Legal aid is only a loan to winners

Cavaliere v Legal Services Commission (QBD [2003] EWHC 323 25 February)

The publicly funded claimant obtained a judgment for £807,623 and the costs were assessed at £46,752, but the defendant entered into a creditors’ voluntary liquidation, as a result of which nothing was recoverable from it. The claimant therefore looked to the defendant’s insurers under the provisions of the Third Parties (Rights Against Insurers) Act 1930, as a result of which she accepted a sum of £165,000 in settlement of any claim she might have against it. The claimant contended that the money she recovered was not caught by s16(6) of the Legal Aid Act 1988 which provides that it applies to ‘any property which is recovered or preserved for [the assisted person] in the proceedings’ and was not therefore subject to the LSC’s statutory charge in respect of costs. Although the Court rejected the argument that the money recovered from the insurers was to be treated as being recovered in the proceedings because it represented payment of the judgment obtained in those proceedings, the Court followed the decision James v Williams [1999] 3 All ER 309 in which it was held that as a general rule, a constructive trust attaches by law to property which is held by a person in circumstances where it would be inequitable to allow him to assert full beneficial ownership of the property. The charge in relation to costs expended by the Legal Services Commission ranked first in relation to any money recovered under the judgment without which it would not have been possible to obtain the settlement. There was no justification for allowing the claimant to assert full beneficial ownership of the sum recovered. It would be inequitable for her to do so, and therefore the Court concluded that a constructive trust attached to that sum. If it had been correct to decide that the claimant could have the benefit of substantial public funds to recover even part of her loss without having to repay the sums advanced this would have been contrary to the clear intention of the operation of legal aid. Legal aid is intended to help those who lose cases, but only to make loans to those who win them.