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Insolvent refugee charity fails in High Court bid for interim relief

Finance | Tania Mason | 1 Jul 2010

A High Court judge yesterday refused to order the Legal Services Commission to pay £600,000 to ensure that clients formerly represented by Refugee and Migrant Justice can continue to be represented by the charity’s staff until their cases are transferred to other law firms.

Martin Westgate QC, on behalf of eight former RMJ clients, had argued that the LSC should pay for 62 RMJ lawyers to continue representing vulnerable clients until they have secured new legal representation.

But Clive Lewis QC, representing the Legal Services Commission, said it was not the court’s place to “micro-manage” the winding up of an insolvent organisation and the transfer of cases to other lawyers.

He gave an assurance that the LSC would listen to RMJ’s concerns about the risks of clients slipping through the net but that it was best dealt with through dialogue and conversation rather than a court order.

Lewis reminded the judge that “RMJ is insolvent – it can’t pay its debts, it can’t pay its rent, it can’t pay its staff.  It owes £500,000 to HMRC. LSC needs to manage the consequences of this.

“It is for the LSC to decide whether to authorise further payment to an insolvent organisation that has demonstrated an inability to provide services within the financial constraints necessary.”

Agreement reached between LSC and administrators

Lewis also said that the LSC had already come to an agreement with the administrators that 33 RMJ staff would continue to be employed for the next six weeks and three of the offices would remain open so that all the cases could be categorised, prioritised and transferred in an orderly way to new providers.  According to Parishil Patel, acting for the administrators, the LSC has also offered a £20,000 contingency fund.

Patel added that the charity was owed at least £850,000 by the government so, while technically insolvent, it was not insolvent on the balance sheet test.

Manjit Gill QC, representing the Children’s Commissioner, added that no other provider had the same specialism in children’s cases as RMJ: “Mr Lewis’s model of simply boxing up files to transfer to another provider does not accord with the obligation to take into account the best interests of children. Child protection risks are not being addressed.”

Mr Justice Mitting said that in order to grant the order for interim relief of £600,000 he had to be sure that the LSC’s model of operating was unlawful. Westgate contended that it was because it did not “properly protect the interests of the clients”.  But Justice Mitting said it was better for the clients that their cases were passed as soon as possible to a “new, profitable provider rather than stay with a redundant RMJ one”.

Westgate argued that the chances of transferring all files – estimates vary between 7,500 and 12,000 – in six weeks were remote, as the LSC had so far managed to transfer fewer than 10 per cent since RMJ went into administration on 16 June.  In Ipswich, for example, just one case out of 80 had found a new home so far.

Judge: LSC's model 'not irrational'

But the judge concluded: “I am satisfied with LSC’s judgement that the interests of the clients, as well as the protection of the public purse, are best served by the rapid transfer of the files to new providers.  Nothing must be done that inhibits or delays that process.

“The six-week transfer may or may not be achievable, but this does not mean LSC’s proposals are irrational.  However they must be alert to the need to co-operate with others.”

A second application by the charity’s clients against the Home Secretary, seeking a blanket ban to prevent her from making any adverse asylum decisions against any RMJ clients before they have secured new legal representation, did not succeed either.

Essentially, the judge said that from what he had seen so far there were no grounds for requiring a blanket ban on decision-making. However, if there appeared to be systemic problems, particularly in the case of children or deportation cases, the claimants could return to court and the application would be heard again.

Click here to read Tania Mason's blog about this story