The future of litigation funding in divorce cases – which new figures from law firms show mainly benefits women – is in the balance as the Court of Appeal hears a crucial appeal.
Lady Justice King, Lord Justice Moylan and Lord Justice Popplewell are hearing Simon v Simon & Level, which concerns the ability of litigation funders to intervene in family proceedings.
An adverse decision could lead to funders either withdrawing from the market or significantly increasing their rates, lawyers have warned.
In the long-running and bitterly contested case, the wife had to rely on loans of nearly £1m from litigation funder Level, a trading name of Integro Funding.
But at a private financial dispute resolution hearing in February 2021, she parted company with her solicitors and leading counsel and then entered into an agreement with the husband.
Under this, 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, meaning 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 Court of Appeal began hearing the case yesterday and family lawyers have argued that finding against Level would have “disastrous consequences for economically weaker parties”.
According to Alex Carruthers, partner at leading family law firm Hughes Fowler Carruthers, 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.
“Family lawyers are concerned that if lenders are unwilling to fund family law cases because of increased concerns about risk, or if lending rates rise to mitigate risk, then adverse consequences may follow – particularly for women, who will be disproportionately affected,” he said.
“Typically, it is the economically weaker party – most often, female – who relies on a litigation loan to fund their costs.”
In the absence of loans – because for example, funders are concerned about the risk of non-repayment – a party is more likely to need to make a legal service payment order (LSPO) application, requiring one party to make payments to the other to finance their legal costs.
The data showed that 66 (40%) of the 164 applications were rejected, leading to 28 applications for LSPOs.
Mr Carruthers said: “Some judges are reluctant to order LSPO costs prior to the hearing of the application. Of the 28 applications, 10 required a further LSPO application for additional funding at a later stage, three required enforcement proceedings to enforce the LSPO award while funds remain unpaid in four orders made.
“Given the absence of legal aid and the potential withdrawal of matrimonial litigation funders from the market, the only alternatives will be for women to represent themselves or to make an application for an LSPO, which the husband will have to pay, and which can make proceedings even more acrimonious. Both options are deeply unsatisfactory.”
Level – which also provides funding for private client matters and other law firm financing – says it has funded hundreds of cases, working with over 200 law firms.
Earlier this year, it took in substantial investment from Guernsey-based 1818 Venture Capital, which also set up a new debt facility, representing a combined total investment approaching £20m.