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Legal Services Payment Orders

Family Team Seminar - 13 January 2016 - Section 22ZA Matrimonial Causes Act 1973
Legal Services Payment Orders Nicholas Elcombe
The need for funding for often impecunious has been identified in a number of cases going back many years. It is succinctly formulated by Wilson J (as he then was) in Sears Tooth (A Firm) v Payne Hicks Beach (A Firm) [1997] 2 FLR 116, where His Lordship referred to "... 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 or obstructive or whose financial circumstances are complex and unclear?"

It might be seen that with the abolition of any real source of public funding this problem ran the risk of becoming more widespread as the “gap” widened (and contained more parties) between the represented and the non represented.

Although the title of the Act gives little hint that it might contain much of significance to Matrimonial lawyers The Legal Aid, Sentencing and Punishment of Offenders Act 2012 attempts by section 49 to provide a remedy to the problem identified by Wilson J.

I make no apologies for setting out the section:-

Divorce etc proceedings: orders for payment in respect of legal services
(1)  In section 22 of the Matrimonial Causes Act 1973 (maintenance pending suit)—
     (a)  number the existing provision subsection (1), and
     (b)  after that subsection insert—

“(2) An order under this section may not require a party to a marriage to pay to the other party any amount in respect of legal services for the purposes of the proceedings.
  (3) In subsection (2) “legal services” has the same meaning as in section 22ZA.”

(2)  After that section insert—
“22ZA Orders for payment in respect of legal services
(1)  In proceedings for divorce, nullity of marriage or judicial separation, the court may make an order or orders requiring one party to the marriage to pay to the other (“the applicant”) an amount for the purpose of enabling the applicant to obtain legal services for the purposes of the proceedings.
(2)  The court may also make such an order or orders in proceedings under this Part for financial relief in connection with proceedings for divorce, nullity of marriage or judicial separation.
(3)  The court must not make an order under this section unless it is satisfied that, without the 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.
(4)  For the purposes of subsection (3), the court must be satisfied, in particular, 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.
(5)  An order under this section may be made for the purpose of enabling the applicant to obtain legal services of a specified description, including legal services provided in a specified period or for the purposes of a specified part of the proceedings.
(6)  An order under this section may—
   (a)  provide for the payment of all or part of the amount by instalments of specified amounts, and
   (b)  require the instalments to be secured to the satisfaction of the court.
(7)  An order under this section may direct that payment of all or part of the amount is to be deferred.
(8)  The court may at any time in the proceedings vary an order made under this section if it considers that there has been a material change of circumstances since the order was made.
(9)  For the purposes of the assessment of costs in the proceedings, the applicant’s costs are to be treated as reduced by any amount paid to the applicant pursuant to an order under this section for the purposes of those proceedings.
(10) In this section “legal services”, in relation to proceedings, means the following types of services—
   (a)  providing advice as to how the law applies in the particular circumstances,
   (b)  providing advice and assistance in relation to the proceedings,
   (c)  providing other advice and assistance in relation to the settlement or other resolution of the dispute that is the subject of the proceedings, and
   (d)  providing advice and assistance in relation to the enforcement of decisions in the proceedings or as part of the settlement or resolution of the dispute,
and they include, in particular, advice and assistance in the form of representation and any form of dispute resolution, including mediation.
(11) In subsections (5) and (6) “specified” means specified in the order concerned.”

And further those matters to be considered:-

50  Divorce etc proceedings: matters to be considered by court making legal services order
After section 22ZA of the Matrimonial Causes Act 1973 insert—
“22ZB  Matters to which court is to have regard in deciding how to exercise power under section 22ZA
(1)  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 matters 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 relation to the proceedings,
   (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, and
   (h)  the effect of the order or variation on the paying 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 paying party to take steps to acquire.
(3)  For the purposes 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 purposes of the proceedings.
(4)  The Lord Chancellor may by order amend this section by adding to, omitting or varying the matters mentioned in subsections (1) to (3).
(5)  An order under subsection (4) must be made by statutory instrument.
(6)  A statutory instrument containing an order under subsection (4) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.
(7)  In this section “legal services” has the same meaning as in section 22ZA.”

In summary it made 3 significant changes
  • abolish the maintenance pending suit ("MPS") "costs allowance" provisions, often referred to as Currey orders (after  Currey v Currey (No 2) [2006] EWCA Civ 1338);  
  • create a statutory regime which provides for "an order or orders requiring one party to the marriage to pay the other ("the applicant") an amount for the purpose of enabling the applicant to obtain legal services for the purpose of the proceedings." It is not expressed to be a lump sum order or a periodical payments order. The "Legal Services Order" is sui generis; and
  • amend s.24A(1) MCA 1973 so that an order made for a Legal Services Order can be backed by an order for sale. It is an interim order for sale provision, for the limited purpose of giving teeth to the Legal Services Order.  The court has power to direct the mode of sale, including by auction, of real and personal  property.
A commencement order bought the section into force on April 1, 2013.

It was fairly obvious because of the competing human rights considerations that the matter needed clarification before the higher courts at an early stage- article 6 as far as the impecunious party is concerned- an equality of arms before the court and Article 1- freedom to enjoy property as far as the less impecunious is concerned.

It came in fairly short compass in Rubin v Rubin [2014] EWHC 611 (Fam) (March 5, 2014) Mostyn J sets out a decision of same magnitude on an application for a Legal Services Payment Order [LSPO].

It is the forth reported case on this piece of legislation none of the others had attempted an analysis of the relevant law. By then 11 months had passed since coming into force and it was perhaps surprising that there had been relatively few cases reported. Those reported cases are:- EM v AK [2013] EWHC 4393 (Fam) (21 June 2013) Moylan J; BN v MA [2013] EWHC 4250 (Fam) (10 December 2013) Mostyn J – no order made; and MET v HAT [2013] EWHC 4247 (Fam) (16 December 2013) - Mostyn J.

In Rubin the following principles can be distilled:

It is clear that orders under this section only arise in respect of MCA ’73 proceedings. They do not arise in respect of Schedule 1 of the Children Act 1989, Inheritance (Provision for Families and Dependants) Act 1975 or Part III of the Matrimonial and Family Proceedings Act 1974. Orders applying the Currey consideration will need to be looked to: see para 14 Rubin.
 
The section itself makes clear that it is a party to marriage that can apply for a LSPO - not limited to husband, wife, petitioner, respondent and would appear to apply both to divorce, nullity and judicial separation and financial relief in connection with each of primary reliefs sought.  My experience is with applications for financial relief on divorce.
 
Distilled from Rubin are 14 points set out in paragraph 13:- I look at them using the Judge's sequence:-
  1. When considering a LSPO the Court must look at s 22ZB (1) to (3);
  2. The ability to pay must be considered- not just what the payer says about (his) ability to pay see in particular TL v ML [2005] EWHC 2860 ( Fam) para 124 – look at the actuality  see if the responsive Form E or statement is defective leaving unanswered questions of actual resources, consider bounty supplied previously from elsewhere- Is it unreasonable to assume it will continue – until at least the end of the case
  3. How real is the substantive claim – are there challenges to the jurisdiction- the more doubtful the claim the more cautious should the Court approach the LSPO application.
  4. The Court must be satisfied that the LSPO is necessary in order to obtain appropriate legal services. It is not another way of approaching CPR Part 44 . Only award with caution re historic costs if necessary to continue to receive legal services.
  5. Other sources of funding- very fact specific
  6. Evidence of refusal by 2 reputable lenders will dispose of issues under s 22ZB (4)(a) Litigation loan non availability
  7. Sears tooth arrangement – statement from the solicitors of the party seeking a LSPO
  8. High interest rates on loan unlikely to be reasonable unless respondent to application for LSPO offers undertaking meet that interest if in due course ordered to do so
  9. Normal for undertaking by the applicant for LSPO to repay if at end of case court considers appropriate. No undertaking  court should proceed with caution
  10. The Court should make clear what the LSPO is for- that means that any application should make clear what the LSPO is being sought for. The Court will consider, and may grant an order prior to the commencement of financial remedy proceedings to finance ADR and/or mediation.
  11. To FDR only in normal course.- better route forward that z22ZA (7)After failed FDR Court better position assess case and realistic costs for final hearing. Can this be a lever where failing FDR remains before Judge
  12. Monthly payments to be considered- necessary set out what sums be acceptable to firm reflect reality- susceptible to variation under s22ZA(8)
  13. Can include costs of the LSPO application
  14. LSPO is an interim order:-
a)  part 18 procedure- FPR rule 9.7(1)(da) and(2)
b)  14 days notice FPR 18.8(b)(i) and PD9A para 2.1
c)  written evidence in support FPR18.8(2) and PD9A12.2
d)  evidence must address s22ZB(1)-(3) but also include detailed estimate of cost incurred and to be incurred in stages if necessary
e)  if urgent ie less than 14 days notice need set out reasons for urgency in evidence
               
Mostyn J  made no award of LSPO in Rubin !

Nicholas Elcombe
January 2016