17th Nov 2014

The problem with divorce legal costs

In the recent decision of J v J regarding divorce costs Mostyn J expresses a clear frustration at the level of legal fees being charged in some divorces.

In this case the matrimonial assets were £2,770,000 plus a modest pension.  The costs totalled £920,000.  Interestingly, the husband asserted that one of the assets – his shares in a company – were only worth £400,000.  If that was the case, and was a viewpoint sincerely held by the husband, then the total assets value would have been only £1,137,000 and the costs expended would have amounted to 80% of the assets.  As it was they still accounted for a third.

The husband incurred costs of £551,000 and the wife; £369,000.

What is more, only £226,000 of those accumulated costs were incurred up to the financial dispute hearing.  A staggering additional £700,000 was then incurred between that `settlement’ focussed hearing and the final hearing itself only eight months later.

Who is to blame?

The cry inevitably goes up; who is to blame for these very high costs.  Within the case itself the wife would have inevitably blamed the husband and vice versa.

In the judgment then it appears that everybody gets dealt a portion of the blame.

The first judge

The judge who dealt with the case in the earlier stages is criticised for having allowed the husband to proceed with his own expert evidence supporting his `absurdly’ low estimation of £400,000.  He had annexed this to his first financial statement.  No expert evidence should be filed without court permission.  This first expert report no doubt set the tone for the rest of the litigation as we shall see later.

The judge was also criticised for then allowing the wife to file her own expert report.

What should have happened instead is that a single expert should have been instructed jointly in accordance with the rules of the court.  We are told that both barristers “Poo-pooed” this idea and the Judge `acquiesced’ to the demands for competing expert evidence.

The legal teams representing both parties

This poo-pooing draws our attention to the positions put forward by both legal teams.  We see typical positioning – one party goes low on a valuation (absurdly so in this case) and the other goes high.  The greater that divergence between the parties, the greater the scope for prolonged and highly expensive litigation.  The greater also the need for your own independent and inevitably partisan evidence supporting such positions.

It is fair to criticise the legal teams for not abiding by the court rules on expert witnesses nor, in this case, on filing slimmed down court bundles.  The reality is though that the legal teams would have been answerable to the criticisms of their clients or the barristers they instruct.  The writer of this article knows that playing by the rules has led to him being criticised several years ago by his own barrister, for having properly agreed to a single joint expert in accordance with the rules.

The legal teams are technically officers of the court and, accordingly owe a duty to the assist the Judge and court.  The reality is that the instructions, possible dissatisfaction of the client and the risk of losing them might often be a far more pressing concern for some.

Do lawyers want to please their clients?  Of course they do and as a result they can be highly influenced by the instructions and the implied or explicit opinions of their clients on the way they work.

In this particular case the criticism against the lawyers is withering. Mention is made of the “Grotesque leaching of costs” and of practices where “The only commodity being charged for was time, not product.”

The clients

The clients do not escape condemnation.  The absurd positions adopted by both – informed and no doubt in their own eyes excused and justified by the partisan expert reports they each commissioned for such purposes – is roundly condemned.

But the challenge is this?

Are clients’ positions shaped by the advice they are given and the conduct of their legal team, or is it the other way around?

So what is to be done?

The question of what is to be done feels seemingly impossible to resolve.  Judicial concern has long been expressed by the courts in cases such as these and yet the problems persist.  It is interesting that here the law makers, whether legislative or judiciary do not escape the criticism either – “Stop saying something must be done and actually do something”

The court however seems strangely impotent even in the acting out of their own frustrations.  In this case, for example, despite all of the words and heat and very clear criticism, the real penalty in cash terms was very small.

Both parties were condemned for their conduct.  While the bulk of criticism is against the husband the comment is also made at paragraph 57 that the wife was regarded as “Having litigated almost as disproportionately as the husband.”

The result therefore was that the husband was ordered to pay £50,000 towards the wife’s costs.

Think about that.  That is less than 10% of his total costs he incurred for himself.

There is a terrible irony revealed here as well.

The more unreasonable the position of either party is then the more reasonable the high costs incurred in defending that position become. How can that possibly be?

Essentially, the husband here sought to argue that his shares were worth £400,000.  If he was successful in that then he would have written off £1,400,000 from the judicial value attributed to that asset within the case.  On a very superficial level, he invested £551,000 on a gamble to see that position win through.  He may well have taken the view, and might still do, that such a punt was worth it.

He was subsequently order to pay an additional £50,000 which a litigant, if not this particular one, might see as being, again, an acceptable risk or even a form of gambling tax!

We also see the what we might call the risk of collusion; when one party pursues a certain path of litigation conduct it is all too easy for the other party and/or their legal team to fall in line and believe they must follow that same path.  When they do so, they essentially collude in the shared misconduct of litigation.

The alternative?

The judge suggests several alternatives, some of which will require changes in the law or the court rules.  That will take time.  There are immediate alternatives already available however.

In one of the most damning indictments in this case it is said that this case was turned, by virtue of the way in which it was dealt, from “Something easily settleable into something impossible to compromise.”

We can help you

There are a range of choices available to families going through separation and divorce.  You can litigate, as above, you can choose to mediate or collaborate or even use arbitration. Here at Family Law in Partnership, divorce lawyers in London, we have recognised experts in all of the processes.  We can help you to select the best process for you and then, having done so, we can help you to ensure that you stay on the right side of the rules.

If you are separating or thinking about divorce, give us a call and ask to speak to one of our divorce solicitors or mediators.  You can call us confidentially on 020 7420 5000.  Alternatively email us with your divorce questions on hello@flip.co.uk.