Funding financial proceedings
When acting for a party in financial remedy proceedings on divorce, it can sometimes prove necessary to seek provision by way of court order for assistance in paying legal fees. With Paradigm Family Law, our fixed fee model will no doubt help budgeting for financial proceedings, but in certain circumstances applications can also be made to the court for further help.
Matrimonial Causes Act 1973 – Legal Services Orders
The procedure is governed by S.22ZA of the Matrimonial Causes Act 1973 which gives the court power to:
“make an order or orders requiring one party to the marriage to pay to the other an amount for the purpose of enabling the applicant to obtain legal services for the purposes of the proceedings.”
Payment can be for all or part of the costs and by instalments which have to be secured.
The test for an order focuses on satisfying the court that unless the funding is made available to the applicant, that applicant would not be able to secure legal assistance for the proceedings or part of them. However, the court needs to know that the applicant cannot reasonably secure a loan to pay for the legal fees, and will not be able to obtain legal representation by providing a charge over any assets they might recover in the proceedings (a so called “Sears Tooth” agreement).
The factors
The factors that the court will pay particular attention to are set out in S.22ZB and include:
(a) The income, earning capacity, property and other financial resources which each party has or is likely to have
(b) The financial needs, obligations and responsibilities which each party has or is likely to have in the foreseeable future
(c) The subject matter of the proceedings, including the matters in issue
(d) Whether the paying party is legally represented in the proceedings
(e) Any steps taken by the applicant to avoid all or part of the proceedings, through mediation or other methods
(f) The applicants conduct
(g) Any money owed by the applicant to the paying party for costs
(h) The effect the order would have on the paying party
Case law
There are more cases now being decided by the courts which give guidance as to how the court exercises its discretion to make awards for legal services cost provision. What is clear is that each case is going to be fact specific, but there are some guidelines that have been outlined, most notably by Mostyn J in the case of Rubin v Rubin [2014] EWHC 611 (Fam) and summarised at paragraph 13 of his judgment, extracts of which are as follows:
1) When considering the overall merits of the application for a LSPO the court is required to have regard to all the matters mentioned in s22ZB(1) – (3).
2) Without derogating from that requirement, the ability of the respondent to pay should be judged by reference to the principles summarised in TL v ML [2005] EWHC 2860 (Fam) [2006] 1 FCR 465 [2006] 1 FLR 1263 at para 124 (iv) and (v)
3) Where the claim for substantive relief appears doubtful, the court should judge the application with caution. The more doubtful it is, the more cautious it should be.
4) The court cannot make an order unless it is satisfied that without the payment the applicant would not reasonably be able to obtain appropriate legal services for the proceedings.
5) In determining whether the applicant can reasonably obtain funding from another source the court would be unlikely to expect her to sell or charge her home or to deplete a modest fund of savings. This aspect is however highly fact-specific. If the home is of such a value that it appears likely that it will be sold at the conclusion of the proceedings then it may well be reasonable to expect the applicant to charge her interest in it.
6) Evidence of refusals by two commercial lenders of repute will normally dispose of any issue under s22ZA(4)(a) whether a litigation loan is or is not available.
7) In determining under s22ZA(4)(b) whether a Sears Tooth arrangement can be entered into a statement of refusal by the applicant’s solicitors should normally answer the question.
8) If a litigation loan is offered at a very high rate of interest it would be unlikely to be reasonable to expect the applicant to take it unless the respondent offered an undertaking to meet that interest, if the court later considered it just so to order.
9) The order should normally contain an undertaking by the applicant that she will repay to the respondent such part of the amount ordered if, and to the extent that, the court is of the opinion, when considering costs at the conclusion of the proceedings, that she ought to do so. If such an undertaking is refused the court will want to think twice before making the order.
10) The court should make clear in its ruling or judgment which of the legal services mentioned in s22ZA(10) the payment is for; it is not however necessary to spell this out in the order. A LSPO may be made for the purposes, in particular, of advice and assistance in the form of representation and any form of dispute resolution, including mediation. Thus the power may be exercised before any financial remedy proceedings have been commenced in order to finance any form of alternative dispute resolution, which plainly would include arbitration proceedings.
11) Generally speaking, the court should not fund the applicant beyond the FDR, but the court should readily grant a hearing date for further funding to be fixed shortly after the FDR.
12) When ordering costs funding for a specified period, monthly instalments are to be preferred to a single lump sum payment.
13) If the application for a LSPO seeks an award including the costs of that very application the court should bear in mind s22ZA(9) whereby a party’s bill of costs in assessment proceedings is treated as reduced by the amount of any LSPO made in his or her favour.
14) A LSPO is designated as an interim order and is to be made under the Part 18 procedure (see FPR rule 9.7(1)(da) and (2)). 14 days’ notice must be given (see FPR rule 18.8(b)(i) and PD9A para 12.1). The application must be supported by written evidence (see FPR rule 18.8(2) and PD9A para 12.2). That evidence must not only address the matters in s22ZB(1)-(3) but must include a detailed estimate of the costs both incurred and to be incurred. If the application seeks a hearing sooner than 14 days from the date of issue of the application pursuant to FPR rule 18.8(4) then the written evidence in support must explain why it is fair and just that the time should be abridged.
An applicant will therefore need to show that they have exhausted other ways of funding the case, most particularly by having been rejected by no less than 2 lenders and their lawyer not being able to offer a charge over the expected assets to be recovered in the financial proceedings.
International
It can also provide a funding option for those cases where an international element comes into play, such as the risk of child abduction or cross jurisdictional issues. In Al-Khatib v Masry [2002] EWHC 108 (Fam), [2002] 1FLR 1053 Munby J awarded the wife and mother a war chest or ‘fighting fund’ to cover future litigation not only in England & Wales but any other jurisdiction aswell. In our experience relocation applications in other jurisdiction can be extremely expensive and such Legal Services Orders can prove invaluable.
Contact us
If you think you might need legal assistance for your divorce or financial proceedings, ask Paradigm Family Law for advice on the funding options available. We offer fixed fee funding for family law cases, and can assist you with budgeting for your case. We can also help with an application for funding and have connections with a wide range of expert financial advisers.
Call Paradigm Family Law today on 0845 6020422 or email us at [email protected] to arrange a free initial consultation.
