Monday 10 June 2013 by Andrew Newbury
Since 1 April the family courts have had the power to make a legal services order, which is a new form of interim order compelling one spouse to make provision for the other's legal costs. Although on the face of it, it is a significant change to the courts' powers under the Matrimonial Causes Act, in practice it may make little difference to the majority of cases. Sections 49 and 50 of the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (LASPO) insert sections 22ZA and 22ZB into the Matrimonial Causes Act 1973. By virtue of LASPO (commencement no 7) order 2013, the amendments took effect from 1 April.
The new provisions go beyond the family courts' power to make a costs allowance within a maintenance pending suit order under section 22 of the Matrimonial Causes Act 1973. Since the decision of Holman J in A v A (maintenance pending suit: provision for legal fees)  1 FLR 377, the definition of 'maintenance' under section 22 was interpreted to be wide enough to include a monthly provision for the payment of legal fees. The leading decision on cost allowance orders is the Court of Appeal's judgment in Currey v Currey (no 2)  EWCA Civ 1338. Wilson LJ (as he then was) considered the criteria for the court making such orders. The threshold was a high one as the applicant would need to show the following: that if they did have assets, they could not reasonably be deployed towards the payment of legal fees; or that the applicant could not raise a loan; or that they could not provide security for legal fees. That test is, to a large extent, mirrored by the test contained in section 22ZA.
Power to make orders
Legal services orders stand alone and are not a form of lump sum or periodical payments order. They are therefore a new form of order. Such orders can be made in divorce, nullity or judicial separation proceedings (mirror provisions have been inserted into the Civil Partnership Act) and provide that the court may make an order requiring one party of the marriage to pay to the other an amount for the purpose of enabling the applicant to obtain legal services for the purposes of the proceedings. Such orders may be made for a specified period or for a specified part of the proceedings. That mirrors the existing approach where cost allowance orders have often been made up to the FDR stage of proceedings.
Costs allowance orders under A v A are a form of maintenance pending suit, and payments towards costs were therefore made on a monthly basis. By contrast, a legal services order may be made as a one-off payment, a payment in instalments or a deferred payment. Such orders can also be varied where there is a material change in circumstances. An order can be made on more than one occasion within proceedings.
Factors to consider
The matters to which the court is to have regard are set out in section 22ZB. The court must have regard to the following:
Of particular note, however, are the provisions contained in sections 22ZA(3) and (4). By virtue of subsection (3), the court must not make a legal services order 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. Subsection (4) provides that, for the purposes of subsection (3), the court must be satisfied in particular that the applicant is not reasonably able to secure a loan to pay for the services, and is unlikely to be able to retain the services by granting a charge over any assets recovered in the proceedings.
The ability of the applicant to 'reasonably… secure a loan' may therefore be crucial to the success of an application for a legal services order. On the issue of securing a loan, the case law on costs allowances (TL v ML  EWHC 2860 (Fam)) stated that the applicant should ordinarily produce letters from at least two banks providing a negative response to a request for a loan; however, bearing in mind the number of specialist firms now offering litigation funding for matrimonial proceedings, it may prove to be extremely difficult to prove that negative. While high street banks may be reluctant to loan monies for litigation, that may not be the case with specialist lenders.
The success of an application may therefore hinge upon what is reasonable or not. If the rate of interest offered is high or the terms of the potential funding unacceptable to the applicant, can it be argued that they cannot reasonably secure a loan? What about the position of the applicant's solicitors? What if they refuse to underwrite the loan as may be required by some specialist litigation lenders? Would that put the solicitor into conflict with their client? Undoubtedly, case law on this issue will be required.
The second hurdle is that the applicant will need to show that they cannot grant a charge over assets recovered in the proceedings. Under existing case law, a statement from the applicant's solicitors stating they were unwilling to enter into a Seers Tooth v Payne Hicks Beech agreement would deal with that requirement; however, what if the paying party could establish that other specialist family lawyers in the area were willing to offer such a funding arrangement? Would a judge reasonably expect a party to change their legal representatives?
In practice, therefore, although the changes to section 22 reflect a significant addition to the courts' powers by creating a new form of order, the hurdle created by section 22ZA(4) together with the preponderance of specialist litigation funders may mean that the granting of such orders may be relatively uncommon in practice.
Andrew Newbury is head of the family, private client and wealth management division at Pannone