WHEN YOU’VE SPENT ALL YOUR MONEY ON LEGAL COSTS: NO REMEDY AVAILABLE: LITTLE SYMPATHY WHEN YOUR NET INCOME IS THE SAME AS A CIRCUIT JUDGE

This blog usually looks at family cases in the context of evidence or costs.  The decision in Daga v Bangur [2018] EWFC 91 has a salutary tale to tell in relation to costs. There is also an interesting comparison in relation to salaries…

“But this tragic and destructive case should stand as a cautionary tale to those who would embark on expensive litigation which they can ill afford in the hope of prising money from a discretionary trust.  A very careful and cool appraisal needs to be made at the very outset as to how realistic a prospect that really is.”

THE CASE

Mr Justice Holman was considering financial issues following a divorce. There were normal maintenance orders to the child of the family. However the husband wanted a major lump sum payment from the wife (£2.5 million) on the grounds that she may a beneficiary from a discretionary trust.   The husband’s application failed. He had spent (at least) £150,000 in costs. The court would not award a lump sum to pay those costs.

THE JUDGMENT

3         This is the husband’s claim for a lump sum payment or other capital provision from the wife.  She seeks no capital provision or current maintenance at all from him for herself, and modest, conventional periodical payments for their son.  At the outset of the hearing the open claim of the husband was for a lump sum of £2.5 million.  By the time of his closing submissions, his counsel, Mr Simon Webster, had moderated that claim to one of the order of £1-1.5 million.
4         How tragic it is that, meanwhile, the parties have spent or incurred between them over £1 million on legal costs.  Of that figure about £380,000 related to litigation about their son.  But almost £650,000 has been spent litigating over finance.  £650,000 could have made a very large contribution to the purchase cost of the sort of flat the husband now aspires to buy.  As it is, the savings of around £150,000 which the husband had accumulated during the course of the marriage by the time of separation have been wiped out, and each party now has considerable debts.  There are now in this case no liquid matrimonial assets nor any “acquest” at all, but only large debts.
5         The focus or target of the husband’s claim is two discretionary trust funds of which the wife was the settlor and is a beneficiary, and which have combined assets of the equivalent of about £17.5 million sterling.  The trustees are now a company, MKK Services Limited, incorporated in Saint Vincent and the Grenadines.  No distribution has ever been made from the trusts; but the husband argues that I should make a lump sum order directed against such assets as the wife does own and give “judicious encouragement” to the trustees to distribute to her the funds with which to pay it.  So one of the issues in this case is what Coleridge J described in AM v SS [2014] EWHC 865 (Fam) as “the perennial and intractable problem of the proper weight to be given to valuable resources which do not belong to one of the parties… but to e.g. a parent or family trust…”
 6         I say at the outset that I perfectly understand, and, indeed, have some sympathy with, the frustration that one party of no, or only relatively modest means must feel when he or she is aware that there is great wealth on the other side of the family, but is unable to tap into it even for the purpose of buying a home.  But this tragic and destructive case should stand as a cautionary tale to those who would embark on expensive litigation which they can ill afford in the hope of prising money from a discretionary trust.  A very careful and cool appraisal needs to be made at the very outset as to how realistic a prospect that really is.

THE RESULT

The judge refused to make any lump sum award.

66     I conclude that the husband simply does not have any objective, reasonable or justifiable need for £2.5 million, £1 million or any other lump sum from the wife.  His only pressing need is to clear his debts, but they are entirely referable to the costs which he has incurred in these proceedings.  If I were to order her to pay to him a lump sum with which to pay off those debts, that would be tantamount to making an order for costs in his favour, which could not be justifiable.

AN INTERESTING COMPARISON

Mr Justice Holman used judicial salaries by way of comparison, in relation to the husband’s case that he could not afford to live.

This husband has a net income of £130,000 per annum.  A glance at table 18 of At A Glance shows that that is the same as the net income (from his salary) of the Chief of Defence Staff (£130,000), more than that of the Master of the Rolls (£125,000), but a little less than that of the Lord Chief Justice (£140,000).  The husband is now a single man.  He does not pay, and is not being asked to pay, a penny of maintenance towards his former wife.  He has one child.  That child does have special needs, but the extra costs of the child referable to those needs (mainly medical and therapeutic, but possibly also some educational expenses) will all be paid by the wife’s father who has offered to do so.  The financial burden of the child upon the husband need only be about £15,000 per annum in periodical payments, plus the direct disbursements for the child when staying, or on holiday, with his father.  The husband currently pays rent of about £30,000 per annum; so a total of his rent and direct maintenance payments for his son is about £45,000 per annum, leaving a balance from his net income of £85,000 per annum, which happens to be about the same as the entire net income from salary of a senior circuit judge.