The LSC has issued “a point of principle” clarifying how costs will be treated in the cost compliance audit regime, which could help those firms threatened with losing legal aid contracts.
The ruling came after Scunthorpe law firm Martin & Haigh challenged an audit. “When taking an audit sample the Commission must assess the value of each file should be looked at. Where the solicitor has claimed less than the value of an individual item, the full value should be allowed,” the Commission said. “If the total amount due on a file has been under-valued by the solicitors, the under value must be set against any over-claims elsewhere.” In the case of the Martin & Haigh audit, the amount under-claimed actually exceeded the amount allegedly under-claimed.
Penny Owston, a partner at the firm, hopes that the ruling will assist those firms that feel they have been unjustly treated in the much-loathed audit process. “If anybody can get out of that position by using this point of principle then I shall be delighted,” she said. “[Auditors] go over the files with a fine tooth comb, look at the records and make judgments with the benefit of hindsight about what should or shouldn’t be done.” The Commission’s previous position of not taking into account under-claims was “just unconscionable”.
However the LSC has drawn a line under all audits conducted before the date of the cost committee hearing which took place last December and said that earlier audits will not be affected. The ruling will be seized upon by those firms have been found to have two consecutive category 3 findings (i.e., those firms judged to overclaiming by more than 20 per cent) that risk losing their legal aid contract. Martin & Haigh was not one of those firms, but Penny Owston argued that it would be “horrendous if firms were in this situation but they were not able to invoke this principle.”