RUN UP COSTS OF £1.4 MILLION: EXPECT TO PAY A LARGE CHUNK OF THEM YOURSELF: “NO ONE ENTERS LITIGATION SIMPLY EXPECTING A BLANK CHEQUE”

There are interesting (and important) observations on the running up of costs in the judgment of Mr Justice Francis in WG v HG [2018] EWFC 70.  This blog does not normally follow family law cases. However the question of costs is one of general interest and importance.

“… people cannot litigate on the basis that they are bound to be reimbursed for their costs.”

THE CASE

The applicant former wife made an application for financial provision against her former husband.  During the course of this, and proceedings the wife’s costs ran up to over £900,000.

COSTS IN FAMILY CASES

The fact that the wife would have have such high costs liabilities was considered early in the judgment.

Given my description of this case as a needs case and given the near agreement as to the value of the assets and liabilities, save the one significant area of dispute about alleged over-expenditure on Project A, to which I return, it is worrying if not shocking to note that the parties between them have spent considerably more that £1 million on these financial remedy proceedings.  The wife’s financial remedy costs currently stand at £625,000 to which needs to be added litigation loan interest of £71,000 and a litigation loan arrangement fee of £9,000.  The husband’s financial remedy costs currently stand at £426,000.  If one adds together all of the parties’ costs including Children Act and Family Law Act proceedings, the parties between them have spent almost £1.4 million on legal fees.  This is the second judgment that I have written in as many weeks where the sum of the parties’ costs exceeds at least one side’s estimate of the housing need of one of the parties.  I questioned in that judgment and I question again here whether the removal of the Calderbank regime has helped to add to the costs crisis one frequently finds in this type of case.”
“… The fact that this is now being run as a needs case by the wife led her counsel Jonathan Southgate QC to make what I regard as a rather remarkable proposition, namely that the wife is entitled to a full indemnity in respect of all of her costs.  The rationale behind this is that her costs are a debt that needs to be paid and that, in a needs case, her needs must be met.  Mr Southgate agreed with me that the usual outcome in a sharing case would be each party paying his and her own respective costs.  He has sought to argue here that his client could be better off than she would have been in a sharing case because the cost is a need.  I return to the issue of costs and capital apportionment later in this judgment.”

THE JUDGE’S CONCLUSIONS AS TO COSTS: THE APPLICANT WOULD HAVE TO FIND £500,000 (AND THE APPLICANT £400,000)

  1.  I am then faced with the vexed question of what to do about the wife’s litigation loan.  Whilst I recognise that she has a significant debt in respect of the Family Law Act proceedings and the Children Act proceedings, it seems to me that I have to tread very carefully indeed here.  The Children Act proceedings were compromised by an agreement that the children split their time more or less equally between the parents.  The wife incurred very substantial costs indeed in those proceedings and the husband did not.  I imagine that for both parties, those proceedings were a nightmare but for the wife, with all the difficulties she had encountered, they must have been especially difficult.  I am sure that it would have been all the more difficult for her in the light of her horrific riding accident.
 Against that, people cannot litigate on the basis that they are bound to be reimbursed for their costs.  The wife has chosen to instruct one of the highest regarded and consequently one of the most expensive firms of solicitors in the country.  Whilst I have no doubt that the representation has, at all times, been of the highest quality, no one enters litigation simply expecting a blank cheque.  A judge, in a position as I am now in, is facing the invidious position of seeing his or her order undermined by the extent of litigation loan or costs liability.  If, here, I make no provision for the wife’s costs or litigation loan, then half of the Duxbury fund will be wiped out and she will be left with insufficient money to manage, according to my assessment.  Doing the best that I can to recognise that her costs are excessive, to recognise that she has presented an unreasonable case in financial remedy proceedings but to recognise that her Duxbury fund cannot be completely undermined and that the husband’s offer was too low, I am going to add to the lump sum, already referred to above, an additional £400,000 which is a little bit less than half of the total sum due. 
  1.  I note that in his offer letter the husband offered to pay the wife’s costs to be assessed on a standard basis.  That was an entirely reasonable offer in respect of costs when made in April this year.  After a detailed assessment he might have succeeded in reducing the costs liability by about one-third and that gives me some basis for making the order that I have.  The husband’s open offer, seeking as it did a step-down in maintenance and starting from a low point in maintenance terms was obviously too low.  However, the wife’s claims are manifestly too high, and the husband’s position was far closer to the likely outcome at trial. 
  2.  The wife will, therefore, have to find some £500,000 in order to fund that part of the costs which I am not ordering the husband to pay.  I recognise that this will deplete her Duxbury fund.  I have very carefully considered whether this is fair.  It might be said that I have assessed her needs at a given figure.  If I have done that, then how can I leave her with a lower sum which, by definition, does not meet her needs?  This conundrum happens in so many cases.  People who engage in litigation need to know that it has a cost.  The wife may choose to sell the property at some point in the future converting part of the value of it into a Duxbury fund.  She may decide to use the property to generate some income rather than simply installing her own staff into it.  She will have to make the sort of decisions about budget managing that other people have to make day in day out, but I am satisfied that people who adopt unreasonable positions in litigation cannot simply do so confident that there will be an indemnity for the costs of the litigation behaviour, however unreasonable it may have been.
  3.  The consequences of the above will be that the wife will have a Duxbury fund not of the £2 million that I intended but of about £1.5 million.  This will generate for her less than £75,000 a year net, for life.  This is a small fortune for most people.  Parties cannot spend £1 million on their representation without being prepared to face the consequences of their decision to incur that level of expenditure.