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Legal Services Payments Orders and Legal Aid Exceptional Funding

Date:8 OCT 2014
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Peter Morris, Partner, Irwin Mitchell, Leeds
Sue Parkinson, Trainee , Irwin Mitchell, Leeds

Sections 49-51 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 resulted in new rules governing maintenance pending suit for legal costs in divorce (including proceedings for financial relief in connection with divorce), nullity or judicial separation proceedings being introduced into the Matrimonial Causes Act 1973 (MCA 1973).

Under the new sections 22ZA and 22ZB of the MCA 1973, the court can make a legal services payment order (LSPO). The amounts are payable either in instalments, which may be secured, or by way of a lump sum, which can be reinforced by an interim order for sale of property. A LSPO may be made for the purposes of advice and assistance in the form of representation and any form of dispute resolution, including mediation. The LSPO should normally contain an undertaking by the applicant that he/she will pay 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 he/she ought to do so. If such an undertaking is refused by the applicant, the court will think twice before making the order.

In deciding whether to make a LSPO, the court must consider all the factors in MCA 1973, section 22ZB(1)-(3), which are:
  1. 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;
  2. the financial needs, obligations and responsibilities that each of the applicant and the paying party has or is likely to have in the foreseeable future;
  3. the subject matter of the proceedings, including the matters in issue in them,
  4. whether the paying party is legally represented in the proceedings;
  5. any steps taken by the applicant to avoid all or part of the proceedings, whether by proposing or considering mediation or otherwise;
  6. the applicant's conduct in relation to the proceedings;
  7. 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
  8. the effect of the order or variation on the paying party, including whether the order would cause undue hardship to the paying party or prevent the paying party from obtaining legal services for the purposes of the proceedings.

In Rubin v Rubin [2014] EWHC 611 (Fam), Mostyn J summarised both substantive and procedural points that apply when the court is dealing with an application for a LSPO. He confirmed that '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'. Much of Mostyn J’s guidance relates to the determination of whether an applicant can reasonably obtain funding from another source, and how this can be evidenced.

The court would be unlikely to expect him/her to sell or charge his home or to deplete a modest fund of savings. However, the court will look carefully at the facts in each case and it is possible that where 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 be deemed reasonable to expect the applicant to charge his/her interest in it.

Evidence of refusals by two commercial lenders of repute will normally dispose of any issue under s 22ZA(4)(a) whether a litigation loan is or is not available. 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.
In determining under s 22ZA(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.

An applicant’s potential to reasonably obtain funding from another source, including their eligibility to apply for Legal Aid is a factor for the court to consider in assessing their application for a LSPO. Following the recent changes that reduced eligibility for Legal Aid, it is unlikely that most applicants would be able to obtain any Legal Aid to assist them; however, some applicants may be able to apply for Exceptional Funding under sections 10(2) and (3) of the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

The Lord Chancellor’s Exceptional Funding Guidance provides information on the eligibility of potential applicants. Applications are considered on a case-by-case basis, and applicants need to demonstrate that a failure to provide such funding would be a breach of either the individual’s Convention Rights under the Human Rights Act 1998, or any rights of the individual to the provision of legal services that are enforceable EU rights, such as Article 6(1) ECHR, which guarantees the right to a fair hearing and the right of access to the court for the purposes of the determination of a person’s civil rights and obligations. This includes private family law proceedings, in particular those concerning the right of contact with and residence of the applicant’s child or the division of matrimonial assets. Factors that will be considered are whether the withholding of legal aid would make the assertion of the claim practically impossible or lead to an obvious unfairness in proceedings, if the proceedings are likely to be unusually emotive for the applicant or if the proceedings are very complex. Where applicants do not have English as a first language, and family, friends and the court are unable to assist with the interpretation and/or translation of documents, the applicant will be assessed to see how capable they would be of presenting their case effectively without a lawyer.

This threshold is very high and, in addition, all exceptional funding applications are also subject to the legal aid means and merits criteria.

From 1 April 2013 to 31 March 2014, there were 821 applications in the family category and just 8 of these were granted with 14 awaiting decision. From April to June 2014, 209 applications were made in total, and only 4 applications in Family were granted.

The Lord Chancellor’s Exceptional Funding Guidance has recently been criticised heavily, with six decisions by the Legal Aid Agency not to award legal aid being overturned by Mr Justice Collins in his judgment in Gudanaviciene & Others v Director of Legal Aid Casework and the Lord Chancellor [2014] EWHC 1840 (Admin). Collins J concluded that the Guidance has misstated the test for the circumstances in which legal aid should be granted in order to comply with Articles 6 and 47 of the European Convention on Human Rights; the circumstances in which Article 8 requires legal aid to be granted, and the circumstances under section 10(3) in which legal aid should be available. Collins J found the Guidance set too high a threshold and produced unfairness by denying publicly funded legal advice to applicants to assist in providing a fair and effective hearing in exceptional cases.

It will be interesting to see if the Lord Chancellor’s Guidance is amended or applied less strictly to applicants in the future and if more applications for exceptional funding are successful. This may in turn reduce the need for the court to exercise its discretion to award Legal Services Payment Orders.

The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing and should not be considered as legal advice.