CA allows funder to challenge financial remedy consent order

Divorce: Funder to have say over consent order

A litigation funder owed up to £1m by the wife in a “bitter and extortionately expensive” divorce battle can remain a party to financial remedy proceedings, the Court of Appeal has ruled.

Lady Justice King said funders were “entitled to expect some measure of protection from the improper manipulation of the outcome of the proceedings by the parties” to avoid repaying them.

Here, funder Level submitted that the husband and wife may have colluded to get out of her having to repay the loan.

King LJ went on: “It should be remembered that there may well be little or no security reasonably available; in this case for example there was nothing: even the matrimonial home is held in the husband’s name.”

This meant that Level, “in common with most lenders, therefore depended on the borrowing party receiving a fair and appropriate award at the conclusion of the proceedings” which “properly takes into account that party’s liability in respect of their litigation loan”.

Although 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”, in this case there was “evidence of ‘collusion between the spouses’” to avoid paying Level, a trading name of Integro Funding.

In Simon v Simon and Level [2023] EWCA Civ 1048, the wife had to rely on loans of nearly £1m from Level in the long-running case.

But at a private financial dispute resolution (FDR) hearing in February 2021, her solicitors and leading counsel became conflicted and withdrew. The wife has continued unrepresented.

She then entered into an agreement with the husband, under which she surrendered a lump sum in return for the right to reside in a property owned by the husband’s trust for the rest of her life. This meant she would not have any money to repay the loan.

Level sought to be joined as a party to the financial remedy proceedings to challenge this. Mr Justice Newton agreed on a without-notice basis, a decision upheld last year by Nicholas Cusworth KC, sitting as a deputy High Court judge. The husband appealed.

King LJ said Parliament had legislated in section 22ZA of the Matrimonial Causes Act 1973 that litigants in matrimonial proceedings 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.

“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.”

Funders had to satisfy the provisions of Family Procedure Rules to achieve party status and their interest would “ordinarily be apparent and taken into account without their intervention”.

Such intervention would “usually be achieved by limited participation at the stage when the court considers whether to approve a consent order”.

King LJ ruled that Mr Cusworth was in error only in directing a new full financial remedy hearing and transferring proceedings to the Family Court. She dismissed the remainder of the husband’s appeal.

“It follows that Level remain a party for the purposes of the outstanding application by the husband and wife for a consent order to be made in the terms agreed between them at the FDR.”

She ordered that the case be remitted to Mr Justice Peel, the lead judge for financial remedy cases, so he could give directions for a hearing of the application by the husband and wife for the making of a consent order.

Lord Justices Popplewell and Moylan agreed, with the latter saying that apart from the unusual circumstances of this case, “no circumstances were identified during the course of the hearing which, in my view, would justify any more extensive participation either in this case or more generally.

“Accordingly, I would rather not speculate as to whether there could be such circumstances as, at present, I cannot envisage what they might be.”

Lawyers had come together to express concern about an adverse outcome from the appeal, saying that information shared between 16 major family firms showed that, in the year to May 2023, they collectively made 164 applications for litigation funding, with a woman the applicant in 85% of them.

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