Fees and fury

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The real value of family law expertise is for clients, not a judge, to decide says Robert Williams.

The recent judgment in J v J [2014] EWHC 3654 (Fam) (06 November 2014) has left a number of family lawyers jumping to the defence of the client’s right to choose how they spend their money. The couple had a business and assets worth £2,885,000 and they ended up spending £920,000 on legal costs of which £154,000 was on experts to value the business. Part of the costs had come from an earlier failure of the court – a different judge – to take a robust view on the issue of the instruction of experts to value to business. Between the second of the 3 stage process (called the financial dispute resolution appointment) and third stage, the trial, costs had increased from an already whopping £226,000 by a “staggering sum” (to quote the judge) of just under £700,000. On any level, that raises both eyebrows.

The trial judge in J v J, Mostyn J, was highly critical of the fact that nearly 32% of the asset base was going on lawyers/experts. It doesn’t appear from a reading of the judgment that the lawyers had covered themselves in glory regarding the trial bundles (the documents prepared for the judge at the final hearing) and they left themselves somewhat exposed to a judicial savaging. That said we cannot ignore the part the parties would have played in that process.

The learned judge’s outrage needs close scrutiny. Is it is for the judiciary to tell clients how they choose to spend their money? Absent conduct the appropriate order for costs in financial cases in divorce/civil partnership proceedings is no order. Do I think this is sensible? No. However that’s the position in finance cases. The days of carefully crafted offers which would have cost consequences if they were not beaten at trial are long gone. And by the look of the judgment such an approach is opposed by this senior judge.

The argument seems to be that an order for one party to pay the other’s legal costs at the end of the trial could impact on the overall fairness of the outcome, especially when it’s a needs based case. These are cases where there is often a departure from a broad equal division of assets where one party needs more, e.g. to re-house themselves/the children. So what if the impact of the judge’s order gets a broadside from a costs order? Isn’t that the point? Money has been spent getting where that party could have been much sooner (and with often significantly less expense). Of course, that puts the weaker party under pressure. Get it wrong and the outcome may not work.

This is where lawyers add real value. Experienced lawyers who challenge and reality check potential outcomes for their clients before their clients get near a final hearing. Lawyers who set out the risks and what those risks could mean. Not automatons that hide behind comments such as “we think the judge got the use of his/her discretion wrong but can’t be appealed”. There could be solutions created to address the impact issue where a “needs” based order has been made, for example deferring costs where there is a delayed sale, reflecting in how the pension is divided etc.

But as in other litigation, why shouldn’t there be a consequence of wrongly pursuing a bad point of law at trial or not accepting a reasonable offer to settle beforehand?

Nowadays run the case in a compliant way and you can take your chances at trial in the knowledge you’re pretty safe on costs. If you have the money and feel strongly enough (whether those feelings are ones to base a case on is an entirely different issue) then why not have a punt? After all, in the family jurisdiction, you’ll be told any range of orders is possible.

However, the judge’s suggestion that your lawyer has to limit the costs they charge you by means of a costs cap is verging on the obscene. I can foresee situations in which lawyers will give sensible advice to settle and the client will, heedless, forge on. After all if a particularly bullish client knows their lawyer’s costs are fixed and the client faces no risk of a costs order, why not plough on to the bitter end?

What if the case is taken out of the list as there is no judge available, if it goes part heard (it needs more court time than originally required – it may have started late as the court had other cases to deal with or the evidence may have taken longer then anticipated to hear), an issue arises that results in a change of tact (e.g. a parent wanting to be involved in the case where they say they have an interest in the family home due to monies provided by them) etc. Who pays then? What if the solicitors retainer (i.e. the contract between the client and lawyer to do the work) enables them to withdraw at a crucial moment.

If judges want to express their displeasure with the way the parties have conducted their case then cost orders would be the solution. An unreasonable point taken, a reasonable offer refused, no reasonable offer made etc. The problem is the opportunity to do so is very limited in family cases. So an awkward or embittered party faces little consequence for their actions absent conduct which would trigger the consideration of costs. Walk the right side of the line and you can take the case to trial and blow the consequences.

I repeat my view that the notion the solicitor needs to cap their costs is ridiculous. Why should a firm have to compromise its ability to earn an income, employ staff, invest in technology etc just because a limit has been reached? And who sets the limit? What criterion is used? What rates apply? Can the lawyer walk away from the unreasonably bullish client who ignores all sound advice and if so, at what point? And if they do, where does that leave the client (because the client can be sure that ‘fair use’ clause will be in the solicitors’ retainer)?

Surely the answer is to go back to a system that worked well. Carefully crafted offers; they were called Calderbank offers as the principle came from a case between Mr and Mrs Calderbank (if ever there was a good reason to avoid court it is the prospect of ending up being a leading authority on a point of law!). They required skill. Of course many cases settled. Compromises were reached. The risks of litigation and trial avoided. Why? Because advice was given, and taken, about risk. The uncertainty of litigation had an added and very real consequence. But contrast that with the present where you may as well have a punt, run a novel argument. It might succeed and be worth it and if you lose what the hell, an order for costs is the exception and not the rule.

Is this solicitors’ protectionism? No. It’s recognising the value our advice adds. Recognising that you can save costs by being realistic. It puts a real value on experience. It stopped these ridiculous offers we see that can benchmark a client’s expectations unreasonably high and in doing so make settlement that much harder. If it’s a broadly 50/50 case and you start at 71/29 how does the client offering 71% come down by 21%? And to be frank, if they have been advised that 71% is what they should be seeking, why should they!

So am I experiencing a wave of protectionism or are the costs a client pays a question of freedom if choice? I remember a case where a London firm had charged 3 times our fees. Their client chose them and knew what they charged. Even after agreement was reached, and at a point where it was difficult to see their client ending up with any hard cash, the client continued instructing the firm. The firm played hardball. They were instructed to do so. They lost but their client had a choice throughout the process. In that case there were cost orders because the other party took bad points and lost.

Was the judge in J v J right to put the boot in given the percentage of assets spent on costs? You bet he was. It’s exactly what you would have expected to have been said at the FDR (when costs in that case were already high). That said the costs post FDR to trial (£700,000) were astonishing. The reason the judge was right is that it is a reminder to the parties and the world at large that parties can lose sight of what cases cost; we call it the cost benefit analysis. However, the horse had bolted and for me, it was not then an opportunity to put the boot in to lawyers at large.

The simple fact is that costs can be disproportionately high in cases with significantly less money than the parties had in J v J. At Family Law Partners, that’s why we are keen to make sure clients look after their emotional wellbeing so we can be as sure as possible that decisions are not ones based on negative emotions.

The approach our team takes is to find solutions. We can’t force a settlement but we can influence and encourage agreement. Some cases can’t settle and some won’t settle. In those cases the client pays their money and takes their chances. We will advise on the risks and cost benefit of the process. But it seems to us that nowadays if you have the money and inclination why not test the other party’s resolve? Money to a poker player is like words to an author. The more you have the better your chances if you want to keep going and wait for the other party to fold! Should cases really be governed by who can afford to take a case to trial? Sadly that’s where we are (and more so given the removal of legal aid). We need to redress the balance and costs orders would be an obvious start.

Calderbanks we miss you. Come back, all is forgiven (but probably not by Mr and Mrs Calderbank and certainly not Mostyn J!).

You can read the full judgment here: www.judiciary.gov.uk/wp-content/uploads/2014/11/j-v-j-judgment.pdf

 

 

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