Friday, 17 July 2015

Court Closures and the Two Tier Contract

This week, the Ministry of Justice announced a consultation on plans to close 91 courts and tribunals identified as ‘surplus’. The courts affected are in all areas of the country and include Magistrates’ Courts, County Courts, Youth Courts, Family Courts and even four Crown Courts (two standalone and two within combined court centres).

The overall costs and benefits of this suggestion are lengthy and too detailed to consider here. This blog will focus on one particular point, which is the interaction between the possible court closures and the two tier crime contracts, which are due to be introduced in January 2016.

In brief, at present firms doing criminal legal aid will have a ‘Standard Crime Contract’. This includes both duty work (at police stations and magistrates’ courts, acting for those who don’t have their own preferred solicitor) and own client work, where a client has specified that that firm is their preferred law firm. There are approximately 1600 existing Standard Crime Contracts. The proposed change is to create ‘two tier’ contracts. For these contracts, pretty much any firm already holding a Standard Crime Contract may apply for, and be granted, an Own Client Contract. There is no limit on the number of Own Client Contracts available. However, there will only be 527 Duty Contracts. This is, obviously, almost a 2/3 reduction on the current number of contracts for duty work in existence.

Firms submitted their tenders for Duty Contracts in early May of this year and will hear the outcome of the tender in September or October. Some firms chose not to tender for a variety of reasons; and many firms, including some of those who tendered, continue to hope that two tier contracts will not go ahead.

The particular question at issue here is the way in which the court closures may affect the Duty Contracts. When firms tendered for Duty Contracts, they did so for particular designated areas. In each of these areas the courts and police stations were specified, and no doubt many or most firms tendered with a strong focus on their ability to cover the courts and police stations named in each designated area. If a firm found, for example, that in a particular contract area, the courts were located too far from their offices to make it economic to attend that court on a regular basis, then the firm would not have tendered for that area. Conversely a firm may have been more keen to tender for an area in which the courts or police stations are located conveniently for access from their office.

We can see from this that the court closures may be a game changer, particularly for law firms based in rural areas.  A hypothetical, but quite possible, example: a small law firm, Firm X, based in a rural area, tendered for one Duty Contract area. There are two criminal courts based in the duty contract area. One of them, Court A, is across the street from Firm X and the other, Court B, is further afield, perhaps an hour’s drive from Firm X. Then Court A is proposed for closure. This means that even if the volume of work does not decrease, because the work from Court A is transferred to Court B, the financial calculations for Firm X are now entirely different. Instead of half of their work being done across the street at Court A, and the other half being done an hour away at Court B, now all of their work is being done at Court B. But Firm X has tendered for the Duty contract with the expectation that Court A will remain open, and they have done their financial calculations on that basis. The entire functioning of Firm X may no longer be feasible – but they have already put in their tender. Now if they withdraw, they will not have the opportunity to re-tender for a more appropriate duty contract area, as the tender is closed; and without a Duty contract Firm X may not longer be financially viable at all.

The above example may be an extreme one. However, it is surely the case that tenders were made on the basis of the existing courts and police stations prior to the proposed closures, and it seems at the least unfair, if not arguably in bad faith, that this consultation was launched after the tender process, thus preventing firms from taking possible closures into account in calculating the financial viability of their tenders. It should be acknowledged that for some firms, the opposite to the above example may happen: for them, all of their work will get closer to their office and become more convenient, and those firms may revise their expected profits upwards. But for many others this may have an overall negative effect and increase their operating costs, and those firms should have had the opportunity to consider the possibility of closures before submitting their tenders.

As we have had occasion to remark on this blog before, criminal legal aid firms do not in the main operate with large profit margins or have significant financial reserves to draw on. For some firms, then, if two tier does in fact go ahead, the court closures may be the straw that breaks the camel’s back.

The views expressed do not necessarily reflect those of the firm or its partners.


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