, we cannot say those failings affected Ms I in the way they said they did. We are also satisfied that the LAA have done enough to put right what it got wrong.

2. As such, we do not uphold this complaint.