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Maintenance Pending Suit Part II: Costs Allowances

This article follows on from Part I which deals with Maintenance Pending Suit applications generally, which is also published on the site.

















Alexander Chandler, barrister, 1 King's Bench Walk

Part one of this article can be found here

Jurisdiction
An applicant for maintenance pending suit (MPS) may seek a 'costs allowance' to meet the ongoing expense of legal representation.

In the 'seminal decision' 1 of A v A [2001] 1 FLR 37712, the wife faced a quandary: she had been legally aided without contribution but, following the part-payment by the husband of an order for MPS, her legal aid certificate had been discharged. At the time of the hearing, the wife had incurred £40,000 costs on a private basis and expected to incur a further £50,000 to trial. Since the validity of the marriage was in dispute, the wife could not borrow against her expectation of ultimate capital recovery. In awarding MPS of £7,750 per month until the determination of the suit (and upon the wife's undertaking to pay £4,000 of the sum punctually to her solicitors), Mr Justice Holman held that: "the words of s 22 [MCA 1973] are 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" (at p 383)

The legitimacy of a 'costs allowance' came under a 'full-scale attack' in G v G (Maintenance Pending Suit: Costs) [2002] EWHC 306 (Fam); [2003] 2 FLR 71, where the husband asserted that the court lacked the jurisdiction to extend 'maintenance' to cover payments towards legal costs. After a comprehensive review of statute and case law, and consideration of the Barras principle of statutory interpretation, Mr Justice Charles concluded

"A v A is correctly decided and therefore I have jurisdiction to include an element to cover the wife's legal costs of the ancillary relief proceedings in the award of maintenance pending suit." (at [41])

Subsequently, it has been established that a 'costs allowance' is not a 'costs order', and so falls outside the provisions of FPR 2.71, e.g. that there will generally be no order as to costs3. Although usually sought within ancillary relief, recent authority suggests an element of legal costs may also be sought in applications under Sch. 1 of the Children Act 19894.

Applicable Guidelines
When will the court make a costs allowance, and in what circumstances?

In A v A, the court held that 'in an appropriate case'5, a costs allowance could be made. In Moses-Taiga v Taiga [2005] EWCA Civ 1013; [2006] 1 FLR 1074, the Court of Appeal held that, "…only in cases that are demonstrated to be exceptional that the court will consider exercising the jurisdiction" (per Thorpe LJ at [25]). Subsequently, in TL v ML [2005] EWHC 2860 (Fam); [2006] 1 FLR 12636, Nicholas Mostyn QC, sitting as a Deputy High Court Judge, suggested the following interpretation of the word 'exceptional' [at 128]:

"[In Moses-Taiga] Thorpe LJ speaks of the power only being exercised in 'exceptional cases'. I would be surprised if he intended by that remark to impose the need to demonstrate anything beyond the requirements that he had previously mentioned, namely, that the applicant: (1) had no assets; and (2) could not raise a litigation loan; and (3) could not persuade her solicitors to enter into a Sears Tooth v Payne Hicks Beach7 charge. The combination of those three factors would, to my mind, make the case exceptional.

In Currey v Currey (No. 2) [2006] EWCA Civ 1338; [2007] 1 FLR 946, the Court of Appeal clarified the law, per Wilson LJ:

"[19] I consider that the word 'exceptional' is obstructing the proper exercise of the jurisdiction to include a costs allowance; and I am convinced that Thorpe LJ never intended that it should do so…

[20] In my view the initial, overarching inquiry is into whether the applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means. Thus, to the extent that she has assets, the applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services. Furthermore, not to forget the third of Thorpe LJ's three features, she has also to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery. I would add, fourthly, that the court needs also to be satisfied that there is no such public funding available to the applicant as would furnish her with legal advice and representation at a level of expertise apt to the proceedings, i.e. that the applicant does indeed in that regard fall within the unserved constituency referred to by Thorpe LJ in the statement quoted at para [1], above.

[21]   Although in making a costs allowance the court has a discretion, I cannot imagine that it would be reasonable to exercise it unless the applicant had thus duly demonstrated that she could not reasonably procure legal advice and representation by any other means. That, I venture to suggest, is, in effect and as a matter of common sense, a necessary condition of making an allowance. But I certainly do not consider that it will always be a sufficient condition… at this stage other factors may well come into play which will no doubt on occasions lead the court to decline to make it notwithstanding the demonstration. The subject-matter of the proceedings will surely always be relevant; and, insofar as it can safely be assessed at so early a juncture, the reasonableness of the applicant's stance in the proceedings will also be relevant. So also will a variety of other features, including of the type which exist in the present case, in particular the arresting fact that the husband already owes £46,000 to the wife in respect of costs." (my use of italics)

Procedure
The procedural steps in applying for MPS are set out in the first Part of this article. There are no specific rules concerning applications for costs allowances. However, it is suggested that where a costs allowance is sought, a sworn statement should be filed to set out the applicant's case as to why she cannot otherwise reasonably procure legal advice and representation.

Following Currey (No. 2) (see above), a sworn statement should explain:

i) firstly, why the applicant's assets cannot be reasonably deployed to meet the litigation costs;

ii) secondly, what efforts have been made to raise a loan to meet the litigation costs;

iii) thirdly, why the applicant cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery (see Sears Tooth (A Firm) v Payne Hicks Beach (A Firm) [1997] 2 FLR 116). In TL v ML, Nicolas Mostyn QC commented:

"The second and third requirements make the applicant prove a negative in each instance. In order to prove the inability to raise a litigation loan, I would have thought that production of correspondence between her solicitors and at least two banks eliciting a negative response would suffice. A simple statement from her solicitors stating that they were not prepared to enter into a Sears Tooth v Payne Hicks Beach charge should ordinarily deal with the third requirement." (at [129])

iv) and fourthly, that public funding is not available which would "…furnish her with legal advice and representation at a level of expertise apt to the proceedings" (Currey (No. 2), per Wilson LJ at [20])

Having met these 'necessary' conditions, the applicant would be well advised to address why the 'sufficient' condition, i.e. why the court should exercise its discretion (see para. 21 of Wilson LJ's judgment in Currey (No. 2) above). There should also be some explanation as to the amount sought by way of costs allowance.

The Order
Since the court has no jurisdiction to make orders in favour of third parties such as the applicant's solicitors (Burton v Burton and Another [1986] 2 FLR 419), the applicant should undertake to pay promptly such sum as represents the costs allowance to her solicitors. A costs allowance can be backdated to the date of the petition.

Duration of a Costs Allowance?
Should a costs allowance continue to the conclusion of the suit or an earlier stage, such as FDR? In Currey (No. 2), Wilson LJ commented:

i) that with regards to the duration of the costs allowance:

"…whenever a court decides to make a costs allowance, ought to proceed with a judicious mixture of realism and caution as to both its amount and its duration… . The FDR appointment is a watershed and all reasonable inducements to both parties there to negotiate positively in the light of informal judicial indications should be in place. The knowledge of a spouse in receipt of a costs allowance that, absent settlement at or in the immediate aftermath of the FDR, she will have to apply for a further allowance, which may or may not be granted, seems to me to amount only to a reasonable inducement, as opposed to improper pressure, to reach settlement." (at [28])

ii) however, after an unsuccessful FDR, the judge could not hear an application to extend or vary an existing costs allowance. FPR 2.61E(8) provides that the judge could have no further involvement other than giving further directions. In the opinion of Wilson LJ,

"To extend a costs allowance by further variation [at FDR] … would be otherwise than to give a direction for the future course of the proceedings" (at [29]).

iii) accordingly, a costs allowance may be limited until FDR, after which the applicant could renew the application to a judge who had not conducted the FDR (and who would have no knowledge of any privileged offers).

The Final Reckoning
How should the court factor in a costs allowance where (as in most cases), the ultimate order is that there should be no order as to costs (FPR 2.71(4)(a))? In Currey (No. 2), Wilson LJ commented

"…insofar as the objection in principle to a costs allowance has previously been cast in part upon an argument that it pre-empts the normal despatch of issues as to costs at the conclusion of the proceedings, such an argument will largely fall away by virtue of the new rules. The proper treatment of liabilities for costs thereunder will generally be that they are debts to which the judge should have regard in making his substantive award; and so in my view an allowance for costs within an award of maintenance in the circumstances which I have sought to outline would be consonant with the movement under the new rules to cater for costs at an earlier stage than hitherto." (at [32])

Conclusion
In summary, when seeking a costs allowance:

i) It is suggested that a sworn statement should be prepared that demonstrates why he or she could not reasonably procure legal services by other means;

ii) In particular, the applicant should address the 'necessary conditions' set out in Currey (No.2) as well as the 'sufficient condition', i.e. why in the circumstances of the case, the court should exercise its discretion in his or her favour

iii) Evidence in support may assist, e.g. letters from banks refusing loan finance and from the solicitors explaining that a Sears Tooth agreement is not available;

iv) Accordingly, whilst the test is not 'exceptional', the applicant must satisfy the court in a number of respects before the court will exercise its discretion.


Alexander Chandler
1 Garden Court
Temple
London

17th February 2010

______________________________

1 Per Wilson LJ in Currey v Currey (No. 2) [2006] EWCA Civ 1338; [2007] 1 FLR 946 at [14]
2 Full title: A v A (Maintenance Pending Suit: Provision for Legal Fees) [2001] 1 FLR 377
3 Per Wilson LJ in Currey v Currey (No. 2) [2006] EWCA Civ 1338; [2007] 1 FLR 946 at [32]
4 See M-T v T [2006] EWHC 2494 (Fam); [2007] 2 FLR 925, cf. W v J (Child: Variation of Financial Provision) [2003] EWHC 2457 (Fam); [2004] 2 FLR 300
5 Per Holman J at p 387
6 Full case name: TL v ML and Others (Ancillary Relief: Claim Against Assets Of Extended Family) [2005] EWHC 2860 (Fam); [2006] 1 FLR 1263
7 Sears Tooth (A Firm) v Payne Hicks Beach (A Firm) and Others [1997] 2 FLR 116.