Meeting Your Legal Fees

FLiP associate Vanessa Asante outlines the options for funding your legal fees when embarking on a divorce or separation.

Last week, an article in The Times featured the story of Katy Daly, who spoke of the significant costs of her divorce which totaled £80,000 over a period of 2 years, not including her ex-husband’s legal fees.

In actual fact, the costs of obtaining the divorce itself from the court are relatively inexpensive and usually equate to a very small fraction of the overall costs spent. Where matters tend to become complex and more expensive is in relation to resolving the financial division between the parties. Often, technical and specialised legal advice is needed in this area, particularly as every couple’s circumstances are different and family law is discretionary.

The legal fees involved in conducting your matter will always be an important consideration. There are various ways in which your legal fees for a divorce can be funded:

• Using savings, income and investments – some clients meet their legal fees from their own income, savings or by drawing from or liquidating an existing investment. If savings or investments are held jointly with the other party, then you may need their agreement before using these funds towards the payment of your legal fees. In such circumstances, it may be that a pragmatic approach can be taken and agreement made with your ex-partner’s solicitor that fixed amounts will be released to each of you in order to meet ongoing legal fees, if that is appropriate.

• Funding from your business – If you are an owner of a business, then it may be possible to fund legal fees by declaring larger dividends or in the form of a director’s loan. Both require very careful consideration with the business’ accountant and possibly other shareholders, and are likely to have tax implications.

• Support from family or friends – sometimes family members may offer or agree to pay your legal fees. If friends or family provide funds to you (or directly to your solicitor’s firm) for your legal costs with the expectation that the funds will be repaid, then there may be benefit in recording this in a formal agreement which clearly sets out the terms on which the funds are borrowed. This may make it more likely that the court considers this a hard debt which must be repaid, rather than a ‘soft loan’ which the lender may have no firm intention of enforcing.

• Credit cards and commercial loans – some clients may make use of credit cards or take out a loan from a commercial lender.

• Litigation loan providers – There are a number of specialist loan providers who provide funding for appropriate family cases. Where a litigation loan is provided, the loan as well as any interest that has accrued is paid at the end of the case from any financial settlement received.

• Your ex partner meeting your legal costs – Where your former partner has the resources available to meet your legal costs as well as their own, they may agree to cover some or all of your legal fees. The extent to which they contribute towards your legal fees is unlikely to be without limit, particularly if this is agreed within the context of litigation.

If your former partner can afford to cover both sets of legal fees but will not agree to do so, then an interim application for a legal services order can be made to the court to oblige them to do so. There are certain pre-conditions that applicants must meet before applying. These are that:

• Without an order being made for your former partner to pay your legal costs, you would not reasonably be able to obtain appropriate legal services;
• You are not able to secure a loan to pay for legal services (in this regard, refusals from two litigation loan lenders will suffice); and
• You are unlikely to be able to fund the cost of legal services by granting a charge over property belonging to you.
• There are also other matters which the court will consider, such as whether you have conducted your case reasonably thus far and whether your solicitors will accept payment at the end of the case.

Judges have a wide degree of discretion when deciding these types of applications and much will depend on the circumstances of each of the parties. Even if an application for a legal services order is successful, it may not cover all of the costs incurred, may cover only certain stages of the proceedings and can potentially be varied by the paying party. It can also be expensive to bring an application for a legal services order and it will take some time to have a hearing listed to decide on this issue. This can be a risk if the application is ultimately unsuccessful.

At FLiP we can discuss the funding options available to you and it may be that over the course of your case a combination of the above options may be right for you. We cannot provide detailed advice on financial products and you may need to speak to an IFA or external funding providers for more tailored guidance as to their products and whether they are right for you.

Legal costs can be a significant concern on divorce and proportionality needs to be kept at the forefront of your mind when conducting your case to ensure that matrimonial funds can be preserved  to use toward rebuilding your new life. There are also flexible ways in which you can work with your solicitor; whether that is taking advice in an initial consultation and carrying the matter forward yourself, or in appropriate cases, with FLiP providing unbundled legal services where advice is needed on an intermittent basis. There are also a number of different process options which may be open to you to resolve your case, which we can explore further with you.

If you have any queries about funding your legal fees on a divorce or separation, please contact a member of the FLiP team to discuss this.