Case No. ZZ20D49528

solicitors in respect of unpaid bills.A total of £673,508. And this would only take him up to the conclusion of the First Appointment. 8.The wife does not give figures for categories (i), (ii) and (iv). She estimates that she will spend £96,732 on the Part III claim to the First Appointment. It is reasonable to suppose that if the husband were to be granted permission to appeal the children judgment that the wife would incur costs of the same order as those anticipated by him for categories (i) and (ii). 9.The total future costs of both parties thus range between £330,000 (if permission to appeal is refused) and about £1,135,000 (if permission to appeal is granted, the appeal allowed and the children case reheard).10.The cost of an FDR and a full trial of the Part III claim would probably not be less than £750,000 per side, given the extraordinary rate they have incurred costs at hitherto. So the total future costs are likely to be somewhere between £1.8m and £2.6m.11.Thus, we are looking at the total cost of the litigation between these parties being somewhere between £7.2 million and £8 million, of which £5.4 million has already been incurred.12.Figures like this are hard to accept even in a conflict between the uber-rich, but in this case the wife’s Form E discloses two properties in London each worth about £5 million and a sum of about £11 million in the Coutts account. There are predictable disputes as to the true beneficial ownership of one of the properties and of the sum in the Coutts account. The wife also discloses properties in Siberia worth a little over £1 million. The husband, who has next to nothing in his name, says that this is an entirely false presentation and that the wife is correctly ranked by Forbes as the 75th richest woman in Russia, with vastly valuable interests in supermarkets in Siberia. Even if this were true (and the suggestion is hotly contested) to run up in domestic litigation costs of between £7 million and £8 million is beyond nihilistic. The only word I can think of to describe it is apocalyptic. 13.It is difficult to know what to say or do when confronted with such extraordinary, self-harming conduct. Periodically the judges bemoan the heedless incurring by divorcing parties of huge costs. What was regarded in 1996 as gross costs inflation was the principal driver for the ancillary relief pilot scheme of 25 July 1996: Practice Direction [1996] 2 FLR 368. In 2014 in J v J [2014] EWHC 3654 (Fam), [2016] 1 FCR 3 I exploded with indignation at the rate and scale of costs incurred in that case and solemnly pronounced that “something must be done”. With the benefit of hindsight those costs – a total of £920,000 – now seem almost banal. The rules have been changed so that orders have to record the costs incurred and to be incurred (see FPR 9.27(7)). Para 4.4 of FPR PD 28A has been introduced to try to force parties to negotiate openly and reasonably in order to save costs. Yet costs continue to go up and up.14.In my opinion the Lord Chancellor should consider whether statutory measures could be introduced which limit the scale and rate of costs run up in these cases. Alternatively, the matter should be considered further by the Family Procedure Rule Committee. Either way, steps must be taken.Background facts15.The husband is 42 and the wife is 41. The husband is Greek but was born, and has spent much of his life, in Russia. He describes himself as a homemaker. The wife is Russian. She holds a senior position at Maria-Ra, an extremely large retail grocery business in Russia which I am told has some 1,300 outlets. The value of her interest in that business is a central dispute in these proceedings. The husband’s case is that the wife is very wealthy: he suggests that Forbes have named her as the 75th richest woman in Russia and says that, on a conservative estimate, her corporate interests are worth in excess of £300 million.16.The parties began cohabiting (according to the husband) in 1999. It is not clear whether the wife accepts that date of cohabitation. They were married in Moscow on 25 March 2006. The parties separated (according to the husband) on 14 September 2020 or (according to the wife) on 21 September 2020. The husband’s English divorce petition was issued on 21 September 2020. The wife instituted parallel divorce proceedings in Russia. Despite there being a Hemain injunction in force against the wife, on 11 March 2021 a court in Russia pronounced a divorce on the wife’s application. 17.Unsurprisingly, the husband has been highly critical of the circumstances in which the Russian divorce was obtained. In any event, on 15 June 2021 the parties agreed that, on condition the husband would not challenge the Russian divorce, the financial proceedings would be reconfigured to proceed under Part III of the Matrimonial and Family Proceedings Act 1984.18.The relationship produced two children, one aged 15 and the other aged 5. In the 18 months since September 2020, the parties have litigated furiously about their two daughters. The litigation about the children has reached a conclusion in a judgment recently given by Sir Jonathan Cohen (“the children judgment”) which:i)Declared that on 27 October 2020, when the wife issued child arrangement proceedings in Russia, the children were habitually resident in that country; and ii)Recognised a Russian child arrangements decision made on 18 March 2021 providing that the children should live with the wife and permitting her to take them to Russia.19.Subject to any appeal by the husband, that judgment concludes the dispute about the children.20.The wife remains living in a property held in her sole name located in a prestigious area of London. The wife estimates that property is worth £5.25 million. The husband is living in rented accommodation, which is being funded by the wife pursuant to an interim order at a cost of £10,000 per month, in a similarly affluent area of London. 21.The parties have exchanged Forms E. As I have referred to in passing above, their financial circumstances can be summarised in broad terms as follows:i)The property in London in which the wife and the children are living is said to have a value of £5.25 million. This property is subject to an injunction restraining the wife from dealing with it. ii)The wife owns an adjacent property which is also said to have a value of £5.25 million. The wife says that the entire purchase price of the property was funded by her brother with the intention that she hold it on bare trust for him; she therefore says that she has no beneficial interest in this property. This property is subject to an injunction in the same terms as the family home.iii)There is real property located in Russia with a combined value of approximately £1 million. I anticipate there will be arguments as to the current value and realisability of these resources in light of the current geopolitical climate. iv)The Coutts account holds approximately £11 million. v)There are various other accounts in this jurisdiction and overseas holding comparatively modest sums. vi)Both parties have various liabilities. In the context of this hearing, the most relevant liabilities are those that the parties have to (in the husband’s case) former solicitors and (in the wife’s case) current solicitors.vii)The wife has an interest in the business, as I have referred to above. It appears that the true beneficial ownership of the wife’s interest in the same is in dispute, but the wife has not fully articulated her case on this issue so far. As above, the husband suggests that the wife’s corporate interests are conservatively worth more than £300 million. 22.Following separation in September 2020, the parties have been engaged in near-constant litigation about every conceivable issue. I am told that they have spent more than 40 days of the past year in court. There have been various interlocutory skirmishes. For the purposes of this judgment, I set out only the most important events.23.On 22 January 2021, a legal services payment order was made in the husband’s favour of £750,000 to be paid at the rate of £150,000 per month. This award was designed to take the husband to the conclusion of the hearing to determine jurisdiction in the children proceedings and the divorce and proposed mediation.24.As I have noted above, on 15 June 2021 the parties agreed to reconfigure the husband’s application for financial relief so that it would proceed under Part III. The wife also gave the undertaking that is the subject of her present application. 25.On 14 October 2021, an order was made providing that the wife was released from the undertaking to enable the payment out of the Coutts account of £590,355 to the husband’s solicitors and £496,267 to the wife’s solicitors. Those funds were supposed to take the parties to the conclusion of the hearing listed before Sir Jonathan Cohen commencing on 22 November 2021 with a time estimate of seven days and the First Appointment in the Part III proceedings which, at that time, was listed on 25 November 2021.26.On 4 November 2021, the wife’s application made in advance of the hearing to be released from the undertaking was adjourned to be considered at the First Appointment. The First Appointment was adjourned from 25 November 2021 as that date fell in the middle of the hearing listed before Sir Jonathan Cohen commencing on 22 November 2021. The First Appointment has now been fixed for 28 April 2022.27.On 15 March 2022, a further order was made releasing the sum of £110,000 from the Coutts account being £90,000 to satisfy arrears of interim maintenance (including for the husband’s rent) and £20,000 to the wife for her own living expenses. Directions were made at that hearing timetabling the husband’s further application for a legal services payment order to this hearing. 28.The husband applied in Form D11 on 15 March 2022 for orders under section 22ZA of the Matrimonial Causes Act 1973, and Paragraph 1 of Schedule 1 to the Children Act 1989 that the wife pay his costs to date and on an ongoing basis. The reference to the Matrimonial Causes Act 1973 was an obvious error but that is of no consequence. In the body of the application notice, it is said that a considerable amount of work had to be undertaken that was not envisaged at the time of Holman J’s order on 14 October 2021 and that is why the husband now sought more than was then provided for. As at 23 December 2021, the husband’s solicitors’ incurred costs were said to have been £783,751.36. By 15 March 2022, some £240,211.65 was outstanding. 29.In a letter to the wife’s solicitors dated 21 March 2022, the husband’s solicitors clarified that they sought the release of funds from the Coutts account totalling some £1 million for the husband and £500,000 for the wife (a total of £1.5 million). 30.The husband applied in Form C2 dated 22 March 2022 seeking orders under Schedule 1 to the Children Act 1989, Paragraph 1, and/or in accordance with the so-called Currey principles that the wife pay his costs to date and on an ongoing basis. This application effectively mirrored the application dated 15 March 2022 in that it sought the same substantive relief albeit via a different procedural route.31.The wife applied in Form D11 dated 25 March 2022 seeking a partial release from her undertaking given on 15 June 2021 to enable the release of sums from the Coutts account to pay for both parties’ legal fees in an amount to be determined at this hearing. 32.In a letter to the husband’s solicitors also dated 25 March 2022, the wife’s solicitors explained that they proposed the release of some £200,000 to the husband and £340,000 for the wife (a total of £540,000). It was also proposed in the same letter, in respect of the Part III proceedings, that the wife be released from her undertaking in respect of the Coutts account at least for the purpose of meeting her reasonable legal costs and that each time the wife made a payment for legal costs to her solicitors that an equivalent sum be paid (plus VAT) to the husband’s solicitors.33.The wife applied in Form D11 dated 28 March 2022 seeking (i) an order vacating the hearing on 30 March 2022; and (ii) an order that the husband’s application for a legal services payment order be dismissed on the basis that £80,610 is released from the Coutts account to fund her costs to the First Appointment and £96,732 be released to the husband’s solicitors to fund his costs to the First Appointment (being the sum of £80,610 plus VAT). 34.The husband’s (now former) solicitors, Penningtons Manches Cooper, applied in Form D11 dated 28 March 2022 for an order pursuant to FPR rule 26.3 that they be removed from the court record. I granted the application on 29 March 2022.The husband’s application for a further legal services payment order35.At the outset of the hearing, I indicated to the husband that I considered his application was bound to fail in circumstances where his solicitors had come off the court record the day beforehand. Even if the husband’s solicitors had, however, remained on the court record, and so the costs schedules remained relevant, I would have had serious reservations about the relief sought, for the reasons I give below.Outstanding costs36.The husband sought an order to clear all of his outstanding costs with his solicitors. Varying figures were provided in the lead up to this hearing for the husband’s outstanding costs, but they appear to have been in the order of about £250,000. 37.It is worth repetition that: i)On 14 October 2021 an order was made providing that the wife was released from the undertaking to enable the payment out of the Coutts account of, inter alia, £590,355 to the husband’s solicitors. ii)Those funds were supposed to take the parties to the conclusion of the hearing listed before Sir Jonathan Cohen commencing on 22 November 2021 and the First Appointment in the Part III proceedings. iii)The hearing listed before Sir Jonathan Cohen has now taken place. The First Appointment in the Part III proceedings is due to take place on 28 April 2022. 38.The husband, having been provided with a substantial sum of money to take him to the conclusion of those two hearings, has therefore greatly overspent what he was awarded with the consequence that some £250,000 is outstanding.39.As a general proposition: i)A legal services payment order should only be made in respect of outstanding costs to current solicitors where, without payment, those current solicitors would likely cease acting for the party in question (i.e. so to ensure that that party can continue to access representation). ii)The position is entirely different in relation to former solicitors as they have already ceased acting for the party in question (i.e. so payment of their outstanding costs has no relevance to the question of whether a party can continue to access representation).40.The husband’s solicitors in this case came off the record the day before this hearing. They therefore now fall into the second category and so I decline to make any award in respect of their outstanding costs. They now stand as a creditor of the husband and may seek recovery of their costs in the usual way. 41.In any event, even if the husband’s solicitors had remained on the record, I doubt I would have made any substantive award in respect of their outstanding costs.42.Cobb J was presented with a similarly unhappy situation in Re Z (No 2) (Schedule 1: Further Legal Costs Funding Order; Further Interim Financial Provision) [2021] EWFC 72. Despite having made an award designed to cover the mother’s future costs, there was a significant overspend on the sums awarded. The mother returned to court seeking that the shortfall be made up by way of a further award in her favour. Cobb J stated: “[32] … I must confess to being dismayed to discover that the solicitors in this case have billed the mother sums significantly in excess of the amount which I awarded to cover the costs of the Schedule 1 litigation, and which Mostyn J ordered in relation to welfare/medical litigation; they can only have assumed that this overspend would be retrospectively authorised by the court. They were not entitled to make that assumption.[34] If I had thought that my comments in Re F and in the earlier judgment in this case would have the effect of encouraging the mother's solicitors, or indeed any solicitors in similar cases, to assume that they had carte blanche to bill their clients as they choose, I would not have made the comments, or I may have expressed myself differently. In November 2020, I set a budget within which I expected the mother's solicitors to work. I did so having regard to a number of factors including:i) the issues in the case,ii) the ball-park likely value of the claims,iii) my recognition that this is a 'big money' Schedule 1 claim,iv) the father's current and projected costs (see Theis J at [21] in PG v TW (No.1) (Child: Financial Provision: Legal Funding) [2014] 1 FLR 508), andv) the professional standing of the lawyers instructed.I cross-checked my assessment with what I considered to be reasonable and proportionate in all the circumstances. I expected – as all judges would expect – that the lawyers in the case would conscientiously work within the budget which I had set. Sadly, I sense that they have not tried very hard to do so.”43.Cobb J went on to find that additional costs had been incurred that were inevitable given the unexpected prolongation of a hearing by two days and the unnecessary involvement by the maternal grandfather in the process. Additionally, and critically, the mother’s solicitors had paid insufficient regard to the financial parameters set by the court. The mother was awarded only two-thirds of the sum sought under this head, which sum was reduced further by 30% to reflect a notional standard assessment. 44.I might have adopted a similar approach to that of Cobb J by awarding a proportion of the outstanding costs reduced by a notional standard assessment percentage. I may equally, however, have declined to make any award at all under this head on the basis that the husband, having been provided with a substantial sum to take him to the conclusion of the two hearings identified, should have budgeted with greater care than he has done so. Future costs45.In circumstances where the husband’s solicitors have come off the record, their costs schedules are now entirely redundant. It is unknown, and indeed unknowable, whether any future solicitors instructed by the husband would estimate their costs to be the same, less than, or indeed greater than his former solicitors. It would not be right to make a speculative award for a substantial sum of future costs in the absence of any evidence as to whether they are appropriate. 46.The proper course is therefore for the husband to instruct new solicitors and to make a fresh application supported by a detailed budget, as I indicated to him during the hearing. 47.In any event, even if the husband’s solicitors had remained on the record, so that their costs schedules remained relevant, I doubt whether I would have granted much, if indeed any, of the relief sought. Future children litigation costs: appeal48.The husband sought costs of £79,585 for an appeal hearing against the children judgment. 49.Those costs were entirely speculative as permission to appeal has not even yet been granted. I indicated during the hearing that I have personally never known of a case where a legal services payment order has been made to fund the costs of an application for permission to appeal or the substantive appeal to follow thereafter if permission is granted. 50.Having considered the issue further, I note Sir Andrew McFarlane’s judgment in Re A I M [2021] EWHC 303 (Fam) following an interlocutory hearing in the long running Sheikh Maktoum litigation. The President was concerned with the mother’s application for an additional payment under a legal services payment order to fund the costs of an appeal being heard in the Court of Appeal. Permission to appeal had been granted by the time of that application. 51.I am therefore prepared to accept that the jurisdiction to make such an award exists, but, in my judgment, it should be exercised extremely cautiously, particularly so in circumstances where permission to appeal has not been granted.52.I would therefore have very likely refused to make any legal services payment order to cover these costs. I may have been persuaded to adjourn the application with liberty to restore in the event the husband did secure permission to appeal.Future children litigation costs: the five-day hearing 53.The husband sought £285,095 for a five-day hearing in the event his application for permission to appeal, and the substantive appeal against, the children judgment were successful. 54.In my judgment, this limb of the husband’s application was obviously premature. Although five days have been notionally set aside in July 2022 to determine any issues in relation to the children in the event of a successful appeal, I cannot see how it can possibly be known at this stage what the precise issues at that hearing would be and therefore what the associated costs would be. 55.I would therefore have refused to make any legal services payment order to cover these costs at this stage.Part III costs: now to First Appointment56.The husband sought costs of £233,295 being the costs between this hearing and the First Appointment on 28 April 2022. 57.There are two problems with this element of the husband’s application. 58.The first is that the costs sought are, on any objective view, exorbitant. The preparation for the First Appointment would include the drafting of the standard First Appointment documents (including a questionnaire); the making of any relevant FPR Part 25 applications; and attendance at the First Appointment itself. It is hard to see how costs of this magnitude could properly be incurred in undertaking that relatively limited amount of work. 59.The second, and more fundamental issue, is one of principle. As with the outstanding costs the husband seeks to be cleared, it cannot be right when a legal services payment order has been made on the basis that it is to fund costs for a certain period for there to be an enormous overspend with the consequence that an applicant returns for a further order seeking more costs for the same period. 60.For those two reasons, I would therefore have been extremely reluctant to award much, if indeed anything, in relation this limb of the husband’s application. Costs of other proceedings61.Finally, the husband sought £75,533 to enable him to fund his defence to a claim mounted by an earlier set of solicitors in respect of unpaid bills. I cannot see how this limb of the relief sought can possibly fall within the lawful scope of a legal services payment order. In truth it is an application for an interim lump sum, a form of relief that is beyond the powers of the court. 62.I would therefore have declined to make any award in respect of these costs.