Divorce is not a “blank cheque” for litigation, judge warns


Francis: Litigation loan posed vexed question

Litigation is not a “blank cheque” and divorcing people cannot behave on the basis that they are bound to be reimbursed for their costs, a leading family law judge has warned.

Mr Justice Francis said 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”.

He was ruling on the financial provision following a divorce where the assets were £12.3m. The wife had sought £7.7m – with the judge saying her budget was “an unreasonable dream which cannot be afforded” – and he awarded her £3.65m.

Some £2m of this was for a so-called Duxbury fund – an investment fund providing annual income for the rest of her life.

The wife also sought £915,000 in legal costs and to repay a litigation loan.

Francis J said the loan posed a “vexed question”. He acknowledged how difficult both the Family Law Act and Children Act proceedings must have been for her, particularly as in late 2015 she suffered an “horrific” riding accident that caused very serious head injuries.

He continued: “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 [London firm Stewarts].

“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 he made no provision, then half of the Duxbury fund would be wiped out and the wife would be left with insufficient money to manage. Balancing this against the wife’s “unreasonable case”, the judge added an extra £400,000 to the lump sum.

“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.”

Francis J said that his order would mean the Duxbury fund would be about £1.5m, generating less than £75,000 a year, rather than £90,000.

“This is a small fortune for most people. Parties cannot spend £1m on their representation without being prepared to face the consequences of their decision to incur that level of expenditure.”




    Readers Comments

  • Andree says:

    Bring back Calderbank. There was never a better discouragement to greed. It may be necessary to postpone enforcement of the costs during the minority of children – with interest at a penal compound rate.

  • Angela Seager says:

    I would like to change the law:

    Two people enter a marriage,
    Two people should exit a marriage!

    Why?

    Because when a third party is involved, it will always make for the most acrimonious divorce and the Solicitors love the animosity…

  • ZsaZsa says:

    Here, a judge, fully aware that a woman who is situationally vulnerable, and physically and psychologically vulnerable, has been sold a litigation loan, to fund legal proceedings. Who was the loan with? What is the interest rate? From experience, these litigation loans sold to vulnerable women, are generally unsolicited, and sold in the course of paid for legal advice on family law issues. While it appears this woman will get a reasonable settlement, it also appears she will have to either sell, or let out the family home, and while half a million of the loan will be paid by her former husband, she still has to find another half a million from her own funds, in order to pay of the rest. It is likely that whatever happens she will have to sell the family home, as interest on the remaining half a million accumulates, she risks considerable erosion of her assets. Let’s assume the loan is at 9% (but bear in mind some of these litigation loans for divorce have interest rates of up to 24%) a simple interest calculation indicates she will be paying circa £2,500 a month, or just shy of £30k a year in interest. Her annual income, once that interest is deducted, is not £75k, but less than £50k. She had a serious head injury, and is no doubt in serious emotional distress after the court case, and confronted with this astronomical debt, it is unlikely she will be able to find work which pays enough to even service the interest on that loan. Why doesn’t the judge enquire as to to how a vulnerable woman, with serious head injuries was ever in a situation where she could incur a million pounds of debt. And we need to consider whether the solicitors acting for her, were acting in her best interests, how much of what is bound to be a deeply private and personal case was shared with the loan company, and what is the source of funds of that loan company? Do such loans obviate the need for the solicitors being paid a million pounds, to carry out any anti money laundering due diligence into source of funds? Or do these loans allow solicitors to take money, and side track their NCA obligations? I don’t know enough about this case, but it’s surely in the public interest to understand where the money came from, what sort of loan this was, who sold it, and how the solicitors justified such huge fees.


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