On 1 April 2013 the Government introduced a new section 22ZA into the Matrimonial Causes Act 1973 (MCA 1973), giving the family courts the power to order one party to a marriage to pay to the other an amount for the purpose of enabling the applicant to pay for legal services for the purpose of certain family court proceedings.­ In effect, it is an interim order to fund the other’s costs.­ ­­

Previously, following the confirmation from Holman J in A v A in 2001 that the words of section 22 of the MCA 1973 were wide enough to empower the court to include an element towards the payee’s costs of the suit provided it is reasonable to do so, applications for a so-called costs allowance were determined within an application for maintenance pending suit.­ Since 1 April 2013 it is no longer possible to make an application under section 22 MCA 1973 for the other party to pay an amount in respect of legal services.­­­

Since the introduction of the Legal Services Order, there were in 2013 only three reported decisions, none of which had an in-depth analysis of the new law.

Now, on 10 March 2014 Mostyn J has handed down judgment in Rubin v Rubin.­ After acknowledging that he had recently had to deal with a number of applications for Legal Services Orders, he provided at paragraph 13 a very helpful summary of the substantive and procedural principles (extract below).­­­

Whilst the comprehensive summary provided by Mostyn J is very helpful, family lawyers dealing with cases involving an international element will be particularly interested to note the indication that, where the claim for substantive relief appears doubtful, the court should consider the application with caution.­ In 2005, the Court of Appeal in Moses-Taiga v Taiga confirmed that the court had jurisdiction to make an order for maintenance pending suit pursuant to section 22 of the Matrimonial Causes Act 1973 even where there is a preliminary issue as to the court’s jurisdiction to hear the substantive suit.­ Following the comments of Mostyn J in Rubin, whilst the court has jurisdiction to make a Legal Services Order where the jurisdiction in respect of the divorce and ancillary financial remedy proceedings appears doubtful, it should treat such applications with caution.­ The more doubtful jurisdiction is, the more cautious the court should be.­Practitioners should also be aware of the comments of Mostyn J in relation to litigation loans.­ Over the last few years there have been a number of litigation loan providers willing to offer litigation loans secured against properties in the UK, sometimes even when the property is in the name of the other party to the proceedings.­ One the surface it appeared that this may mean that an applicant for a Legal Services Order would be unlikely to satisfy a court that they were unable to obtain the appropriate legal services by way of a charge over an asset recoverable within the proceedings.­ However, following Mostyn J’s comments, the court is unlikely to expect an applicant for a Legal Services Order to take a litigation loan offered at a very high rate of interest unless the respondent offered an undertaking to meet that interest, if the court later considered it just so to order.

Mostyn J also held, echoing his comments from when he sat as a Deputy High Court Judge in TL v TL in 2005, that:

  1. Where the disclosure by the payer is obviously deficient, the court should make a robust assumption about his ability to pay;
  2. Where the paying party has historically been supported by a third party, and where the paying party is asserting that the support from the third party has been curtailed but the position of the third party is unclear, the court is justified in assuming that the third party will continue to support the paying party; and
  3. Any order should normally contain an undertaking by the applicant that they will repay to the respondent such part of the amount ordered if the court is of the opinion, when considering costs at the conclusion of the proceedings, that they ought to do so.

The difficulty for the respondent to an application for a Legal Services Order is that, should it later become clear that the disclosure they gave was accurate, that any support they had historically received from a third party had indeed curtailed, or that for any other reason the applicant ought to repay part of the order, they may only receive the appropriate reimbursement if there is a further hearing or potentially a final hearing.­

Whilst the financially weaker party must be able to have available resources to fund litigation, there is surely therefore a risk that, by exercising and interpreting the legislation is this way, the courts will not be giving effect to the overriding objective of for example ensuring that cases are dealt with expeditiously and saving expense.

The summary provided by Mostyn J, at paragraph 13, is as follows:

i)­ 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).

ii)­ 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), where it was stated: "iv) Where the affidavit or Form E disclosure by the payer is obviously deficient the court should not hesitate to make robust assumptions about his ability to pay. The court is not confined to the mere say-so of the payer as to the extent of his income or resources. In such a situation the court should err in favour of the payee.­Where the paying party has historically been supported through the bounty of an outsider, and where the payer is asserting that the bounty had been curtailed but where the position of the outsider is ambiguous or unclear, then the court is justified in assuming that the third party will continue to supply the bounty, at least until final trial."

iii)­ Where the claim for substantive relief appears doubtful, whether by virtue of a challenge to the jurisdiction, or otherwise having regard to its subject matter, the court should judge the application with caution. The more doubtful it is, the more cautious it should be.

iv)­ 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. Therefore, the exercise essentially looks to the future. It is important that the jurisdiction is not used to outflank or supplant the powers and principles governing an award of costs in CPR Part 44. It is not a surrogate inter partes costs jurisdiction.­ Thus a LSPO should only be awarded to cover historic unpaid costs where the court is satisfied that without such a payment the applicant will not reasonably be able to obtain in the future appropriate legal services for the proceedings.

v) ­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.

vi)­ 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.

vii) ­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.

viii) ­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.

ix) ­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.

x)­ 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.

xi) ­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.­ This is a better course than ordering a sum for the whole proceedings of which part is deferred under s22ZA(7). The court will be better placed to assess accurately the true costs of taking the matter to trial after a failed FDR when the final hearing is relatively imminent, and the issues to be tried are more clearly defined.­

xii) ­When ordering costs funding for a specified period, monthly instalments are to be preferred to a single lump sum payment. It is true that a single payment avoids anxiety on the part of the applicant as to whether the monthly sums will actually be paid as well as the annoyance inflicted on the respondent in having to make monthly payments.­ However, monthly payments more accurately reflects what would happen if the applicant were paying her lawyers from her own resources, and very likely will mirror the position of the respondent.­ If both sets of lawyers are having their fees met monthly this puts them on an equal footing both in the conduct of the case and in any dialogue about settlement. Further, monthly payments are more readily susceptible to variation under s22ZA(8) should circumstances change.

xiii) ­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. Thus, if an LSPO is made in an amount which includes the anticipated costs of that very application for the LSPO, then an order for the costs of that application will not bite save to the extent that the actual costs of the application may exceed such part of the LSPO as is referable thereto.

xiv)­ 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.

If you would like to discuss obtaining such an order or other matters in this note, please contact us.­