Today’s Family Lawyer talk to Nigel Shepherd, twice former chair of Resolution, consultant and financial arbitrator at national law firm Mills & Reeve and now an adviser in the family law litigation funding sector where he is currently working with Ampla Finance.
Is it more difficult to get litigation funding in the current climate?
The short answer is probably; as a result of what is happening in the world at the moment, there is a tightening of belts amongst some litigation funders whose backers have been squeezed by the financial impact of Covid-19.
There are a growing number of providers, and while some have taken a more risk averse attitude to lending, others are well placed to pick up on these opportunities.
Much of it is where the source of funds comes from. If this is a major bank, their lending criteria may be more cautious whereas we’re seeing funders with private equity backing, like Ampla Finance, continue to lend.
The other factor is differing approaches to the assessment of cases. Some litigation funders come at lending decisions from a more family law perspective and take a proactive role in the case and strategy. Others approach applications from a primarily commercial lending angle and, once the route to repayment is clear and loan to value criteria are met, will then take a backseat and allow the solicitors to get on with running their case.
What are your thoughts on how the funding market is shaping up for 2021?
To a certain extent the funding marketplace has been going through a “shake-up” over the past couple of years with a number of new entrants providing greater choice.
These newer providers, like Ampla Finance, have provided a greater focus on what solicitor partners want and need from their funders. Ultimately the solicitor wants as little involvement in getting the loan set up as possible, freeing them up to do the family law work, not admin.
Like many other markets, the sector has benefited from investment in technology, making the process as straight forward as possible. We now see portals for applications and uploading documents, panels for independent legal advice and quick and streamlined payment of invoices.
But it’s important not to forget the human input required and this is where the balance between technology and people is so important. The funders that get that balance right will be most successful going forward.
There is some consensus that divorce rates are about to rocket as a result of people spending prolonged time together… and family lawyers are already busy.
Let’s put the headlines into context. There is statistical evidence that the number of marriages is dropping with more and more people choosing to live together and that of course has a longer term impact on the number of divorces.
Although the most recent published annual figures for 2019 show an increase in both the number of divorces and the divorce rate (the percentage of marriages ending in divorce) this may have been a result of previous backlogs in the system. In contrast, the quarterly figures for April to June 2020 showed a very sharp decrease, but this is probably the result of lockdown. The overall trend over recent years has been a reducing divorce rate and certainly one that is considerably lower than it used to be.
Although some lenders, like Ampla Finance, will provide loans for proceedings arising from cohabitation rather than marriage breakdown, when it comes to litigation funding it is the number of financial applications within divorce proceedings that is most relevant. These were 31% down between April and June, again almost certainly mainly due to the initial closure of courts, adjournment of hearings and people learning to adapt to the new remote ways of working. As the courts are working through the backlog and the judicial system becomes better accustomed to the new normal, it will be interesting to see what June to September’s stats turn out to be.
There may be a spike as we come out of the pandemic, but in this context I don’t see it being huge.
Sadly, the big concern in family law currently is the rise in domestic abuse cases that we’ve seen during the pandemic. The courts have rightly prioritised these cases and indeed cases involving children ahead of the financial ones.
What, in your opinion, has the impact of remote court hearings been?
I think the big debate is around access to justice and how remote hearings fit into that. Clearly we’ve learnt a huge amount in recent months.
It is interesting to read the President of the Family Division, Sir Andrew McFarlane’s, “Road Ahead” report which recognises that more hearings can and will be dealt with remotely not only during the current restrictions but also when they are lifted, but equally stresses that for justice to be done face to face court hearings will remain essential. The experience of the professionals on the one hand and our clients on the other can be very different. Technology is just one part of the equation. The nuances of hearing and assessing evidence and, importantly, supporting people who are vulnerable and may not have access to technology or private space at home have to be acknowledged.
There is no doubt in my mind therefore that face to face hearings and indeed client meetings still have a critical role in the way we work.
That said, we’ve moved a long way forward in the right direction. Courts are now much better set up to deal with social distancing requirements and we are better understanding when and where remote hearings are appropriate.
The bottom line is, like with many sectors, Covid has been a catalyst for change in family law but we must not lose sight of the need to provide access to justice for all, not just those who are comfortable with the technology.
You have been a vocal advocate of dispute resolution through your time at Resolution, how do you see that developing in the future?
As we’ve said, the family justice system is under enormous pressure, some of which can be alleviated by this continued effort to steer people away from the confrontational nature of court.
We must find better ways of encouraging parties to resolve cases before they get to court; there will always be cases where mediation or collaborative practice are not the answer, but far more are suitable for resolving out of court than currently benefit from these options.
The challenge is two-fold;
- how do we get the profession to change its mindset. I think the work Resolution does continues to be vital here;
- and how do we get the public to understand and embrace these non-court dispute resolution options. Resolution is key to this as well but we also need much greater education, resources and also greater encouragement from the courts themselves if we’re to make genuine progress.
There are plans to provide courts with more teeth when it comes to promoting non court dispute resolution, which I applaud; inevitably government has a role to play but have clearly got other matters on their hands at the moment; and I think it is incumbent on the profession to continue to educate ourselves and “buy in” to all the options available.
We are seeing increased opportunities to help our clients move in that direction; and coming back to funding, some providers, like Ampla Finance, will now lend for out of court settlements, which give us as practitioners more options and will help further to facilitate a less adversarial approach.
