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Funding Family Proceedings and Legal Services Orders

Tony Ward, Family Law barrister with 3PB analyses the latest case law relating to Legal Services Orders under s.22ZA MCA 1973

Tony Ward, Family Law Barrister with 3PB Barristers

I was recently involved in a case concerning the workings of Legal Services Orders (LSO's) under s22ZA Matrimonial Causes Act 1973, and this article aims to update fellow practitioners with the current legal position in the light of a number of recent reported cases following on from the introduction of the provision in April 2013.

This article will not explain the past and current law in detail but assess the current situation in the light of the new law and the cases decided under it.

1. Applications for LSO's are likely to increase because of the lack of legal aid available for private law Children Act proceedings and financial proceedings since 1st April 2013. The problem arises where one of the parties, usually the wife, has little or no assets in her name and a low or non-existent income. This issue was foreseen and articulated by Wilson J (as he then was) in Sears Tooth (A Firm) v Payne Hicks Beach (A Firm)  [1997] 2 FLR 116 where he referred to "…. A grave and widespread problem encountered increasingly in the Family Division: namely, how can a spouse, usually the wife, who is ineligible for legal aid but who has negligible capital, secure legal advice and representation in order to pursue her rights against her husband, particularly one who is rich, litigious or obstructive or whose financial circumstances are complex and unclear?" As a result of this problem case law was built up in a series of cases including: A v A (Maintenance Pending Suit): Provision For Legal Services) [2001] 1 FLR 377 Holman J; TL v ML and others (Ancillary Relief: Claims against Assets of Extended Family) [2005] EWHA 2860 (Fam) Mr. Nicholas Mostyn (as he then was); Re G (Maintenance Pending Suit) [2006] EWHC 1834 (Fam) Munby J (as he then was) and; Currey v Currey (No2) [2006] EWCA Civ 1338.

2. In summary, the main principles that emerge from the case law prior to April 2013:

a. The test for making an order for legal services was one of reasonableness in each case;

b. Each party must be afforded a reasonable opportunity to present their case under conditions that do not place them at a substantial disadvantage to their opponent;

c. Even if the W did have assets and could give security was it reasonable to expect her to do so?

d. A case did not need to be exceptional and the applicant had to show:

i. That they had little or no assets.

ii. That they could not raise a litigation loan.
Mr. Mostyn in TL v ML made the comment that this meant the party had to prove a negative and considered that production of correspondence with at least 2 banks eliciting a negative response would suffice.

iii. That they could not persuade their solicitors to enter into a Sears Tooth Agreement. Mr. Mostyn in TL v ML said that what was required was a simple statement from her solicitors that they would not enter into a Sears Tooth Agreement.

e. In practice, such an application should be made before the FDR and any claim for costs should only be up to the FDR. Therefore, if the case goes to a final hearing and if the husband cannot be persuaded to agree a reasonable sum for costs, there will almost certainly need to be a further application

f. There should be a reasonably detailed estimate of costs so that the court can scrutinise the amount asked for by the applicant.

g. The enquiry for the court is into whether the wife can reasonably procure legal services and representation by any other means.

h. It is relevant for the court to take into account that no public funding is available.

i. The court could take into account the subject matter of the proceedings

j. The court could take into account the reasonableness of the applicant's stance.

k. Human rights are relevant to such applications. The Article 6 right to a fair trial is an essential part of the concept of equality of arms.

3. S22ZA provides that " (1) The court must not make an order under this section unless it is satisfied that, without that amount, the applicant would not reasonably be able to obtain appropriate legal services for the purposes of the proceedings or any part of the proceedings" Subsection (4) states: "for the purposes of subsection (3) the court must be satisfied that: (a) the applicant is not reasonably able to secure a loan to pay for the services, and (b) the applicant is unlikely to be able to obtain the services by granting a charge over any assets recovered in the proceedings." Section 22ZB sets out the matters to which the court must have regard in deciding how to exercise power under s22ZA. It provides: "When considering whether to make or vary an order under section 22ZA, the court must have regard to:

a. The income earning capacity, property and other financial resources which each of the applicant and the paying party has or is likely to have in the foreseeable future;

b. The financial needs, obligations and responsibilities which each of the applicant and the paying party has or is likely to have in the foreseeable future;

c. The subject matter of the proceedings, including the maters in issue in them;

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, whether by proposing or considering mediation or otherwise;

f. The applicant's conduct in the proceedings; and

g. Any amount owed by the applicant to the paying party in respect of costs in the proceedings or other proceedings to which both the applicant and the paying party are or were party.

(2) In subsection (1)(a) "earning capacity", in relation to the applicant or the paying party, includes any increase in earning capacity which, in the opinion of the court, it would be reasonable to expect the applicant or the party paying to take steps to acquire.

(3) For the purpose of subsection (1)(h), the court must have regard, in particular, to whether the making or variation of the order is likely to:

(a) cause undue hardship to the paying party, or
(b) prevent the paying party from obtaining legal services for the purpose of the proceedings."

Recent Case Law on LSOs

BN V MA [2013] EWHC 4250 (Fam) Mostyn J 10 December 2013

This was a case where the application for a LSO by a wife was rejected. However, as with most cases it has to be looked at on its own facts.

Of crucial importance was the fact that the wife had entered into a "pre-marital agreement" and the agreement and its making and terms were regarded as being highly influential in the determination of the application. The agreement was concluded and signed after extensive negotiation; with full legal advice on both sides; it was in writing; it was intended to create legal relations; it was intended to constitute the entire agreement between the parties; it even had an endorsement to the effect that the wife's solicitor was satisfied about all aspects of the negotiation and agreement and was satisfied that her client had entered into the agreement and that it was fair and reasonable. The agreement was extensive in its terms as to what should happen in the event of a separation and divorce including interim arrangements.

In the face of this agreement the judge commented that the wife's application in Form A for the full range of financial remedies was "extremely speculative" "borderline irresponsible" and "the prospects of success are questionable".

The judgment is not detailed in connection with the costs allowance application which is dealt with at paragraphs 36-38. The following points emerge:

a. The statutory provision does no more than codify the principles to be collected in this regard from the authorities, most recently in Currey v Currey [2006]EWCA Civ 1338;

b. Section 22ZB(1)(c) requires the court to have regard to the subject matter of the proceedings including the matters in issue;

c. The Applicant had received offers from litigation loan suppliers at fairly steep interest rates to fund her solicitor of choice. As the loans were available and the interest could be rolled up the Applicant did not satisfy the first criteria as specified in s.22ZA(4)(a) as she can reasonably secure a loan to pay for services;

d. There was no detailed schedule of costs;

e. The claims were unlikely to succeed because of the agreement.

It is quite clear from the judgment that the Applicant wife had chosen her solicitors and was able to stay with them. She had been offered litigation loans to pay for her current solicitor's fees. There was no question that there was a condition of any loan that she had to instruct another firm of solicitors (see below A v A.)

EM v AK [2013] EWHC 4393 (Fam) Moylan J

The wife had made one application which had been successful before King J, and obtained an LSO for a 3 day preliminary hearing which subsequently fell away and so the costs were not utilised for that hearing. At the earlier hearing the judge had decided that the husband had the means to satisfy an LSO and that the wife had no assets available to her for the purpose of enabling her to obtain legal advice and representation. The order was in the sum of £40,200. Her application to backdate the order and additionally for a monthly sum of £39,000 was dismissed. The judge referred to this claim as "astonishing''.

At the hearing before Moylan J she claimed a further £52,000 (in addition to the £40,200) to get her to FDR. Her claim was dismissed because:

a. The £40,200 was still available pursuant to the order of King J and the judge found that from this sum she would be able to fund her legal services up to the conclusion of the FDR;

b. As the wife was also seeking to backdate the order the judge considered that this was not possible as it was an attempt to open an issue that had been determined by King J;

c. The judge said that it was not appropriate to provide an LSO beyond the FDR at that stage and in fact no such order was sought.

The main parts of the judgment on s22ZA are to be found at (paragraphs 18-22). The important principle to emerge from the BN V MA case is that s22ZA codifies the case law according to Mostyn J.

A v A, Exeter County Court 25th February 2014, His Honour Judge Tyzack QC

Although this case is only of persuasive value, being in the County Court, it is interesting in a number of respects.

The background.
The husband was 41 and the wife was 55. They commenced cohabitation in July 2006 when the wife moved into the husband's property and it became their matrimonial home. They were married in October 2010 and separated in May 2013. It was therefore a relatively short relationship of about 7 years' duration. There were no children although the wife had grown up children from a previous marriage. In the early part of the relationship the wife had pursued a beauty business but that failed in 2009 and she became bankrupt losing her house in the process. After the wife's business failed the husband did not expect or want her to work and wanted her to concentrate her efforts on the home (improving it) and supporting him in his business activities. The wife had no specific qualifications and had only ever earned a small income from her business. At the present time the wife was unable to work through illness, due mainly to the break up of the relationship, and her condition was being monitored monthly by her GP. The wife therefore had no income nor did she have any assets. The husband, on the other hand, had an income of over £150,000 pa from his financial services business and owned the matrimonial home and a property in France (purchased during the relationship) with equity totalling about £150,000. On his own assessment his interest in his business was worth in excess of £1.1m.

When the wife separated from the husband she sought advice initially in connection with divorce and protective orders under the Family Law Act. Her solicitors applied for, and obtained, non-molestation orders ex parte shortly after being instructed in May 2013. On the return date in the middle of June 2013 the orders were repeated and there were also extensive recitals to cover the wife's interim position. Included in the recitals the husband was to pay a rent deposit of £2,900 to enable her to be adequately housed; rental payments of £1,250 pm and the sum of £1,650 pm by way of interim periodical payments and; the sum of £9,000 to enable the wife to purchase a small car so that she would hand back one of the husband's Porsches. Thereafter, her solicitors issued divorce proceedings in July which were shortly followed by a Form A.

The wife had been legally aided for the Family Law Act proceedings but could not get her certificate extended to cover the financial proceedings. Having issued her financial proceedings she was hopeful that there would be negotiations and a settlement at an early stage. Unfortunately, that was not to be. The wife now had to fund the financial proceedings. She did this initially by using what savings she had, borrowed money from her son and daughter and instead of purchasing a car used that money mainly towards her legal costs. As time went on it became clear that the parties were a long way apart and the likelihood was that case would not settle before the FDR, if then. Her solicitors had a policy not to enter into Sears Tooth Agreements and therefore advised her to apply for a LSO as her only avenue to continued representation by them.

In anticipation of the application the wife was advised to seek litigation loans from high street banks. Her efforts failed. She applied to three High Street banks. In each case it is relevant to explain how the High Street banks apparently dealt with her applications. In each case she asked for an appointment in relation to a litigation loan. She was interviewed and assessed at the interview on the information she provided and with the banks no doubt carrying out credit checks there and then. All three refused her application as not meeting their criteria or because she had no security. It may well be that when the banks undertook their credit checks they were informed about the bankruptcy and so therefore she was unlikely to succeed on that basis alone. The wife found it very difficult to get the banks to put anything in writing and what they did provide reluctantly said very little beyond the fact that she did not meet their criteria (whatever their criteria were) and/or had no security. The solicitor had in mind, of course, the words of Mr. Mostyn in TL v ML that production of correspondence with at least 2 banks eliciting a negative response would suffice.

The solicitors had not dealt with an application under s22ZA before and being very cautious advised the wife to apply to at least 2 companies that provide specific litigation loans. In this respect the wife telephoned one litigation loan company in early November 2013 and she made a note of her conversation on a printed page from the web site. She was assessed over the telephone and told she would not qualify as she had no security. She also applied to another firm of solicitors as she had noticed they advertised litigation loans. She did the same with them and her note on a copy of their web page said that it would be necessary to instruct a solicitor from that firm to be able to apply for a litigation loan. The wife was very satisfied with her representation and had a particularly good professional relationship with the lead solicitor. In these circumstances she did not want to change her solicitors.

In any event she lived in Devon and the other firm only had offices in Manchester and London.

The wife then issued her application under s22ZA to be heard at the FDA in early December 2013. Her application was issued on a D11 Application Notice. It referred to the five applications for loans that had been made in box 3 of the form. In box 10 it was indicated that she relied on the evidence set out in the box where the information was given about the refusal of the five organisations.

The application was heard by a Deputy District Judge (DDJ) at the FDA hearing. The DDJ was provided with a full Case Summary/Skeleton on behalf of the wife. The husband did not respond to the application and his solicitor did not file any Case Summary or Skeleton Argument. It was not known what the husband's position was until a few minutes before entering court. The DDJ listened to the submissions put before her by the wife's Counsel but was not persuaded by them.

In a surprisingly short judgment , the judge made the following points:

1. She was concerned about the level of costs and thought they were disproportionately high at £12,600 of which the wife had been able to fund £8,250 so far, from savings and family.

2. She said the wife had not produced any evidence of her telephone conversations with the specialist litigation loan company or the other firm of solicitors. These were two possibilities for litigation loans and the onus was on the wife to show that she could not obtain legal services.

3. The judge said that in the face of the fact that she had been offered a litigation loan by the other firm of solicitors, it was almost impossible for her application to succeed. The fact that she wished to make her own choice of solicitor was irrelevant. The other firm were respected solicitors.

4. The wife's Article 6 rights were to a fair trial. In this case it did not impede a fair trial. It was stretching the wording of Article 6 too far to read into the words that representation has to be of the wife's choosing. She was not therefore satisfied that the wife was not reasonably able to obtain legal services.

5. The DDJ said that it may be that the wife will have to consider a Sears Tooth Agreement with another firm of solicitors and pay interest but it is a means of funding.

She refused the application and immediately said that she would make an order that the wife was to pay the husband's costs of the application. At this stage no application had been made by the husband for costs and they had no schedule of costs to put before the court (presumably because they had not anticipated seeking such a costs order. The DDJ did listen to submissions on costs when it was pointed out to her that she had not heard from the wife's Counsel. The judge made an order for costs in the husband's favour to be assessed by the judge at the FDR, after the husband had produced a schedule of costs.

Clearly, the wife was up against the wall. She had no funds to appeal the order unless she borrowed more money from relatives and friends and had no funds to continue her applications. If she instructed the other firm of solicitors she had no guarantee of a litigation loan as it only opened the door to another application for a litigation loan to one of that firm's agents who provide them. In any event, the fact of her bankruptcy was likely to be fatal. She didn't want to change her solicitor anyway. She had great faith and confidence in her solicitor. There were also practical difficulties in instructing a solicitor in Manchester (or London) when she lived in Devon and had no independent means. It was totally impractical and uneconomic for her to have a solicitor in Manchester or London.

She did appeal and her appeal before HHJ Tyzack QC was successful. The Judge then went on to deal with her application and granted it. She was awarded the sum of £8,750 to be paid at the rate of £1,250 pm. She was also awarded the sum of £4,500 costs of the appeal and the court below, to be paid by the same instalments. The following points arise from this appeal.

1. Judge Tyzack QC was satisfied that the wife had not had a fair hearing at first instance and did not have her case fairly considered. The wife's Counsel had prepared a very detailed Case Summary and the DDJ had not analysed the arguments deployed by Counsel. The judgment was unsatisfactory and there was no proper structure to it.

2. The most fundamental point of the appeal was that "It has always been the fundamental right of every citizen to be represented by solicitors of his or her choice" Neuberger J (as he then was – now President of the Supreme Court) in the case of Maltez v Lewis, The Times May 4th 1999. Although this case dealt with the CPR the FPR are similarly worded. The CPR was referred to in the judgment and in particular the overriding objective of enabling the court to deal with cases justly and ensuring that the parties are on an equal footing. Mr. Justice Neuberger went on to say that this right was qualified. He said: "That right is not of course absolute; circumstances may cut it down. Thus a person's chosen lawyer may be ill or engaged elsewhere or conflicted out. A legally aided party may find that the legal aid board is not prepared to fund his or her particular selection of legal representative. Further, it is clear that no party has the right to expect a hearing date to be fixed on the basis of the availability of his or her choice of advocate or solicitor. Subject to that consideration, it seems to me that there is a fundamental right of a choice of legal representative; indeed, I would go as far as to say it is an important feature of any free society. I do not consider that the Civil Procedure Rules, while accepting that they confer (and are intended to confer) very wide new powers on the court, could or should be interpreted so as to cut down, let alone so as to remove that right".  In addition the wife's Counsel referred to the recent case of Brown-Quinn and others v Equity Syndicate Management Ltd and others [2012] EWCA Civ 1633. In this case the Court of Appeal sent a very clear message to the insurance industry about the way they were behaving. They had been told that the policy terms interfering with an insured's right to select the solicitor of their choice "Must be either deleted or comprehensively re-drafted". Although this case dealt with the insurance industry it is equally applicable in the family courts as the courts are interpreting the same words from the Overriding Objective. The judgment also refers to European Directives which state that a litigant has a right to choose his or her own lawyer.

3. Clearly the case in hand did not come within the type of situation that Neuberger J referred to as qualifying the right of choice of lawyer. HHJ Tyzack QC had little difficulty in holding that in this case the wife had a fundamental right to the representation of her choice. In addition, the DDJ was wrong in the way she dealt with the Article 6 point.

4. On the issue of evidence it was quite clear that the DDJ had ignored the fact that Form D11 gives the applicant the opportunity to set out the evidence relied on in Box 10. In this case, it had been indicated that the evidence relied on was set out in the box itself. The wife had also signed a Statement of Truth at the end of the Application. HHJ Tyzack QC had no difficulty in holding that the wife had filed evidence. The husband had pointed out in argument that there was no evidence that the wife had tried to persuade the lenders in any way and she could have said anything to them because she didn't want a litigation loan. Judge Tyzack QC accepted that it was difficult to obtain precise details from banks and the evidence produced by the wife in her application was not misleading or inaccurate. It was pointed out in argument that in any event this application was heard at the first court hearing; that the husband had not responded in any way; and it was open to the husband or the court to exercise its powers and order evidence from both parties to be filed. The better practice may well be for the applicant to file a full statement so that if at all possible the application can be heard at the first opportunity and thus save costs.

5. The DDJ was clearly wrong to state that the wife has been offered a litigation loan by the other firm of solicitors. As pointed out above the wife had to change her solicitor to that firm and only then would they assist her to apply for a litigation loan from one of their agents. There was no guarantee that she would be successful.

6. During the course of submissions the husband's solicitor had argued that the wife could easily find a firm of local solicitors who would be prepared to enter into a Sears Tooth Agreement. The Husband's solicitors said that they were prepared to enter into a Sears Tooth Agreement and there must be many firms who did the same. They did not produce any evidence to this effect. It may well be that there are many firms all over the country who are prepared to enter into a Sears Tooth Agreement. This is irrelevant. First, there is the fundamental right to choose your own lawyer. Secondly, if it be right that a litigant has to search until they find a firm prepared to enter into such an agreement (and they almost certainly will) then the provisions of s22ZA are superfluous and no one would ever succeed in such an application.

The DDJ referred to the amount of the wife's costs. She thought the wife's costs were too high and disproportionate and "out of kilter" with what she sees in such cases at the FDA stage. To be fair to the DDJ she did say that this point was not "primarily determinative". However, it was a consideration in her judgment. It is submitted that the simple answer in these circumstances is for the judge to allow the application and award an amount for costs that the judge considers is more reasonable, which Judge Tyzack QC did in this case.

When dealing with the application itself Judge Tyzack QC noted that s22ZB was in similar terms to s25 but noted the differences. He took into account the husband's financial position as set out in his Form E. He also accepted that the husband did not have unlimited means but was clearly in an advantageous position. When dealing with these applications it is necessary to deal with s22ZB fully and not simply s22ZA.

Finally there is the case of Rubin v Rubin [2014] EWHC 611 (Fam) handed down by Mostyn J on the 10th March 2014. This case can almost be described as a leading judgment because Mostyn J makes the point that he has recently had to deal with a flurry of applications under s22ZA and he supposes that courts up and down the country are doing likewise. He therefore considered that it would be helpful if he attempted to summarise the applicable principles both substantive and procedural.

The case is interesting not only because of the attempt to summarise the applicable principles but also factually.

The Background
The husband was American and the wife English. They cohabited from April 2009. They entered a premarital agreement on 18th August 2011 and married 2 days later in California. A daughter was born in London in June 2008 and a son was born in California in August 2012. The parties lived in California from February 2012. In October 2012 all four members of the family came to England. The wife refused to let the children return to California on the 30 October on their return tickets. Hague Convention proceedings were issued by the husband in July 2013. Mrs Justice Hogg found that the children has been wrongfully retained in England and Wales and ordered their return to California on 17th February 2014. All parties returned to California shortly thereafter and there they remain.

Meanwhile, the wife had issued divorce proceedings in London on 10th May 2013. She filed a Form A seeking financial remedies. She also issued proceedings under s8 Children Act 1989. The husband filed for divorce in the Superior Court of California on the 3rd June 2013. The parties exchanged voluntary Forms E for the purpose of mediation (which proved unsuccessful). On the wife's return to California on the 18th February 2014 she filed a response to the husband's divorce petition seeking dissolution of the marriage, a determination in relation to the premarital agreement and an order allowing her to relocate back to England. The husband applied for the English proceedings to be stayed and this application was dealt with by DDJ Elliot on the 28 February 2014 when he stayed the proceedings but excepted from the stay the wife's application for a LSO (see below).

The wife had incurred costs of £7,268 in relation to the financial remedy proceedings. She now applied for a LSO payment to recover those costs. In the Hague Convention proceedings she had incurred costs of £21,700. In relation to the Hague Convention proceedings she applied under s15 and Schedule 1 para 1(2)(c) Children Act 1989 for an order to cover those costs from the husband. At the hearing the husband agreed to make a gratuitous payment of £6,000 to cover her Counsel's brief fee. So the balance she sought was £15,700.

Mostyn J therefore was dealing first with the wife's application for a LSO in the sum of £7,268; secondly with the wife's application under s15 and Schedule 1 to recover £15,700 and; thirdly the husband's appeal against the DDJ's order excepting the LSO application from the stay.

Mostyn J's summary of the applicable procedural and substantive principles was as follows:
Paragraph 13

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.

v) 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."

In applying those principles to the case he said that the wife was seeking to recover costs which had already been incurred in circumstances where there was to be no further substantive litigation in this country either about the children or about money. As such, both applications fell foul of principle (iv) above. It was not a case where the wife's lawyers were saying that they would "down tools" unless they were paid outstanding costs as well as being funded for the future. He said that were her application to be granted it would represent a very dangerous subversion of the exclusivity of the inter partes costs powers and principles in CPR Part 44.  His Lordship considered that, "A shadow or surrogate jurisdiction would emerge. Such a development must be stopped in its tracks". It was "wholly unprincipled" to allow her claims to succeed where there were no further proceedings in this jurisdiction. The gratuitous payment by the husband simply enabled the wife to be represented and the court could not rewrite history retrospectively making an order to recover costs on the footing that if payment were not made she would not have been able to be represented. This was counter-factual absurdity".

Mostyn J noted that s22ZA did not extend to proceedings under Schedule 1 to the Children Act 1989, the Inheritance (Provision for Family and Dependants) Act 1975 or Part III Matrimonial and Family Proceedings Act 1984. He said that in all such proceedings the application will continue to be for an interim order. The principles to be applied will be those of the case law ending in Currey v Currey (No 2) [2006] EWCA Civ 1338. He went on the say that the principles he set out in paragraph 13 ought to apply with necessary modifications where costs funding orders are sought. He pointed out that the first sentence of principle (x) will not apply. He said that it was an open question if the courts had the power to make an award for costs funding for ADR. Also any funding under the three above Acts would be by monthly payments and not a single payment.

The Judge made a comment about applications for LSO's in Hague Convention cases. He pointed out that if the court had to first set up and then adjudicate upon applications for costs payments prior to any work even being commenced, with extensive financial disclosure from litigants who lived abroad it would be inimical to the purpose of the Convention which sought a swift return of abducted children. On the other hand he had in mind the words of Holman J in Kinderis v Kineriene [2013] EWHC 4139 (Fam) (18 December 2013) at paragraphs 17 and 18. Here the judge pointed out the difficulty where a mother who speaks negligible English was simply incapable of presenting and developing her case properly in a complex area of the law. Holman J pointed out that it was not equality of arms as required by Article 6 ECHR and creates unfairness for the mother and child. There is therefore, as Mostyn J said, "a clear tension". That it was "difficult territory". How these tensions were to be resolved had to be left for decision when such an issue actually arises. Clearly, an interesting point for the future.

Finally, in relation to the husband's successful appeal, Mostyn J held that financial applications ancillary to a divorce depended on the continuation of the petition. If authority was required, there is s22 MCA. If a petition is dismissed any orders such as those for maintenance pending suit, are also dismissed. Similarly, if a petition is stayed it follows that any applications are also stayed. By the terms of FPR 2010 rule 9.7(1) an application for a LSO is an application for an interim order and as such is dependent for its existence on the main suit continuing. So if proceedings are stayed, all subsidiary ancillary applications for financial relief are stayed as are all interim orders and reliefs.

Disclaimer: Whilst every effort is made to ensure these notes are accurate they are a summary of some parts of the law and not a precise statement of family law. They are not intended to constitute legal advice in any particular case and no liability is accepted in respect of any loss caused by reliance on the same.

The author is a specialist family Barrister at 3PB Barristers with extensive experience at all levels of financial disputes within divorce, cohabitation, and under Schedule 1 of the Children Act. In addition to his established financial practice he advises on intricate private law matters, including residence and contact of children where jurisdiction, international abduction and relocation are key issues.