Funding Legal Fees

Marriage is a partnership and people conduct their own in many different ways.  A common agreement is that one will adopt the role of provider, again this may be for a number of different reasons, if they have children say and it is agreed that one will take greater responsibility for their care or there is disparity in incomes.

What happens then upon separation and a financial dispute over how the assets are to be divided occurs?  Is it right that the financially stronger party will likely secure the better deal because the weaker one cannot afford on-going legal advice?

The legal principle of equality of arms forms part of the right to a fair trial and this lies at the heart of the statutory provisions that have been introduced to ensure that one party is not unfairly disadvantaged due to lack of funding.  With the cuts to legal aid for family related matters this is more prevalent now then it has ever been.

Under 22ZA and B of the Matrimonial Causes Act 1973 it is possible to apply for a Legal Service Order - this is an interim order requiring the respondent (the paying party) to pay to the legal costs of the applicant.  This can be one order, or a series of orders that provide for instalments (which in the interests of fairness is more likely to mirror the position of the respondent).  The order should "look to the future", they are designed for future costs, not those already incurred.

This is not to be seen as an alternative option to the usual options of funding legal costs.  The court must be satisfied that without the order the applicant would not reasonably  be able to obtain legal services.  The applicant must be able to demonstrate that :-

  • they are not reasonably able to secure a loan; and
  • they are unlikely to be able to grant a charge over any assets recovered.

What steps should reasonable be taken to secure a loan?

In Rubin v Rubin [2014] Mostyn J indicated that a refusal letters from at least 2 banks would ordinarily suffice.

Public funding cuts have seen the increase in the availability of  litigation loans and the applicant should therefore be able to demonstrate that they have given these due consideration.  The ability to raise a loan may not however frustrate an application.  A loan may not be reasonable due to  eye watering interest rates that often accompany loans of this sort, Mostyn J commenting that it would unlikely be reasonable to expect the applicant to take on a loan at a very high rate unless, if the court felt it appropriate , an offer was made by the respondent to meet that interest. 

However in BN v MA [2013] where litigation loans where the interest could be rolled up were offered it was held that the applicant could therefore secure a loan.

The applicant should also investigate whether it is possible to convince their solicitors to enter into a seers tooth agreement.  If the answer is no, whilst it may be considered reasonable for for the applicant to make inquiries with different firms, Mostyn J commented that a "statement of refusal...should normally answer the question".

Does being unlikely to be able to grant a charge mean that the applicant will not have any assets?  Not necessarily, in Currey v Currey (No.2) [2007] it was considered to be more the case of whether it would be unreasonable to expect someone to do so.

When considering how to exercise the power provided under 22ZA   the court must have regard to a no of factors including :-

  • income earning capacity property and other financial resources that  both the applicant and the respondent has or is likely to have
  • whether the respondent is legally represented
  • whether steps have been taken by the applicant to avoid all or part of the proceedings by proposing or considering mediation or otherwise
  • what the case concerns and the issues in dispute
  • if the order were made would this cause undue hardship to the paying party or prevent him/her from obtaining their own legal services

Respondents' who do not make full or accurate disclosure beware.  Where the paying party's disclosure is obviously lacking the court should not hesitate to make robust assumptions about their ability to pay.

Costs can also be claimed by the applicant in respect of LSO applications.

For further advice and information on funding options please contact us on 020 3440 8000 or send us an email at enquiries@tvedwards.com