Since the cuts to legal aid for family cases in April 2013, there has been a rise in the number of companies offering loans to fund legal costs. These ‘litigation loans’ are only available for financial cases in which the client is likely to receive a settlement with which they will be able to repay the loan. Such loans are not generally available for cases involving disputes over arrangements for children. We offer litigation loans through a company called Novitas (www.novitasloans.co.uk).
To coincide with the legal aid cuts, the law which governs divorce (the Matrimonial Causes Act 1973) was amended to allow a court to make a ‘legal services order’. This is an order that the financially better off party pays the other’s legal costs, either in a lump sum or in instalments.
It was hoped that this change in the law would go some way to enabling the financially weaker party to pursue their case, especially as legal aid is no longer available. However, such orders are only available once court proceedings are underway. It is likely to have already cost a significant amount to get to this stage and there is no guarantee that a legal services order will be made.
The new law states that when the court is asked to make a legal services order the applicant has to fulfil a two stage test. First, they have to demonstrate that they are unable to obtain a litigation loan. Secondly, the applicant must show that their legal advisors will not defer the costs until the end of the case.
A recent case in the High Court has interpreted the test in a way which should enable more people to obtain a legal services order. With regard to litigation loans, the judge said that applicants should not be expected to pay high levels of interest. Further, a statement from the applicant’s legal advisors confirming that they will not defer payment of costs will fulfil the second limb of the test.
To date, very few legal services orders have been made. Now that the test appears to have been relaxed it should be easier for the financially weaker party in divorce proceedings to have access to justice.
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