HOW TO PAY YOUR LEGAL COSTS?

How much a particular course of action is going to cost and how these costs are going to be met should be high on the agenda at the outset. This has grown in prevalence since the legal aid reforms severely restricted access to legal services.

Parliament has sought to react, and to some extent dilute the impact of the reforms, by introducing, into legislation, the ability for a party to apply for a Legal Services Payment Order under s.22ZA of the Matrimonial Causes Act 1973. This is an order requiring your spouse to fund your legal costs, usually, and initially, until the Financial Dispute Resolution Hearing (the second hearing where constructive discussions and negotiations are held before a District Judge who will provide an indication to assist you in reaching an agreement)

Of course the legislation has sought to endorse the common law principles first set out by Justice Mostyn in the all too familiar case of TL v ML [2005] EWHC 2860 (Fam). What it does do, however, is provide a statutory framework for a judge to consider when determining such applications and introduces the scope for a lump sum payment as opposed to monthly periodical payments.

Though such applications, without careful preparation will invariably fail, I have personally used them to great effect in recent times. I think there is, understandably, a general anxiety to make these applications. Not least, how the client, who is unable to pay their own legal costs, can meet the costs of such an application which usually demands a high level of preparation, statements, evidence and a minimum of one hearing. The opponent is quite often up in arms at the proposition of paying, not only their only legal cost, but those of their estranged spouse following potentially a bitter break up. For that sense of injustice the applications are frequently contested.

 

In the very recent case of Rubin v Rubin [2014] EWHC 611 (Fam) Justice Mostyn took the opportunity to clarify the principles to be applied when seeking a Legal Services Payment Order.

Interestingly, he recognises that there is now, since his 2005 case, a much greater drive towards alternative ways of resolving disputes and, as such, the court should not hesitate to exercise its power to make such an order prior to any financial remedy proceedings to fund other forums of resolution like arbitration, round table meetings, voluntary disclosure etc.

 

In the case of Rubin are the wife applied, and failed, for a Legal Services Payment Order (LSPO) under s 22ZA MCA 1973 to cover costs she had incurred in financial remedy proceedings.

 

I have set out below, for ease of reference, the guidance issued by Justice Mostyn.

 

Conclusion

We now need to be more creative and not so easily disregard options available to clients to meet their legal costs. Family lawyers have a collective responsibility to ensure that litigants are given access to justice and it is therefore incumbent, in my view, on all practitioners to ensure they are fully up to speed with this area of law and can confidently give the right advice.

 

Mark Hands (Solicitor)

 Irwin Mitchell LLP

0121 203 5309

mark.hands@irwinmitchell.com

 

Rubin v Rubin

[2014] EWHC 611 (Fam)

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.