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Litigation lender appropriately joined as party to financial remedy proceedings - Simon v Simon (Integro Funding Ltd ("Level") intervening [2022] EWFC 29

Posted on 31 August 2022

The Intervener (L) was the wife's litigation lender. The parties had been through protracted financial remedy proceedings, including a successful appeal & were on their second set of substantive proceedings. The wife had obtained 3 litigation loans from L, with the usual terms regarding keeping L informed and repayment to L.

At a private financial dispute resolution (FDR) hearing, the husband and wife reached an agreement to the effect that the husband would provide the wife with accommodation for her lifetime through a trust that he had access to. The wife's legal team had come off the record part way through the FDR.

Upon discovering the agreement that had been reached, L applied to be joined to the proceedings in order to object to the agreement being made into an order. In the meantime, the husband's legal team wrote to the Judge overseeing the proceedings, asking him to approve the consent order. Neither the husband's team nor the wife informed the Judge of L's application or objection to the order being made. The order was approved. Unsurprisingly, L, now a party, applied for it to be set aside, on the basis that the order amounted to an act of bankruptcy and a statutory fraud within the meaning of s.423 of the Insolvency Act.

The return date of L's application to be joined came before Nicholas Cusworth QC, who had made the consent order. By the time of the hearing, it had been conceded that the consent order should be set aside. However, the husband continued to dispute that L should be joined as a party.

The Judge noted that the debt in question was incurred by the wife to meet the cost of the financial remedy proceedings and the concurrent Children Act proceedings. L was not in the position of any other unsecured lender and would clearly be directly affected by the prospective final order, whether or not an order would in fact be made which enables L to enforce the debt owed by the wife, or any part of it. It was entirely appropriate and desirable that L should remain a party so that the connected issues between L and the wife, and the wife and husband could be fairly resolved.

Barbara Reeves says: This case highlights the ability of parties to negotiate a financial settlement that adversely impacts on the ability of a lender to recover their loan, and, where negotiation takes place at a court-led or private FDR, to do so without the lender having access to the negotiations.

This is a cause for concern, because while the borrowing remains the personal responsibility of the borrower, lenders also should be protected for several reasons. First, litigation funding in family litigation has been endorsed by the family justice system as a resource to help maintain 'equality of arms' in legal representation for the more vulnerable party, and secondly, without the continued support of the family justice system, lenders may withdraw this lending if no longer commercially attractive, thereby causing further prejudice to the more financially weaker party, often wives, with no easy recourse to litigation funding.

Though often a costly means of funding litigation, until the more vulnerable partner has access to the same resources as the more financially dominant partner in financial proceedings on divorce, then litigation funding is a useful tool and frequently a much-needed resource if a fair financial settlement is to be achieved. It therefore seems appropriate that, although third party creditors are not usually party to financial remedy proceedings, in this case the litigation lender has been permitted to intervene in the proceedings.

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