Young v Young [2013] EWHC 3637
Given that the Court stated “In many respects, this is about as bad an example of how not to litigate as any I have ever encountered” it is no surprise that this case also highlights some of the pitfalls of litigation funding. Divorce and financial remedy cases are, in one sense, well suited for funding – often there is a desperate need to level the playing field and external funding may be the only solution. However, litigation - when there is a high degree of personal animosity – needs to be very carefully managed. A litigation funder may well find itself in the middle of a highly charged battlefield, and the sine curve of emotions do not sit happily with a funder’s need for certainty and non-champertous control.
Given that there were 65 hearings, the costs and the timeline immediately stand out as being very much outside a funder’s sweet spot. Judgment was given in November 2013 with the early hearings starting 7 years earlier. As a consequence, at the time of the final hearing the lawyers (both solicitors and barristers) were only going to get paid if Mrs Young succeeded in achieving a significant lump sum. The moneys advanced by the litigation funders had long since run out. She had three previous arrangements. The first with Harbour was terminated in December 2009. The second, with Bracewell Law, was terminated in July 2012. A final agreement was reached with another group. Each time, the amount of funding increased – from £400k to £1m to £2.7m. Immediately it can be appreciated how the case’s development, and budgeting, has been diametrically opposite to how a funder would wish to approach a piece of litigation. It gets worse, though, when it is realised that the money was entirely spent long before the final hearing commenced and many of the directions of the Court were simply not followed. The Court found that Mrs Young had spent around £5 million without getting to the final hearing or having produced a final forensic accountant's report. Whilst the Court considered that the amount spent was “completely unacceptable” the situation was very difficult for the funders that had been involved – and demonstrates the perils of funding without having a high level of oversight over the lawyers and the strategy. The funders would agree with the Court’s assessment that “there should be rigorous control on the amount spent, in particular, on expert evidence”. The case is a good example of how an element of overarching control exercised by a funder would have been to the benefit of the case and the Court. Mr Young was an unrepresented litigant and, as the Court stated, “It is difficult to see how 65 preliminary hearings followed by a final hearing lasting 20 days can possibly be a fair allocation of this court's limited resources”. Ultimately it was the Court that recognised that if there were not maximum figures placed on the disbursements incurred, “litigation funders will be put off supporting these cases for ever”.
The central allegation in the litigation was that Mr Young was hiding very considerable assets. His case was that he was insolvent with a deficiency of £28m. In the family courts, “it is up to the respondent to open the cupboard door and show that the cupboard is bare”. So far, so good from a litigation funding perspective because the reversal of the burden of proof can have advantages. But the Court’s assessment of Mrs Young as a witness carries with it a major red flag for a funder – “I regret to say, however, that I do not consider her evidence to be reliable. She has become utterly convinced that her husband is a liar who has hidden vast resources. She sees conspiracy everywhere”. Family cases are particularly difficult for funders precisely because the positions of the two parties are often so polarised that the funder will require an objective opinion – primarily a forensic one - and it is often impossible to have that opinion because of the lack of funding. Ironically, therefore, the funder may be placed in the position where it needs to have its own forensic opinion for its own due diligence. The need for such a significant upfront expense is often the reason that a funder cannot proceed with such cases. As the Court said in the case “I have already concluded that I cannot accept the Husband's evidence without corroboration. Equally, a significant number of the Wife's allegations have been wild. Where does that leave me?” A litigation funder would say much the same.
In the event, the Court made a lump sum award of £20m and the Court was quick to point out that Mrs Young would have difficulties enforcing the order. This points to another challenge for the funders in this case – the funders’ return was never going to be paid across at the conclusion of the main hearing. They were always going to have to chase for it. The budget for the enforcement work was going to increase the overall costs of the litigation which merely rendered the case all the more unsuitable for funding unless the funders had a very high level of confidence in the ultimate award.
The high levels of the legal costs, coupled with the uncertainty of the enforcement of any award and the manner in which the litigation was conducted, suggests that this case should not have been funded. However, without funding Mrs Young may not have achieved her judgment. The challenge for a funder and a claimant is to balance the costs of an action against being a judgment creditor. An unsatisfied judgment is of course of great value – and whilst a judgment can sometimes be monetised, it is impossible to do so if the stack of creditors already exhausts the judgment sum.