How divorce funding gives access to justice?

Brought to you by our friends at Vannin Capital PCC Ltd

Everyone must be familiar with the findings of last month’s final settlement of a very long, public and acrimonious divorce case: (Young v Young [2013] EWHC 3637 (Fam). Michelle Young was awarded a £20 million settlement and her former husband was also ordered to pay £5 million of her costs. Certainly high stakes in a high value divorce, but figures that are rather diminished in light of her initial £400 million claim. Whether it was fair is not the central issue though; rather it is the staggering costs [described by the judge (Moor J) as “completely unacceptable”] of bringing the claim. The total costs were £6.5 million. Also a fundamental aspect of the case, is that she would not have had that £6.5 million had she not secured third party funding. Indeed it is the protracted funding and costs which have been as controversial as the case itself.

Michelle Young seems to have been of the view that she achieved access to justice, even if her award was less than she had hoped for. She has also called for the law to be changed to help women with children who have no assets after the separation.

In making her stand she was dependent on third party funding of over £4 million, derived from three separate and consecutive funders. This helped to pay the cost of 65 preliminary hearings, the fees of 4 firms of forensic accountants, 13 legal teams, 10,000 pages of court documents and a search for Mr Young’s assets spanning three continents. Nearly seven years later, by the time of the final hearing it is not surprising that the litigation funding had all been spent, especially on expert evidence. It was this which drew strong rebuke from the judge, whose salient words suggest that litigation funders might be more wary of funding divorce cases in the future. What he said was: “It cannot be right that all the litigation funding is spent before the final hearing, which is, on any view, the most important part of the entire litigation exercise. Maximum figures need to be placed on the disbursements incurred. If the solicitors and clients are not willing or able to do so, the court will have to impose limits. Without such restraints, litigation funders will be put off supporting these cases for ever.” He had already commented on how fortunate she had been to secure funding, especially in light of her lack of security. As we all know, third party funders lose their investment if the claim fails. If the award is reduced so is their share. Indeed most third party funders are already wary of funding divorce cases. The emotionally-loaded aspect of an acrimonious divorce only adds to the risks, in what is already a risk-heavy business. The ending of the first funding agreement in this case further highlights this point; the funder departed saying it would be sticking to funding commercial cases in the future. The latter are certainly more economically rational.

There are few statistics as to how many divorce cases secure third party funding. Certainly to warrant consideration they would need to involve a high level settlement, bearing in mind that few third party litigation funders are interested in disputes of less than £1 million at least. At a time when swingeing legal aid cuts have thwarted that as a funding option, it is a real problem for many would-be divorcees to afford the legal costs of a contentious divorce. Interestingly the growing and cheaper option is mediation. It is highly unlikely that the majority of divorces will secure the funding that the Young one did; perhaps it is the exception that proves the rule that divorce funding gives access to justice.

This article was written by Vannin Capital. Visit their website to learn more about how litigation funding works.

Any Crown Copyright material is reproduced with the permission of the Controller of OPSI and the Queen’s Printer for Scotland.

January 6, 2014 · Tim Kevan · Comments Closed
Posted in: Uncategorized