Paying back your Legal Costs – how and when you have to pay back
There is a rule that if you win your case and recover or hang on to money or property then you will have to repay your legal costs, this is known as the “Statutory Charge”.
Also 50% of any redundancy payment is exempt or any money received as a result of an order made by an Employment Appeal Tribunal. Also maintenance received under an order in matrimonial proceedings is also exempt.
In addition certain lump sum payments recovered in lieu of a pension share will be exempt from the charge. Additional costs associated with a person’s disability will also be excluded when calculating the amount of their statutory charge.
If your opponent pays your legal costs because they lost the case then you may not have to pay anything back to the Legal Aid Agency out of your own pocket.
Be aware that sometimes there are still “unrecovered” costs which you may have to pay to your solicitor. This is because the court will only make your opponent pay your reasonable costs so the cost of any extra work your solicitor has done may not be considered as reasonable costs to pass on to your opponent. However, as your solicitor has done the work you are still liable to pay your solicitor.
If you lose your case you do not have to pay back your legal costs as the Agency will pay your solicitor, but you will lose any contributions you have paid.
You may have to pay your opponent’s costs, because you lost. However, it is usually possible to argue that because you have legal aid this means you have little or no money and therefore cannot pay your opponent’s costs.
The court will usually make a “Costs Order” against you, but say that it is not to be enforced until it can be shown that you have the money to pay.
Legal Aid does not mean that the Agency will pay your opponent’s costs for you or that they will pay any other money you are ordered to pay for losing your case (i.e. damages/compensation).
If you are receiving legal help under the Legal Help Scheme you can ask the Agency to consider “waiving” your legal costs so that you do not have to pay these costs back. The Agency might agree to do this, for example, if you have only been able to recover a small amount of money. They have a discretion which means they do not always have to agree.
You or your solicitor will have to write to the Agency after your case is over to ask if they will agree to waive the Statutory Charge. Not all cases where Legal Help is granted require you to pay back your legal costs if you win. You will only be asked to repay your costs in family, personal injury or clinical negligence cases.
Where you were receiving legal representation under a certificate the Agency has no power to waive the statutory charge, unless:
i) The proceedings were considered to have a significant wider interest, or
ii) The Agency considered it cost effective to fund legal representation for certain claimants, but not others who might have benefited.
Alternatively, if the statutory charge cannot be waived where you have had a legal representation certificate you may be able to “postpone” the statutory charge so you do not have to repay your costs to the Agency straight away.
The Agency will only agree to postpone the payment of your legal costs if you have been able to recover property, hang on to your interest in a property or you have received some money in a matrimonial dispute, but you need to use the money to buy a house as a home for you and your family. However, their decision is discretionary.
You have to apply to the Agency to postpone their Statutory Charge. This is done by completing an application form which your solicitor will have. The Agency will then register a “Caution” on the Title Deeds to your property. If the property has not been bought yet then they will register the Caution after the property has been bought.
If your solicitor acts for you in buying the property they have to promise to send the Agency the Title Deeds so that they can register their caution. You then do not have to pay your legal costs until the property is sold. Your mortgage will then be repaid first, before the Agency is paid.
However, the Agency will charge interest of 8% until they recover their money. It may therefore be better to pay the Agency as soon as you can to avoid the interest.
Any money you receive from settling your case has to be paid to your solicitor. Your solicitor must then send the money to the Agency who will hold on to it until the end of your case and after your solicitor has sent their bill to them. The Agency will deduct any money you have to pay for your costs and send the rest to you. You are also entitled to interest for the time the money is held by the Agency.
If the Agency has agreed to postpone the Statutory Charge and agreed that you can use the money to buy a new home then the money will be released to the solicitor acting on the purchase of your new home and not directly to you.
Your solicitor may have some idea about how much their costs might be. They can give an “Undertaking”, (a guarantee) to the Agency that their costs will not exceed a certain sum. The Agency will hold this sum and release the rest of the money to you.