Legal services orders and costs allowances: funding family finance proceedings

Funding and when may it be available

It is likely that financial relief in matrimonial and civil partnership, and in some other financial relief proceedings (eg under Matrimonial and Family Proceedings Act 1984, (MFPA 1984) Pt 3) are unique in all litigation in enabling courts – in this case family courts – to provide for funding between parties for future litigation. That is to say, there is some statutory provision for a less financially advantaged spouse/partner (A) to claim funding from the better off other spouse/partner (B). A can claim from B, if there are family assets available for either to pay for lawyers’ fees. A can ask the court – as some husbands see it – for B to pay A’s lawyers to sue him.

In the matrimonial and civil partnership jurisdiction this remedy is known as the legal services order (LSO under Matrimonial Causes Act 1973, (MCA 1973) s 22ZA for divorces and other matrimonial causes with the parallel Civil Partnership Act 2004, Sch 5 para 38A). In other financial jurisdictions it tends still to be called a ‘costs allowance’ (after its pre-statutory form in A v A (Maintenance Pending Suit: Provision for Legal Fees) [2001] 1 FLR 377, [2001] 1 FCR 226, Holman J).

Two recent examples of LSOs (both in Bloomsbury Family Law Briefing (BFLB) for October) are respectively to be found in action in Gafforj v Gafforj (Appeal: Hadkinson Order) [2018] EWCA Civ 2070 (20 September 2018) and LKH v TQA AL Z (Interim maintenance and pound for pound costs funding) [2018] EWHC 2436 (Fam) (24 July 2018), Holman J. The first case concerns a legal services order and provides a text-book example of a Hadkinson (Hadkinson v Hadkinson [1952] P 285 CA) order. The husband was told that his appeal to the Court of Appeal would be dismissed if he did not pay arrears of LSO and of a costs order of £140,000 (£165,561 including arrears of periodical payments claimed) by 4 October 2018. As explained in BFLB (October 2018), all conditions for a Hadkinson order (after) were present (see [9]-[15]), described by Peter Jackson LJ in Gafforj as ‘draconian’ (because it goes to any right to access to the court), and ‘a case management order of last resort in substantive proceedings… where a litigant is in wilful contempt’.

In LKH v TQA AL Z (Interim maintenance and pound for pound costs funding) [2018] EWHC 2436 (Fam) (24 July 2018) concerned a costs allowance in MFPA 1984, Pt 3 proceedings (financial relief after a foreign divorce). Holman J was confronted by a husband who had been ordered to pay £40,000 per calendar month by way of a costs allowance payable monthly in advance on the 1st of each month commencing on 1 May 2018 for six months, in proceedings under. ‘The husband has not paid one penny under that order either’ said Holman J. Following Bodey J in Mubarak v Mubarak [2007] 1 FLR 722 the defaulting husband was ordered to pay £1 to his wife’s lawyers for each £1 he paid to his own lawyers.

Legal services orders and costs allowances

The statutory LSO or the common law costs allowance enables a family court to require the financially stronger party (B: say the husband or the father (in Children Act 1989, Sch 1 proceedings)) to provide from assets controlled by B enough to ensure Family Procedure Rules 2010, r 1.1(2)(c) is complied with: that both ‘parties are on an equal footing’. In other words, yes, that B must release cash to ensure his (former) wife or partner (A) has enough to pay her own lawyers. At a time when so many spouses are acting in person in family proceedings, I wonder how many parties – mostly it will be wives or mothers – are applying for orders.

These thoughts were given prominence by press reports (https://www.thetimes.co.uk/article/princess-tessy-of-luxembourg-represents-herself-in-divorce-case-ll9x8srdw) that Princess Tessy of Luxembourg had conducted her own financial relief proceedings before McDonald J in the Family Division. That said, had she not wanted to represent herself, and if she was short of funds herself, I am sure funds would easily have been made available by LSO for her to fund her own lawyers. We await the full case report, perhaps to find out more….

Funding for financial relief proceedings: legal services orders

Proceedings in which orders may be available by statute (LSOs under MCA 1973, s 22ZA) or at common law (‘costs allowances’) are generally financial proceedings in the family courts (ie Family Division of the High Court or the Family Court). Mostly the proceedings dealt with are financial relief proceedings. And this is where legal aid for the less well off, is rarely available since the new more repressive legal aid scheme under Legal Aid Sentencing and Punishment of Offenders Act 2012. MCA 1973, s 22ZA, be it noted, was introduced by amendment to MCA 1973 by the 2012 Act.

The way the legal services order (LSO) scheme works is that application is made as if for interim financial provision (or by equivalent Family Procedure Rules 2010, Pt 18 application in other financial relief (eg MCA 1973 financial proceedings; or Children Act 1989, Sch 1) proceedings, and as confirmed by Mostyn J in Rubin v Rubin (below) at [24]). Thus MCA 1973, s 22ZA(2) says a party to ‘proceedings…for financial relief’ can seek an order for payment for ‘legal services’ (as defined by s 22ZA(10)) (s 22ZA(1) is about funding divorce costs). The presumption is it will be the financially weaker spouse, parent or partner (A) only who will apply for a LSO.

In a case where the means of the parties are modest, if B has his own lawyer, the question must be: why should not B’s expenditure for A’s lawyers where she cannot pay from her own means be balanced – at least in part – by him for lawyers of her choice to help her? Section 22ZA, and the common law (for costs allowances), provides a statutory basis for A to make such an application to the court.

If the court is to make an order, it must be satisfied that there is no other source of funding available to the applicant spouse (s 22ZA(3)) eg a bank loan or other borrowing (s 22ZA(4)(a)) or a loan charged on property (s 22ZA(4)(b)). MCA 1973, s 22ZB sets out the factors about the parties’ circumstances the court must take into account before it makes an order.

Costs allowances and the common law

The case of LKH v TQA AL Z (Interim maintenance and pound for pound costs funding) [2018] EWHC 2436 (Fam) shows that the costs allowance is still very much at large where couples or parents do not come within the terms of MCA 1973, s 22ZA (or its civil partnership equivalent). Thus in PG v TW (No 1) (Child: Financial Provision: Legal Funding) [2012] EWHC 1892 (Fam), [2014] 1 FLR 508 Theis J made an order for interim payments orders in CA 1989, Sch 1 proceedings, that is a costs allowance order.

In Rubin v Rubin [2014] EWHC 611 (Fam), Mostyn J refused to make a legal services order for a wife and mother in proceedings for financial relief (under MCA 1973, s 22ZA); and an equivalent order under CA 1989, Sch 1 for parallel Hague Convention proceedings. He refused both orders because the applications were, he said, disguised costs orders: what Mostyn J called, at [13](iv), ‘a surrogate inter partes costs’ order’. In the course of giving the judgment, he set out 14 ‘applicable principles’ for exercise of the jurisdiction (at [13]), including that an applicant would not normally be expected to sell or charge her home or deplete a modest fund of savings (v) and that ‘refusals from two commercial lenders of repute’ should normally answer and questions as borrowing under s 22ZA(4)(a) (vi). Monthly instalments are generally to be preferred to a single payment (xii).

And, says Mostyn J at [14], the same statutory and other principles, should in his opinion, apply to an application for funding in proceedings under Children Act 1989, Sch 1, Inheritance (Provision for Family and Dependants) Act 1975 and under MFPA, Pt 3. In each case an application can only give rise to periodical payments of funding to parties lawyers. (Mostyn J does not consider payments direct to counsel.)

At a time when so many wives, partners or parents of modest means are presenting their own finance cases (as legal aid has been so harshly squeezed), I wonder how many are using LSO or costs allowance applications to help them to finance their own lawyers. They can then – if they are not – have payments made for lawyers to help them, and to give them equality of arms – in terms of legal representation – with their former husbands or partners?

David Burrows

Written by Ellie MacKenzie

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