Fixed Fees are the Future
The recently reported case of TT v CDA (Rev1) 2020 EWCA Civ 1215 has again brought the issue of costs in divorce proceedings into the spotlight. Are fixed fees coming?
Having given a comprehensive review of the case law in the area of litigation conduct and the impact of costs in cases where needs are a significant feature [see paragraphs 61 to 80], Lord Justice Moylan neatly summarises the position in this way:
“I agree with Moor J in R v B when he said that, if required to achieve a fair outcome, the court “must be entitled to prioritise the [needs of the] party who has not been guilty of such conduct”. It is clear from the outcomes in M v M and B v B, as referred to above, that the financial consequences of the litigation misconduct, perhaps combined with other factors, might be such that it is fair that the innocent party is awarded all the matrimonial assets. In this respect, I also agree with Moor J’s observation that an order can be made which does not meet needs because to exclude that option “would be to give a licence … to litigate entirely unreasonably”. [paragraph 80].
In other words, the effect of litigation conduct CAN affect the outcome in a needs based award. No longer is it the case (if it ever was) that a party to divorce can say that they have spent so much in legal fees that their award should still make provision for their needs.
The courts have for some time now been highlighting the costs being spent by parties in financial remedy litigation and have made it very clear that those costs should be proportionate to the issues (and value of the assets) at stake.
We have written before about the very same topic, back in 2014 when we had recently set up Paradigm Family Law with the USP of our ‘Fixed Fee model’.
The facts of the case are very succinctly summarised by Mr Justice Mostyn in his Judgment. Briefly, it concerned financial remedy proceedings begun by the Wife aged 44, the husband aged 54. Their relationship and marriage lasted 18 years. They had 2 children, now aged 17 and 16. They separated in May 2011, the Wife remained at the marital home. The Husband was a market gardener but also had other business and property interests. Financial proceedings started on 12 July 2012.
Mr Justice Mostyn in his Judgment noted that the value of the marital assets without the impact of any costs amounted to “about £2.9 million”. He then goes on to highlight what he calls the “vast sums” spent by the parties on costs. From the start of the proceedings to the Financial Dispute Resolution (FDR) hearing on 12 March 2014 the parties had spent £226,000. A large proportion of those costs were incurred in forensic analysis, by expert valuers on both sides, the experts incurring a total of £154,000 in fees between them.
From the FDR to final hearing a further £700,000 was spent by the parties over an 8 month period, a figure Mr Justice Mostyn called “staggering”. The total costs including the experts fees came to £920,000, which was nearly a third of everything they built up over the 18 year relationship.
For Paradigm Family Law and our fixed fee model, what Mr Justice Mostyn goes on to say at Paragraph 13 bears repeating:
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 better. An approach to litigation costs based on value-pricing rather than hourly-billing is one which urgently needs to be worked out and applied. Rather than treating time as the commodity which is being sold, we should be adopting an approach where skill and experience are the commodities which are sold.”
[ The keynote address of the then Master of the Rolls, Lord Neuberger (as quoted by Mr Justice Mostyn) was delivered to the Association of Costs Lawyers at their Annual Conference in 2012 and can be found here. ]
Change in costs culture
Mr Justice Mostyn then sets out how he thinks the costs culture should change. Firstly he sets out a 3 phase fixed price system for cases to (1)First Appointment, (2)FDR and (3)Final Hearing. Secondly, he considers that the Court should able to cap fees for each of the three phases. Mr Justice Mostyn states in his judgment that only if those steps are taken will “the gross leaching of costs…..be arrested”.
Paradigm Family Law’s tailored fixed fees do just that. We set out at the outset when we first see a client how much our fees will be and fix them from Day 1 covering the process from start to finish including the 3 phases set out by Mr Justice Mostyn.
We at Paradigm Family Law consider ourselves to be leading the way in bringing a fixed fee pricing model to clients. If our fixed fee formula had been applied in J v J, the parties would have spent a fraction of the total costs that they actually incurred. They would have reaped the benefit of our years of experience, depth of legal knowledge, expertise and efficient case management, the elements that Mr Justice Mostyn says should be rewarded. Furthermore, they are all attributes by which James and Frank at Paradigm Family Law operate and upon which they have founded this firm.
Paradigm Family Law have a team of experienced lawyers to help guide you through the process of divorce, just waiting to hear from you.
If you would like more details on this or want to discuss your family law matter, please do not hesitate to contact James, Frank, Evelyn or Paul. Paradigm Family Law offers a free initial consultation and our fixed fee solutions cover financial proceedings from start to finish. You can call us on 01904 217225 or email us to [email protected].