J v J
| Jurisdiction | England & Wales |
| Judge | Mr Justice Mostyn |
| Judgment Date | 06 November 2014 |
| Neutral Citation | [2014] EWHC 3654 (Fam) |
| Date | 06 November 2014 |
| Court | Family Division |
[2014] EWHC 3654 (Fam)
Mr Justice Mostyn
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
Manchester Civil Justice Centre
1 Bridge Street West, Manchester, M60 9DJ
Sally Harrison QC (instructed by DWF LLP) for the Applicant
Peter Mitchell (instructed by Merrick Solicitors) for the Respondent
Hearing dates: 29 October – 5 November 2014
This judgment is being handed down in private on 06 November 2014. It consists of 58 paragraphs and has been signed and dated by the judge. The judge gives leave for it to be reported only in this anonymised form.
In this judgment I shall refer to the applicant as the wife and to the respondent as the husband.
This is my judgment on the wife's claim for what I persist in calling ancillary relief (and which I will continue to do for as long as it is so described in Part II of the Matrimonial Causes Act 1973). The claim was commenced by Form A as long ago as 20 July 2012.
The husband is aged 54; the wife is aged 44. Following two years' cohabitation they married on 7 April 1996. They have two children O now aged 17 and J now aged 16. In May 2011 they separated; the wife continues to live in the former matrimonial home while the husband lives in rented accommodation. The former matrimonial home is subject to an agricultural tie which has the effect of suppressing its value, although it may be possible to shift the tie to another property owned by the husband.
At the time of the marriage the husband was an established market gardener, although he has also since had a business in the manufacture, sale and hiring of horseboxes; that line of business is now defunct. In addition he has a portfolio of properties some of which are rented to the market gardening businesses; some of which are rented to residential tenants; and one of which stands empty and derelict. The market gardening businesses are, first, S Ltd. It produces lettuces in greenhouses which are sold to multiples. Unfortunately one multiple has recently signified that they are going to terminate their arrangement with S Ltd.
The second market gardening business is F Ltd. In this the husband is effectively a one third shareholder. The other two shareholders who each own a third of the ordinary shares are LW and KB. This company grows and sells tomatoes, aubergines, strawberries and blueberries. In addition it has a packing arm for certain third parties. The lettuces of S Ltd are sold to multiples through one of its subsidiaries (although there is no profit on the turn for F Ltd in doing so). F Ltd's operations are all undertaken in the North West of England.
F Ltd is in negotiations to take over or merge with another unincorporated business, MS, which is owned by BGL. This is to secure a contract with a multiple in circumstances where the multiple wants to limit its suppliers and cut out middle men. According to AR, a director of SCP, which firm is advising F Ltd, and who I judge to be a witness of unimpeachable integrity, the only benefit will be the consolidation of the multiple contract; there will be no synergetic benefits. No money will change hands. What will happen is that the business of MS will be hived off into a new company which will be owned by F Ltd. BGL will become a shareholder in F Ltd and will also receive loan notes. The deal is far from concluded but everyone is hopeful that it will be. For some reason the husband was extremely guarded about revealing this negotiation in the course of these proceedings.
If the parties had not spent a penny on costs then, pursuant to the valuation findings which I will explain below, they would have had to share between themselves assets amounting to about £2.9m made up as follows:
| FMH | 291,000 |
| Husband's bank and credit card debts | (25,000) |
| Wife's investments | 1,000 |
| Property portfolio | 317,000 |
| Tax | (42,000) |
| Husband's one third share in F Ltd | 1,800,000 |
| S Ltd | 280,000 |
| Husband's paid costs (excluding litigation loan of £120,000) | 148,000 |
| 2,770,000 | |
| Pensions | 115,000 |
| Total | 2,885,000 |
However, the parties have spent vast sums on costs. By the time of the FDR on 12 March 2014 the parties had already spent £226,000 on costs. This was a totally disproportionate sum given the scale of the assets. That said, costs of this scale — about 8% of the assets — are not uncommon, disproportionate though they are. One reason why so much forensic acrimony was generated, with the consequential burgeoning of costs, was that the Deputy District Judge at the first appointment on 9 November 2012 permitted each party to have their own expert to value the husband's business interests, notwithstanding the terms of Part 25 FPR which clearly stated then (and even more strongly states now – see PD 25D para 2.1) that a SJE should be used "wherever possible". Not "ideally" or "generally" but "wherever possible". In this case the forensic accountants have filed a total of no fewer than six expert reports and have prepared a joint statement setting out their extensive disagreements. They have charged a total of £154,000 in fees. The husband has been permitted during the course of the case to ditch his expert and to instruct a new one.
In this case since the failure of the FDR a mere eight months ago the parties have between them spent on costs the staggering sum of just under £700,000. I must confess to have been almost lost for words when the scale of this madness was revealed to me. They have spent a total of £920,000 in costs. Of this they have spent, as I have said, £154,000 on forensic accountants valuing the Husband's business interests. They have spent on costs nearly a third of everything they built up over 18 years; most of it over the last eight months. The result has been to make a case that was surely so easily settleable almost impossible to compromise, and to impose on the High Court a seven day trial where the principal focus has been a bitter war of recrimination and denunciation about who was more at fault for this appalling state of affairs. This is well illustrated by the fact that of the 18 pages of Miss Harrison's final written submissions nine were devoted to costs and her argument that the husband was responsible for them.
The impact of the costs expenditure is not as calamitous as it was in the infamous case of KSO v MJO & Ors [2008] EWHC 3031 (Fam) [2009] 1 FLR 1036. There the parties spent £553,000 out of a the marital pot of £771, 000 (or 71.7%), leading Munby J, as he then was, to compare the case to Jarndyce v Jarndyce, he quoting from Chapter 65 of Bleak House in his Appendix. Here the proportion of the estate wasted is a little under half as much but the costs themselves are nearly twice as much. In his judgment Munby J stated at para 81:
"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."
Although the mantra "something must be done" is repeated time and again, nothing ever is. In the ancillary relief field the mantra has been incanted over and over ever since the iconic judgment of Booth J in Evans v Evans [1990] 1 FLR 319. The procedural reforms of 1996 and 2000 tried to address the problem, but with only limited success, as this and many other egregious cases show only too clearly. In the civil sphere the Jackson reforms of 2013 were intended to curb excessive litigation costs. In his lecture to the Association of Costs Lawyers on 11 May 2012 Lord Neuberger of Abbotsbury, then Master of the Rolls, said this:
"Excess litigation cost has for too long been an endemic and unwelcome feature of our civil justice system. In his 1986 Hamlyn lectures, Sir Jack Jacob rightly described it as having long been 'the most baneful feature of English Civil Justice.', and he was by no means the first person to do so. In the quarter century that has passed since those lectures things have got worse."
Yet the Jackson reforms in the civil sphere limit merely the costs recoverable by the winner from the losing party by confining them to a pre-approved costs budget. They do not seek to limit the amount of costs that a lawyer may charge his own client, even though this had been mooted during the process of the review. I suppose that to do so was regarded as an impermissible interference with the right to form whatever commercial contracts you want and to spend your money on whatever you like. Yet that argument simply does not wash when those very costs come out of a finite pot over which the other party has a valid claim.
In my judgment the time has come when the law-makers in this country, whether they are legislators or judges, must stop saying something must be done and actually do something. The first thing would be to insist, as Lord Neuberger did in the lecture I have cited, on fixed pricing for cases, whether they are ancillary relief cases or anything else. He said:
"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."
And he later stated:
"That no-one has suggested a viable alternative is something which needs to be remedied, and the sooner the...
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