17 June 2010

Suffer any wrong that can be done you rather than come here!

No litigation is cheap, certainly not litigation concerning matrimonial finance.  Of course one important difference between matrimonial and most other litigation is that divorce is an uninsurable risk and the costs are non-deductable.  Generally, the very assets that are the subject of the dispute are therefore diminished in meeting legal expenses.

 Last year Munby J (as he then was) heard a ruinously expensive case in which over 70% of the matrimonial assets were "squandered" in legal costs, leaving less than 30% for distribution within the family.  

KSO v MJO and JMO (PSO Intervening) [2009] 1 FLR 1036 was an extreme example. However the final legal bill of £430,000 pales into insignificance when compared with the extraordinary expenditure incurred in many other high profile cases.

John Charman's legal bill, for example, was said to exceed £5M, an astonishing figure on any analysis - but he could afford it and most certainly understands risk.

Not so, it seems, either Michelle Young or Mati White, both of whom have now run out of money litigating against their respective husbands, Scot and Marco Pierre.

Before the financial crisis, any number of private banks would have beaten a path to Mrs Young and White's doors offering to lend them money. However, as the value of their assets has plummeted (or in the case of Mr Young, evaporated), so the banks have become considerably more risk averse and less inclined to make loans.

In the absence of the availability of a commercial litigation loan, first Mrs Young and now, it appears, Mrs White have turned to third party litigation funding.  Commercial funders assess the risk, fund a case and, if the client wins, take a percentage of the award.  The percentage will vary according to risk, by anything from 15 to 30 per cent.  The appeal to the funders is that it offers a fantastic return in this market and the appeal to the litigant is obvious; particularly if there are no viable alternatives.

However, as Mrs Young found out, funders take their risk assessments very seriously indeed; Harbour Litigation Funding pulled the plug on her after a matter of weeks leaving her unrepresented and ultimately with no choice but to discontinue.  And whilst it looks like Mati White has been given a financial lifeline so she can be represented at the final hearing of her application next week, one can only speculate on how much of her award will be top-sliced to repay her funder's eleventh hour investment.

Sandra Davis is a Partner and Head of Family at Mishcon de Reya. She is a member of the firm's management board, a Fellow of the International Academy of Matrimonial Lawyers, the author of International Child Abduction (Sweet & Maxwell, 1993) and a member of the Lord Chancellor's Child Abduction Panel. In 2009 she was shortlisted in the Citywealth Magic Circle Awards as a Leading Lawyer.

The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing and should not be considered as legal advice.

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