Legal Aid -- Is It Worth It?

There is some good news and, looking at the small print, a fair bit of bad news for VAT practitioners who thought that the arrival of 2 October 2000 and the incorporation of the European Convention on Human Rights into VAT and all other English legislation was going to be of real help to real clients.

Good news

First, here is the good news. Article 6(3) of the Convention provides:

'3. Everyone charged with a criminal offence has the following minimum rights:

…

His Honour Stephen Oliver QC, the president of the VAT and Duties Tribunals, in the appeal of Han and Yau and Others (16990), confirmed that even though the statute law may define them as civil, in Convention terms, penalties imposed under section 60, VAT Act 1994 (for conduct involving dishonesty) and section 8, Finance Act 1994 (the corresponding section in excise), remain 'criminal in nature'. This means that the right to legal assistance should apply to appeals against these penalties in the tribunals, just as it does for criminal offences in the Magistrates and Crown Courts.

The decision of the tribunal is being appealed by Customs in the Court of Appeal and the outcome is awaited.

Legal assistance

However, many recognised the validity of Stephen Oliver's decision, including the Lord Chancellor, the Legal Services Commission which administers legal assistance, and the tribunals themselves. This is why if you have a client with a section 60 or section 8 appeal you should have received from the tribunal a letter advising you that, in certain 'limited circumstances' legal assistance may be available, not only for the hearing itself but also for legal advice prior to that hearing.

The tribunal's letters follows the Lord Chancellor signing, on 2 April 2001, a direction under section 6(8) of the Access to Justice Act 1999, which reverses the normal rule under Schedule 2 to that Act, namely that legal assistance is not available for hearings in tribunals. The Lord Chancellor directed:

'5. The Lord Chancellor authorises the Commission to fund legal help, help at court and legal representation in all proceedings before the General and Special Commissioners of Income Tax and before the VAT and Duties Tribunal in the circumstances specified below.

'6. These circumstances are where:

Professional restrictions

Having spent the last few years trying to introduce a limit to civil legal aid by using only firms of solicitors who have a contract with the Legal Services Commission for civil work, draft rules were sent out for consultation in January limiting the tribunal work to such firms. However, as far as we were able to discover, there are few if any legal firms in the whole country who had a civil contract with the Legal Services Commission and also had experience in the VAT and Duties Tribunals. Representations were therefore made, including from the tribunals themselves, as a result of which the Commission has now conceded that it is prepared to use its powers to grant 'exceptional case contracts' in appropriate cases to any organisation which can 'satisfy the Commission that it has specific expertise and ability in dealing with cases before these tribunals'.

Bad news

The bad news begins with the qualifying terms for those who will be eligible for civil legal aid. Eligibility will be subject to the normal Legal Services Commission financial eligibility criteria, which comes under two headings, income and capital.

Income

The income limit is £2,767 a year. This is the amount that the client would have left over after deducting from his gross income, income tax and National Insurance, superannuation and pension contributions, rent, rates, council tax and mortgage repayments (to a maximum mortgage of £100,000) and the following family allowances:

If the client's 'final' income after all these deductions is less than £2,767, then he will not have to contribute anything towards the cost of his representation. If it is between £2,767 and £8,196 he will have to contribute on a sliding scale, and where the income is above £8,196 he will not qualify for any legal assistance at all.

Capital

The limit here is £3,000, which consists mainly of liquid savings, but also includes any equity in a house above £100,000. Again, any more than the £3,000 limit and there is no right to any form of legal assistance.

There are exceptions however, the main one being that the capital rules do not apply to pensioners and, as the tribunal points out in its letters, 'applicants on income support and income based jobseeker's allowance are automatically financially eligible'.

Practitioners' rates

The problems then continue with the rates that will be payable to practitioners representing clients for such work in the tribunal. These are:

* per item, all other rates per hour.

Given that these rates have been recently increased and are those already applicable to representation by solicitors at other tribunals, for instance the Mental Health Review and Immigration Appeals Tribunals, there appears to be little likelihood of an increase in these rates, at least in the foreseeable future.

Whether or not any practice with the variety of skills needed to provide fully effective representation in the VAT tribunals can work for such rates remains to be seen.

Expert opinion

It is interesting to read what Stephen Oliver had to say in his decision about representation in the tribunal for appellants and the complexity of these appeals:

'Cases where section 60 penalties are in issue usually involve allegations of dishonest and systematic suppression of sales or misuse of fictitious invoices over a number of accounting periods … Civil penalty assessments frequently follow lengthy investigations, covert observations, self-invigilating exercises, formal interviews, analysis of traders' records, mark-up exercises and projections based on specimen periods. The representation of the appellant ranges from the expert to the incompetent and not infrequently the appellant appears in person. Hearings usually last for three to six days; many, including those where the representation is competent, require much longer. Many raise difficult questions as to the admissibility of evidence and as to the weight to be placed on evidence before the tribunal. To those of us with judicial experience of criminal proceedings, the level of criminality alleged against the appellant does not appear significantly different from that involved in Crown Court fraud trials.'

These appeals will become even more complex with practitioners requiring knowledge of criminal law and procedures in order to represent their clients effectively. It should also be pointed out that the whole point of the tribunal decision was that these penalties are criminal charges, yet the Lord Chancellor has decided that the civil legal aid scheme applies.

Damp squib of the year

All this means that what is in place at the moment must qualify for the 2001 damp squib of the year award. We need to see whether these rules will be challenged, as in reality they deny appellants their rights under the Convention. We would be more than pleased to hear from other practitioners who have clients who should qualify for legal assistance, but who do not because of terms announced by the Lord Chancellor.

In the meantime, if anyone discovers a dishonesty penalty imposed on the jobseeker, please let me know as, following a recent bet, I will have a hat to eat.

Vincent Curley Consultancies is an independent consultancy practice acting in the lead human rights test cases in the tribunal. It has been approved by the Legal Services Commission for exceptional case contracts and is instructing in Han and Yau and Others in the Court of Appeal. Vincent Curley, 25 Spring Lane, Flore, Northants NN7 4LS, tel: 01327 340298; e-mail: vjcurley@aol.com.

Categories: Comment & Analysis