Ministry of Justice rules curbing legal aid payments for judicial review cases have been declared unlawful by the High Court, in a judgment the department says backs the wider "principle" of its reforms.
The regulations, introduced last April, remove the guarantee that law firms will be reimbursed for legal aid work if a court refuses their clients’ bid to challenge decisions made by a public body.
At the time it introduced the changes, the MoJ argued that shifting the financial risk for a refused claim to law firms would "provide them with a greater incentive to give careful consideration to the strength of the case before applying for permission".
But the rules were challenged in a case brought by four public firms - Ben Houre Bell, Mackintosh Law, the Public Law Project and Deighton Pierce Glynn - as well as housing charity Shelter.
They argued that justice secretary Chris Grayling had gone beyond his powers, and claimed the system could have a "chilling effect" on access to the High Court by forcing law firms to apply stricter-than-usual criteria when taking on new cases.
In a judgment issued today, Lord Justice Beatson rejected the argument that Grayling had acted beyond his authority in issuing the new rules, and said the claimants would not have met the "high threshold" for a challenge on "chilling effect" grounds had those been considered.
But Beatson said it was "difficult to see" why law firms should take a financial hit in three specific scenarios reliant on “something that was not foreseen by the provider and was outside his or her control”.
The three scenarios highlighted were cases in which defendants chose to withdraw a decision unchallenged; where a court ordered an oral hearing following an application; or where a court ordered a "rolled-up" hearing.
In those last two scenarios, Beatson said there appeared to be “no rational or proportionate connection” between the rules and “the purpose for which the Lord Chancellor has stated he introduced it”.
And he agreed that law firms could end up imposing a higher threshold for taking on cases "for the sake of financial safety" rather than to ensure they "examine a case rigorously" as intended by the MoJ.
“In our judgment the reach of regulation 5A extends well beyond those in which such a regulation could lawfully incentivise providers to a sharper focus on the merits test in the way described in the consultation papers," the judgment states.
Responding to the judgment, a MoJ spokesperson said the department was "clear” that taxpayers’ money “should not be spent on judicial reviews that are not given permission to proceed".
The spokesperson added: "We are therefore pleased this judgment confirms the principle of our reform is lawful. We will now carefully consider the technical aspects raised by the court and our next steps.”