RUN UP LEGAL FEES – THEN EXPECT TO PAY A PORTION YOURSELF!

Tracy Maw – Costs Lawyer and Team Leader

Tracy Maw, Costs Lawyer and Team Leader at PIC, reports.

The question of costs in the recent family law case of WG v HG [2018] EWFC 84 (30 July 2018) is one of importance and general interest.

In this case, the Applicant former Wife made an application against her former Husband for financial provision. Between the parties they spent considerably more than £1 million pounds in legal fees for pursuing financial remedy proceedings. This was apportioned as £625,000 for the Wife including litigation loan interest of £71,000 and loan arrangement fee of £9,000; with the Husband’s current spend at £426,000. The sum of the parties’ costs exceeded at least one side’s estimate of the housing need of one of them.

The Wife instructed Counsel; Jonathan Southgate QC who made a remarkable proposition, namely the Wife was entitled to a full indemnity in respect of all her costs as this was now being run as a needs case. The basis was that the Wife’s costs were a debt that need to be paid and her needs must be met.

The usual outcome in a sharing case would be that each party pay for their own respective costs. Although this was agreed by Mr Southgate QC, he argued that the Wife would be in a better financial position as a needs case.

Mr Justice Francis noted that the children split their time equally between the parents however the Wife incurred very substantial costs in these proceedings compared with the Husband. The Judge referred to the Wife’s horrific riding accident which would have contributed to the difficulties she had encountered in these proceedings. However, despite the difficulties, the Wife chose to instruct one of the most expensive firms of Solicitors in the country and it was the Judge’s decision that people cannot be left to litigate on the basis of believing that they are guaranteed to be reimbursed their legal costs. And whilst the representation was of the highest quality, the issue of proportionality should be at the forefront of proceedings.

When dealing with the Wife’s costs or litigation loan, Mr Justice Francis faced the difficult decision that if no provision was made, then half of the fund would be wiped out and she would be left with insufficient money to manage in his assessment. Mr Justice Francis did recognise that the Wife’s legal costs were excessive and unreasonable in a case for financial remedy. It was noted that the Husband had made an offer in April 2018 to pay his former Wife’s legal fees to be assessed on a standard basis. This was considered a reasonable offer as following a detailed assessment, the costs may have been reduced by approximately one-third, which gave Mr Justice Francis some basis for making the Order which he did.

Judgement was made for an additional payment of £400,000 to the Wife which would seek to cover a portion of her legal fees, but which did not completely undermine her fund. Mr Justice Francis had to ensure the Wife was not left with a lower sum, which, by definition, did not meet her needs; a situation which happens in so many cases. The Wife would have to make decisions about budget managing; that other people make day in and day out, which may include selling the property or using it to generate income. In total the Wife was awarded a fund of approximately £1.5 million pounds which would generate £75,000 a year net, for life.

Costs Note

Every person who brings a case and engages in litigation needs to be fully aware that it has a cost. People cannot simply expect that there will be an indemnity for the costs of the litigation behaviour, however unreasonable it may have been. You cannot litigate on the basis that you are bound to be reimbursed for costs and should not spend an excessive amount on legal fees without being prepared to face the consequences. Litigation is not a blank cheque.

Proportionality is a main issue within legal costs and should be taken into account by all Solicitors and Clients when pursuing litigation.

This is a two-stage test with work undertaken pre-1 April 2013 under the Lownds test. The Court considers the overall total of the Bill, less additional liabilities and VAT, and decides whether it appears disproportionate. If it does, the dual test of necessity and reasonableness applies to all work done. If it does not, costs simply have to be reasonable.

The ‘new’ test of proportionality on work from 1 April 2013, remains a two-stage test at CPR 44.3(2). First the Court will assess reasonable costs on a line-by-line basis and a calculation of the aggregate of those sums is worked out. The second stage considers whether or not that reasonable sum is proportionate, with regard to the factors set out at CPR 44.3(5):-

  1. The sums in issue in the proceedings
  2. The value of any non-monetary relief in issue in the proceedings
  3. The complexity of the litigation
  4. Any additional work generated by the conduct of the paying party
  5. Any wider factors involved in the proceedings, such as reputation or public importance

If you have any questions with regard to proportionality and legal costs, please feel free to contact Tracy by clicking here.

If you are interested in a training session at your firm, please click here

Tracy Maw – Costs Lawyer/Team Leader – PIC – Doncaster

07.03.19

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