How Divorce Funding Makes Justice Possible

by LitFunder on January 6, 2014

Many in the legal community are familiar with the recent settlement of the long and incredibly public divorce case Young v Young [2013] EWHC 3637 (Fam). The divorce case was one of the most public and costly in recent history, with Michelle Young’s former husband paying out a £20 million settlement in addition to £5 million of her court costs.

While the figures may seem astoundingly high – the judge described them as “eye-watering” – the £20 million settlement seems significantly less costly compared to Young’s initial claim of £400 million. The costs of the case were £6.5 million – itself an immense sum of money for a divorce case, albeit a very high profile one.

One of the most important issues of the case is the availability of the funding. Unlike many other cases, in which litigation is self-funded, Michelle Young used third party funding to cover the costs of her divorce case. Without access to third party funding, it is likely that she would not have had any access to the £6.5 million in court costs.

Ms Young certainly believed that she had achieved justice through the settlement, despite the award being less than her initial goal. She announced that she was an advocate for women in similar circumstances, claiming: “I have made a stand for women. I want to see the law changed to protect women like me with children by men who conveniently find they have no assets when they want to go off with a younger woman”.

Ms Young’s public stand for women depended on three different sources of third party funding, providing a total of more than £4 million in costs. Her case involved over 65 preliminary hearing, four expert forensic accountancy firms, over 10,000 pages of court documents, 13 legal teams, and a transcontinental search for her former husband’s hidden bank accounts and off-shore assets.

The case took over seven years to reach a settlement, with millions of pounds spent on expert evidence and forensic accounting in the process. The case’s judge strongly criticised the incredible spending of Ms Young, noting that litigation funders need to be more careful about funding divorce cases that could grow highly expensive.

His statement noted the importance of the final hearing relatively to the preliminary stages of the divorce process. He stated: “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.”

It’s important to remember that, should a case fail, third party funders lose their investment in the case. The judge specifically commented on Ms Young’s luck in receiving any third party funding, let alone the millions of pounds in third party funding that she had received.

A large number of third party funders are, as the judge noted, already concerned about funding divorce cases. The immense emotional involvement in a case like divorce adds to the risks involved for funders, alongside the great risk of a case potentially failing.

This is easy to see in Ms Young’s case, in which the first funder departed following the case, noting that it would focus on commercial cases in the future and avoid any form of divorce funding. Commercial cases, lacking the emotional involvement of a divorce, are certainly a more rational and secure area for investment.

Despite the shocking news headlines, there is little data examining the number of divorce cases that receive third party funding. In order for funders to consider a divorce case, there would certainly need to be a large settlement – very few third party funders, if any, would be interested in settlements of under £1 million.

With legal aid cuts making it an ineffective funding option and third party funders hesitant to offer funding for divorce cases, many divorcees are struggling to afford the immense costs of a difficult divorce case. Because of this, a growing number of would-be divorcees are instead turning to cheaper, simpler mediation.

The Young case is an interesting exception – an unusual case that highlights the fact that divorce funding can, albeit increasingly rarely, give access to justice.

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

This article was written by Vannin Capital. We are a flexible and innovative funding organisation, which is well capitalised and recognises the potential in the litigation funding market.

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