In Simon v Simon & Anor [2023] EWCA Civ 1048 the Court of Appeal considered the function of a litigation funder in matrimonial proceedings.   The role is an important one and those providing funding are entitled to some measure of protection from attempts to improperly manipulate the outcome to avoid repayment of the loan.


“Parliament legislated within s22ZA MCA 1973 that a litigant in matrimonial proceedings without the financial means to litigate must, before they may seek an order that their spouse cover the costs of litigation, first demonstrate that they are not reasonably able to secure a loan. In my view, those who provide such loans are entitled to expect some measure of protection from the improper manipulation of the outcome of the proceedings by the parties in order to avoid repayment of the loan.”


The appellant and first respondent were married. They engaged in, what the Court of Appeal described as “extortionately expensive” divorce proceedings.  To fund those proceedings the wife took out a loan of £1 million with the second respondent “Level”.

The husband and wife came to a financial agreement. This was to give the wife a life interest in a property, but no free capital or income. This meant that there was no money from which the loan could ever be repaid. A consent order was made to this effect, but subsequently set aside by consent.

Level applied, and was granted, permission to intervene in the action.    The husband appealed against various directions that had been made and King L.J. noted “his appeal additionally throws up the issue as to what role, if any, a company who supplies litigation loans such as Level should be permitted to play in the financial remedy proceedings they are funding by way of the provision of a loan to one of the parties.”


The Court of Appeal was clear that litigation funding, in this context, was an important element of litigation.  Statute allows one party to apply for the other to pay their litigation costs.  However this can only arise if the party applying can show that a loan was not available.    In the current case the wife could not make an application against the husband because litigation funding was available.  Further this was funding that claimed interest, it did not seek a share of the proceedings.

(v ) Level as a litigation Lender
    1. That then leaves the public policy issue.
    1. By virtue of s58A(1)(b) Courts and Legal Services Act 1990, (‘CLSA 1990’) family proceedings ‘cannot be the subject of an enforceable conditional fee agreement’. It is because of that prohibition that funding in family proceedings is by way of a loan repayable with interest as opposed to repayment of funding being by way of a percentage of monies recovered.
    1. With the loss of legal aid for most financial applications occasioned by the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (‘LASPOA 2012’), the issue of how to access funding for legal services for financial remedy applications became more acute.
    1. Section 22ZA MCA 1973 was inserted by ss49-54 LASPOA 2012 and was designed to place on a statutory footing the jurisprudence which had developed in cases such as A v A (Maintenance Pending Suit: Provisions for Legal Fees) [2001] 1 FLR 377 and Currey v Currey No 2 [2006] EWCA Civ 1338[2007] 1 FLR 946, whereby orders were made for the financially stronger party to pay a costs allowance to the financially weaker applicant to fund matrimonial finance proceedings, but only in circumstances where the applicant could demonstrate that they could not “reasonably procure legal advice and representation by any other means”; Wilson LJ (as he then was) at [20] (emphasis in original).
    1. Section 22ZA MCA 1973 provides that:
“In proceedings for divorce, nullity of marriage or judicial separation, the court may make an order or orders requiring one party to the marriage to pay to the other (“the applicant”) an amount for the purpose of enabling the applicant to obtain legal services for the purposes of the proceedings.
(2) ….
(3) The court must not make an order under this section unless it is satisfied that, without the amount, the applicant would not reasonably be able to obtain appropriate legal services for the purposes of the proceedings or any part of the proceedings.
(4) For the purposes of subsection (3), the court must be satisfied, in particular, that—

(a) the applicant is not reasonably able to secure a loan to pay for the services, and

(b) the applicant is unlikely to be able to obtain the services by granting a charge over any assets recovered in the proceedings”.

My emphasis
    1. Critically, it should be noted that the court will not make an order unless satisfied that the applicant ‘is not reasonably able to secure a loan’. As a consequence, no matter how wealthy the husband is and no matter how long the marriage has lasted, consideration has to be given to this requirement. This is the case even in circumstances such as the present where any award will be made from non-matrimonial property and is therefore likely to be constrained by needs.
    1. In this case, any application by the wife for the husband to pay her legal fees under s22ZA MCA 1973 would have failed because a litigation funding agreement was available.
    1. There have been a number of reported cases both inside and outside the field of matrimonial law as to the importance of the availability of legal funding in order to enable access to justice, see for example: Sears Tooth (A Firm) v Payne Hicks (A Firm) [1997] 2 FLR 116; Gulf Azov Shipping Co Ltd v Idisi [2004] EWCA Civ 292Young v Young [2013] EWHC 3637 (Fam)[2014] 2 FLR 786 at [9] and Weisz v Weisz [2019] EWHC 3101 (Fam)[2020] 2 FLR 95 at [53].
    1. Holman J in the present case similarly recognised how important litigation funding is, saying: ‘we all have familiarity with these litigations loans, and it is in fact important that they should be available and the appropriate protection afforded to the funder‘.
    1. In Akhmedova v Akhmedov [2020] EWHC 1526 (Fam)[2021] 1 FLR 1 at [40]-[45], Gwynneth Knowles J, when addressing an argument that the wife’s litigation funding in that case was champertous, cited a number of authorities emphasising the importance of the availability of litigation funding including Excalibur Ventures LLC v Texas Keystone Inc [2016] EWCA Civ 1144[2017] 1 WLR 2221 where at [31] Tomlinson LJ regarded the risk of litigation funding as being champertous as ‘unrealistic’. Champerty, he said, involves behaviour likely to interfere with the due administration of justice but ‘Litigation funding is an accepted and judicially sanctioned activity perceived to be in the public interest’.
    1. With specific reference to funding in family proceedings, Gwynneth Knowles J said that:
“71….Mr Owen QC’s contentions came perilously close to a submission that there was an issue of principle as to whether third-party funding was per se permissible in family proceedings. Those submissions are misplaced, in my view, in circumstances where third-party funding has been accepted in this jurisdiction to be desirable to facilitate access to justice and where first-instance decisions in the Family Division have concluded that (a) it is “a necessary and invaluable service in the right case” (per Mr Justice Francis at paragraph 53 in Weisz v Weisz [2019] EWHC 3101 (Fam)) and (b) that nothing should be said “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” (per Mr Justice Moor at paragraph 9 of Young v Young [2013] EWHC 3637 (Fam)).”
    1. I should add that since the hearing of the appeal, the Supreme Court handed down its decision in R (PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28 (‘PACCAR Inc’). This was a case which was concerned with whether litigation funding agreements (‘LFAs’) under which the funder is entitled to recover a percentage of any damages recovered, were damages-based agreements (‘DBAs’) within the meaning of the relevant statutory scheme and therefore subject to the conditions required by that scheme. Lord Sales, for the majority, said that they were, with the consequence that the scheme in issue was unenforceable as it failed to meet the conditions under the scheme. Lord Sales recognised that it is not usual for those conditions to be met in relation to other, similar, third-party funding arrangements.
    1. The decision in PACCAR Inc may significantly alter the landscape for litigation funding. I did not however find it necessary to obtain supplementary submissions from counsel on the decision as it seems to me that it has no relevance to this appeal. The kind of agreement that Level made with the wife was for a litigation loan, to be paid back with interest, as opposed to an agreement for funding in exchange for a percentage of any award at the conclusion of the proceedings which form of litigation funding would have been prohibited by s58A CLSA 1990.
    1. Against that legal backdrop, Mr Todd, before Roberts J and again before this Court, was robust in asserting that Level should not be afforded preferential treatment by virtue of being a litigation funder over and above that which would be given to any other third-party creditor. Level, he said, had simply made a poor commercial decision by lending the wife the money to fund the litigation and they must now pay the commercial penalty for that decision.
    1. Mr Southgate submits that litigation lenders can only ever lend on an unsecured basis with the consequence that there is potentially a ‘generous field’ for borrowers to engineer their finances at the point of divorce in order to cut out their lenders. That risk if not recognised would, he says, make the business model unviable so that the lenders would have to increase their rates to be more in line with commercial funding rates or simply exit the market. Roberts J, he submits, was right to say that litigation lending would break down as a concept if lenders thought that the court could or would sanction outcomes where the litigation loan was left unpaid. The result would be many more unfunded litigants and many more applications under s22ZA MCA 1973 clogging up the courts.
    1. Mr Southgate pointed to the well-established concept of the solicitor’s lien over the fruits of litigation as being the product of similar public policy considerations which allow a solicitor to intervene in a claim if collusion is afoot to defeat their lien. The availability of such a lien, Lord Briggs said in Gavin Edmondson Solicitors Ltd v Haven Insurance Co Ltd [2018] UKSC 21[2018] 1 WLR 2052 at [1], is because it promotes access to justice by enabling solicitors to offer services to clients without the funds to pay upfront.
    1. The judge at [39] of the first judgment adopted in full Roberts J’s analysis in relation to what she held to be the different policy considerations which apply to a litigation lender from that of a third party unsecured external creditor.
    1. In LS v PS, Roberts J said at [74]:
“…In its quest to ensure equality of arms and a level playing field, the court has always been astute to ensure that both parties should have access to resources from which they can meet legal fees.”
    1. Roberts J went on to refer to a number of cases where judges in the Family Division have ‘recognised and endorsed’ the valuable function which litigation lenders such as Level can provide and went on at [75]:
“.…The availability of this form of finance is now recognised specifically by the court in the context of the provisions of s.22ZA of the 1973 Act . For the purposes of any application made to a court for a legal services provision order against the other party, a litigant generally has to show that he or she has been refused lending by “two commercial lenders of repute”: see Rubin v Rubin [2014] 2 FLR 1018 at para 13(vi) per Mostyn J. In this context Mr Southgate QC makes the obvious point that litigation lending and its interrelationship with s.22ZA would break down if applicants and lenders perceived a real risk that a court could, or would, sanction an outcome which left an applicant without any resources to repay the loan at the end of the litigation.”
    1. In the context of the present case Roberts J said:
“77. [Level’s] status in this litigation derives from the fact that the wife entered into a direct contractual arrangement with it in order to enable her to continue to participate in complex and highly contentious litigation where there was every prospect of an appeal, a rehearing of the financial remedy proceedings, or both….
78. In my judgment, on the basis of the facts in this particular case, [Level] was entitled to seek, and secure, party status as an intervener in the financial remedy proceedings when it became aware of the steps which had been taken to conclude a settlement which, on its face at least, had the appearance of defeating its ability to recover its debt, in whole or in part, from the wife….”
    1. Mr Todd made the submission that the same policy considerations apply to a litigation lender as to an ‘ordinary’ third party creditor. I disagree. For the reasons set out above, commercial litigation lenders are not in the same position as other creditors.
    1. I do however note that, in certain unusual circumstances, third party debtors or alleged debtors have properly been joined as parties to a financial remedy application in order to be heard as to whether a consent order should be made.
    1. In Bogolyubova v Bogolyubov [2023] EWCA Civ 547 Bogolyubova‘) at [13] a bank (PrivatBank) (‘the bank’) which alleged that the husband had executed a substantial fraud against it was allowed by consent to intervene in financial remedy proceedings for the purposes of making submissions as to why there should be an adjournment of an application made by the husband and wife for a consent order to be approved by the court. The order, if made, would have potentially reduced the funds available to meet the bank’s claim if established. Of note is the fact that the bank was discharged as a party to the financial remedy proceedings once the case management decision in respect of the approval of the order had been made.
    1. Whilst in Bogolyubova the court was unable to determine the net assets without the fraud claims having been determined, what was at the heart of that case was the suggestion that the purpose of the proposed consent order was to enable the transfer of a substantial sum into the hands of the wife and out of the reach of any enforcement proceedings that the bank may have taken in due course (see [20]).
    1. I also accept that there will be occasions when the needs of (usually) a wife will mean that provision is made for her at the expense of a creditor; see for example HM Customs and Excise v MCA & Anor, A v A [2002] EWCA Civ 1039[2003] 1 FLR 164, where the wife’s needs were met at the expense of satisfying an outstanding criminal compensation order which had been made against the husband.
    1. In my judgment, contrary to the submission of Mr Todd and for the reasons given by Roberts J and adopted by the judge, somewhat different considerations apply where the creditor is the commercial provider of a litigation loan. The policy interest that underpins the overall scheme of litigation funding is that articulated by Lord Phillips MR in Gulf Azov Shipping Co Ltd v Idisi [2004] EWCA Civ 292 at [54]: the desirability of third parties being available to provide assistance to ensure that those in litigation have legal representation. To repeat what Tomlinson LJ said, ‘Litigation funding is an accepted and judicially sanctioned activity perceived to be in the public interest’. In the context of matrimonial proceedings, such funding enables the financially disadvantaged spouse to secure legal representation in order to pursue an application and thereby to seek such orders as she is entitled in order to meet her needs and those of any children of the family.
    1. Parliament legislated within s22ZA MCA 1973 that a litigant in matrimonial proceedings without the financial means to litigate must, before they may seek an order that their spouse cover the costs of litigation, first demonstrate that they are not reasonably able to secure a loan. In my view, those who provide such loans are entitled to expect some measure of protection from the improper manipulation of the outcome of the proceedings by the parties in order to avoid repayment of the loan. It should be remembered that there may well be little or no security reasonably available; in this case for example there was nothing: even the matrimonial home is held in the husband’s name. Level, in common with most lenders, therefore depended on the borrowing party receiving a fair and appropriate award at the conclusion of the proceedings which award properly takes into account that party’s liability in respect of their litigation loan.
    1. It will be very rare for it to be appropriate for a lender to have party status in relation to any aspect of financial remedy proceedings. They will need to satisfy the provisions of FPR r. 9.26B in order to achieve party status and their interest will ordinarily be apparent and taken into account without their intervention. Where however, as here, the lender wishes to intervene in circumstances where the debt has been incurred exclusively in order to enable the recipient to litigate and the lender has become aware of steps which they believe to have been taken by the parties to conclude a settlement which has the appearance of defeating its ability to recover all or part of its debt, the lender should be entitled to be heard in whatever form is felt to be appropriate by the court. This is because as Thorpe LJ put it in Hill v Haines, there is evidence of ‘collusion between the spouses designed to adversely affect the creditors’.
    1. Such intervention would usually be achieved by limited participation at the stage when the court considers whether to approve a consent order. Such limited intervention would avoid the consequence of full disclosure to the lender, or the ability for them to file questionnaires and to cross-examine the parties or to make submissions as to the appropriate settlement for the wife, which figure may be substantially over that which is owed to the lender or be in a form which would otherwise be inimitable to the wife’s wider interests. As Holman J said, the lender’s interest is limited to such sum as would satisfy its contractual debt. Where the issue arises other than through a proposed consent order, the wide case management powers of a judge are again likely to allow for limited participation by a lender, for example by way of a preliminary finding of fact hearing. I find it difficult to envisage circumstances where the full participation of a lender in financial remedy proceedings would be justifiable, but I would not go so far as to say that the evidence of collusion, and the procedural circumstances in any particular case could never make it appropriate.
    1. Pulling together the various threads, the appeal is allowed to the extent only that the judge was in error in (i) directing there to be a new full financial remedy hearing (with Level participating as a party), and (ii) transferring the civil proceedings to the Family Court. The judge was otherwise entirely correct in his approach to this difficult and unusual case and accordingly the appeal is otherwise dismissed. It follows that Level remain a party for the purposes of the outstanding application by the husband and wife for a consent order to be made in the terms agreed between them at the FDR.
  1. The case will be remitted to Peel J, the lead judge for financial remedy cases, in order for him to give directions for an inter partes hearing of the application by the husband and wife for the making of a consent order under s33A MCA 1973.