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Conduct in divorce cases

February 3, 2014 in Legal services by Alan Larkin | No comments

the relevance of conduct in divorce financial proceedings

GUEST POST: LISA BURTON-DURHAM

Conduct in divorce cases often raises its head as an issue when family lawyers are first consulted.  To most clients, it seems clear as day that since their spouse is at fault in some way, it must follow that this will impact on the financial outcomes in the divorce settlement.

I asked one of my colleagues at Family Law Partners, Lisa Burton-Durham, to let me post an article she has recently written on this enduring issue.  I think my readers will find it of great value.  Thanks, Lisa!

Conduct in divorce cases

I am often asked whether a spouse’s behaviour would have an effect upon the financial settlement following a divorce.  Indeed there is a common misconception that one person’s ‘bad’ behaviour will mean that their spouse will receive a larger financial settlement by way of compensation for one and penalisation for the other.  But is that right?

Conduct is one of the factors that the court should take into account when looking at the appropriate financial settlement within divorce proceedings.  However the law is very clear in that the conduct will only be taken into account if it is so serious that it would unfair for the court to disregard it.

Of course, deciding on whether conduct is such that it should be taken into account will be subjective to many.  I often hear: “It was my husband who went off with someone else so why should he get anything?” or “She recklessly gambled away lots of our money so why should she get half of my assets?”

When looking at the relevance of conduct there are two types to be considered: personal misconduct and financial misconduct.

Personal misconduct involves some sort of ‘bad behaviour’ on the part of one party. In my experience it the type of misconduct that is complained of the most but it is actually very rare that it will have any bearing upon the financial settlement.   Adultery and most forms of ‘unreasonable behaviour’ will probably only be relevant when deciding who should pay the costs of the divorce.

To be a relevant factor in a financial settlement, personal misconduct has to be of a very serious nature and outside the range of normality.  Ordinary fighting and quarrelling in an unhappy marriage would not be sufficient neither would one party having committed adultery.  Examples of cases where personal misconduct was taken into account include a wife shooting her husband and a husband committing incest with the children of the family.  Thankfully, these types of cases are extremely rare.

Financial misconduct is normally where one party recklessly or purposely squanders assets prior to the divorce proceedings, thereby reducing the amount of the ‘matrimonial pot’.  Examples of this are gambling and spending money on unnecessary things like expensive holidays and cars. 

In such circumstances the court will try to put right the circumstances by ‘adding back’ the money or assets that have been spent and continuing on the basis that the party still has them.

It is also important to note that conduct during the course of the divorce proceedings, such as failing to comply with a court order, is not usually punished by providing a lower settlement to the ‘guilty’ party.  However they can be penalised by the court ordering that that party pay a contribution towards the other party’s costs.  This is known as ‘litigation conduct’.

To summarise, it is quite unusual for a conduct claim to be successful, especially if the misconduct is personal.  It is therefore very important that legal advice is sought before embarking on such a claim as this could save considerable expense in the long run.

Lisa Burton-Durham is a Chartered Legal Executive and accredited collaborative lawyer with Family Law Partners based in Brighton.  Nothing in this article constitutes legal advice.

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Taxing access to justice

January 25, 2014 in Alternatives to Court, Legal services by Alan Larkin | No comments

Another (austerity) budget

Tax policy to incentivise mediation

I have often wondered, when sending my clients their legal bills, how on earth they can afford my services?  In short, how can they afford access to justice?  The cost charged for the work  carried out will look imposing enough.  But the killer touch is when VAT at 20% is added to the bill.  A stiff bill becomes a….really large bill.  This is important because most legal aid for family work has now been kicked into touch.  “Access to justice” is no longer a slightly dry form of words bandied around by academics or politicians.  It is real and it affects us all because it you can’t afford to pay for it, you ain’t getting it.

When providing costs estimates to clients at a first consultation the figure arrived at will be discussed and agreed.  A client will be encouraged to help themselves as much as possible, or use my online platform for document production: anything to keep the cost down.  So an estimate is arrived at and the client thinks: OK, I’d rather not be using my money to pay legal bills but I need the help and I can live with that likely cost.  Then comes the point when you have to add in VAT at 20%.  The client’s face always drops.  (Mine would in their position).  Adding in VAT at 20% has just broken the bank.  There is access to justice – you just have to clear the VAT hurdle first.

This post was first created as a draft over a year ago and then put in mothballs.  I’ve brushed off the cobwebs and published it now,  prompted by an article in The Law Society Gazette about Belgian lawyers resisting the imposition of VAT on their bills.  Not the sexiest of links I’ve stuck in a post but try to bear with me.

The problem with VAT

The imposition of VAT on legal services does not create a level playing field.  Because:

  • If a VAT registered company needs legal services (and think of the millions spent by large corporates every year on their legal needs) they can reclaim the VAT they have paid out so it is cost neutral for them.  Sweet.  So spend all you like, lads, on that latest merger.
  • If you are an individual you pay 20% VAT on top of your legal bills and can’t reclaim it from anyone.  Harsh.  So you can’t afford to get legal advice on access to your kids or financial agreements to keep a roof over your head, after all.
  • Some of my clients are individuals and don’t pay a penny of VAT on their bills.  (No way!)  Yes way.   Because they live abroad in non-EU member states and therefore don’t have to pay VAT on legal services even though the legal services are being conducted in the UK.  Fortunate for some.

I mean, I understand there has been (still is) a recession: the government needs these tax receipts. But access to justice should mean something: the government has taken the axe to civil legal aid and promoted mediation.  Unfortunately, the government’s championing of mediation was a fig leaf to distract from the legal aid cuts.  The catastrophic fall in mediation referrals is testament to the fact that the presentation of mediation as a panacea in family law work was political window-dressing rather than well-considered, appropriately resourced social policy.

If the government is serious about the promotion of mediation, and is equally serious about preserving access to justice, then I have a suggestion by which it can redeem itself, ever so slightly. My suggestion focuses on family law.

The solution

We all know that a blanket tax, like VAT, penalises the less well-off.  We also know that the government keeps banging on about mediation whilst doing nothing (in resource or policy terms) to promote its take-up.  Talking of policy, they really need to catch up with the fact that there are other options available to keep people out of the courts as well, such as collaborative law and family arbitration.  We know, despite the political window dressing, that the withdrawal  of civil legal aid has directly and adversely impacted upon  many individuals’ rights of access to justice – they can’t afford it – full stop.

So, here is my suggestion to help the government climb halfway out of the hole of its own making.

  1. Spend a few quid telling the public that legal aid is still available for mediation (on a means tested basis);
  2. Permit mediators and lawyer/mediators to reduce the rate of VAT on their services to 5%;
  3. Permit collaborative lawyers to reduce the rate of VAT on their services to 10%.  Family consultants and financial neutrals assisting the parties in the collaborative process be allowed to do the same.
  4. Impose a reduced rate of VAT at 15% on legal advice offered outside mediation or collaborative law.  This would apply to family arbitration, and work conducted under the pre-action protocol (attempting via solicitor-led negotiation to resolve matters without recourse to court proceedings).
  5. Impose 20% VAT on legal services from the moment one of the parties issues contested legal proceedings.  An application for a consent order (so not really contested) would attract VAT at the rate of 5% if it follows on from mediation and 10% if it arises following the collaborative process.

In my humble opinion, I think this is a win/win scenario.  The lawyers don’t get a penny extra, so the Daily Mail won’t get its knickers in a twist.  It will make legal services  (access to justice) more affordable.  It will incentivise individuals to choose dispute resolution models such as mediation and collaborative law that objectively produce better outcomes at lower cost.  The reduction in VAT receipts will be offset (I’m guessing) by the drop in numbers using the (expensive to maintain) family court system and perhaps even reverse the increase in litigants in person that is now threatening the bring the courts grinding to a halt.  Timely legal advice can prevent a host of problems later on and I don’t know how you even begin to count the cost in developmental and emotional terms for those kids whose parents cannot stop warring without legal intervention, or who don’t receive maintenance or the opportunity to develop a relationship with a parent who has been excluded from their lives.

Worth a punt?

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Funding options in the absence of legal aid for family law

April 2, 2013 in Legal services by Alan Larkin | No comments

Funding options in the absence of legal aid for family law

The forecast is dark clouds but it may become clearer

Funding options in the absence of legal aid for family law will be one of the more common concerns in my virtual postbag.  Legal Aid has largely disappeared for those wanting help from solicitors, legal executives or barristers who specialise in family law.  I consider the removal of legal aid for family law to be a terrible mistake.  The costs savings that will be trumpeted about by various ministers will be offset by the increased costs of other government departments such as the Ministry of Justice who will see further increases in Litigants in Person (LIPS).  A number of judges are now sounding the alarm bells about the delays (which means costs) in the court case lists attributed to LIPS turning up unprepared or unable to progress the case.

My purpose here is to list what limited provision remains for legal aid for family law matters and the funding options or alternatives there may be out there.

Legal Aid (remains of the day)

You can still obtain legal aid (provided you qualify on capital and income) in the following scenarios:

  1. If you are a victim of domestic violence.  You must be able to produce evidence of the domestic violence to your solicitor.
  2. If you have a child who is at risk of abuse from a partner.  Again, you must be able to give your solicitor evidence of the abuse.  Guidance has been published on the type of evidence at the Ministry of Justice website.
  3. If you and your partner agree to go to mediation.  You can also get some limited help from a solicitor outside the mediation process such as the drawing up of a consent order if the mediation is successful.  Unfortunately, mediation is not going to work for everyone.

Funding options in the absence of legal aid for family law

So what if you can’t get legal aid for family law?  What are the options?  In no particular order:

  1. Are you a member of a union?  Funding assistance may be available for members.
  2. Are you covered for legal assistance under your domestic household insurance?  Check the policy terms.
  3. Litigation loan funding.  There are specialist providers and your family lawyer should have the contacts to assess whether you can use such a facility.  However, you will pay interest on the loan and, ultimately, you will need some capital assets (such as property) in order to pay off the loan at the end of the case.
  4. Commercial lending from banks.  Unsecured loans generally available on the high street or online.
  5. Credit cards.  Another source of legal fees funding if all other commercial avenues are exhausted.  Fine in the short-term if the borrowing can be cleared in the settlement.
  6. Cashing in any existing investments.  There may be some savings accounts or ISA’s that could be utilised but do discuss with a lawyer first or an independent financial adviser.  Works if you have control over your own assets but not as good if the assets are joint and your partner wants to control your ability to get advice.
  7. Borrowing off family and friends.  More common than you might think. But ensure it is a ‘hard loan’ – one that must be paid back and is evidenced in writing.  If the loan is seen as ‘soft’ by your partner’s lawyers, they may argue it is not to be paid back and therefore you cannot count it in as a liability when deciding finances.
  8. A ‘Sear Tooth’ agreement.  This is a form of deed with your solicitors.  They will carry out the work for you if they believe that your settlement will be a reasonable one but the deed secures the costs of the legal fees against the settlement.  The usual scenario is that if a house is sold your lawyers recover their costs from the sale plus interest.  But the reality is that firms will only carry a handful of such arrangements at any one time.  They are risky for the lawyers because the settlement or court order may not be what was expected.   And there can be huge delays before the solicitors get paid even though they have no choice but to pay significant overheads each month such as staff wages and rent.
  9. A voluntary payment from your spouse or partner towards your legal fees.  Not as daft or improbable as it may sound.  Your lawyer picks up the ‘phone to your partner’s lawyer and says: “let’s be sensible, we don’t want to fight in court, give us some money to cover fees so we can explore a quick resolution.  We will give you a credit for it in the settlement”.  If the lawyers are sensible on both sides this can be quick and cost-effective.
  10. In the case of divorce or civil partnership financial orders: applying to the court for an order that your spouse or civil partner pays your legal fees. This used to be called an A v A application.  If you are married or a civil partner you can apply for interim financial help towards your outgoings called maintenance pending suit.  Part of this application could be for a ‘costs allowance’ to help you with your legal fees.  Various tests have to be satisfied (such as your inability to get commercial funding, legal aid or a Sear Tooth agreement with your solicitors).  A recent law change (which is not yet in force but which is imminent) will abolish the ‘cost allowance’ aspect and replace it with something called a Legal Services Order which will also go to meeting your legal fees.  Additionally, the court can provide an interim order for sale of real or personal property to provide the funds, if necessary, to meet the Legal Services Order.  (For years, matrimonial lawyers have argued that spouses should be able to apply for interim lump sum orders and interim orders for sale instead of having to wait until the end of a case. The power appears to have arrived at last, but strictly defined to only provide assistance with legal fees under the Legal Services Order).
  11. In the case of financial claims against your unmarried ex-partner on behalf of children under Schedule 1 of the Children Act 1989.  It is possible to seek interim lump sums on account of legal costs but certain tests have to be satisfied.

And a word about fixed fees.

I think that about wraps it up.  Remember that you must still ensure that you have a full discussion with your lawyer about how you can fund your case.  Make sure you ask for a written estimate of costs – or bands of costs depending upon likely outcomes.  Ask for fixed fee quotes which may be appropriate in some proceedings.  I keep reading various surveys that tell me the public demands fixed fees for all types of family work.

The public should be careful what it wishes for.  Fixed fees can be a good solution for some clients.  But guess what?  Sticking to an hourly rate with a carefully agreed plan of the work the solicitor will do and the work the client will carry out, can be cheaper. This is fashionably called unbundling nowadays. It is all about having a proper discussion at the start of the case.  I talk through budgeting plans and division of responsibility and work out whether a fixed fee or hourly rate is better for my client in every single case I take on. I fully explore all funding options.  And I put it in writing to them.

I think when people talk about fixed fees they want certainty about cost.  I absolutely understand that.  But I also think that some commentators are talking about fixed fees when they are actually meaning cheap fees.  And I suspect there will be a drive from some of the new entrants to family law – like Co-operative Legal Services – to offer lower fixed fees (like loss leaders) to bring in business.  That approach will only ever work on a commoditised basis.  This means the work may be dealt with by less qualified and less experienced staff.   Like my grandmother (and yours) always said: you get what you pay for.  That’s always been true.  So if you want to fly with Fixed Fee Family Airways, be my guest.  It may be fine for you but only make that decision after weighing up all the options.

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Litigants in person: recover your costs

December 14, 2011 in Self-Representation by Alan Larkin | No comments

 

Litigants in person, or self-reppers, often feel the justice system keeps them in the dark and covers them in the you know what. 

In family law court proceedings, it can be difficult if not impossible to obtain a costs order.  But there may occasions where the court feels it is right for a party to proceedings to be paid some or all of their legal costs.  This usually means recovering some part of your solicitor’s costs if you are represented.

But self-reppers can claim their costs as well.  An obvious candidiate is in the divorce proceedings proper (as opposed to the financial remedy proceedings aligned with the divorce petition).  The Petitioner in divorce proceedings is able to claim the court fees charged on the issue of the petition and also the costs of their time preparing the paperwork.

The 57th amendment to the Civil Procedure Rules has increased the hourly rate recoverable by a litigant in person from £9.25 to £18.00 effective from 1st October 2011.  Best then, to keep a log of the time spent on the matter, from the beginning,  so you can produce a schedule of your time and your costs if asked by your spouse or the court.

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