The courts approach to costs in financial proceedings on divorce

8 Dec 2022 | Lisa Pepper

WC V HC – a recent costs case in financial proceedings on divorce

The recent case of WC v HC [2022] EWFC 40 is a useful reminder about the court’s approach to costs in financial cases on divorce.

At first, the wife sought no order as to costs, but the husband sought costs of £310,000 against the wife, and she then sought costs of two interlocutory (interim) hearings of £264,010.

The total legal costs of the husband and wife were £1,600,000.

In Mr Justice Peel’s Judgment which can be found here, he recapped the Court rules on costs, in the Family Proceedings Rules 2010 (Rule 28.3(6)) and supporting Practice Direction. Although the starting point is no order as to costs, there can be a departure from that, and factors to be taken into account include:

“(b) any open offer to settle made by a party;

(c) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(d) the manner in which a party has pursued or responded to the application or a particular allegation or issue;

(e) any other aspect of a party’s conduct in relation to proceedings which the court considers relevant; and

(f) the financial effect on the parties of any costs order.”

Rule 4.4 of Practice Direction 28A states that:

“The court will take a broad view of conduct for the purposes of this rule and will 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”.

The Judge described as a “powerful factor” sensible attempts to settle, or an unreasonable failure to make such attempts, in deciding a costs award.

Whilst he criticised the approach of both the husband and wife in their open negotiations, he felt that the wife must bear “greater responsibility in the light of her disproportionate needs claim… W missed the mark by a wide margin whereas H was proximate to my decision.” He added:

“The authorities make it clear that the fact of an award being based on needs does not prevent the court from making a costs award which reduces the claimant below the level of assessed needs. If that were not the case, no court could ever make a costs award in a needs case (and needs cases account for the vast bulk of litigation in this field). That cannot be right. Otherwise, the payer runs the risk of, directly or indirectly, being responsible for all costs on each side even if the payee has litigated unreasonably.”

The Wife was ordered to pay £150,000 towards the Husbands costs.

Conclusion

The moral of this case is that if you are in financial proceedings arising from your divorce, you need legal advice to make a sensible, fair, open offer to settle – ordinarily that will be required to be made three weeks after the Financial Dispute Resolution hearing. Such offer is likely to be less generous that your Without Prejudice offer that you made at the FDR hearing; I often describe an open offer to clients as: you having a good day in Court. Here, the Wife’s needs case was that she needed a second property in Switzerland and Mr Justice Peel wasn’t with her on that.

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