This information was last updated: 4 July 2016
In the case of Sears Tooth (A Firm) v Payne Hicks Beach (A Frim)  2FLR 116, Wilson LJ identified “… a grave and widespread problem encountered increasingly in the Family Division: namely, how can a spouse, usually a 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 and obstructive or whose financial circumstances are complex and unclear?”
Since the introduction of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 [‘LASPO’] on 1st April 2013, public funding is no longer available in most financial remedy applications, save where the domestic violence or child abuse exemptions apply.
LASPO has however inserted two key sections in the Matrimonial Causes Act 1973: s.22ZA and 22ZB, which go some way to overcoming this problem identified by Wilson LJ, through the introduction of Legal Services Payment Orders [‘LSPO’].
The Law and key Sections:
22ZA Orders for payment in respect of legal services
22ZB Matters to which a court is to have regard in deciding how to exercise power under section 22ZA
What is a LSPO?
It is an order where one party to the marriage is ordered to pay the other an amount for the purpose of enabling that party to obtain legal services.
A LSPO can be:
- A one-off payment
- Payments in instalments
- Payment for a specified period i.e. the whole proceedings or up to a particular stage in proceedings
- Deferred payments.
Furthermore, an Order can be varied in the event of a significant change in circumstances since it was made.
In what type of proceedings do the Orders apply?
- Financial Remedy
- Judicial Separation
NB: These provisions do not apply to claims under Part III of the MFPA 1984 and Schedule 1 of the Children Act 1989. In these cases a Costs Allowance Order is still permissible, and the principles in Currey v Currey  EWCA Civ 1338 would apply, namely that although in making a costs allowance the court has a discretion, it would not be reasonable to exercise it unless the applicant had demonstrated that they could not reasonably procure legal advice and representation by any other means.
What did the provision change?
- You are no longer able to apply for Cost Allowance Order in Maintenance Pending Suit (MPS) Orders. [s.22(2) of the Matrimonial Causes Act 1973 precludes it]
- It is the exclusive method of providing for one party to fund the other’s costs of the main suit and financial remedy proceedings in connection with the main suit.
- Costs Allowances in orders for MPS were confined to cases where Respondent’s income was large to cover fees, now any party with sufficient capital may be threatened with LSPO where the opponent cannot meet their legal fees from their own resources.
What does the Court consider when making an Order?
- The income, earning capacity, property and other financial resources which each of the parties has or is likely to have in the foreseeable future. As far as earning capacity is concerned, that includes any increase in earning capacity which, in the opinion of the court, it would be reasonable to expect either party to take steps to acquire.
- The financial needs, obligations and responsibilities of the parties either now or in the foreseeable future.
- The subject matter of the proceedings, including the matters in issue.
- Whether the paying party is legally represented.
- Steps taken by the applicant to avoid all or part of the proceedings, whether by proposing or considering mediation or otherwise.
- The applicant’s conduct in relation to proceedings.
- Any amount owed by the applicant to the paying party. In particular, the court must consider whether the order is likely to cause any undue hardship to the paying party or prevent them from obtaining legal services for the purposes of the proceedings.
What does the Applicant have to satisfy?
The Applicant has to satisfy ss.22ZAA  and . In the case of Rubin v Rubin  EWHC 6611 [Fam] Mostyn J set out helpful guidance when the Court determines whether an applicant can reasonably obtain funding from another source and how this can be evidenced:
- 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).
- Without derogating from that requirement, the ability of the respondent to pay should be judged with reference to the principles summarised in TL v ML  EWHC 2860 (Fam)  1 FLR 1263 at para 124 (iv) and (v), where it is 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.
- 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.
- 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.
- 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.
- Evidence of refusals by two commercial lenders to repute will normally dispose of any issue under s22ZA (4)(a) whether a litigation loan is or is not available.
- 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.
- If a litigation loan is offered at a very high rate of interest it would be unlikely to be reasonable to expect the application to take it unless the respondent offered an undertaking to meet that interest, if the court later considered it just so to order.
- The order should normally contain an undertaking by the applicant that she will repay to the respondent such part of the amount ordered, 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.
- The court should make clear in its ruling or judgment which of the legal services mentioned in s22ZA (1) 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.
- Generally speaking, the court should not fund the applicant beyond 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.
- When ordering costs funding for a specific period, monthly instalments are to be preferred to a single lump sum payment. It is true that a single payment avoids the 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 reflect 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 put 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 s 22ZA (8) should circumstances change.
- If the applicant for a LSPO is seeking 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 anticipated costs of that very application for the LSPO, then an order for 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 referable thereto.
- A LSPO is designated as an interim order and is to be made under Part 18 procedure (see FPR rule 9.7(1)(da) and (2). 14 days’ notice must be given (see FPR rule 8(b)(i) and PD9A para 12.1). The application should 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 brief, the Applicant has to show:
- They do not have sufficient funds and the Respondent does.
- They are not able to obtain a litigation loan: they have to provide two rejection letters.
- Their solicitor is not willing to enter into a ‘Sears Tooth’ Agreement.
- They are not able to charge any property they may own.
- They are not entitled to Legal Aid.
How to make application?
- Form D11
- Statement in support
- Draft Order
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