Litigation funding and ancillary relief - access to justice?
26 January 2015
In the case of Young vs. Young Moor J. awarded Michelle Young a lump sum of £20m in her divorce from her estranged husband, Scot.
In so doing, the Judge denounced the costs she had spent in pursuing her financial remedy claim as ‘completely unacceptable’, decrying the £6.4m it had cost her to bring the proceedings - some of which had been funded by commercial third parties – as ‘truly eye-watering.’ However, amidst the debris of a case which had involved ‘extraordinary’ allegations on both sides, the Judge recognised the practical importance of external funding to parties to a contested divorce:
'I make it equally clear that I do not want to say anything that makes it even more difficult for litigants to obtain litigation funding in the future, particularly given that there is no legal aid available in this area anymore.’
The case produced understandable press interest. In an article in The Times (‘Multimillion-pound divorce – at a cost’, 28th November 2013), Frances Gibb analysed the litigation funding market in divorce, highlighting a number of practitioners’ views of third party funding within the family jurisdiction. One appeared to conflate the third party funding of divorce with contingency fee arrangements between lawyers and clients, suggesting that some of Michelle Young’s non-recourse funding amounted to a contingent or conditional fee agreement ‘unenforceable under English law for family proceedings.’
The legal position
Funding agreements between lawyers and clients in the divorce sphere are of course unlawful. Section 58A Courts and Legal Services Act 1990 (‘the 1990 Act’) proscribes a lawyer representing a client under a conditional fee agreement in ‘family’ proceedings, defined to include proceedings under the Matrimonial Causes Act 1973.
However, there is no legal impediment to the third party funding of divorce proceedings. While s. 58B of the 1990 Act contains provisions dealing with litigation funding and does exclude the funding of claims relating to proceedings which by virtue of s. 58A (1) and (2) cannot be the subject of an enforceable CFA, the section in question is not yet in force and it appears unlikely to be for the foreseeable future.
Since s. 58B found its way onto the statute book (prospectively at least) in 1999, litigation funding has been recognised by the Judiciary through case law (in particular Arkin vs. Borchard Lines  EWCA Civ 655) and by Parliament through the adoption of Sir Rupert Jackson’s wide-ranging Review of Civil Litigation Costs (2009).
Sir Rupert’s Final Report noted, with approval, the role of third party litigation funding in promoting access to justice for litigants in financial difficulty and recommended that it be regulated voluntarily. This was duly done by way of the promulgation of the Code of Conduct for Litigation Funders and the establishment of a voluntary regulator – the Association of Litigation Funders – in November 2011. Both the Code and the Association received approval from Sir Rupert and the then Master of the Rolls – Lord Neuberger – and the Ministry of Justice.
The Code – recently enhanced in its capital adequacy and complaint provisions – applies to non-recourse funding. It is not restricted to any particular type of proceedings; in other words, ‘family proceedings’ are quite capable of being lawfully funded and Moor J.’s judgment in Young does nothing to disapprove that position.
While the Young case was indeed extraordinary, it illustrates exactly the type of claim in which third party litigation funding may be the only means by which a divorcee may have any prospect of obtaining access to justice; particularly where an estranged husband (or wife) adopts a course of conduct designed to ‘starve’ the other of funds and frustrate an equitable division of the matrimonial assets.
The overarching message is that divorce funding is ‘open for business’ and may be a useful source of finance for divorcees seeking access to justice in suitable cases.