Litigation Loans to fund divorce

[Highlandheath]

Any views, experiences, recommendations please, or do these contribute to what Mostyn describes in JvJ as "gross leaching of costs" and solicitors charging for nothing but time?

I too cannot understand why a client would prefer to pay 18% interest:

This client did not want to pay 18% interest. This client wanted to use her savings and made that clear to the lawyers.... repeatedly, but this client's solicitors wanted this client to enter into the debt, because apparently the judge would be less likely to ignore this clients legal fees if they were secured on her home..... The judge did pay attention to the legal fees and described them and the loan, and the interest on them as "neither justified nor justifiable". The Judge also said the impact of the debt had caused significant harm and stress. The lawyers did get told off. They also got their fees..... So I don't think they really minded the Judge being cross with them. I'm the one who carried the can. As you can probably tell, this client is pretty P'd off!!! ;-D

Are you the client?

@Collaborate

I could enter into a bit of banter about our tag names...how I would like to collaborate.... ! But jokes aside...

You say:

'I would be really interested to find out what yours and Highlandheath’s interest is in this subject. I have nothing to hide on this subject. I’d just rather spend my spare time helping someone who has a problem rather than satisfying someone’s curiosity, and the level of detail gone in to on this thread is one that makes me think of all the other things I could be doing with my time.'

In reply, first of all I have not asked you to spend your time answering any questions on here.. I believe that is entirely your choice isn't it? I imagine you are on here voluntarily as a lawyer...?

As I understand it Highlandheath has started some threads which I got involved with and I will only answer for myself on here.

My interest is personal interest. I have personally been harmed by a litigation loan. Seriously. The harm extends beyond me, it extends to other interested parties too. The existence of the litigation loan was undeclared to me or into proceedings. My assets were charged it seems. Obligations to issue me with Notice of it was not issued.

So, I come into the category, like Highlandheath, of having a significant legal problem.

In my case the problem raised its head in 2014 and it is now 2018 and I do not have my settlement on proper legal footing. I am left with court orders which breached my human rights. I have lost assets dubiously within all this. The lawyers who administered the litigation loan are in breach of the orders they themselves obtained and got sealed without agreement.

The extraordinary events went on and on, making no sense, disregarding protocol and when the truth was revealed nearly a year after property was sanctioned for sale by using the Senior Courts Act 1981 in my place as I knew nothing was being done correctly in conveyancing, behind all the aggressive litigation hid a weapon of mass destruction - hidden so as to obtain unfair advantage. It was used to obtain control over assets and action mismarketing of them and actual loss of decision making over property.

It has made a mockery of the administration of justice. It has denied me a fair hearing.

Its existence infected the protracted proceedings which were not conducted as litigation should be ...it was conducted in absence of the facts. This all took place in court under Form E obligations and disclosure obligations.

Mine is a serious case. I trust this explains my interest in the matter.

This all led to me having a huge legal bill run up defending my absolute rights to proper process which was denied me and all because the loan construct existed and was not revealed.

The solicitor bank account was used for banking as they paid numerous parties with my money and were not acting for me.

I am curious to know about the mechanics of these loans, how lawyers administering them balance the risks and potential conflicts of interest and how ordinarily, as I hope my case is not commonplace, they are declared into court so that the judiciary are aware of them.

Your interest in an asset cannot be prejudiced by a charge granted by a third party, so I don’t understand how you think it has been.

@Collaborate

'Your interest in an asset cannot be prejudiced by a charge granted by a third party, so I don’t understand how you think it has been.'

It can be changed by it because the dynamics have changed. Out of interest hae you looked behind the loans and the construct of them?

A third party interest is profound. A couple go into ancillary relief with their assets all being well anyway, intact. To find yourself with third parties who have an invesment in the case, who are getting periodic updates on your allegedly private family case who have financially invested in your case and to whom the loan company is beholden because those investors are providing the funding to keep the lawyers bills being paid does not take away my interest but it challenges it. It attempts to compete with it and is a last to pitch up comes first.

A characteristic of the loans is that the client of the loan has to obtain control of the sale of any property on which the loan is secured.

Ok, so charges...equitable ones stay invisible right? Except you should of course be aware they exist because your assets as a joint legal owner of them is affected by them. It has to affect them. It affects the dynamics of how assets are viewed.

When you say you would prefer loans are secured loans are you saying the loan and legal fees could be allowed to be taken off the top before division of the rest for settlements?

However the loan should only be taken from the settlement of the party taking the loan...right?

You are affected by third party charges because there are risks attached to them and the dynamic changes because of them in the terms of these loans.

If you don't know there is a mechanism doing these things to your assets and impacting the behaviour of the other side there is inequality in proceedings and contempt of the process.

So this is a complex matter of conflicting duties and interests. It might solve solicitor cashflow problems but there is more to the story than that.

I had restrictions on my assets title deeds, they were jointly owned and this is where the breach of my rights came in. I did not agree to the sale as it was being carried out suspiciously.

Sorry but you lost the asset because the court exercised its powers under the MCA. The loan wasn’t the thing that did it.

I hope you get help coming to terms with what happened to you but crusading against litigation loans is tinfoil hat stuff I’m afraid.

This is a very odd thread and you seem to have a real agenda OP. Are you sure the facts you are representing are accurate? For example, none of the magic circle firms practice family law...

Fair play to Collaborate for taking time to reply. Sounds like the OP has come of worse after a Divorce and looking either for someone to blame or sympathy from Legal?

I am astonished at the replies on this thread. There is an air of aggression and defensiveness which speaks volumes.

'Sorry you lost the asset' from @Collaborate is extraordinary. I suggest that it may be more appropriate for the easily offended lawyers and arbitrators on here to look into what they are dealing with fully, responsibly and properly. Read the small print, check your facts, look at the history of this and the FCA intervention on peer to peer wholesale lending.

I did not lose an asset...I wanted it sold. But I wanted it sold right. I do not appreciate litigation loans being undeclared into court and the court action purporting to be something it was not so that a fast one can be pulled over part of my property. That is fraud.

I am not the slightest bit worried by your replies because my case will be a game changer given what is going on with it.

If you want to uphold the many duties you have to your public, the people who pay your bills, then you would be wise to listen and take in what you are hearing.

All I can say is this...disappointed.

If it helps cut to the chase, these loan vehicles can be used to exercise financial abuse. Of course it takes lots of willing folk to make it happen.

Ethics and conflicting duties and interests features here big time. Read the SRA fresh advice here:

www.sra.org.uk/sra/news/press/risk-outlook-autumn-update-2018.page

Nothing in the link you posted mentions litigation loans. You are barking up the wrong tree.

www.sra.org.uk/risk/resources/balancing-duties-litigation.page

Extract:

By showing the ways in which the risk of improper or abusive litigation tends to occur, this report discusses how individuals and firms must balance the interests of their client with their duties to the court, third parties and the wider public interest.

Solicitors owe duties to multiple parties. In some cases, acting to advance a client's interest has led solicitors to disregard their wider duties. Clear-cut cases of this kind are relatively rare, but we have seen cases of solicitors taking unfair advantage of an opponent, misleading the court or taking actions that lead to grossly disproportionate costs. When this happens, public confidence in the legal system, which underpins the rule of law, is put at risk. And individuals, many of whom might be vulnerable, could be harmed.

We also sometimes see unethical behaviour that relates not to the pursuit of the client's interest, but to the pursuit of the solicitor's interest at the expense of the client. For example, causing clients to incur unnecessary costs by not being clear about the risks of pursuing a litigation claim or by not making it clear that a solicitor is not needed for some types of claims. Again, these issues have the potential to cause serious harm to individuals and to confidence in the legal system.

Integrity and ethics in litigation
Although solicitors must advance their clients' cases in accordance with the client’s instructions and interests, they are not ‘hired guns’ whose only duty is to their client. They also owe duties to the courts, third parties and to the public interest. Breach of those duties can give rise, for example, to wasted costs orders or to findings of misconduct.

Comment by poster: some posting on here are flip sides of the same coin...having been affected by litigation loan products in ways we could not have comprehended.

I do not think I am barking up the wrong tree. I am alerting to a problem which is emerging. I was interested to know from a legal perspective how various aspects work and in so doing appear to have caused offence.

Nowhere does this mention that loans per se are the issue. The issue is whether proper advice as to merits and costs is being given.

I'm sorry that you fail to see that, but perhaps it is down to your preoccupation with how you think litigation loans have affected you.

If litigation loans enable a litigant to be properly represented, they are aware how much it is going to cost them, and they are aware of the reasonable parameters outcome range you may be the only person who sees a problem with this.

I'm with Mostyn J, "grotesque leaching of costs" and "the only commodity being charged for was time".... One of the most brilliant lawyers of his generation. Collaborate, however many times Hidden Truth, Pink Fog or me say these loans are a problem you will never acknowledge it - it doesn't fit with your narrative, and it doesn't fill your wallet. I appreciate your time though.

If you're well informed enough about the law to have a considered view on Mostyn J's merits as a jurist, why did you enter into a litigation loan when you were adamant it was not in your interests to do so?

Everyone is entitled to a fair "crack of the whip". For some where large assets are involved a Loan may be the only way. If they are told upfront what the costs will be they need to decide for themselves whether or not the return will justify the outlay.

The Case that Mostyn commented on where Legal costs where 920K out of assets 2.9 Million hopefully was an extreme example. More fool the partners for allowing it to escalate and not settle amicably I would say. However, not possible to know the mindset of the two partners. Did they make it a contest? Did one say to the other "If I am going down so are you"

I work in Arbitration and Dispute resolution and very often clients cherry pick what information they provide. I guess family solicitors and barristers face the same?

In answer to @RCohle on what I aspire to becoming a constructive and not destructive debate on here....

I would suggest those of us who are now able to quote from reported cases and talk the lingo is down to sheer hard graft of looking into what we have become either part knowingly or unknowingly wrapped up in.

The fact is this. It may take two to make a war. It takes 3 or more to make a mess. Litigation is a reserved activity. It has strict rules of conduct. Litigation loans say what they do on the tin...litigation...yet does the common man or woman know what that is even if they were advised one existed? It is one of those legal words that they may never have uttered from their lips in their lives. It is a word that needs to be explained by a competent solicitor.

I have directed people on here to consider what the SRA are considering long and hard it seems and that is the duty of solicitors of which there are many. The SRA say you must not conduct knowingly unwinnable cases for example.

So if we consider a divorcing couple with a long history of domestic abuse being the reason for the eventual failure of the marriage together with other unreasonable behaviours and adultery. The whole shebang. In abuse cases there is almost always a perpetrator. You will know your domestic abuse by now with all the legislation and offences surrounding it and Sir James Munby leaving it as a parting task to the judicial college to get its judges up to speed.

So, there are high emotions in abundance. You are the advising solicitor or arbitrator. Is it wise to take this couple where there is imbalance already economically as in very many cases, and give the main earner and the person against whom abuse in several forms is cited in the divorce petition....do we give this person a litigation loan?

What is the duty here...this is what I am asking you to think about a bit. There are a fair few assets to go at here...how do you balance your moral duty to the fractured family who have enough problems as it is without more coming along...

What if the richer of the 2 spouses wants to take a super aggressive stance because they are humiliated to have been left...they have lost control so sure as hell are not going to lose control of the money...

I set a scene here which all professionals have a duty to consider. I come back to the SRA news release...where do your duties lie?

So whilst there is some truth in that everyone is due 'a fair crack of the whip' even if both of these imbalanced parties (from a monetary perspective here) could be put on a totally even footing and both had, let's say, 100k to play with...I advance that your duties to the family and the case factors would still come into play to consider the risks here, and duties to the court and to the process to preserve assets for the family and as such there are obligations on solicitors to try to help this troubled pair, not to rub salt into the wound. They need to be helped to strike a deal.

You can say no, I cannot support you to prolong this fight or use tactics with bespke loans or trusts or other schemes to get one over on the ex, even if @MissedTheBoatAgain is right that one is going to take the other one down come what may.

So, if I can ask a practical question of those of you who use third party funding as I know it can be used to fund arbitration too, how do you declare this into court and the parties especially joint owners of assets affected by its terms?

If I look at reported cases they crop up where these loans are named and therefore are being declared it seems and are able to be considered by Judges and form discussion points. That did not happen in my case but what is the proper process please...?

From advising they are available, from dealing with the applications and onward to the other side and to court. What if at any point it becomes clear in proceedings that nobody is discussing this loan...what is your duty then?

What if you suspected one on the other side and you had not been advised of it...how do you then behave? After all this is litigation which has rules....

You seem to be suggesting that the lawyer should work for free. I'm sure that's not what you intend. Is it?

The loan will always be declared as a liability in financial remedy proceedings. To miss it out in a schedule of assets would be unthinkable.

A loan helps redress a power imbalance by allowing a party to be represented when no other source of funding would be available. It would help of course if the law were changed to mean that an application for a legal services order could be made without having to apply for a loan first, and the court's powers to order interim sale of assets could be beefed up (the court has a power but it is limited). But the powers that be have determined that an application for a legal services order is the last resort.

@Collaborate

Please may we set aside any idea that solicitors should work for free.

This is not what is proposed at all nor under discussion. What is under discussion is how these loans are operating.

Whether people can be unreasonably harmed by them.

It is helpful to know that a schedule of assets MUST declare it. One would have thought so...it is a debt to be factored in.

However, how common is it that proceedings are carried out - proceeded with - where no schedule of assets is agreed, where one party refuses to co-operate in creating one. Where the other side has created one...

How often does the court go ahead in your experience in absence of one being agreed?

Who is at fault then when one party to proceedings wants one, quite naturally, as it is essential to make sense of Form E and what is up for division.

Also, would a bespoke loan such as advertised and offered as a possibility by Novitas for example be able to be hidden by some NDA and the court be asked to determine a financial settlement in consideration of it and in absence of disclosure of it because of some NDA? Or the other possibility, if the Novitas operating solicitor had put some assets into trust for their client...

And in such a scenario which court would be able to effect this when in reality it is commercial litigation because these loans are handled by the commerical departments of law firms. Or their are conflicts of interest...

You can see the waters are getting very muddy and remember this is the common people we are dealing with...

Yes the legal services order situation is an odd one...I agree

What seems odd too is that where a litigation loan is used a requirement of it is that the loan holder has to get control of the sale. This is adversarial and introduces a level of tussle when the act and aim to sell property may not be at issue at all.

So false allegations can be made to justify getting control and something on the market by one party only which then requires decree absolute to be passed to allow this artificially created order giving control of sale to one side to be able to be effected.

All the meanwhile the property could have been on the market all along.

It would be a different scenario again if the loan were taken out on a property that was needed as a home for one of the parties. Where no other home was available. In such a scenario a litigation loan would be a disaster because of what the loan itself requires in the management of the case and the powers it affords itself.

And so back to my question...how does a solicitor handling a litigation loan application for a client who has the loan with Novitas say ensure that the data rights of the other side are upheld and how the loan is declared into court?

Plus if there is no schedue of assets cooperation...what then?

I think you misunderstand a schedule of assets. It is not the starting point for disclosure. Before hearings the parties will be ordered to prepare one. Usually it can be done by agreement. If one party refuses to cooperate the other party will do it on their own.

The parties are under a continuing obligations to update the court on a change of circumstances.

No way do commercial lenders insert NDAs in to litigation loans. Tinfoil hat stuff again I’m afraid. I’ve seen the agreements. Trust me on this one.

Or the other possibility, if the Novitas operating solicitor had put some assets into trust for their client... are you seriously suggesting that the solicitor will put assets (what assets?) in trust for a client, presumably to hide them from the court? Aside from not having anything to do with a loan, a settlor is the one who puts assets in to a trust. I presume you’re not thinking a solicitor will simply make a gift to a client, and that you mean the solicitor will draw up a trust by which the client will place their own undeclared assets in to trust? That is palpable nonsense. If it’s undeclared there is no need to place it in to trust. A liar will lie without trying to place a hidden asset in to a trust. A solicitor would get struck off for continuing to act for a client who was known to have undeclared assets. This is more tinfoil hat stuff by you.

And in such a scenario which court would be able to effect this when in reality it is commercial litigation because these loans are handled by the commerical departments of law firms. Or their are conflicts of interest... You’re making even less sense now. Effect what??? It is not commercial litigation. Commercial departments of firms have nothing to do with these loans.

You can see the waters are getting very muddy Only in your own head I’m afraid.

You need help. Whether that be legal help or some other kind of help I don’t know. You are clearly aggrieved by something. You have been unable to articulate with sufficient clarity what that is.

I’m out of here.

I’m out of here

Did well to last this long. Hahahaha

Yes it is funny. Hilarious actually.

Funny how questions posed which are not allegations cannot be answered without an offensive slight into the bargain...you reflect very badly on your professions which is a tragedy really.

I am curious to know how a massive asset, literally huge, was entirely lost, mismarketed and is unaccounted for in court proceedings.

Just thought you 'experts' might know.

I shall perhaps on your advice and go to talk to a head doctor and see if they can find the answer...

I suspect they might suggest it is troubling me and I should ask an expert...

Out of curiosity how did you think your ex was funding their legal advice? Presumably you expected it to come out of the pot of assets eventually - either directly or via loan repayment.

I did not know how. They had access to more money than me, their full income at their disposal, they had one credit card because through the marriage they refused to have credit and made me have all cards in my name.

The person who had no money and did not take finances into a court arena was me. So in this case the wealthier spouse took the litigation loan thus getting control essentially and a) did not declare it b) their solicitors did not declare it c) they took tax credits immediately away from me cutting me off further from access to money...and got themselves into serious bother with tax credits as it happens at a later date this came back to haunt them.

Again without telling me. I expect no sympathy on this thread and nor did I seek any.

So the question none of you will wish to answer is ...how often is the money taken off the top for the entire loan (before division) and how often is it taken just from the loan holder's settlement?