Since the Government abolished legal aid for financial remedy proceedings on divorce, the funding proceedings has caused huge problems for a number of spouses. There are still families where one spouse may hold all the “purse strings” making it extremely difficult for the other to fund their legal fees and hence pursue their reasonable financial entitlement. Below I shall set out the various options available to the more vulnerable spouse without the personal wealth to fund their fees.
Ways to fund legal fees in divorce proceedings
A loan from a commercial lender such as a bank. Most banks now shy away from providing litigation funding having had their finger burned previously. In my experience, it is often difficult to obtain anything other than a £20,000 unsecured personal loan.
Utilisation of a credit card
Again these normally only provide limited means of funding often with a maximum spend of no more than £20,000. The credit cards also often attract a high rate of interest.
Loans from family members
This is not always a good idea. Whilst commercial loans (such as credit card loans or bank loans) are considered by the family courts as “hard loans” (i.e loans that have to be repaid) loans from family members are often classed by the family Judges as “soft loans” (i.e loans that may not need to be paid). A hard loan is generally therefore better for litigation than a soft loan. Furthermore, family members are not obliged to provide loans for litigation to their relations and are not expected by the Courts to have to do so.
“Sears Tooth Deeds”
These are arrangements that some solicitors enter into with their clients whereby the solicitors fees are paid at the end out of whatever assets the spouse recovers from the Courts. Very few solicitors now enter into Sears Tooth Deeds. Many have had their fingers burned in previous cases where despite a Sears Tooth Deed being in place they have not been paid.
A specialist loan from a specialist litigation loan provider
These loans can be invaluable. The solicitors firm needs to have an arrangement with the provider. We have an arrangement in place with one firm. These providers rely on us at the beginning to set out what the individual is expected to receive at the conclusion of the case. Based on this and provided that the spouse can offer some form of security (such as an equitable charge over the former matrimonial home) then the litigation provider will make an offer of a fund to litigate. The spouse needs to take independent legal advice before signing up to this. Even if the former matrimonial home is in joint names, the other spouse cannot prevent this litigation loan being taken. Once approved by the spouse, the litigation loan can then be drawn down at various stages of the case. The interest rates can be comparable to credit cards. The beauty of a litigation loan however is that it is a hard loan and will be considered by the family Judge and deducted from that spouse’s side of the balance sheet before dividing up the remaining assets.
A Legal Services Order
If the options mentioned above under “loan” are not available to the spouse but the other spouse has the income or capital to fund your client’s legal fees then you can apply to the Court for an Order that the other spouse indeed is ordered to fund them. This can be funded on a monthly basis or if the other spouse does not have regular income then it can be funded from capital. This piece of legislation which was introduced in 2013 is invaluable for spouses who would otherwise not be able to litigate and claim their fair entitlement of the matrimonial assets. The Court will only order this funding if it is satisfied that without it the Applicant would not reasonably be able to obtain appropriate legal services. The Court has to be satisfied that the Applicant cannot reasonably obtain a loan or a “Sears Tooth Deed”. In deciding whether or not the Applicant can reasonably obtain funding from another source, the Court would not expect the Applicant to deplete a modest amount of savings. To bolster an application for a Legal Fees Order then evidence of refusal of loans from 2 commercial lenders will normally assist as will a statement from the Applicant’s solicitors that they will not enter into a Sears Tooth arrangement. If the Court makes a Legal Fees Order it will normally ask the Applicant to give an undertaking to repay to the Respondent a portion of the amount ordered if the Court is of the opinion, when considering costs at the conclusion of the proceedings, that he/she ought to do so.
Generally speaking in financial remedy cases the Court should not make a Legal Services Order beyond the financial dispute resolution hearing (‘FDR’ a negotiation hearing) but will grant a hearing date for further funding after the FDR if the case does not settle. Monthly instalments are preferred to a single lump sum payment. The evidence in support of the Legal Fees Order must include a detailed estimate of the costs of the Applicant incurred to date and the costs predicted for the future so that the Court can assess the appropriate monthly instalment.
I have successfully obtained Legal Fees Orders this year for a number of clients. Without which, these clients simply would not have legal representation and would not be able to pursue their case and obtain their reasonable financial settlements from their opposing spouses. In these cases, this Order from the Court is therefore invaluable to the spouse in the weaker financial position. As long as the application is prepared properly and thoroughly with the requisite evidence in support then the Applicant has a good chance of success in getting the legal support they need to pursue what they are rightfully entitled to.
Melanie Hamer is a one of the founding Directors of the firm who deals with all aspects of family law. There isn’t an awful lot that Melanie doesn’t know about financial proceedings, especially high net worth matters. As usual, our contact number is 029 2034 2233 or email firstname.lastname@example.org.