In Defence of Legal Fee Loans: The Economics of Access to Justice

Introduction

The recent High Court judgment of Peel J in Simon v Level [2025] EWFC 89 has renewed focus on the role of legal fee lending in family proceedings. This coincides with significant judicial commentary about funding arrangements, including notable judgments in DSD v MJW [2025] EWFC 119 (B) (DDJ Hodson) and LI v FT [2024] EWFC 342 (B) (DDJ Harrop), and perhaps most notably Sir Nicholas Francis’s observations in his interview in the Financial Remedies Journal by Nicholas Allen KC and HHJ Edward Hess, published 18 March 2025, regarding current practices. While others will write about the legal implications of the Simon case going forward; the purpose of this article is to consider the economics of the ‘problem’. While both authors are committed to advancing family law, one declares a commercial interest as founder and CEO of Level; the other has had no involvement in the Simon litigation above and need declare nothing more than being a fellow member of the same collaborative law pod – ‘Creative Solutions’. This article therefore examines the comparative economics and practical realities of different funding mechanisms in light of the above and other judicial observations.

Interim funding & legal fee loan concerns

In Sir Nicholas Francis’s FRJ interview referenced above, he highlighted important considerations about access to funding in family proceedings, specifically in relation to interim maintenance and legal fees provision. He observes:

‘One of the things that I feel very strongly about is the unfair and illogical situation we now have in relation to interim maintenance or maintenance pending suit and legal fees provision. How much court time would be freed up if we didn’t have all these endless arguments over interim maintenance and funding of costs? I think we should have the ability to make interim lump sum orders. So often I’ve had cases where the husband has control of marital assets which are relatively liquid, but he forces the wife, and I don’t want to be stereotypical but it often is that way, to go and borrow money at extraordinarily expensive rates, arrangement fees, and very high interest rates, presently around 24%. If you could make an interim lump sum order, why can’t you just say to an applicant in a big money case in a long marriage, ‘Well, here’s £100,000 on account, pay your own fees’. I think it is incredibly patronising (and often stressful) to say to somebody that they’ve got to borrow the money and keep an account of everything they’ve spent, in a case where you’re likely to get equality of outcome. In fact, what I’ve done in those cases when they’ve been in front of me is I’ve made it very clear that if the husband (I’ll just stick with that assumption for a minute) makes the wife borrow money at expensive rates when he has liquid resources that could be used, I will treat all of those costs that she’s incurred in borrowing that money as liabilities to come out of his share of the assets. And anybody who’s giving these judgments saying, ‘Well, they haven’t satisfied the conditions’, I’m afraid that as soon as they see me and I tell them, ‘Well, I’ll make them pay the cost of the borrowing if they don’t sort it out’, then they sort it out. That’s obviously only in the bigger money cases, and I appreciate that might not be relevant in many of the smaller cases in family courts around the country, but I’d like to see that change. There are, I fear, many cases where coercive spouses continue the coercion and the bullying by the control of money post-separation. I detest the idea that a wife must prove that she can’t borrow before the husband will be ordered to provide her with litigation funding.’

Court-based interim funding applications

As Sir Nicholas Francis rightly observes, traditional court-based funding (whether MCA s 22ZA or under the parallel Children Act approach) can create significant inefficiencies – recent judgments powerfully illustrate this. In DSD v MJW [2025] EWFC 119 (B), Deputy District Judge Hodson encountered legal costs of approximately £13,000 pursuing maintenance pending suit worth a total of £1,500-£2,000 over 3–4 months. With £700,000 from a property sale sitting in the client account, the judge observed that the LSPO costs were ‘almost ten times what would have been the recovery’ and concluded the application was ‘thoroughly cost disproportionate’. The judgment went on to say:

‘this family court will not entertain such cost disproportionate applications and thoroughly criticises this approach. It has done only ill for the reputation of the family courts and family lawyers.’

Similarly, in LI v FT [2024] EWFC 342 (B), a holiday dispute generated £39,000 in legal fees, prompting Deputy District Judge Harrop to observe that costs ‘could have paid for the disputed holiday nearly twice over’. These cases exemplify ‘legal fee expenditure blossoming on contested interim issues in a way that is often quantitatively disproportionate to the amounts in dispute’ as Joe Rainer noted in ‘Costs’, published 13 March 2024 in the Financial Remedies Journal.

Comparative economics

Sir Nicholas Francis’s characterisation (above) of legal fee loans as ‘extraordinarily expensive’ warrants examination against the costs to reach the same point through interim costs litigation.

Using figures from DSD v MJW, a legal fee loan of £1,500–£2,000 at 24% interest (the top end of market rates) would generate £360–£480 in interest over 12 months, as compared with the legal costs of £13,000 which, when viewed as an annualised cost percentage for comparison purposes, would represent an effective ‘APR’ of 650%–867%. In LI v FT the legal fees of £39,000 would equate to an effective ‘APR’ of c. 200%. While these are of course extreme cases, it is nevertheless a stark comparison and cases like this are becoming more frequent.

Cost analysis on larger interim disputes

It is clear that proportionality is a particular issue when the amounts in dispute are smaller as clearly it is an impossible ask for lawyers to make their legal costs directly relative to the quantum of the claim (unlike interest on a legal fee loan, which is a percentage of the amount) and so let us examine Sir Nicholas Francis’s £100,000 ‘interim lump sum order’ as a more proportionate example.

The court application process: An interim application such as LSPO/ MPS applications (or a ‘costs lump sum order’) typically require substantial work including correspondence, advice, hearing preparation, instructions to counsel, brief fees/refreshers, the actual hearing, followed by agreeing and implementing the order (not to mention possible enforcement/appeals). This amounts to dozens of hours of solicitor and counsel time on each side, with practitioners’ hourly rates typically ranging from £200-£700 per hour – all before any substantive proceedings have been addressed.

Legal fee loans can also address interim living expenses, offering an alternative to maintenance pending suit (MPS) applications.

The legal fee loan alternative:

• Legal fees: £100,000 at 24%, drawn in quarterly tranches = c. £15,000 interest over 12 months + 1 week setup
• Living expenses (in place of an MPS): £36,000 at 24%, drawn down at £3,000 drawn per month for 12 months = £4,680 interest + 1 week setup

The court cost reality: for the LSPO component to be cheaper than a legal fee loan, each side would need to keep their costs below £6,250 + VAT. For a contested case of this sort of size and accompanying complexity, that figure is unlikely. Indeed, based on anecdotal evidence from practitioners, London firms typically see LSPO applications costing £25,000 (inc VAT) for each side, i.e. £50,000 to the matrimonial pot, equating to an effective ‘APR’ of 50% on £100,000.

A starker comparison is a standalone MPS hearing, which can generate similar legal costs to an LSPO. For the MPS hearing to be cheaper than a living expenses loan, the legal costs incurred would need to be less than £1,950 + VAT on each side.

And for a combined LSPO & MPS hearing to be cheaper than a combined legal fee and living expense loan, each side would need to spend less than £8,200 + VAT – per the above, this would be very difficult to achieve.

Of course, one can argue about the legal cost involved, but the point of principle is likely to be unarguable: the simple financial cost of the borrowing is likely to be less than the legal costs involved in an application. Not to mention the extra non-legal costs involved in a court application: stress / distraction / delays / litigation risk, etc.

Beyond legal costs & interest rates: addressing Sir Nicholas’s concerns

Granted Sir Nicholas Francis’s solution of interim lump sums may be drawn in reality from higher value cases where liquidity is either not a problem or less of one, nevertheless his observation that requiring loan applications is ‘stressful and patronising’ also merits consideration alongside the proposed alternatives. Court applications involve weeks or months of contentious correspondence, extensive financial disclosure, contested hearings, followed by weeks of waiting for often-unpredictable outcomes and then may be subject to potential enforcement and appeal proceedings. Throughout this often-lengthy process, applicants may lack adequate legal representation and/or money to live.

Loan applications, by contrast, involve a straightforward application process and a decision within days. If the loan is granted, this may circumvent the entire process outlined above with funds available immediately.

The issue and cost of liquidity

Even in high value cases, matrimonial assets tend to be illiquid, at least in the immediate term – family homes, businesses, pensions, etc. Interim lump sum orders would risk or even necessitate forced sales under time pressure. Leaving to one side for a moment the hoary question of an interim power to order sale WS v HS [2018] 2 FLR 528, a forced sale on any asset typically results in a discount: for example, a 15% discount on a £1.5m property would cost the matrimonial pot £225,000 or say a 10–20% discount on a £2m business would cost the matrimonial pot £200,000-£400,000. Clearly, this would exceed typical total loan interest costs by many multiples.

Extended loan terms – a real risk

Extended proceedings present the primary risk for borrowers. If cases extend significantly beyond the standard 12-month term, interest costs accumulate accordingly. For example, a fully drawn £100,000 loan at 24% would cost an additional £24,000 if repayment was delayed by another twelve months, bringing total interest to c. £39,000 over 24 months, i.e. equivalent to each side spending £16,250 + VAT on interim funding issues.

However, using Level’s loan book data, over 90% of loans are repaid by month 24 and even at this extended duration, total costs remain comparable with court application expenses.

More significant concerns arise with unusually prolonged proceedings. The Daily Telegraph recently featured two Novitas borrowers: one who borrowed £150,000 for legal costs, with the loan growing to £300,000 after c. 5.5 years, and another who borrowed £600,000 to finance their legal costs, with the loan reaching £700,000 after 10 years. While such cases are rare and likely involve exceptional circumstances/conduct, they highlight the costly impact of extended repayment periods.

Breaking cycles of control

Sir Nicholas Francis correctly identifies the core problem above when he says: ‘There are, I fear, many cases where coercive spouses continue the coercion and the bullying by the control of money post-separation.’ The late Mrs Justice Roberts also articulated this dynamic in LS v PS [2021] EWFC 108 at [74]: when she said:

‘courts are frequently confronted with situations where one party has direct access to funds ... in circumstances where the other party’s access to such funds may be limited, if they exist at all.’

Practitioners frequently report that court-based interim funding applications may become platforms for extended coercive control. Hostile spouses can weaponise these processes through deliberate non-compliance with orders, delay tactics, strategic appeals and forced enforcement proceedings – each creating additional pressure while at the same time, withholding essential financial support for representation and/or living costs. This can create prolonged uncertainty that depletes both matrimonial resources and the resolve of the economically weaker party. Such tactics seriously impact vulnerable clients who have already endured years of financial control or domestic abuse as the court process itself can become another mechanism for maintaining control and perpetuating harm. This dynamic was recently highlighted in the landmark family court ruling involving a tech billionaire, who used ‘scare tactics’ to pressure his wife into accepting his financial demands, with the court ruling that his ‘persistent controlling behaviour had eroded her free will’. Mr Justice Cobb awarded the wife £230 million – the third largest settlement in English legal history.

Legal fee loans are a powerful way to break these controlling dynamics significantly more quickly and effectively than court-based alternatives. Rather than subjecting vulnerable parties to contested proceedings over several months where they must justify their need for support/representation, loans provide immediate financial independence without requiring the financially stronger party’s cooperation or consent.

Many practitioners report that independently funded parties conclude proceedings more quickly and with fewer hearings and even less acrimony than those dependent on contested court orders for representation/living costs.

The established legal framework

The courts have long recognised the importance of third-party funding for access to justice. In Gulf Azov Shipping Co Ltd v Idisi [2004] EWCA Civ 292, Lord Phillips MR stated at [54]:

‘Public policy now recognises that it is desirable, in order to facilitate access to justice, that third parties should provide assistance designed to ensure that those who are involved in litigation have the benefit of legal representation.’

In LS v PS [2021] EWFC 108 at [74] and [75], the Honourable Mrs Justice Roberts observed that ‘Judges in the Family Division have often recognised and endorsed the valuable function which litigation funders such as Level can provide in appropriate circumstances’ and that ‘the principle is enshrined that fairness and justice require that both parties have access to litigation funding’.

The ‘loan-first principle’ established in Rubin v Rubin [2014] EWHC 611 (Fam), and given statutory frame in MCA s 22ZA, already requires parties to explore private funding before seeking court orders. Mr Justice Mostyn established at [13(iv)] that ‘the court cannot make an order unless it is satisfied that without the payment the applicant would not reasonably be able to obtain appropriate legal services for the proceedings’ and that applicants must demonstrate they cannot reasonably secure litigation loans before the court will grant an LSPO. Indeed, he noted at [13(vi)] that ‘evidence of refusals by two commercial lenders of repute will normally dispose of any issue under s22ZA(4)(a) whether a litigation loan is or is not available’.

The existing legal framework also addresses Sir Nicholas Francis’s concerns about fairness. Courts regularly use their ability to order financially stronger spouses to bear loan interest costs where they unreasonably refuse funding from available assets. This creates appropriate incentives while protecting against exploitation – precisely the dynamic Sir Nicholas advocates through his proposed interim lump sum orders, yet likely achieved more efficiently in terms of cost, court time, delay and stress while removing the opportunity for continued financial control.

All legal fee lenders are authorised and regulated by the FCA under the Consumer Credit Act – a heavily customer-focused regulatory framework with extremely strict obligations for lenders. Most recently, all firms have undergone rigorous Consumer Duty assessments, requiring them to demonstrate they deliver genuine value to clients relative to the cost of borrowing.

FCA regulations also mandate strict affordability assessments. In matrimonial lending, these focus on proportionality against the anticipated settlement: loans can only be approved where settlements are expected to exceed the loan value by 3–4 times. Real-world data from Level’s loan book shows that the average repaid loan (across thousands of loans over 8 years) represents approximately 7% of the final settlement, demonstrating clear proportionality in the vast majority of cases.

Systemic effects and judicial resources

Sir Nicholas Francis asks: ‘How much court time would be freed up if we didn’t have all these endless arguments over interim maintenance and funding of costs?’ This question gains particular significance when viewed alongside cases like DSD v MJW and LI v FT above, where disproportionate interim disputes costing tens of thousands in legal fees also siphon public resources from the broader family justice system, creating delays across the entire docket and affecting families who genuinely require timely judicial intervention.

Mr Justice Moylan (as he then was) reinforced this perspective in BD v FD [2014] EWHC 4443 (Fam), at [33]–[34] noting that court intervention should be pursued:

‘only when, on a broad assessment, the court’s intervention is manifestly required. Otherwise, parties will be encouraged to engage in what can often be an expensive exercise.’

Legal fee loans address this by enabling immediate representation without court intervention, freeing judicial resources for substantive matters while often reducing overall costs to matrimonial assets.

Practical applications

The choice between funding mechanisms should, of course, consider case-specific factors:

Traditional court applications are more appropriate where:

• legal aid eligibility exists;
• the financially stronger party is (i) unlikely to contest applications and (ii) likely to comply with orders;
• sufficient cash is available (or liquid assets may be sold without a discount);
• the case may take longer than c. 30 months;
• the majority of the assets sit outside the UK.

Legal fee loans may be particularly suitable where:

• the cost of a court application risks becoming disproportionate to the claim;
• immediate financial independence from a controlling spouse is required;
• avoiding additional litigation is preferred;
• an immediate funding solution is required;
• the cost of delay exceeds interest charges;
• where asset preservation (by avoiding having to liquidate assets) is crucial.

Conclusion

Sir Nicholas Francis raises important concerns about fairness and efficiency in family proceedings, particularly regarding financial control dynamics affecting vulnerable parties.

As DDJ Hodson’s judgment in DSD v MJW powerfully illustrates, traditional court applications may become disproportionately expensive compared to the relief sought, with costs ‘almost ten times’ the amount in dispute. His call for ‘creative solutions in financial remedy work’ and observation that such disproportionate applications have ‘done only ill for the reputation of the family courts and family lawyers’ provides a compelling judicial endorsement for considering alternatives like legal fee loans. The stark mathematics of the DSD v MJW case – where £13,000 was spent and which could have been obtained via a loan for interest of just £360–£480 – demonstrates how legal fee loans can sometimes represent the most economically rational choice.

And so, we say we need to reconsider the characterisation of legal fee loans as ‘extraordinarily expensive’ and ‘stressful’ when viewed against court alternatives. The evidence suggests that properly regulated legal fee loans, operating within established frameworks that include interest cost accountability, may provide more efficient, cost-effective, and less stressful access to representation than the procedurally complex alternatives they help to avoid.

Legal fee loans do not represent a perfect solution to all funding challenges in family proceedings – extended proceedings can generate substantial costs, and careful consideration of case-specific factors remains essential. However, legal fee lending may deliver the financial independence and procedural efficiency that Sir Nicholas Francis’s proposed reforms ultimately seek to achieve, and typically at a lower cost both financial and otherwise.

The family justice system benefits from continued dialogue about access to justice, fair funding, and efficient procedures and this article aims to contribute to that dialogue by examining how different mechanisms perform in practice, recognising that our shared objective remains ensuring that all parties can participate meaningfully in proceedings that will shape their family’s future.

References

• BD v FD [2014] EWHC 4443 (Fam)
• DSD v MJW [2025] EWFC 119 (B)
• Gulf Azov Shipping Co Ltd v Idisi [2004] EWCA Civ 292
• LI v FT [2024] EWFC 342 (B)
• Rubin v Rubin [2014] EWHC 611 (Fam)
• Simon v Level [2025] EWFC 89
• WS v HS [2018] 2 FLR 528
• Joe Rainer, ‘Costs’ (2024) Financial Remedies Journal, 13 March 2024
• Sir Nicholas Francis, Financial Remedies Journal interview, 18 March 2025