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This post was first published in November 2014.

Not a stranger to setting out forthright views, Mr Justice Mostyn’s comments on costs in the case of J v J [2014] EWHC 3654 (Fam)  could have far-reaching implication for family law practitioners.

The case itself is relatively unremarkable, but the judge’s strong views on two topics: costs and bundles, make it required reading for family solicitors.

Mostyn J calculated that:

“if the parties had not spent a penny on costs then … they would have had to share between themselves assets amounting to about £2.9m”

But, of course, they had spent something on costs.  So much, in fact, that Mostyn J needed three pages to set out his thoughts on the matter.  The parties had between them spent £226,000 getting to the FDR and nearly £700,000 more to the final hearing, with total costs of £920,000.

“I must confess to have been almost lost for words when the scale of this madness was revealed to me”

“I remain completely baffled as to how the professionals on each side incurred £700,000 of costs following the FDR.  It seems to me to have been an unbridled exercise where the only commodity being charged for was time rather than product”

Ouch!

Of course, Mostyn J is absolutely right to highlight the extraordinary costs in this case.  They are, as he says, utterly disproportionate.  Other judges have made similarly scathing comments in the past.  Indeed, he quotes Munby J (as he then was) in KSO v MJO and Ors [2008] EWHC 3031 (Fam), in which the parties had consumed over 70% of the marital pot in legal fees:

 “Something must be done about the problems highlighted by this and by too many similar cases.  We simply cannot go on as we are.  The expenditure of costs on the scale exemplified by this and by too many other such cases is a scandal which must somehow be brought under control”

He also quotes Lord Neuberger’s 2012 address to the Association of Costs Lawyers,  which gives as powerful a summary as any of the inherent problem in time-based billing:

“Hourly billing at best leads to inefficient practices, at worst it rewards and incentivises inefficiency.  Moreover, it undermines effective competition in the provision of legal services, as it ‘penalizes … well run legal business whose systems and processes enable it to conclude matters rapidly.’  It also penalises the able, those with greater professional knowledge and skill, as they will tend to work at a more efficient rate.  In other words, hourly billing fails to reward the diligent, the efficient and the able:  its focus on the cost of time, a truly moveable feast, simply does not reflect the value of work.”

Well, Mostyn J has had enough.  Too many times, he says, has “something must be done” been repeated, but nothing ever has.  Since the “iconic” judgment of Booth J in Evans v Evans [1990] 1 FLR 319, attempts at cutting the cost of litigation have failed again and again.  Drawing on comments made by Lord Neuberger, Mostyn J has two proposals:

“In my opinion only if these two steps are taken will the grotesque leaching of costs, such has occurred in this case, be arrested”

The proposals are significant:

  1. A litigant should be able to demand a fixed price for each of the three phases of an ancillary relief case, namely (1) Form A to First Appointment, (2) First Appointment to FDR and (3) FDR to trial.
  2. The court in ancillary relief proceedings should be able to impose at the very beginning of the case a costs cap on what may be charged by the lawyers to their client for each of the three phases of the case – naturally this cap would be variable if circumstances change but the change of circumstances would have to be a big one for a variation to be allowed.

And he’s serious about this:

“I intend to bring this judgment to the attention of the President with a view to him raising this pressing matter as a matter of urgency with the Family Procedure Rules Committee”

The initial reaction from many solicitors seems to be to point to the huge sums that Mostyn J was able to earn while at the bar fighting high value cases that fought out over many days.  It is ironic, they say, if not downright hypocritical to make these comments only once he no longer stands to benefit from the legal fees paid by litigants (see, for example, the comments section in the Law Society Gazette).  I have little time for this view – it is not the job of judges to prop up a flawed system just because it is a system they benefited from in the past.

From a practical viewpoint  it is tough to see how some of the proposals would work.  One element of the high fees in this case was that the parties between them spent over £150,000 on experts.  That is a remarkable amount and something that the solicitors would not have anticipated even at the First Appointment when the instructions were agreed.  If costs are truly to be capped then this would seem to require an all-inclusive fixed cost (which would them include the costs for the solicitors, counsel and any experts or other disbursements).  This puts the various professionals into conflict – if an expert charges more than anticipated (perhaps because of lengthy questions or delay caused by the other party) their additional fees will reduce pound for pound what the solicitors receive, even though that is likely to have increased the amount of work they will have to do.

What effect, too, will this have on the parties’ choice of barrister?  If the court is entitled to cap the parties’ legal spending part of its role will be to assess the appropriate level of legal representation.  What if the client wants a more senior barrister than the court thinks necessary?  He cannot simply pay the difference – the legal fees are capped.  Any additional spend on counsel comes straight out of the solicitor’s pocket.  And what about the converse – might solicitors deliberately instruct less expensive counsel knowing they can keep any savings themselves?

Even if fixed pricing were to separate out the different strands (solicitors, barristers, experts etc) is there not also a significant opportunity, or even incentive, to engage in some litigious gamesmanship by inundating your spouse’s solicitor with a deluge of correspondence to waste the time they have allocated to their client?  Does it not also give a client carte blanche to contact their lawyer fifty times a day, and keep them on the phone for hours, knowing that it costs them nothing more to do so?  One of the reasons that solicitors are reluctant to adopt fixed fees is the fear that once the ‘time is money’ element has been removed one or two cases could consume their entire professional (and perhaps personal) life without providing a reward commensurate with the amount of work they are obliged to put in. It is all very well sharing risk with your client, but a fixed fee imposed by the court could pass all the risk on the solicitor.

Clearly a significant amount of thought would need to be given to how these proposals would work in practice.  There are a small number of cases where a costs cap could be disastrous for the firms involved and I expect a significant amount of opposition from the professional as a whole.

In my view, however, it would be beneficial in the majority of cases, and the time has long passed since lawyers should have adopted more consumer-focused fee structures of their own volition.  It is a shame that it has taken a judge’s “rages” (per LSG) to put the issue in the spotlight.  Now that it has, however, I hope it will spark a proper debate and encourage solicitors to have a serious think about how to charge for their services in a more consumer-focused way.