In the high net worth sector of matrimonial finance, the numbers are big. With a complex financial claim, the work required of divorce lawyers – not to mention the finance experts and valuers – is huge. But cashflow can always be a problem. Getting the money upfront to fund a case that involves unravelling vast financial chicanery, with assets stretched across all corners of the globe, is a tall order.
It can be particularly hard if you’re not the breadwinner, and have joint assets that you can’t access to pay legal fees. You don’t want to be at a disadvantage in your legal representation just because you don’t have the same funds immediately available to you, but are still good for them. Thankfully there are solutions. Litigation funding, a loan provided by specialist lenders, is testing the scope of what can be achieved with a reliable injection of cash. It’s a real step in the right direction for access to justice.
Of course, there are other options available, such as asking the other side to shoulder the legal costs voluntarily: this will usually be done first of all. Very often they refuse; no surprise there. You can eventually apply for a court order demanding the other side pay the fees, but before you go down this road you will need to apply for litigation funding in order to show the court that you’ve explored all options. In any event there are advantages to litigation funding. Applying for a court order to get the other side to fund your case is costly and there is no guarantee that you will win. With litigation funding, a trustworthy third party provides you with added protection and it can offer a helpful method of payment of your legal fees as your case progresses. There’s no need to take out a litigation loan for your entire case; you can just apply to fund part of it, as you see fit. The loan is then usually repayable in full from the settlement at the end of the case.
How does it work?
Your lawyer will make an application for you to one of our trusted litigation lending providers – we work with a select few and can help choose the most appropriate for your needs – setting out the details of your case. They will want to know what they can secure the loan against, as you would expect. This might well be property, such as the former matrimonial home. In cases involving high net worth individuals, this is not usually a problem. Even in very big cases, where there aren’t assets within the jurisdiction, or they’re arranged in structures against which it may be difficult to secure a loan, it can still be possible to secure lending. The experts will then come back with any questions they may have, and come to a decision. They’ll determine how much money will be needed, based on carefully worked out costs estimates by your lawyers.
If successful, once you’ve got the paperwork back from the lenders, there is a mandatory minimum seven day 'cooling off' period, during which you must seek independent legal advice to make sure you want to go ahead. If you decide to proceed, the first lot of money will reach your lawyers directly – though only after your approval. A great advantage of this is that your lawyers don’t need to keep troubling you with the payment of monthly bills, though you will still see and approve monthly invoices so that you can check the work that is being carried out and be kept well in the loop.
Money is typically drawn down in ‘tranches’ – often three, to correspond with the three stages of financial proceedings on divorce: First Appointment, FDR and Final Hearing. This is useful because, should you settle at any of these stages along the way, you’ll have no need to draw down any more and then pay back excess. Interest is typically payable on each tranche only once it’s been activated, which helps to keep your interest costs down.
Alternatively, other lenders agree an overall amount then release the funds each month based on the invoice for that month. In that instance, interest is payable on the money advanced – the payment of the amount to settle the invoice. Once your litigation is concluded, the loan and interest will be repaid from your settlement.
Is it reliable?
There’s been a lot of work done in recent years towards making sure standards are tip-top, which has opened up the process and helped make it transparent and consistent both for lawyers and clients. Applying for litigation funding is rigorous, not a legal equivalent of a payday loan. But that care and precision really pays off, and a top divorce lawyer will put together all the essentials and help the client along every step of the way. The best lawyers will also know when best to apply, and exercise careful judgement in determining when to pursue claims.
Vardags is experienced in securing litigation funding for its high net worth clients and has strong relationships with a select pool of the very best funders around. This is a real boon as it allows you access to top lawyers who can get the best possible settlement. It paves the way for a real shot at success in the courts.
If you would like to know more about the issues covered in this article, Vardags offers a free consultation to qualifying individuals.
For high net worth and ultra high net worth individuals or their companies, our confidential enquiry line is staffed 24 hours. Call 020 7404 9390 today.