Financial Remedies
September 2023

Overview: The case involved W’s application for MPS and LSPO where the parties entered a Deed of separation in 1994. The main issue was that H had been providing financial support for over 20 years after the deed.

Background: W (64) and H (72), married in 1984 and separated in 1993. Decree Absolute was pronounced on 3 November 1998. The parties were married for nine years and had no children. W claimed that she did not recall entering the Deed, despite have legal representation at the time and her signature being on the deed.

Terms of the deed:

H would pay W £702,000 on a clean break basis.

It was agreed by both parties that H complied with the agreement and had implemented more minor provisions. H had continued to provided support to W for over 20 years after entering in the Deed of separation. For example, H in 2009 provided financial assistance to W to enable her to buy a property in Central London, subject to a declaration of trust dated 25 November 2009. Neither party was able to produce a consent order of the Deed and therefore Peel J proceeded on the basis that no order was made and therefore no formal bar to the MPS and LSPO applications.

“If a consent order comes to light, then W’s financial remedies application automatically falls away. If not, she is entitled in principle to proceed with her Form A dated 7 February 2023.”

W issued her Form A, following H ceasing all payments of support. This case raises the issue of the potential for injustice caused by lengthy delay. Peel J referred to Rossi v Rossi [2007] 1 FLR 790 wherein Mostyn J considered the potential for injustice caused by lengthy delays in initiating financial remedies claims.

Mostyn J noted: “The payer is entitled to take the view that no claims will be initiated against him or her, and there is no risk to his financial arrangements. Further, the longer the time that passes the more likely it is that documents will not be located and memories will cloud.”

H sought to rely on the delay but the court noted the factor which marks out that difference is the ongoing support by H to W for an uninterrupted period of over 20 years, and which has now ceased. Further, this is an interim hearing, not a final hearing where these arguments can be more fully ventilated. This meant that the significance of delay was reduced.

Peel J stated [28]:

“i) delay in bringing a claim for financial remedies is not by itself a jurisdictional or procedural bar to making a claim;

ii) delay does not automatically, on the merits, disentitle the applicant to financial relief, but it will be a factor (potentially a highly material one) when weighing up the s25 criteria;

iii) delay does not prevent the court from making interim orders, albeit I accept I should tread carefully and consider, in the exercise of my discretion, whether the claim has prospects of success, or is so spurious that there is no justification on the merits for the making of an interim order.”

Judgment

Maintenance Pending Suit

H was ordered to pay W £9,344pcm inclusive of health insurance backdated to the date of the application. W’s expenditure list was £11,436pcm, however, the Peel J held that W could use earnings from her job to contribute towards her expenses. The court held that it would be unfair for the financial support to cease or be significantly reduced in circumstances where W had become accustomed to receiving similar sums and had minimal liquid resources of her own to meet her needs.

Peel J noted that H had significant wealth such that the ‘millionaire’s defence’ was available, alleviating the need for financial disclosure in circumstances where W’s total needs-based award was pitched at about £5m’ [17]

Legal Services Payment Order

H was ordered to pay £227,321 to the FDR. Peel J set out the approach to the application for a LSPO, with reference to Mostyn J in Rubin v Rubin [2014] EWHC 611 at para 20.

Background: The parties entered a consent order in 2021 which deprived a litigation funder of repayment of the loan they advanced to the W. The W owed £1m from what was described as long, bitter, and extortionately expensive divorce proceedings. Under the terms of the consent agreement, the W was to receive a life interest in a residential property to be purchased for a figure of £1m by the husband's trust. The trust would thereafter own the property absolutely. The wife was to receive no free capital or income in settlement of her claim.

The lenders were informed of the agreement and wrote to the court urgently requesting to be joined to the proceedings prior to the approval of any order.

Two days later, H’s solicitors had contacted the judge directly at his chambers, attaching the signed draft order. The court was not sent a copy and no formal application was made nor fee paid. The judge was not informed of the letter Level had written two days earlier asking that the proposed order not be made. The judge approved the order.

Level accordingly made an application to set aside the consent order, having already sought and been granted leave to intervene in the proceedings. The consent order was set aside by consent. The judge ordered the parties to undertake disclosure by way of Forms E and questionnaires and listed a full hearing at which Level would also be a party. He concluded Level’s civil claim should be transferred to the Family Court to be heard following the financial remedy proceedings.

The H appealed the case management orders. The appeal raised issues of what role, if any, a litigation lender should be permitted to play in financial remedy proceedings they are funding.

The Appeal

The grounds of appeal in summary are:

The judge was wrong to permit Level to intervene in the financial remedy proceedings.

If Level were allowed party status, then after their representations were heard, the judge should have either made the consent order or made no order.

One of the consequences of allowing the intervention and directing the new financial remedy hearing was to trespass on confidential proceedings as Level were intervening solely for the collateral purpose of recovering their civil debt.

The judge was wrong to find that litigation lenders fall into a special category to be treated better than secured creditors.

The judge was wrongly influenced by the circumstances of the making of the consent order.

Ground 1 - In considering whether the Lender should have been granted party status the Court referred to FPR r9.26B. However, H accepted that the initial decision to join Level to be heard on the issue as to whether the draft consent order should be approved was correct.

Ground 2 – King LJ held that the order had been set aside by consent and therefore the court had to approach the matter in accordance with s 33A MCA 1973. Given the judges’ knowledge of the circumstances leading up to the making of the original consent order, the judge was going to reject such an application.

The judge however fell into error by ordering the filing of fresh Forms E, questionnaires and listing a trial. The judge should have taken an intermediate step and set the matter down for an inter partes hearing of the application by the parties for an order to be made in the terms of the earlier consent order. An order which was still sought by both parties. Level accepted that there was little they could do if the W withdrew her application for financial remedies.

In considering Level’s role as litigation funder, H submitted that the Lender ‘should not be afforded preferential treatment by virtue of being a litigation funder over and above that which would be given to any other third-party creditor.

Level submitted that;

‘Litigation lenders can only ever lend on an unsecured basis with the consequence that there is potentially a 'generous field' for borrowers to engineer their finances at the point of divorce to cut out their lenders. That risk if not recognised would make the business model unviable so that the lenders would have to increase their rates to be more in line with commercial funding rates or simply exit the market’.

The court noted that an applicant under s 22ZA of the Matrimonial Causes Act 1973 without the necessary financial means must, before they seek orders that spouses cover their costs, demonstrate they were not “reasonably able” to secure a loan. King LJ noted the importance of litigation funding had been emphasised in several recent cases.

King LJ also noted that “In my view, those who provide such loans are entitled to expect some measure of protection from the improper manipulation of the outcome of the proceedings by the parties in order to avoid repayment of the loan.”

The court therefore concluded that it would be very rare for it to be appropriate for a lender to have party status in relation to any aspect of financial remedy proceedings as their interest will ordinarily be apparent and considered without their intervention.

In this case, however, where, the lender wishes to intervene in circumstances where the debt has been incurred exclusively to enable the recipient to litigate and the lender has become aware of steps which they believe have been taken to defeat recover of all or part of its debt, the lender should be entitled to be heard in whatever form is felt to be appropriate by the court. This is because as Thorpe LJ put it in Hill v Haines, there is evidence of 'collusion between the spouses designed to adversely affect the creditors'.

The appeal was allowed and the matter was remitted to Peel J, as lead Judge of the Financial Remedies Court, for directions.