Leading family judge Mr Justice Mostyn has heavily criticised the size of the solicitors’ bills in a recent case where a couple spent £920,000 in legal fees arguing over assets worth about £2.9 million. So appalled was the judge by the size of the bill, he described it as a “grotesque leaching of costs“. It was, he also said “madness“, “wasteful” and “inefficient“.
The bills incurred by both the husband and the wife are indeed very high. Most divorces do not cost anywhere in this region; for a “normal” divorce, the likely cost is usually under £5,000 each, and even in cases where people apply to the court rather than reaching an agreement or resolving matters using the cheaper collaborative process or mediation, the costs then are not likely to be more than £15,000 to £20,000.
The description of the costs as leeching is confusing. Some media outlets have printed this as “leaching“, others as “leeching“. I suspect that Mostyn said “leaching” which has nothing to do with bloodsucking parasites; it means a draining away of something.
What seems to have happened here is a failure at an early stage by the Court to get a firm grip on the case. At the First Appointment, a deputy district judge (a part-time judge, who would probably be either a senior solicitor or barrister who may or may not have had much experience of family work) allowed both parties to instruct their own expert witnesses. Two expert witnesses will inevitably lead to arguments and a higher bill. Normal practice is for the court to appoint a single jointly instructed expert and to then expect the parties to be bound by that valuation.
It may be very unfair to accuse the lawyers of being leeches here. Each parties’ solicitors will have given their clients clear costs information about how big the bill would be. The clients then make the decision whether it is worth incurring the expense. Nobody forced them to incur these very high fees.
Or did they have no alternative? The reality is that if one side is intent on dealing matters in an aggressive and confrontational manner, and is determined not to be reasonable in negotiations, that party will have a high bill and so will the other side who will have no choice other than to respond.
Mostyn also said that it is time for the legal profession to move away from hourly charging rates and to adopt “value based” fixed fees. That is easier said than done. Many solicitors do some fixed fee work, such as divorce proceedings, where it is easy to predict the likely amount of work and therefore to set a fixed fee accordingly. However, applications to the Family Court for financial orders in divorce proceedings are much harder to predict and very few firms currently will take the risk that they agree a fixed fee and then find that the case becomes far more complicated and expensive than anticipated. Structuring such fees is complex.
Mostyn even suggest that fixed fees should be set by the court or government. I think that shows a lack of understanding of the economics of supply and demand. The market sets the fees; charge too much and you’ll lose business. Fixed fees may be the answer, but they should not be set by the court or the state. For a long time I have suspected that the days of hourly rates are numbered, but for the time being at least, fixed fees in financial cases are the Holy Grail of family work.
17th November 2014.