Following last week’s high-profile divorce judgment, we consider why proportionality could put claimants at a disadvantage.
In last week’s high-profile judgment, divorcee Michelle Young was awarded £20m, but spent £6.4m in costs to achieve it. The judge described the level of costs as ‘completely unacceptable’; though he acknowledged that Young’s expenses were driven up by her lack of cash and the fact that she kept running out of funding, requiring her to change legal teams and instruct new experts.
The case has once again focused attention on the issue of very high legal costs. But while this was a family case, it has some worrying lessons for the civil litigation arena, particularly in light on the new rule on proportionality under the Civil Procedure Rules.
As readers will know, under the CPR, the overriding objective has been amended to place proportionality of costs at centre stage. With no detailed guidance on how the new proportionality rule will be interpreted, the signals from the senior judiciary so far appear to indicate that the sums at stake will be the main consideration when the court is assessing whether costs were proportionate. It doesn’t matter that those costs might have been reasonably and necessarily incurred; if they are disproportionate to the amount of damages won, they will be cut down.
In the civil litigation arena, would £6.4m be considered a proportionate amount to spend in order to receive £20m? Frankly, no one knows yet. But the proportionality rule does seem to play into the hands of the uncooperative defendant. The more intransigent the defendant, the more they force the claimant to spend on disclosure, the more they refuse to negotiate a settlement, the higher the claimant’s costs will rise; until it reaches the point where the claimant lawyers know that their costs are getting too big in relation to the likely damages.
That means that even if the claimant wins, their client will not be able to recoup all their costs from the defendant, putting the claimant and their solicitors in an invidious position.
The Court of Appeal will be issuing guidance on how the new proportionality rule will operate as soon as it gets the opportunity, when the right case comes its way. But in the meantime, the rule is undoubtedly already influencing litigation tactics on the ground.
Rachel Rothwell is editor of Litigation Funding magazine