The Lord Chancellor v Blavo & Company Solicitors Ltd ((in Liquidation))
| Jurisdiction | England & Wales |
| Judge | Mr Justice Pepperall |
| Judgment Date | 21 December 2018 |
| Neutral Citation | [2018] EWHC 3556 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: HQ15X04908 |
| Date | 21 December 2018 |
[2018] EWHC 3556 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
THE HONOURABLE Mr Justice Pepperall
Case No: HQ15X04908
Rachel Sleeman and Gita Chakravarty (instructed by Michelmores LLP) for the Claimant There being no appearance by the First Defendant
Robert Bourne (instructed by Radcliffes le Brasseur) for the Second Defendant
Hearing dates: 3, 4, 5, 8, 10, 11 & 12 October 2018
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
By this action, the Lord Chancellor seeks to recover over £22 million of public funds that were paid to Blavo & Co. Solicitors Limited by way of legal aid for mental health cases. The shocking allegation at the heart of this case is that Blavo & Co. made dishonest claims for payment on the legal aid fund for thousands of cases where it was not entitled to any fee.
The law firm (as I shall call it in this judgment despite its incorporation) is now in liquidation and has taken no part in these proceedings. The claim is therefore pursued against John Blavo, a former director of the law firm, pursuant to a deed of guarantee and indemnity. The Defence pleaded but failed to particularise a set-off. In the event, it was not pursued at trial.
In this judgment, I shall first consider the central questions of fact in this case. I shall then consider the contractual issues as between the Lord Chancellor and the law firm. Thereafter, I shall consider the question of Mr Blavo's liability under the deed of guarantee and indemnity.
On 18 July 2018, His Honour Judge Bidder QC ordered that any parts of the trial that might involve consideration of any sensitive personal data belonging to former clients, or purported former clients, of the law firm should be heard in private. Sitting in private is of course a derogation from the important principle of open justice. In the event, I decided that Judge Bidder's quite proper concerns about confidentiality could be addressed simply by anonymising all references to clients or purported former clients. Accordingly, I was able at all times to sit in public. I have equally anonymised references to clients and purported clients in this public judgment.
THE LEGAL AID SCHEME
First, it is necessary to describe the operation of the legal aid scheme in mental health cases. Until 1 April 2013, the legal aid scheme was administered by the Legal Services Commission (“the LSC”). By paragraph 7 of Schedule 4 to the Legal Aid, Sentencing and Punishment of Offenders Act 2012, the property, rights, powers, duties and liabilities of the LSC were, from that date, transferred to the Lord Chancellor. By s.2(2)(c) of the Act, the Lord Chancellor established the Legal Aid Agency (“the LAA”) to provide, or facilitate the provision of, legal aid services. While solicitors provide legal aid services to their clients pursuant to contracts with the Lord Chancellor, the LAA administers the legal aid scheme on his behalf.
Advice and assistance in respect of mental health law and representation before a mental health tribunal are classed as “controlled work.” Such work is undertaken pursuant to a contract with the Lord Chancellor and remunerated in accordance with a graduated fee scheme. In 2015, fees were payable on the following scale for mental health work:
| Level | Work | Fee | Cumulative fee |
| 1 | Advice & assistance | £129 | £129 |
| 2 | Preparation for a tribunal | £321 | £450 |
| 3 | Attendance at a tribunal | £294 | £744 |
Exceptionally, firms are sometimes able to claim fees in excess of these fixed rates. These “escape fee” cases require justification and individual assessment of the files.
Approved firms undertaking mental health work are required to complete the Controlled Work form, known as form CW1&2, together with their clients in order to be eligible to claim a fee. No means assessment is required where the client seeks Controlled Legal Representation before a Mental Health Tribunal. Advice or assistance short of representation can also be given, but legal aid for such clients is means tested.
Firms claim their fees from the LAA by making a monthly on-line claim using the agency's Contracted Work & Administration (“CWA”) portal. Since there is no need to assess the fees in cases falling within the graduated fee scheme, firms are not required to submit any supporting files to the LAA except when they are seeking an escape fee. Compliance with contractual quality standards and the risk of fraud inherent in this self-certification system are addressed by periodic audits of sample files. In addition, each firm's contract with the Lord Chancellor is closely managed by a designated Contract Manager.
While there is no need for mental health clients to apply for legal aid certificates in order to access publicly funded advice and representation, the Lord Chancellor's total exposure is controlled by contractual limits on the number of “new matter starts.”
THE EVIDENCE
BLAVO & CO. SOLICITORS LIMITED
John Blavo is a solicitor. He was admitted to the roll in 1997 and was formerly the Senior Partner of Blavo & Co. The firm was incorporated on 29 June 2011 as Blavo & Co. Limited. Mr Blavo was the sole shareholder and a director of the incorporated practice. He was also recorded on the Solicitors Regulation Authority's (“the SRA”) website as the law firm's Managing Partner.
The law firm practised under the trading name Blavo & Co. both before and after incorporation. It specialised in mental health law, but also practised in criminal, clinical negligence, housing, immigration, family and general civil law. The firm grew rapidly and, by 2015, operated from 18 offices throughout England and Wales.
In November 2010, Blavo & Co. entered into a contract for civil legal aid work with the LSC. The contract came into effect on 15 November 2010. Although originally disputed, it is now common ground that the 2010 contract was novated in favour of the newly incorporated company with effect from 1 December 2011. The incorporated practice entered into a further contract for civil legal aid work with the Lord Chancellor on 1 August 2014.
Both Ms Sleeman, who appeared for the Lord Chancellor with Ms Chakravarty, and Mr Bourne, who appeared for Mr Blavo, assured me that there were no material differences between the 2010 and 2014 contracts. In any event, I note that clause 1.27 of the 2014 contract provided that it was to operate as a “seamless continuation” of the 2010 contract. Accordingly, counsel made their submissions and I have considered this judgment by reference to the terms of the 2014 contract. The contract incorporated the LAA's standard terms and the 2014 Standard Civil Contract Specification.
At least 80% of the law firm's income was derived from the legal aid scheme and, at its height, it was the second or third largest legal aid firm in England and Wales.
CONTRACT MANAGEMENT
The Lord Chancellor relied on evidence from five witnesses from the agency's Contract Management team:
16.1 Tamsin Fendley was the firm's Contract Manager between November 2013 and September 2015.
16.2 Kevin Giles was an Area Contract Manager. From 2014, he managed Ms Fendley.
16.3 Paul Davies is a National Contract Manager. Although primarily responsible for Wales and the west and south-west of England, his remit was expanded to include central and west London from January 2015. Accordingly, Mr Giles then reported to him.
16.4 In addition, the Lord Chancellor relied on the written evidence of two further witnesses:
a) Zarah Hornett was the firm's Contract Manager until September 2012. Her evidence was agreed and accordingly Ms Hornett was not required to attend the trial.
b) John Sirodcar is employed by the LAA as the Head of Contract Management. Dr Davies reported to Mr Sirodcar. Unfortunately, Mr Sirodcar underwent quadruple heart bypass surgery shortly before trial and was accordingly not fit to give evidence. While not agreed, his evidence was therefore admitted as hearsay.
Ms Hornett gave formal evidence of the novation of the LSC's contract upon the law firm's incorporation. She did not appear to have any particular concerns about the firm. In her time, the LSC's focus was on immigration work. She said that most of her day-to-day contact was with Mr Blavo's brother, Frederic. She had the sense that Frederic Blavo managed everything on a daily basis while John Blavo took the important decisions.
Ms Hornett was succeeded by Rodney Addy. Ms Fendley told me that on taking over management of the Blavo contract in November 2013, she learnt from Mr Addy that there were historical issues with the firm's overuse of new matter starts in mental health work. Mr Addy attributed this to the firm's rapid expansion. Further, she was told that they often needed chasing to comply with deadlines and that there had been some issues with duplication of claims.
Where a provider opens files in excess of its contractual limit then, unless such files are covered by an agreed extension to the contract, it is not entitled to payment for any work done on the unauthorised matters. Any payments made for such unauthorised work are therefore liable to be repaid.
In January 2014, Ms Fendley sought to recover the sum of £204,225 which had been assessed as repayable following an earlier investigation of the firm's overuse of new matter starts. Throughout 2014, she also addressed the firm's continuing overuse of new matter starts and agreed some increases in its allocation of mental health work. When asked why they were...
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