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Has it just got harder to obtain a litigation loan?

July 11, 2024

Financing legal representation can often be a major issue for a party involved in financial remedy proceedings in connection with a divorce settlement.

One way to do so is via a litigation lender, who will lend the party the money to pay for their representation, on the basis that they recover the loan plus interest from the settlement monies that the party receives.

But obtaining a litigation loan may have just got harder, following the latest, and perhaps last, judgment in a long-running case.

The case began back in 2016 when the wife issued her financial remedies application.

In the course of the proceedings the wife entered into an agreement with a litigation lender, under which she received a total of £630,000.

In 2021 the parties agreed a settlement whereby the wife was to receive a life interest in a residential property to be purchased for a figure of £1 million by the husband’s trust, which would thereafter own the property absolutely. The wife was to receive no free capital or income in settlement of her claim, and given that she had no capital of her own, it followed that a consequence of the agreement was that she would have no funds with which to repay any part of the loan. The agreement was subsequently incorporated into a consent order.

The litigation lender applied to have the consent order set aside. It was set aside, and the proceedings went back before the court in June this year, at a hearing conducted by Mr Justice Peel.

However, neither the wife nor the husband sought any orders from the court. In these circumstances Mr Justice Peel made no order, on the basis that the wife would withdraw her application. Thus the wife has still not received a financial settlement from which the litigation lender can recover their loan.

As Mr Justice Peel pointed out at the end of his judgment, the litigation lender does have a civil claim against the wife, which now stands at some £1.2 million including interest, but whether it will succeed in recovering that sum, or any significant part of it, must be in doubt.

Whatever the ultimate outcome, the actions of the husband and the wife in this case may well mean that in the future, litigation lenders will be more cautious about lending money for financial remedy proceedings.

You can read the full report of the latest judgment in the case here.

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