Simpson v The Law Society

JurisdictionEngland & Wales
JudgeLord Bridge of Harwich,Lord Oliver of Aylmerton,Lord Brightman,Lord Templeman,Lord Goff of Chieveley
Judgment Date20 May 1987
Judgment citation (vLex)[1987] UKHL J0520-3
Date20 May 1987
CourtHouse of Lords

[1987] UKHL J0520-3

House of Lords

Lord Bridge of Harwich

Lord Brightman

Lord Templeman

Lord Oliver of Aylmerton

Lord Goff of Chieveley

Simpson (A.P.)
(Appellant)
and
The Law Society
(Respondents)
Lord Bridge of Harwich

My Lords,

1

The appellant was the petitioner in divorce proceedings in which her claim for ancillary relief was the subject of a long and bitter contest. She was legally aided. The respondent husband was not. The main asset in dispute was the former matrimonial home, which was jointly owned. The net equity of the parties in the house was estimated to be about £40,000. Booth J., after a hearing lasting four days, made an order dated 11 March 1982 that the house should be sold and that the appellant should receive £30,000 out of the proceeds of sale. The husband was ordered to pay three-quarters of the appellant's costs and £4,500 from the balance of the proceeds of sale was to be retained in a joint account by the parties' solicitors for the purpose of discharging that liability. The husband sought to obstruct the implementation of the order and further substantial costs were incurred in proceedings to overcome that obstruction. The husband is now bankrupt.

2

In the event the net proceeds of sale of the matrimonial home amounted to only £33,431.10. Half of this sum, £16,715.55, belongs to the appellant absolutely in right of her original ownership of a half share in the property. But the balance of £13,284.45 (payable to her pursuant to the judge's order that she receive £30,000) represents property recovered for her in the proceedings in connection with which she received legal aid.

3

Section 9(6) of the Legal Aid Act 1974 ("the Act") provides:

"Except so far as regulations otherwise provide, any sums remaining unpaid on account of a person's contribution to the legal aid fund in respect of any proceedings and, if the total contribution is less than the net liability of that fund on his account, a sum equal to the deficiency shall be a first charge for the benefit of the legal aid fund on any property (wherever situated) which is recovered or preserved for him in the proceedings."

4

The "net liability" of the legal aid fund means, put shortly, the costs incurred by the fund on the assisted person's account and not recouped from the other party to the proceedings: section 9(9). Regulation 96(d) of the Legal Aid (General) Regulations 1980 ( S.I. 1980 No. 1894) ("the Regulations") grants an exemption from the charge created by section 9(6) of the Act in respect of the first £2,500 of any money, or of the value of any property, recovered by virtue of certain orders made under the Matrimonial Causes Act 1973. The appellant is entitled to this exemption. The effect, therefore, of these provisions is to subject £10,784.45 payable to the appellant pursuant to the judge's order to a first charge for the benefit of the legal aid fund. Unfortunately, the net liability of the fund exceeds the appellant's modest contribution by an amount substantially in excess of this sum. Accordingly, if the charge is to be presently enforced, the whole sum of £10,784.45 will be swallowed up by the legal aid fund instead of being available to the appellant, as the judge must have intended, towards the purchase of a new home for herself.

5

The issue in the appeal is whether The Law Society have any discretion under the Act and the Regulations to postpone the enforcement of the charge, to permit the appellant to use the full £30,000 payable to her under the order in the purchase of a new home and to agree to accept a contractual charge on the new property in substitution for the statutory charge on the money recovered in the divorce proceedings. The appellant instituted the present proceedings by originating summons seeking a declaration that The Law Society have such a discretion. It was common ground that the courts below were bound by the decisions of the Court of Appeal in Simmons v. Simmons [1984] Fam. 17 and Regina v. The Law Society, Ex parte Sexton [1984] Q.B. 360 to dismiss the appellant's claim. They did so without hearing argument, but the Court of Appeal granted leave to appeal to your Lordships' House.

6

Property recovered in matrimonial proceedings by virtue of a property transfer order under section 4(a) of the Matrimonial Proceedings and Property Act 1970, now section 24(1)(a) of the Matrimonial Causes Act 1973, was originally wholly exempt from the statutory charge for the benefit of the legal aid fund under regulation 18 of the Legal Aid (General) Regulations 1971 ( S.I. 1971 No. 62). An amendment effected by the Legal Aid (General) (Amendment No. 2) Regulations 1976 ( S.I. 1976 No. 628) limited the exemption to the first £2,500 of the value of the property. As already noted, this remains the present position. But The Law Society nevertheless continued to adopt what was described by Lord Scarman in Hanlon v. The Law Society [1981] A.C. 124, 188 as "the beneficently just practice of refraining from enforcing a charge on a matrimonial home so long as the spouse to whom it has been transferred remains in residence."

7

In Hanlon's case your Lordships' House had to consider whether The Law Society had a discretion to postpone the enforcement of a charge for the benefit of the legal aid fund under section 9(6) of the Act upon a former matrimonial home recovered or preserved in matrimonial proceedings and, if so, whether they had the further discretion to allow the party entitled to the property subject to the charge to sell it and to accept in substitution a charge on a replacement home, or, as it is sometimes put in the speeches, to "transfer" the charge to a new home. The House unanimously held that The Law Society had both the discretions in question.

8

The relevant provisions of regulation 19 of the Legal Aid (General) Regulations 1971 then in force were identical to those now appearing in regulation 97 of the present Regulations which read as follows:

  • "(1) Any charge on property recovered or preserved for an assisted person arising under section 9(6) of the Act shall vest in The Law Society.

  • (2) The Law Society may enforce any such charge in any manner which would be available if the charge had been given inter partes."

9

All their Lordships thought that, in exercising their rights as chargee under paragraph (1) of this regulation, The Law Society were entitled to have regard to wider considerations than the mere interest of the legal aid fund in recouping the costs expended on an assisted person's behalf.

10

Lord Simon of Glaisdale said at pp. 183-184 (correcting an obvious corruption of the text at p. 184 by reference to [1980] 2 W.L.R. 756, 802-803):

"I respectfully agree with the Court of Appeal that the respondent has a discretion as to the enforcement of the charge; but in my view it arises, not from the use of the word 'may' in paragraph (2) of regulation 19, but out of their position as chargee under paragraph (1) … Paragraph (1) vests the charge in the respondent, but does nothing more; paragraph (2) makes manifest the power and mode of enforcing it. By reason of the mere vesting of the charge the respondent has all the normal powers of a chargee as well as the powers of enforcement manifested by paragraph (2).

But I venture to think that it is too narrow to hold that the prime, if not exclusive, duty of the respondent in exercising its discretion is to the legal aid fund. Certainly the well-being of the fund is one of the matters which the respondent will weigh in the exercise of its discretion in relation to the charge. I think, however, that the duty of the respondent is rather to the whole legal aid scheme; and that this would not exclude consideration, among other factors, of the assisted litigant and of the purpose and result of the litigation."

11

Lord Scarman said at p. 188:

"The effect of regulation 19(1) is to vest the charge in The Law Society. The charge becomes its property to be managed as it thinks fit. The Law Society is, of course, a trustee: for the benefit of the charge vested in the society is to accrue to the legal aid fund. For instance, the society could not properly allow the charge to be switched to a property offering less security for the costs than the original property. But The Law Society is not merely the guardian of the fund. Its function is to secure that legal aid is available as required by the statute: section 15(1) of the Act of 1974. If, therefore, in its judgment it is able, without endangering its security, to defer the enforcement of the charge or to...

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