Articles and Publications
Provision for Legal Fees in Maintenance Cases
11/Jun/2009
The most recent case of Currey -v- Currey [2006] EWCA Civ 1338 has provided further clarification and guidance on the issue of whether maintenance pending suit payments can be increased to incorporate an allowance for legal fees.
The Background
The wife, in this case, was wealthy, and part of a well known family in London with a portfolio of valuable property. The husband has been described as "relatively impoverished". He was a name at Lloyds and as a result of that was substantially indebted to Lloyds, his bankers and his mother.
Ancillary relief proceedings were concluded in July 2003 when Charles J ordered that the wife pay to the husband a lump sum of £1,070,000 calculated as follows:
A. £640,000 to trustees as a fund for housing the husband. One half was to be held for him absolutely, the other for him for his life and thereafter for the children absolutely.
B. That the wife transfer her £310,000 share of their jointly owned property in London to the husband.
C. That the wife pay an additional sum to the husband amounting to £120,000.
In addition, Charles J ordered the wife to pay to the husband periodical payments at the rate of £48,000 per annum, such payments to be indexed linked. The wife's income at the time derived from dividends and trusts and amounted to £190,000 per annum net.
The husband appealed against the decision of Charles J but the appeal was dismissed.
During the proceedings the wife disclosed that her income had increased to £340,000. Thorpe L J commented, in a postscript to his judgment, "manifestly there is an opportunity and a need to achieve a clean break by capitalising the husband's entitlement to periodical payments".
Not surprisingly, 16 days after the judgment was given, the wife applied in the Family Division for an order that she make a further lump sum payment to the husband to capitalise the periodical payments order and thus achieve a clean break.
A short time later the husband cross applied for an upward variation of the periodical payments order.
The husband was successful in achieving an interim increase in the periodical payments. He had significant debt, was alleged to have behaved unreasonably and there was an intimation that he had acted irresponsibly financially. He argued however that, whatever the reason for his financial position, he simply could not afford to pay his legal fees in responding to the wife's application without an increase in the payments.
The wife did not accept the husband's contention that he had insufficient funds and that he was unable to raise sufficient monies to fund his legal fees.
Judge Wilcox, whilst accepting many of the wife's arguments, considered that however inappropriate the husband's conduct, his application was not unreasonable. The judge particularly noted that it was the wife who had issued the proceedings, that the consequences of a capitalisation of maintenance on the husband could be drastic, and that the husband's cross application had been made in the first place because the wife's income had increased dramatically. He ordered the periodical payments to increase by £10,000 per month for the 4 months up to the financial dispute resolution hearing. The wife appealed against the decision.
Earlier Cases
In coming to his decision Wilson LJ considered the recent cases in this area including A V A (Maintenance Pending Suit: Provision for Legal fees) 2001 1 FLR 377, G V G (Maintenance Pending Suit: Costs) 2003 2 FLR 71 and the most recent Moses - Taiga V Taiga 2005 EWCA Civ 1013. In that case Thorpe LJ stated,
"If the Applicant has no assets, can give no security for borrowings, cannot guarantee an outcome that would enable her to enter into an arrangement such as that which was upheld in Sears Tooth… then there is no source of funding of litigation other then the approach to the court for a maintenance pending suit that will include a substantial element to fund the cost of litigation. Obviously, in all these cases the dominant safeguard against injustice is the discretion of the trial judge and it will only be in cases that are demonstrated to be exceptional that the court will consider exercising the jurisdiction."
Reference was also made to the case of C V C (Maintenance Pending Suit: Legal Costs) noted only at the time in 2006 Family Law 739. In this case the husband argued that the wife had assets that could be used to fund legal fees: namely her half share in the matrimonial home in which she lived with the children. Hedley J held it would be "wholly unfair" to expect her to risk the loss of their home. He accepted the wife's argument that Thorpe LJ's reference to the other party having no assets and being unable to obtain a loan was "illustrative" of an "exceptional scenario" and not "definitive".
The Decision
Wilson LJ stated,
"In my view, the initial, overarching enquiry is into whether the Applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means. Thus, to the extent that she has assets, the Applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services. Furthermore, not to forget the third of Thorpe L J's three features, she also has to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery. I would add, fourthly, that the court needs to be satisfied that there is no such public funding available to the Applicant as would furnish her with legal advice and representation at a level of expertise apt to the proceedings".
And:
"Although in making a costs allowance the court has a discretion, I cannot imagine that it would be reasonable to exercise it unless the Applicant has thus duly demonstrated that she could not reasonably procure legal advice in representation by any other means".
Wilson LJ admitted that other factors may be relevant and commented:
"The subject matter of the proceedings will surely always be relevant: and, insofar as it can safely be assessed at so early a juncture, the reasonableness of the Applicant's stance in the proceedings will also be relevant. So will a variety of other features, including of the type which exists in the present case, in particular the arresting fact that the husband already owes £46,000 to the wife in respect of costs".
Wilson LJ could not fault the use of the court's discretion. He commented on the unusualness of the case in that the application was initially brought by "the rich spouse against the relatively poor spouse". He went on to comment that the husband was seeking an allowance for his legal fees to respond to her application because it was so important to him. He considered it "prima facie reasonable for him to do so".
In relation to the duration of the Order Wilson LJ also agreed that it was appropriate for him to increase the periodical payments order only to the financial dispute resolution hearing. The judge felt that this amounted to a "reasonable inducement" rather than an "improper pressure to reach a settlement".
The Outcome
The wife's appeal was dismissed. The court was satisfied that the judge had been entitled to find that without an increase in the periodical payments he was not able to secure legal services. Furthermore, given that the application for the clean break was made by the wife against the husband, and he was seeking an increase in the periodical payments in order to respond to that application, his past behaviour was not such an important consideration.
Conclusion
When considering an application to increase periodical payments to incorporate an element of legal fees, it will be necessary for the Applicant to satisfy the court that they are not eligible for public funding. They will also need to satisfy the court that their existing assets cannot be utilised to fund legal fees.
The Background
The wife, in this case, was wealthy, and part of a well known family in London with a portfolio of valuable property. The husband has been described as "relatively impoverished". He was a name at Lloyds and as a result of that was substantially indebted to Lloyds, his bankers and his mother.
Ancillary relief proceedings were concluded in July 2003 when Charles J ordered that the wife pay to the husband a lump sum of £1,070,000 calculated as follows:
A. £640,000 to trustees as a fund for housing the husband. One half was to be held for him absolutely, the other for him for his life and thereafter for the children absolutely.
B. That the wife transfer her £310,000 share of their jointly owned property in London to the husband.
C. That the wife pay an additional sum to the husband amounting to £120,000.
In addition, Charles J ordered the wife to pay to the husband periodical payments at the rate of £48,000 per annum, such payments to be indexed linked. The wife's income at the time derived from dividends and trusts and amounted to £190,000 per annum net.
The husband appealed against the decision of Charles J but the appeal was dismissed.
During the proceedings the wife disclosed that her income had increased to £340,000. Thorpe L J commented, in a postscript to his judgment, "manifestly there is an opportunity and a need to achieve a clean break by capitalising the husband's entitlement to periodical payments".
Not surprisingly, 16 days after the judgment was given, the wife applied in the Family Division for an order that she make a further lump sum payment to the husband to capitalise the periodical payments order and thus achieve a clean break.
A short time later the husband cross applied for an upward variation of the periodical payments order.
The husband was successful in achieving an interim increase in the periodical payments. He had significant debt, was alleged to have behaved unreasonably and there was an intimation that he had acted irresponsibly financially. He argued however that, whatever the reason for his financial position, he simply could not afford to pay his legal fees in responding to the wife's application without an increase in the payments.
The wife did not accept the husband's contention that he had insufficient funds and that he was unable to raise sufficient monies to fund his legal fees.
Judge Wilcox, whilst accepting many of the wife's arguments, considered that however inappropriate the husband's conduct, his application was not unreasonable. The judge particularly noted that it was the wife who had issued the proceedings, that the consequences of a capitalisation of maintenance on the husband could be drastic, and that the husband's cross application had been made in the first place because the wife's income had increased dramatically. He ordered the periodical payments to increase by £10,000 per month for the 4 months up to the financial dispute resolution hearing. The wife appealed against the decision.
Earlier Cases
In coming to his decision Wilson LJ considered the recent cases in this area including A V A (Maintenance Pending Suit: Provision for Legal fees) 2001 1 FLR 377, G V G (Maintenance Pending Suit: Costs) 2003 2 FLR 71 and the most recent Moses - Taiga V Taiga 2005 EWCA Civ 1013. In that case Thorpe LJ stated,
"If the Applicant has no assets, can give no security for borrowings, cannot guarantee an outcome that would enable her to enter into an arrangement such as that which was upheld in Sears Tooth… then there is no source of funding of litigation other then the approach to the court for a maintenance pending suit that will include a substantial element to fund the cost of litigation. Obviously, in all these cases the dominant safeguard against injustice is the discretion of the trial judge and it will only be in cases that are demonstrated to be exceptional that the court will consider exercising the jurisdiction."
Reference was also made to the case of C V C (Maintenance Pending Suit: Legal Costs) noted only at the time in 2006 Family Law 739. In this case the husband argued that the wife had assets that could be used to fund legal fees: namely her half share in the matrimonial home in which she lived with the children. Hedley J held it would be "wholly unfair" to expect her to risk the loss of their home. He accepted the wife's argument that Thorpe LJ's reference to the other party having no assets and being unable to obtain a loan was "illustrative" of an "exceptional scenario" and not "definitive".
The Decision
Wilson LJ stated,
"In my view, the initial, overarching enquiry is into whether the Applicant for a costs allowance can demonstrate that she cannot reasonably procure legal advice and representation by any other means. Thus, to the extent that she has assets, the Applicant has to demonstrate that they cannot reasonably be deployed, whether directly or as the means of raising a loan, in funding legal services. Furthermore, not to forget the third of Thorpe L J's three features, she also has to demonstrate that she cannot reasonably procure legal services by the offer of a charge upon ultimate capital recovery. I would add, fourthly, that the court needs to be satisfied that there is no such public funding available to the Applicant as would furnish her with legal advice and representation at a level of expertise apt to the proceedings".
And:
"Although in making a costs allowance the court has a discretion, I cannot imagine that it would be reasonable to exercise it unless the Applicant has thus duly demonstrated that she could not reasonably procure legal advice in representation by any other means".
Wilson LJ admitted that other factors may be relevant and commented:
"The subject matter of the proceedings will surely always be relevant: and, insofar as it can safely be assessed at so early a juncture, the reasonableness of the Applicant's stance in the proceedings will also be relevant. So will a variety of other features, including of the type which exists in the present case, in particular the arresting fact that the husband already owes £46,000 to the wife in respect of costs".
Wilson LJ could not fault the use of the court's discretion. He commented on the unusualness of the case in that the application was initially brought by "the rich spouse against the relatively poor spouse". He went on to comment that the husband was seeking an allowance for his legal fees to respond to her application because it was so important to him. He considered it "prima facie reasonable for him to do so".
In relation to the duration of the Order Wilson LJ also agreed that it was appropriate for him to increase the periodical payments order only to the financial dispute resolution hearing. The judge felt that this amounted to a "reasonable inducement" rather than an "improper pressure to reach a settlement".
The Outcome
The wife's appeal was dismissed. The court was satisfied that the judge had been entitled to find that without an increase in the periodical payments he was not able to secure legal services. Furthermore, given that the application for the clean break was made by the wife against the husband, and he was seeking an increase in the periodical payments in order to respond to that application, his past behaviour was not such an important consideration.
Conclusion
When considering an application to increase periodical payments to incorporate an element of legal fees, it will be necessary for the Applicant to satisfy the court that they are not eligible for public funding. They will also need to satisfy the court that their existing assets cannot be utilised to fund legal fees.
