Clients sometimes do not have adequate liquid assets to fund our fees. This is especially common in divorces where the assets are tied up in the marital home or rest only in one spouse. There are a range of funding options, and you should discuss these with your client openly, but care must be taken not to advise on, recommend or arrange any particular funding product.
Divorce and litigation funding products are becoming increasingly common, and clients may ask for information about them. We may explain, in general terms, the types of funding that are available and direct clients towards independent sources of information. However, we are not authorised by the Financial Conduct Authority to advise on, arrange or recommend loans or other regulated credit products, nor do we possess the specialist expertise required to assess whether a particular product is suitable for a particular client.
You should note that, in order to get the loan, the lender may require confirmations from you regarding matters such as:
You may also need to complete parts of an application form with the client. Particular care should be taken when doing so. Any factual information provided to the lender must be accurate, complete and consistent with the information available on the file. You should not speculate or express a view beyond that which can reasonably be supported by the evidence available at the time. Where you provide facts, you are giving a warranty in the terms that the information you give is accurate and complete, so far as you know. Where you provide an opinion on the likely outcome, you are giving a warranty that what you say to the lender is the same as what you have said to your client.
To protect yourself and the firm, if the client cannot or does not wish to self-fund their fees, then you should send an email along these lines:
"You have told me that you would like to arrange third party financing to help you cover your legal costs. The Money Advice Service wrote a good article on the various options open to clients in connection with anticipated legal fees and you can find it here. It includes a section on divorce finance. If you do wish to seek divorce finance from a specialist lender, then I can confirm that we are registered with a few such lenders.
As your solicitor, I am not authorised to provide financial advice or to recommend, arrange or broker finance for you. Any decision you make must be yours, or if you need financial advice, then you will need to consult a regulated financial adviser. Whether you go down this route is a matter for you, and depends on your circumstances and attitude to risk. There are a number of lenders active in this market. If you wish to explore divorce finance, you should conduct your own enquiries and compare the products available. You should compare and contrast their differing offerings and make a careful decision if you wish to take such a loan and, if so, from which lender.
If you do decide to use divorce finance, then the lender will ask us both to enter into a series of legal documents to arrange the loan. As my firm will be a party to those documents, we are, so far that that agreement is concerned, not independent and, as a result, we cannot advise you on the terms of the loan and any associated documents, including any assignment of your claim that you may be required to provide. We suggest that you should take legal and financial advice before committing to any loan and any supporting documents. You should also carefully consider the effect that the loan, interest and associated charges may have on any financial recovery you ultimately receive. The overall cost of the borrowing may be substantial. You should also bear in mind that, if you proceed with an application, you will be authorising us to provide certain information to the lender and we may owe obligations to the lender in connection with the administration of the loan. I will charge you at my normal rate for this work.
Your application will contain a number of statements from you, these must be true, and a number of promises from you, you must keep these. Failure to do so, is a breach of the loan and may cause the lender to take legal action against you. The loan agreement also contains other onerous obligations on you. I will also be asked to complete part of the application form to tell you lender about your case. Any information you provide in support of your application must be true, accurate and complete. You must review carefully all application forms, declarations and supporting documentation before they are submitted.
Once you have selected your preferred way of financing the divorce, please let me know."
The client will in due course let you know who they have chosen. At that point you need to send them a copy of the relevant terms (see "Lenders" below) by email in terms such as this:
"I understand that you have applied for funding from [name of lender]. I attach the terms they require of this firm before they will fund your case. [I also attach the undertaking I will be required to give before they will lend to you.] Please review carefully. If you have any questions, then you should contact me and I can explain how the arrangement will work. However, as we are a party to these arrangements and may owe obligations to the lender, we are unable to advise you on the terms of the funding documentation, any assignment, charge, undertaking or other security required by the lender. If you have concerns about any of those documents, you should obtain independent legal advice before proceeding.
Once you are ready and before you borrow any funds, you must reply to this email to confirm that:
The lender has given you a lawyer's instruction letter and you have sent this to us. We will follow your instructions. You remain free to change your instructions to us at any time. However, if doing so would prevent us from complying with obligations which we have assumed to the lender, we may be required to cease acting for you and you may have obligations to the lender which are independent of your retainer with us. We are not advising you on those obligations.
Finally, I need to remind you that the lender will form its own decision as to whether to lend. I don't have any control over that. You should bear in mind that your application might be rejected.
Nothing in this email should be taken as a recommendation that you obtain finance from [lender], or at all. The decision whether to enter into any funding arrangement is entirely yours."