“HOW IS IT THAT THESE EXORBITANT COSTS HAVE BEEN INCURRED?”: A JUDICIAL LAMENT: FINANCIAL REMEDY LITIGATION HEADING FOR RITZ HOTEL STATUS

In  Gallagher v Gallagher (No.2) (Financial Remedies) [2022] EWFC 53 Mr Justice Mostyn, expressed his concern about the costs incurred in a financial remedies case.  This is far from being the first time there has been judicial lament about the costs incurred.

 

“It is no answer because the court is bidden to do its utmost to compel litigants to conduct their cases proportionately. The court does so in the wider public interest. It is in the public interest that citizens who invoke the rule of law should have true access to justice. A putative litigant does not have true access to justice if it is unaffordable; if it is, to adapt the weary aphorism, only open to all like the Ritz Hotel. Financial remedy litigation seems to be fast heading for Ritz Hotel status – so expensive that it is only accessible by the very rich.”

THE JUDGMENT ON COSTS
  1. The wife applies for the full range of financial remedies. This is my judgment on her application.
  2. I find that the overall value of the parties’ assets is £35,456,884.
  3. In reaching that figure I have had to resolve one major point, namely the value of the construction company, Galldris, of which the husband is a 50% shareholder. I have also had to resolve some lesser disputes such as the treatment in the computational exercise of certain potential liabilities of the husband, and the valuation of the former matrimonial home.
  4. In relation to the primary point – the valuation of Galldris – the parties are agreed on the applicable methodology namely that the value will be established by the usual technique of (A x B) + C where A is the future maintainable earnings of the business, B is the appropriate multiplier to be applied, and C is the amount of the surplus assets of the business.
  5. The computational exercise was therefore not complex.
  6. The distributional exercise was equally straightforward. The parties agreed that the matrimonial property should be divided equally. The main dispute in the assessment of the matrimonial property was how much of the business’s value should be excluded to reflect its foundation some years prior to the start of the parties’ relationship. The dispute was whether that element should be calculated on the linear basis, as contended for by the husband, or on a rather more intuitive basis as contended for by the wife. My decision, reasoned in the paragraphs below, is that 24.5% of the value of the business should be excluded as pre-marital property. I also had to resolve a minor dispute as to whether the value of some properties should be excluded as pre-marital assets.
  7. The resolution of those issues leads to a finding, explained below, that the matrimonial property amounts to £28,475,246, resulting in an award in the wife’s favour of £14,237,623, made up of a transfer of the matrimonial home, a property in Ireland and a lump sum of £12,129,209. The wife’s award represents 40.2% of the total assets.
  8. As I have said, the case was very straightforward. No case-law was seriously cited to me either as to computation or distribution. The wife’s evidence lasted one hour. The husband’s evidence lasted half-a-day. The experts’ evidence lasted half-a-day. Final submissions lasted three-quarters of a day. All in, under two days were spent in court. The case should have been capable of being dealt with quickly and economically.
  9. And yet.
  10. In the two years since the wife’s Form A the parties have incurred costs in the extraordinary amount of £1,670,380, or 5% of the total assets. Those costs are tabulated as follows:
Husband
Wife
Total
Solicitors
398,869
320,116
718,985
Counsel
206,880
335,130
542,010
Disbursementsa
295,599b
113,786
409,385
Total
901,348
769,032
1,670,380
a Mainly the business valuation experts
b The husband paid the fees of Faye Hall, the SJE
  1. The wife’s open proposal was  that she should receive an overall award of £18m. That was in the spectrum of possible awards. The husband proposed that the wife should receive an overall award of merely £6.6m. That was not.
  2. It would be no answer to the question:
How is it that these exorbitant costs have been incurred?
to respond:
Well, that is what the market will bear and how the parties want to spend their money is a matter for them not the business of the court”. [1]
It is no answer because the court is bidden to do its utmost to compel litigants to conduct their cases proportionately. The court does so in the wider public interest. It is in the public interest that citizens who invoke the rule of law should have true access to justice. A putative litigant does not have true access to justice if it is unaffordable; if it is, to adapt the weary aphorism, only open to all like the Ritz Hotel. Financial remedy litigation seems to be fast heading for Ritz Hotel status – so expensive that it is only accessible by the very rich.
  1. I am not going to repeat my lamentations about the exorbitance of costs which I have expressed in recent judgments. Nor am I going to repeat my cry that something must be done. In this judgment I merely record the facts and I leave it either to the Lord Chancellor, or to the Family Procedure Rule Committee, to do something about it.