When solicitors 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. These orders are called 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 installments 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 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
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.
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