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 [1] 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.”