Family Law: Autumn 2011- Family cases - who pays the piper?

7 October 2011

Funding legal advice is a perennial difficulty, especially when one party controls the purse strings. Family lawyers and Judges in England and Wales have been inventive in finding practical solutions to this problem. But those solutions can be expensive and raise problems of their own. Funding legal costs therefore remains a real concern for many of our clients.

As long ago as 2000, our courts confirmed (in a case called A-v-A) that an element to meet legal costs can be included in a monthly maintenance claim in divorce proceedings. More recently, in several cases in which we were involved, the English courts have confirmed that one party might be ordered to contribute to the legal costs of the other in proceedings about arrangements for children – where they live, where they go to school, contact, etc. So, an early court application can help ensure funds are available to meet legal costs, in the absence of sensible agreement about the issue.

Prior to these decisions, the paradigm arrangement was that wealthy husbands or fathers would pay privately for their legal advice, whilst wivesor mothers would instruct legal aid lawyers. Orders requiring a contribution to legal costs were not then available, or indeed necessary. Since then, swingeing and relentless cuts have decimated the civil legal aid budget. Legal aid in many family cases will disappear almost entirely in the next few months. Solicitors prepared to undertake family law will decrease in number. So, orders to help underwrite the costs of legal advice – a costs funding order - will become even more important.

Are costs funding orders available as of right?

No. The Court of Appeal said in 2006 (in a case called Currey) that a party seeking a costs funding order must show all other options “cannot reasonably be deployed”. Only then would the court consider making a costs funding order against the other party. What is not clear is the extent to which other options must be exhausted before the court will make a costs funding order (see the table below for some alternative funding options in family cases).

For example, is it reasonable for the poorer party to rely on legal aid, whilst the wealthier retains a magic circle solicitor and a QC? Unsurprisingly, judges see such arrangements as unfair. There are other difficult questions. In what circumstances is it reasonable for the party struggling to meet legal costs to borrow from a third party – a loan from a bank or building society, from family or friends, or from a private bank (in cases where the amounts in issue justify such a loan)?

Clients often ask us to explore funding with our private bank contacts. Whether those contacts are prepared to provide funding varies from case to case. Likewise, the circumstances in which the court is prepared to make a costs funding order is variable depending on the individual case and (to a degree) the Judge hearing it.

What magnitude of costs funding order will be made?

The level of costs funding often does not match the overall legal costs. Costs funding orders therefore can act as a practical cap on the level of legal fees. The financially more savvy party often tactically makes a low costs funding offer. If too low, the proposed recipient might consider it just as well to go to court and argue the toss. Depending on which side of the application you are on, the practical limitations of a costs funding order is either eminently sensible, or constitutes an unfair playing field!

The array of funding options may bewilder clients, especially expatriates not familiar with our financial or legal culture. In some cases, steps may need to be taken swiftly to safeguard the welfare of children or protect assets. Funding concerns in those circumstances represent added complication and worry.

It is vital to seek early advice about legal options and how they might be funded. Clients can expect family lawyers today to be informed about alternatives for funding a case, as well as commercially-minded about their respective pros and cons.

Main sources of funding for private family cases:-

  • Legal aid – R.I.P. 2011?*
  • Private bank loan – low rate to foster relationship
  • High street bank loan - commercial rate
  • Family and friends
  • Costs allowance – Court Order
  • “No win, no fee” or conditional fee arrangements are currently NOT PERMITTED in family cases.

*Will still be available for some child abduction and domestic violence situations.

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