Charity fails in expenses claim against Legal Aid Board
15 April 2013
The case of JH v AB and The Scottish Legal Aid Board  CSOH 53 provides helpful guidance on the “financial hardship” test that requires to be met before a party, that successfully resists a claim by an assisted person, can obtain payment of their expenses from the Scottish Legal Aid Fund.
The principal action concerned a damages claim for alleged historic abuse at a school run by an order of nuns. The pursuer was granted legal aid by the Scottish Legal Aid Board. The action was abandoned by the pursuer and the expenses awarded against the pursuer as an assisted person. The order of nuns subsequently enrolled a motion seeking payment of their expenses from the Scottish Legal Aid Fund.
The claim was brought under section 19 of the Legal Aid (Scotland) Act 1986 and rule 6 of the Act of Sederunt (Civil Legal Aid Rules) 1987. The order of nuns argued that they would suffer “financial hardship” if they required to pay the legal expenses incurred as a result of the litigation.
The expenses were approximately £11,000. The order of nuns had total assets of £23,000,000. They had free reserves of £4,100,000 and incoming resources of £1,600,000. Lord Bannatyne refused the motion, holding that the nuns came “nowhere near” fulfilling the criteria for financial hardship.
The case provides helpful guidance on the requirements of the “financial hardship test”. Lord Bannatyne held that:
“In considering whether a party seeking such an order would suffer financial hardship, the whole financial position of the party must be had regard to including: capital, debts, income, and the nature of the capital and debt. In particular it may be of significance whether investments are easily realisable.”
Lord Bannatyne did not accept the defender’s argument that the charitable status of the order of nuns was relevant to the issue of “financial hardship”. In relation to the nature of the organisation, Lord Bannatyne held that:
“On a proper construction of section 19(3)(b) regard has to be had not to the nature of the organisation seeking the order but to the effect on its finances if such an order is not made. What the court has to consider is the issue of financial hardship. Thus a wealthy charity would not fulfil the criterion at (b) but a charity of modest means would fulfil the criterion at (b). In the same way a commercial organisation which is wealthy would not succeed, however, one of modest means would succeed in fulfilling the criterion.”
John MacGregor, of Axiom Advocates, acted for the Scottish Legal Aid Board in successfully resisting the application.
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