Financial proceedings on divorce – recent case argument over assets held by wider family25 Mar 2019
The recent case of Fisher Meredith -v- JH and PH (Financial Remedy: Appeal: Wasted Costs)  EWHC 408 concerns the issue of when it might be appropriate to join third parties (such as family members) to financial proceedings on divorce and whose responsibility it is to make the application to the court for the third party to be joined to the proceedings.
The facts of the case were that the wife applied to the court to set aside a transaction made by her husband shortly before the parties separated which involved the transfer of shares from his name into that of his aunt. There was a dispute about who owned those shares and where the beneficial interest lay. The matter proceeded to final hearing but at no point was the aunt or her husband (who was also implicated) joined to the proceedings. Just before the final hearing, the aunt served voluminous evidence and alleged that in accordance with the case of TL -v- ML, a wasted costs order ought to be made against the wife’s solicitors for not joining the third parties, which meant that the matter could not properly be resolved. On appeal, Mostyn J. held that the wasted costs order be overturned on the basis that there was no rule specifying whose responsibility it was to join the third parties. He said that it would depend on the particular case but laid out some general guidance.
He reiterated the guidelines in TL -v- ML which state that where there is a dispute about property between a spouse and a third party in financial proceedings:
the third party should be joined at the earliest opportunity;
directions should be given for the issue to be fully pleaded in points of claim and points of defence;
separate witness statements should be directed; and
disputes should be heard separately as a preliminary issue before the FDR.
The Judge also pointed out that in order to obtain a wasted costs order it was necessary to show:
that the lawyer failed to act within the competence reasonably expected of ordinary members of the profession;
there must be a causal link between the lawyer’s conduct and the wasted costs;
the court retains the residual discretion as to whether or not to make a wasted costs order; and
where there are issues of legal professional privilege, the court should also take this into account.
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