Costs and proceedings

Recent changes to the Family Procedure Rules (FPR) 2010 and views expressed from the bench mean that there has been an increased emphasis upon parties making open offers and seeking to narrow the issues in financial remedy proceedings. Not since the long-lamented demise of Calderbank letters have there been so many cases with clear warnings about costs. 

Family Procedure Rules 2010

The most significant change is the introduction of rule 9.27A, which introduces the obligation to make open proposals within 21 days of the Financial Dispute Resolution hearing (FDR). Where no FDR has taken place, the open proposals must be submitted either by such date as the court directs or not less than 42 days before the date of the final hearing. This brings forward significantly the previous deadline, which was 14 days before the final hearing for the applicant and seven days thereafter for the respondent.

President’s Road Ahead

The Family Division president produced The Road Ahead document on 9 June. It largely deals with the impact of Covid-19 on the Family Court, but also emphasises the overriding objective of the court set out at rule 1.1 of the FPR. The document contains what is called the ‘Covid Case Management Checklist’ which emphasises the importance of narrowing the issues of a case. That includes focusing on issues which can be agreed and whether it is necessary for the court to determine the remaining issues. 

Recent costs judgments

Mostyn J’s decision in OG v AG [2020] EWFC 52 is useful from a number of perspectives. It is one of the first judgments to deal with the impact on a business of both Covid-19 and a no-deal Brexit. On that issue Mostyn J applied a 10% discount to the trading value of the business. In addition, Mostyn J also helpfully lists four scenarios in which conduct will be relevant within financial remedy proceedings. They are: personal misconduct (which he describes as being rare); add-back cases; litigation misconduct (which is addressed in costs); and failure to provide full and frank disclosure which will lead to adverse inferences being drawn.

The parties had incurred approximately £1m in costs. Although Mostyn J expressed the view that the costs figure was likely to be referable to the husband’s litigation conduct, he also noted that the wife had failed to negotiate openly and reasonably once the financial position was clear. He stated: ‘It is important that I enunciate this principle loud and clear: if, once the financial landscape is clear, you do not negotiate reasonably, then you will likely suffer a penalty in costs. This applies whether the case is big or small, or whether it has been decided by reference to needs or sharing.’

In RM v TM [2020] EWFC 41, Robert Peel QC, sitting with a deputy High Court judge, was critical of the parties’ costs which amounted to just under £600,000. This was not, however, a big money case. The only liquid asset of substance was the proceeds of the sale of a family home amounting to £630,000. Peel concluded his judgment with: ‘This self-defeating litigation is now over. It is scarcely credible that at the end of it all, they emerge with about £5,000 each of liquid assets, having incurred nearly £600,000 of costs, but such is the reality. There may be worse examples of disproportionate and ill-judged litigation, but none spring readily to mind.’

Another judgment of Mostyn J, JB v DB [2020] EWHC 2301 (Fam), concerned the implementation of a consent order. With a view to resolving the issues between the parties, a meeting had been agreed to take place on 22 May. The afternoon before it was due to take place the meeting was cancelled by the husband, due to what his solicitors described as a funding issue. Mostyn J commented that this was surprising in view of the costs the husband had incurred to date and that he was able to fund further fees.

Mostyn J described the husband’s approach as being cavalier, and although he questioned whether the meeting would have achieved a successful conclusion of the case, he expressed the view that there was ‘certainly the obligation to engage properly in negotiations to see if there is a way around what had now emerged as a very significant impediment should have been taken very seriously indeed, and that in circumstances where the husband has woefully refused to do so he must face a sanction of costs which I assess in the sum of £15,000’.

Finally, in MB v EB [2019] EWHC 3676 (FAM), Cohen J was critical of the way the husband had conducted his case. The wife was wealthy but the husband was described as a ‘struggling artist’. The husband had incurred approximately £650,000 in costs which were described as being wholly disproportionate to what was in issue between the parties. Cohen J made specific reference to paragraph 4.4 of practice direction 28A of the FPR, which had been amended in May 2019. The revised rule, which is cited in the judgment, includes the following: ‘The court will take a broad view of conduct for the purposes of this rule, and would generally conclude that to refuse openly to negotiate reasonably and responsibly will amount to conduct in respect of which the court will consider making an order for costs. This includes in a “needs” case where the applicant litigates unreasonably resulting in the costs incurred by each party becoming disproportionate to the award made by the court.’

Although Cohen J found the wife’s proposals to be insufficient, he stated that if the husband had made a sensible (or indeed any) response, then the matter would have been capable of a quick resolution. It was only 18 months later that the husband made an offer described by the judge as being ‘massively overcooked’.

Andrew Newbury is a partner at Hall Brown Family Law