Variation of Lump Sums All Change on Costs Allowances ... · Variation of Lump Sums All Change on...

Variation of Lump SumsAll Change on Costs Allowances

Coram Chambers

Michael HortonRichard Yorke

21 March 2013

1.5 CPD points

Introduction

1. Today’s talk will cover:

C A brief introduction to the decision in Hamilton v Hamilton [2013] EWCA

Civ 13;

C When can the court vary an order for the payment of a ‘single’ lump sum,

and what difference does the presence of a default provision make?

C Can the court make an order for the payment of money over time as ‘lump

sums’ (not variable) or must such orders be for the payment of a ‘lump

sum payable by instalments’ and thus variable?

C How to tell apart an order for lump sums from an order for lump sum

payable by instalments

C Drafting consent orders in the light of the Hamilton decision

C The provisions of the Legal Aid Sentencing and Punishment of Offenders

Act 2012 on ‘costs allowances’

A brief introduction to the Hamilton decision

2. Mr and Mrs H agreed to the terms of a consent order in late 2007. It was made

on 18 January 2008. The relevant provisions were:

(1) The Wife shall pay or cause to be paid to the husband the following lumpsums:(i) £150,000 within 7 days of the date of this order(ii) £150,000 by 30 April 2008

Coram Chambers Seminar21 March 2013 -2-

(iii) £50,000 by 30th April 2009(iv) £50,000 by 30th April 2010(v) £50,000 by 30th April 2011

And it is directed that interest shall be payable by the Wife at the rateapplicable for the time being to a High Court judgment debt on the saidlump sums from the dates on which the said lump sums are respectivelydue to be paid.

In the event that the Wife shall sell her interest in [company] before sheshall have paid to the Husband all the said lump sums, she will pay to theHusband all the outstanding lump sum or sums within 14 days aftercompletion of the said sale has taken place.

(2) The Husband shall transfer to the Wife simultaneously with the paymentto him of the first lump sum referred to in paragraph 1 above all his legaland beneficial interest in the [former matrimonial home].

(4) Upon completion of the transfer of [the former matrimonial home] and thepayment of the first sum provided for in paragraph 1(i) ... [the usualdrafting dismissing all the parties’ life and death claims against eachother].

(6) There be liberty to apply as to the implementation and timing of the termsof this order.

3. In short, W paid the first £150,000. She paid £90,000 of the second £150,000, albeit

5 months late. She failed to pay the remaining amounts. Having agreed to pay

a total of £450,000, she paid only £240,000 and therefore still owed £210,000 plus

interest.

4. In 2008, W sought permission to appeal out of time/ to set aside on a Barder

basis. That application was dismissed. H then took enforcement steps, including

serving a statutory demand (the precursor to a bankruptcy petition). W’s


company was placed into administration in 2010, despite having had assets of c

£2m on the balance sheet shortly before the consent order was agreed and ‘cash

at bank’ of over £1m. W had remained in the fmh with the children, who had

contact with H. With nothing left in the company, H’s target for enforcing his

lump sum was the fmh.

5. In late 2009 (ie about 18 months after her first default) W made two applications:

C to vary the consent order, on the basis that para 1 was in fact an order for

a lump sum payable by instalments and thus variable, and thereby to

eliminate her obligation to pay the remaining £210,000 plus interest;

C in the alternative, provision under Schedule 1 to the Children Act 1989,

effectively to defer payment of any remaining sums deferred until the

children reached 18 or finished university.

6. Parker J held:

C the order was an instalment order;

C any order for the payment of money over time was always an instalment

order


C an order for lump sums was only possible where the payment of the

subsequent lump sum(s) was contingent on a particular event (eg

inheritance falling in).

7. Parker J refused to ‘write off’ the remaining £210,000 plus interest, but varied the

order by giving W more time to pay, albeit in a complicated fashion by providing

that interest would run on the sums before they were payable. She therefore

dismissed the Schedule 1 claim.

8. H appealed. His appeal was dismissed. The Court of Appeal held:

C the decision that any order for the payment of money over time must be

an instalments order was wrong;

C it was therefore possible for the court to make a non-variable order for the

payment of lump sums;

C but the order in this case was for a lump sum payable by instalments.

9. We set out below how (we think) the Court of Appeal reached that last

conclusion!


Variability of single lump sum orders

10. In this section, we will look at two different orders.

Order A

(1) The husband do pay a lump sum of £200,000 to the wife by 4pm on 1 June 2013.

(2) Save as aforesaid, [dismissal of all claims]

(3) Liberty to apply as to implementation and timing

Order B

(1) The husband do pay a lump sum of £200,000 to the wife by 4pm on 1 June 2013.

(2) In default of payment of the lump sum in accordance with paragraph 1 above,

the husband’s property at [address] shall forthwith be placed on the market for

sale and the net proceeds divided as to 90% to the wife and 10% to the husband.

(3) Upon compliance with paragraph 1 or, as the case may be, paragraph 2 above,

[dismissal of all claims]

(4) Liberty to apply as to implementation and timing

11. Can order A be varied? The answer must be no. Provided the decree has been

made absolute before 1 June 2013

C Interest will start to run at 8% from 1 June 2013

C W is free to take enforcement action by whatever means she chooses


12. What about Masefield v Alexander (Lump Sum: Extension of Time) [1995] 1 FLR 100?

The order in that case was more like order B above:

C H was due to pay W £100,000 by 1 January 1994

C A default provision provided for sale of H’s property with W getting

61.24% of the net proceeds

C H applied to extend time on 31 December 1993

C The DJ refused the application on the basis of lack of jurisdiction on 12

January 1994

C On 3 February 1994 H tendered payment of £100,000 plus interest

C On appeal, the judge held there was jurisdiction to extend time but

declined to exercise that jurisdiction and ordered the sale of the property

C The Court of Appeal allowed H’s appeal, holding that H should be

allowed to pay the lump sum and interest and not have to sell the house

13. The relevant passages from the judgment of Butler-Sloss LJ are:

(1) the relevance of a ‘liberty to apply’ clause: “There is provision in the

consent order under review for liberty to apply, but as Lord Meston has

argued (correctly in my view) it begs the question whether there is


jurisdiction. If there is otherwise no jurisdiction, the parties cannot give

such jurisdiction to the court” (at p 102);

(2) what is the test? At p 103: “it is necessary to look at the purpose and effect

of the application to extend time to see whether in truth it is intended to

strike at the heart of the lump sum order or whether it is a slight extension

... of no great importance, which does not go to the main or substantive

part of the order”;

(3) on the facts, H’s failure to have the money available did not materially

change the parties’ positions, was not blameworthy and did not

substantially prejudice W. The application to extend time did not go to

the substance of the order;

(4) what about the default provision: at p 105: “In my view, the default clause

in para 2 does not affect the issue of jurisdiction although it is highly

relevant to the exercise of discretion”;

(5) on the issue of discretion, ‘if the period for payment was a crucial,

substantive part of the agreement, or the delay was for a period and for

reasons which demonstrated fault’ on H’s part, those factors would tell

against exercising the discretion to extend time;

(6) was the obligation to pay the lump sum imposed with time being of the

essence: As ‘a matter of construction, [the order for the lump sum

payment] does not appear to have been made with time of the essence’.


14. Masefield is not necessarily straightforward to understand. In one sense, the court

did not vary the lump sum. H still had to pay the lump sum, and interest from

the date of payment, but the court declined to enforce the default provision.

Conclusions re variability of order A and order B

15. Notwithstanding Masefield and the fact that, according to (4) above, the default

provision does not make a difference, it is difficult to see how Masefield could be

used by the husband in our order A to seek an extension of time.

16. In order B, Masefield would allow H to seek ‘relief from sanction’ in the sense of

not enforcing the default provision, provided:

C the delay is relatively short;

C the applicant is not (especially) to blame for the delay;

C the applicant can pay the lump sum plus interest from the date payment

was due.

17. Presumably H would now have to address the factors set out in FPR rule 4.6 on

relief from sanction in his application to extend time.


Variation of lump sums involving money being paid over time

Some law

18. First of all, we set out the relevant provisions of ss 23 and 31 of the Matrimonial

Causes Act 1973:

23 Financial provision orders in connection with divorce proceedings, etc(1) On granting a decree of divorce, a decree of nullity of marriage or a decree

of judicial separation or at any time thereafter (whether, in the case of adecree of divorce or of nullity of marriage, before or after the decree ismade absolute), the court may make any one or more of the followingorders, that is to say—...(c) an order that either party to the marriage shall pay to the other

such lump sum or sums as may be so specified; ...(3) Without prejudice to the generality of subsection (1)(c) or (f) above— ...

(c) an order under this section for the payment of a lump sum mayprovide for the payment of that sum by instalments of suchamount as may be specified in the order and may require thepayment of the instalments to be secured to the satisfaction of thecourt.

31 Variation, discharge, etc, of certain orders for financial relief(1) Where the court has made an order to which this section applies, then,

subject to the provisions of this section and of section 28(1A) above, thecourt shall have power to vary or discharge the order or to suspend anyprovision thereof temporarily and to revive the operation of any provisionso suspended.

(2) This section applies to the following orders under this Part of this Act, thatis to say—...(d) any order made by virtue of section 23(3)(c) or 27(7)(b) above

(provision for payment of a lump sum by instalments);”

19. We have set out the bare bones of the Court of Appeal decision in Hamilton

above. The court rejected the notion that any order for the payment of money

over time must be an instalment order.


20. So, it can be seen that:

C the court can make an order for a single lump sum

C the court can make an order for a plurality of or series of lump sums

C any lump sum can be divided up into instalments

C if it is the payer can be ordered to provide security for their payment

C an order for a single lump sum (without any instalments) cannot be varied

under s 31

C an order for lump sums cannot be varied under s 31

C only an order for a lump sum payable by instalments can be varied under

s 31

21. Following Tilley v Tilley (1979) 10 Fam Law 89 and Westbury v Sampson [2002] 1

FLR 166, the conventional view is that, where the court has the power to vary an

instalment order, it can:

C vary the timing and amount of instalments

C vary the arrangements for security or impose new such arrangements

C and also vary the total amount payable under the instalment order. There

is no reported case of the total sum being increased under s 31. The only

reported cases deal with payers who agree to pay a sum by instalments


and subsequently apply to vary on the basis that they can no longer afford

to pay the later instalments.

22. In the Court of Appeal in Hamilton, H sought to argue that the conventional

view was wrong and that the court cannot ever vary the total amount payable

under a lump sum payable by instalments. The court considered that, Parker J

not having varied the overall quantum, the issue did not arise, and no oral

submissions were heard on the issue. Baron J nevertheless commented “In any

event (although it is not directly relevant in this appeal) I cannot see how the

basic argument can be correct. The section is widely drafted. The Court is given

the power to vary a lump sum and it stands to reason that that power must

extend to quantum as well as timing.” Until the question of jurisdiction is put

squarely in issue, the conventional view remains the law of the land.

23. As a result, where agreement is reached for the payment of money over time:

C payees are generally considered to want orders drafted as ‘lump sums’

and not instalment orders to prevent the possibility of the payer

subsequently seeking to vary (either as to timing or overall amount);

C payers are generally considered to want orders drafted as instalment

orders so that they can seek to vary the timetable for payment and/or

reduce the total amount payable if things do not turn out as hoped. This


is the case even though an instalment order opens up the possibility of

security being ordered, either at the time of the original agreement, or

subsequently if an instalment is late or unpaid.

The hard part

24. Having seen the order made in Hamilton, it might be considered surprising that

the court considered that this order was an instalment order. After all, the Court

of Appeal held that Parker J had applied the wrong test, but nevertheless got the

right answer.

25. There are two competing approaches:

C construe the order; or

C search for the ‘true underlying basis of the agreement’.

26. The judgment of the Court of Appeal in effect tries to have it both ways.

Construing the order

27. This was the argument that H made in the Court of Appeal. We learn how to

draft consent orders because the drafting is important to give effect to what the

parties have agreed. Some of us take precedents to court so that we can more


accurately reflect in the court order what has been agreed. If we get the drafting

wrong, our insurance policy might well be in play. So:

C a consent order is akin to a compromise agreement;

C the interpretation of a document which contains the entire contract

between the parties is a matter of law, and so the interpretation of a

compromise agreement is also a matter of law;

C the negotiations between the parties are generally inadmissible to the

construction of a contract;

C without prejudice discussions are inadmissible to the construction of the

contract (in the absence of a claim for rectification of the contract);

C in fact, once the court makes an order, under de Lasala v de Lasala [1980]

AC 546, the legal effect of the consent order is derived from the court

order and not from the agreement. The argument that the construction of

a financial remedy consent order must be a matter of law is therefore all

the stronger;

C so, what the parties agreed or thought they had agreed is irrelevant – it is

simply a question of construing the order, by looking at its terms, its

language, and the words used in the context of all of the provisions;

C the procedural background, and the applications before the court, are part

of the objective factual matrix which will inform the court’s construction

of the order, as in Dinch v Dinch [1987] 1 WLR 252: Lord Oliver said at p


257C-D that ‘their Lordships know nothing of what negotiations then took

place between the parties’ respective legal advisers,’ but it was clear some

took place because a hand-written draft order was handed in to the court

on the day in question. The issue in that case was ‘simply and solely one

of the proper construction of the consent order’, and the House of Lords

concluded: “In the instant case, the consent order, on its face and in the

light of the issues which were clearly before the court, is not, in my

judgment, capable of being construed in any other sense than as finally

and conclusively determining the rights of the parties in the property.”

28. Baron J says at paragraph 41: ‘Ordinarily the language of the order will settle

matters.’ However, this sentence continues: ‘but, in the event of a dispute as to

the nature of the agreement, the court is entitled to look at the surrounding facts

and circumstances which bear upon the terms as drafted.’

The nature of the true underlying agreement

29. To understand Baron J’s comment, it is helpful to see her conclusion first:

“there was sufficient evidence upon which [Parker J] was able to conclude that,

in this case, these parties had agreed a lump sum of £450,000 which was to be

paid in instalments over time. This finding was open to her despite the wording

of the order.”


30. The reasoning appears to be:

C in financial remedy proceedings, the parties cannot by agreement seek to

oust the jurisdiction of the court;

C the parties’ agreement is not the end of the matter because the court has

a duty to exercise its discretion to make an order in accordance with

statute;

C the court order is the relevant document which enshrines the parties’

obligations in law;

C the difficulty arose in this case ... from different perceptions of what was

agreed;

C the judge was entitled to search for a conclusion as to the true underlying

basis of the agreement and what was objectively intended by the terms of

the original order which purported to give expression to the parties’

agreement;

C it was wrong to say that the court cannot seek to discover/ interpret

whether the order as drafted accurately reflects the underlying agreement

that was approved by the judge;

C where there is disagreement as to whether the terms of the order are, in

reality, correct then the Court retains jurisdiction and must assess what

the parties agreed against the objective factual matrix of what occurred

during the relevant period.


31. So, if the parties are agreed that the order is an order for lump sums and that is

what they agreed, there is no difficulty. It is only a problem if one party says

they agreed to an order for lump sums and the other says they agreed to an

instalment order. There is therefore a dispute as to whether the order is correctly

drafted. It is in relation to how the court should approach this dispute that Baron

J commented:

“Ordinarily the language of the order will settle matters but, in the event of a

dispute as to the nature of the agreement, the Court is entitled to look at the

surrounding facts and circumstances which bear upon the terms as drafted. This

investigation is perfectly proper because it is evidence of the stages that preceded

the perfection of the Court order. To be clear, the test is objective as the court is

not looking to assess the subjective beliefs of the parties rather it is looking at the

objective factual matrix to interpret what was agreed in the light of the words

used and communications that passed.”

32. Some obvious objections might be raised to this approach:

C it is one thing for the court deciding whether to approve a consent order

to enquire whether the order it is being asked to approve is properly

within the court’s powers and accurately reflects what has been agreed.


It is another thing entirely for a later court to embark on this exercise in

the absence of any application to correct the allegedly erroneous drafting

of a consent order approved by the court many years ago;

C what is the point of taking the book of precedents to court if the court can

several years later decide that it is not the carefully crafted order that is

relevant but the ‘true underlying agreement’.

Drafting consent orders in the light of the Hamilton decision

‘Single lump sums’

33. What of the single lump sum? It will be rare where a party will insist on a default

provision taking effect if the lump sum plus interest is tendered. Nevertheless:

C suppose W agrees a deal to receive £200,000 by 1 June 2013

C W makes it plain that she regards this on the low side, but she is willing

to accept this sum if paid by 1 June 2013.

C W also makes it plain that it must be paid by 1 June 2013 as otherwise she

will miss the chance to acquire a property at a favourable price

C So, what can W do to ensure she gets her money by 1 June 2013?

34. One way is simple lump sum order as in order A, with no default provision.

There can be little chance of H being able to seek an extension of time. The

downside is that W will then have to apply to enforce, eg to obtain a charging


order and then seek an order for sale. If time is tight, not having a default

provision might be particularly costly for her.

35. However, a simple default provision might be the worse of both worlds, as it

might leave the door open to H to be able to seek an extension of time. Based on

Masefield, the following are suggested:

C (assuming the lump sum is payable under paragraph x) a recital to the

effect that the parties are agreed that time is of the essence in relation to

H’s obligation under paragraph x;

C a recital to the effect that any application to extend the time for the

payment of the lump sum would strike at the heart of the lump sum order

and any extension, however slight it may seem, would go to the main or

substantive part of the order;

C a recital to the effect that W has only agreed to the terms of the order on

the basis that the lump sum payable is in fact paid by the time set out

there, and for that reason the parties have included the default provision

contained in para y and expect that provision to be carried into effect if the

lump sum is not paid in accordance with para x.


Instalment orders vs lump sums

36. Baron J concluded her judgment in Hamilton by saying ‘in future, parties may

consider that a recital at the beginning of an order which sets out the basis of the

agreement in terms of a potential variation would put disputes of this type

beyond doubt.’

37. So, in relation to an order that is intended to be non-variable and thus an order

for ‘lump sums’:

C a recital might be included along the lines of: Whereas the parties have

specifically agreed to the terms of paragraph x below and to the form of

paragraph x below as an order for ‘lump sums’ within s 23(1)(c) of the

Matrimonial Causes Act 1973 so as to ensure that neither party will be

able to apply under s 31 of the 1973 for it to be varied in any way

C the lump sum order might be expressed as being ‘Pursuant to s 23(1)(c) of

the 1973 Act (and not s 23(3)(c))’;

C the order might be expressed, as the order in Hamilton, as separate lump

sums, avoiding reference to the total amount payable;

C it is probably better to avoid ‘liberty to apply as to timing’ in case this is

used as a basis for construing the order as an instalment order – if the

timing can be varied surely that this must mean it is a variable instalment

order? So, if the lump sums are ordered in paragraph x of the order, the


clause might read ‘There be liberty to apply as to timing (save in relation

to paragraph x) and as to implementation’;

C be careful with ‘concertina clauses’ – in Hamilton W had to pay by

specified dates or within 14 days of the sale of her company if earlier. If

such a provision is required, it may be better to draft as follows:

C Whereas ‘the relevant date’ shall be fourteen days after the sale of

the Wife’s company

C W do pay H £100,000 by the earlier of 1 April 2013 or the relevant

date.

C W do pay H £150,000 by the earlier of 1 April 2014 or the relevant

date ...

C be careful with trying to have your cake and eat it! It is not possible to

have a series of truly separate lump sums, such that the obligation to pay

each is separate from the obligation to pay the others, and at the same

time have a clause along the lines of: “Provided that, if the Husband shall

fail to pay any of the above sums by the dates set out above, the remaining

sums shall thereupon become immediately payable and shall bear interest

from that date’

38. In contrast, an order for instalments is likely either to use the word instalments,

or to refer to a whole sum payable as follows, eg:


C H do pay W a lump sum of £450,000 payable by the following instalments,

or

C H do pay W a lump sum of £450,000 payable as follows;

C if instalments are intended, there is no harm in a recital to that effect;

C likewise, the paragraph containing the lump sum might begin ‘Pursuant

to s 23(3)(c) of the Matrimonial Causes Act 1973 (payment of a lump sum

by instalments) H do pay W a lump sum of £450,000 payable by the

following instalments ...

39. What of the future family court’s powers? The Crime and Courts Bill 2012, which

has almost completed its passage through Parliament would give the family

court the following powers:

C new s 31F(5) of the Matrimonial and Family Proceedings Act 1984: where

the family court has the power to require the payment of money, an order

of the court made in exercising the power may allow time for payment or

order payment by instalments, and where the court has ordered payment

by instalments and default is made in the payment of any one instalment,

proceedings may be taken as if the default had been made in the payment

of all the instalments then unpaid;

C new s 31F(6): the family court has power to vary, suspend, rescind or

revive any order made by it ...


Some case studies

40. We invite you to consider two other scenarios.

Scenario E

Assets:

C 51% shares in construction business (valued at £1m) of which H has day-to-day

management (25.5% owned by each);

C £500,000 bonds owned by H;

C FMH (jointly owned).

Order E:

(1) H to transfer legal and beneficial interest in FMH to W by 1 April 2013;

(2) H shall pay or cause to be paid the following lump sums to W:

(a) On or before 1st May 2013 £100,000;

(b) On or before 1st June 2013 £100,000;

(c) On or before 1st July 2013 £100,000;

(d) On or before 1st August 2013 £100,000;

(e) On or before 1st September 2013 £100,000.

(3) Provided 2(a) to (d) complied with in full, on payment of the final lump sum

provided for in 2(e) above, W to transfer her shareholding in Co to H.

4. Save as aforesaid, full clean break etc


Analysis – is this an order for lump sums or an instalment order?

C No reference to s 23(1)(c)

C No recital re not intended to be variable

C £500k over 5 months – does shorter time period make a difference to what the

parties truly intended??

C NB W will presumably get dividends for as long as they are being declared and

the shares are not transferred to H

C H won’t get the shares until he pays up – this ‘informal security’ does not make

it an instalment order

C How relevant is the source of the monies? Is it a cashflow/ liquidity/ tax issue?

What if the bonds mature in 100k tranches over the 5 months so that each lump

sum is paid out of the maturing batch of bonds? Does this make it more ‘lump

sums’ than ‘instalment order’?

Scenario F

Assets

C FMH (with £300k equity) (jointly owned)

C Pre-marital family business (W) unknown valuation; little liquid assets but

making big profits


Order F:

WHEREAS the Parties have agreed to the specific terms set out below so as to reflect

their intention that neither party shall be entitled to apply under s 31 of MCA 1973 for

it be varied

(1) W shall pay or cause to be paid to H the following lump sums pursuant to

s 23(1)(c):

(i) On or before 1st April 2013 £100,000;

(ii) On or before 1st October 2013 £100,000;

(iii) On or before 1st April 2014 £100,000.

(2) In the event that any lump sum provided for in 1(i) or (ii) above is not paid

within 14 days of the date by which it is due to be paid, the lump sums provided

for in each of the following sub-paragraphs shall thereupon become due and

payable forthwith.

(3) On payment of the first lump sum above, H do transfer fmh to W.

(4) Liberty to apply as to implementation.

Analysis – is this an order for lump sums or an instalment order?

C The wording: a victory for ‘fancy drafting’?

C Can the court go behind the wording when the recital makes it plain there is no

contrary ‘true underlying agreement’?

C But is para 2 consistent with truly separate lump sums?


C What difference does it make if the dates for payments of the lump sums coincide

with the six-monthly pattern of dividends being declared for the company, and

both parties understood that the lump sums would be paid out of the dividends?

LASPO, ‘orders for payment in respect of legal services’, and costs allowances

41. It was generally assumed that when LASPO is generally brought into force on 1

April 2013, including the withdrawal of legal aid for most private law family

matters, the provisions of ss 49 to 54 of the 2012 Act would also be brought into

force. After all, it was thought that the wife will not be able to get legal aid any

more to pursue her financial remedy claim, so the new powers to order the

husband to pay a lump sum to contribute to her costs should be available.

42. Now it is not so clear. There are 6 commencement orders – the last of which was

made on 28 February 2013 – and a further set of regulations making transitional

provisions made on 11 March 2013, but as yet there is no sign of a

commencement order to bring into force ss 49 to 54. In addition, the FPR 2010

will need amending to deal with applications for ‘legal services payment orders’.

The new powers

43. Under new s 22ZA of the 1973 Act, the court will be able to order one party to the

marriage to pay to the other (the applicant) an amount for the purpose of

enabling the applicant to obtain legal services. Such an order may be made


C in proceedings for divorce, nullity or judicial separation proceedings to

enable the applicant to obtain legal services for the purpose of the

proceedings (!) or

C in proceedings under Part II of the 1973 Act for financial relief in

connection with proceedings for divorce, nullity etc. ‘Financial relief’ is

not defined in Part II of the Act, although Part II is entitled ‘Financial relief

for parties to marriage and children to family’. It might be assumed that

a lspo will be available to enable the applicant to fund any application

under Part II that is made in connection with divorce etc proceedings.

Most financial remedies applications will be covered, but of course a

Schedule 1 application, a claim under Part III of the 1984 Act, and a failure

to maintain claim under s 27 would appear to be outside the scope of a

lspo.

44. A LSPO may:

C be for a single amount to be paid by R to A

C provide for the payment of all or part by instalments

C provide for any such instalments to be secured

C allow for all or part of the sum ordered to be deferred

C be for any type of allowable legal services or limited to allow A to obtain

legal services of a specified description


C be for legal services to be provided over any period or for only such

services to be provided in a specified period (eg between now and 1 July

2013)

C be for the whole proceedings or for the purposes of a specified part of the

proceedings (eg between now and FDR)

C be varied in the event of a significant change in circumstances since it was

made

Payment for what exactly?

45. For what services can LSPO’s be obtained to cover? ‘Legal services’ is defined in

s 22ZA(10) to mean the following types of services:

C advice as to how the law applies in the particular circumstances,

C advice and assistance in relation to the proceedings

C providing other advice and assistance in relation to the settlement or other

resolution of the dispute

C providing advice and assistance in relation to enforcement of decisions in

the proceedings or as part of the settlement or resolution of the dispute

and they include, ‘advice and assistance in the form of representation and any

form of dispute resolution, including mediation.’


‘Legal services’ need not be supplied by lawyers!

46. Despite being termed ‘legal services’, the definition is not limited to advice or

representation by qualified lawyers. R can be ordered to pay for A to obtain

advice or representation from a professional McKenzie friend or unregulated

adviser/ advocate who asks permission to address the court. Clearly R can be

ordered to pay for A to obtain advice during the course of mediation. Likewise

R can be ordered for A to obtain advice and representation for arbitration (ie any

form of dispute resolution). It is unclear whether a LSPO would extend to R

being ordered to pay money to A so that she can cover her share of the mediator

or arbitrator’s fees – it all depends on the meaning of the words after ‘includes’.

The court’s decision making process on an application for a LSPO

47. There is a checklist of factors to be considered in new s 22ZB(1):

(a) income, earning capacity (including any increase in earning capacity

which it would be reasonable to expect the person to take steps to acquire)

property and other financial resources which each party has or is likely to

have in the foreseeable future

(b) financial needs obligations and responsibilities which each party has or is

likely to have in the foreseeable future

(c) the subject matter of the proceedings, including the matters in issue in

them

(d) whether the respondent is legally represented in the proceedings


(e) any steps taken by the applicant to avoid all or part of the proceedings,

whether by proposing or considering mediation or otherwise

(f) the applicant’s conduct in relation to the proceedings

(g) any amount owed by A to R in respect of the costs of proceedings or other

proceedings to which they are or were both parties

(h) the effect of the order (or its variation) on R, and in particular, whether the

order would be likely to cause undue hardship to R or prevent R from

obtaining legal services for the purposes of the proceedings

48. However, A must surmount the hurdles in s 22ZA(3) and (4) before the court

may make a LSPO in her favour. The court must be satisfied that:

C without the amount, A would not reasonably be able to obtain

appropriate legal services for the purposes of the proceedings or any part

of the proceedings.

C A is not reasonably able to secure a loan to pay for the services

C A is unlikely to be able to obtain the services by granting a charge over

any assets recovered in the proceedings.

How to make the application

49. In advance of the FPR 2010 being amended, this is necessarily speculative, but

unless a new form is devised, it might be expected that the application is made


by form D11 under Part 18 of the FPR with a statement in support. In financial

remedy proceedings, it might be included as an ‘interim order’ within rule 9.7.

50. What about the costs of the costs? It is unlikely that the application for a lspo will

be treated as ‘financial remedy proceedings’ for the purposes of FPR r 28.3. If

that is right:

C the ‘no order as to costs’ rule will not apply. The court will have a ‘blank

sheet’ in front of it, which will often lead to the result that the ‘winner’

should get their costs;

C the ‘only an open offer is admissible on costs’ rule will also not apply. R

will be able to make a Calderbank offer to attempt to protect his position

on costs.

Scope of legal services payments order

No more costs allowances in mps orders

51. The new remedy, when introduced, is intended to be the exclusive method of

providing for one party to fund the other’s costs of the main suit and financial

remedy proceedings in connection with the main suit. New s 22(2) of the 1973

Act prevents the inclusion of a costs allowance in an order for maintenance

pending suit where a lspo might be made: a mps order ‘may not require a party

to a marriage to pay to the other party any amount in respect of legal services for

the purposes of the proceedings.’


52. However, an order for interim pp’s under s 23(1)(a) is not subject to the same

restriction. So, once decree nisi has been obtained, an order for interim pp’s may

contain a costs allowance in the current manner.

53. A costs allowance is still permissible in a mps order in respect of future private

law Children Act proceedings (which cannot be the subject of a lspo).

54. In addition, a costs allowance is still permissible:

C by way of interim pp’s in a claim under Part III of the MFPA 1984;

C by way of interim pp’s (assuming there is jurisdiction) in a claim under

Schedule 1 to the Children Act 1989;

C by way of an ‘interim lump sum’ in a claim under Schedule 1 to the

Children Act 1989.

55. Watch this space!

Michael Horton & Richard YorkeCoram Chamberswww.coramchambers.co.uk20 March 2013


http://www.coramchambers.co.uk

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