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8th February 2024

Olivia Piercy and Henry Hood explore the intersection between LSPOs and economic abuse in Financial Remedies Journal

Olivia Piercy and Henry Hood explore the intersection between LSPOs and economic abuse in Financial Remedies Journal

This article was published in the Financial Remedies Journal, 8 February 2024, and can be seen here.

The Intersection Between LSPOs and Economic Abuse

Recent years have seen increasing awareness of economic abuse, and how the financial remedy process can be manipulated as a tool of such abuse. However, one aspect of this has had little attention: the intersection between economic abuse and LSPOs.

The Domestic Abuse Act 2021 includes economic abuse within the definition of domestic abuse, defined as: any behaviour that has a substantial adverse effect on [the victim’s] ability to (a) acquire, use or maintain money or other property, or (b) obtain goods or services. In DP v EP [2023] EWFC 6, HHJ Reardon found that there had been economic abuse and that this amounted to conduct for the purposes of s 25(g), and Resolution last year launched the Economic Abuse Working Group.

Research has suggested that financial abuse occurs in 99% of domestic violence cases and surveys of survivors reflect that concerns over their ability to provide financially for themselves and their children was one of the top reasons for staying in the relationship or returning to an abusive partner.¹ This means that economic abuse is very likely to feature where domestic abuse is present. Following separation, economic abuse typically plays out in three ways: cutting off financial support in order to exert control and block access to legal advice and representation; failing to provide adequate financial disclosure to create delay and confusion about finances; and using the delay to rearrange finances, suppress income and put assets beyond reach.

An LSPO application will only be made where all of the following conditions are met:

  1. the applicant has minimal assets in her own name;
  2. the respondent has sufficient assets to fund the applicant’s legal fees but is refusing to do so, sometimes blocking the applicant’s access to marital assets to fund her legal fees whilst using them to fund his own;
  3. a litigation loan is unavailable, which is usually due to family assets being abroad, concealed, held on trust or otherwise inaccessible.

It is immediately apparent that such circumstances may well overlap with situations of controlling and coercive behaviour and economic abuse, heightening the risk that abusive and controlling behaviour is present in cases involving LSPO applications. Further, LSPO applications are generally made by women, who are statistically more likely to be victims of domestic abuse than men.

We suggest that there has been insufficient focus not only on the likelihood that economic abuse is present in cases involving LSPO applications, but on the reality that the funding of legal fees can be a new medium through which coercive and controlling behaviour is exercised. If the court does not ensure immediate and sufficient access to legal fees for a victim of economic abuse, it risks facilitating that abuse.

A previous article explored the operation of LSPOs in detail, arguing that the court’s approach creates unfairness to those dependant on them and exacerbates power imbalances. This is especially problematic where the LSPO application has been made in the context of an abusive and controlling relationship.

On an LSPO application, the court frequently reduces the provision for the applicant’s legal fees to below that which her solicitors have assessed as necessary to conduct her case. This is done by reference to reasonableness² and/or proportionality, ³by way of comparison with the other party’s fees, ⁴and/or through deducting ‘notional costs of assessment’ from past⁵ or future⁶ costs. This does not mean, as it would on a costs order, that the applicant has to fund the shortfall herself – by definition she has, at this stage, no resources from which to do so. Therefore, unless her solicitor is willing to act on credit, the time they can spend on the case will be limited. The respondent, by contrast, is free to instruct his solicitors to spend as much time on the case as he wishes to pay for – and, if the matrimonial assets are held in his name, to use them for this purpose.

A short interim hearing, heard prior to the facts of the case being established, is arguably not the best point at which to assess the reasonableness of costs. That is all the more the position in a case featuring economic abuse, where litigation conduct is likely to include behaviour such as non-disclosure, refusal to negotiate, unnecessary correspondence, pursuit of bad points, etc.

The litigation process, and the assisted party’s dependence on a fixed sum for costs, provides new fertile opportunities for control, with both psychological and costs consequences. If the no-go area of an overspend (discussed below) is to be avoided, the result is either the rationing of legal activity which puts proper presentation of the case at risk, or a further interim hearing to address the anticipated shortfall with its attendant cost and risk, and where bad litigation conduct may not be obvious to a busy judge.

In non-LSPO cases, concerns around disproportionate or unreasonable costs are addressed at the end of the matter by way of a costs order, add-back, or reduction in the award. There is no reason this approach should not also be taken in LSPO cases. The court will be in a better position to assess whether costs were reasonable and proportionate after a final hearing. This would mitigate the real risk of a vulnerable applicant having their legal advice restricted due to the respondent’s conduct of the proceedings.

Another judicial practice is the deduction of a percentage from the applicant’s costs incurred prior to their LSPO application, and/or from their budget for future costs, by way of a ‘notional standard basis assessment’. As with deductions for unreasonableness/disproportionality, this curtails a potentially vulnerable applicant’s access to legal advice whilst the respondent suffers no such limitations. Beyond its unfairness, such an approach is misguided given that an LSPO is not a costs order. This was recognised by Peel J in HAT v LAT [2023] EWFC 162: ‘I considered applying a notional reduction to reflect what would occur on a standard basis assessment … But on balance my view is that to do so would be the wrong approach … This is not an inter partes costs order.’ Peel J had seemingly endorsed the ‘notional deduction’ approach three days earlier in Xanthopoulos v Rakshina (Rev1) [2023] EWFC 158, but it is to be hoped that the HAT v LAT approach prevails.

Limiting provision for the applicant’s legal fees by way of comparison with those of the respondent will also create particular problems in a case involving domestic abuse as it is open to manipulation by the respondent, particularly one who practises controlling behaviour. Nor does it consider how an applicant’s vulnerabilities, anxiety and inexperience with financial matters (all of which may be present if there has been abuse) may increase the time needed to advise them. Francis J recognised in DR v ES [2022] EWFC 62 that ‘sometimes, a vulnerable or anxious or talkative client can spend two or three hours doing something that should have taken one … but sometimes you have just got to do it, and it is important for the husband that the wife is properly advised and that she understands what she is doing’. This understanding needs to be more widely adopted.

The rigid approach to overspend taken in recent cases⁷ compounds the problems. It is now clear that costs incurred by the applicant in excess of the budget set by the court are unlikely to be recoverable, irrespective of their reasonableness. If the budget permitted by the court proves insufficient, the applicant must either restrict the steps their lawyers can take or use some of their remaining budget to apply for increased provision. Having one party operating to a strict budget, and the other not, not only creates unfairness but risks replicating the dynamics of a controlling relationship. Further, a perpetrator of domestic abuse can take advantage of the position by conducting proceedings so as to create additional work not anticipated by the budget. Moreover, the requirement often imposed that the applicant provide regular updates to the respondent on her legal expenditure,⁸ may reproduce aspects of controlling behaviour and be inappropriate in cases of abuse.

In his recent judgment in Williams v Williams [2023] EWHC 3098 (Fam), Moor J accepted that the wife’s solicitors could not accurately estimate future costs as the husband, thought to be a billionaire, had failed to engage at all in the proceedings. Moor J therefore granted the sum sought by the wife’s solicitors, saying ‘by doing so, there is no prejudice to Mr Williams given that Mrs Williams will have to give an undertaking to repay if any of the money is not spent or if it is directed at the end of the trial that there should be a repayment’. The point applies in all LSPO cases.

We suggest that greater caution is required by judges when limiting the costs of LSPO applicants, particularly where the respondent’s refusal to fund the applicant’s legal fees voluntarily may be a manifestation of economic abuse. Macdonald J in DH v RH [2023] EWFC 111 emphasised the importance of the court’s ‘power to control the deployment of amounts awarded under a LSPO’. That in LSPO cases the court has this power over one party, which it generally lacks over both parties, does not render it fair to strictly deploy it in every LSPO case. If it is later determined that a cautious approach was misplaced and fees were unreasonably incurred, any necessary redress can be made in the final award. The court’s current approach has worrying implications for access to justice for vulnerable applicants.

¹ Adrienne E. Adams (2011) Measuring the Effects of Domestic Violence on Women’s Financial Wellbeing Center for Financial Security Research Brief:
² HAT v LAT [2023] EWFC 162; DH v RH [2023] EWFC 111
³ References to proportionality are made in CW v CH (MFPA 1984 Part III: Interim Applications) [2022] EWFC B1Z (No.2) (Schedule 1: Further Legal Costs Funding Order; Further Interim Financial Provision) [2021] EWFC 72Z (Schedule 1: Legal Costs Funding Order; Interim Financial Provision) [2020] EWFC 80BC v DE (Rev 1) [2016] EWHC 1806 (Fam); and in unreported decisions of which the authors are aware
⁴ Z (Schedule 1: Legal Costs Funding Order; Interim Financial Provision) [2020] EWFC 80MG v GM [2022] EWFC 8
⁵ BC v DE (Rev 1) [2016] EWHC 1806 (Fam)Re Z (Schedule 1: Legal Costs Funding Order; Interim Financial Provision) [2020] EWFC 80Re Z (No 2) (Schedule 1: Further Legal Costs Funding Order; Further Interim Financial Provision) [2021] EWFC 72MG v GM [2022] EWFC 8
⁶ BC v DE (Rev 1) [2016] EWHC 1806 (Fam)Xanthopoulos v Rakshina (Rev 1) [2023] EWFC 158
⁷ Xanthopoulos v Rakshina [2023] EWFC 50Re Z (a child) (No 4) (Schedule 1 award) [2023] EWFC 25
⁸ e.g. by Peel J in MG v GM [2022] EWFC 8