For Cost's Sake - Costs In Financial Remedy Cases

Sandy Hills, a solicitor in the family team, discusses the Court’s attitude on costs when parties fail to negotiate reasonably.

Under the Family Procedure Rules, there is a general rule in financial remedy proceedings that a court will not make an order for one party to pay the other’s costs. However, the court can make such an order if the conduct of a party is such that they fail to have regard to:

• any relevant practice direction,
• any open offer,
• the reasonableness of any relevant allegation,
• the necessary financial disclosure process,
• the appropriateness of their enquiries,
• any relevant conduct of a party; and
• the financial effect on the parties of any costs order.

Since May 2019, there is now also an obligation on the parties to help the court further the overriding objective (to enable the court to deal with cases justly) and imposes further obligations on the parties, such as the need to make open proposals for settlement. The court will now, therefore, take a ‘broad view of conduct’ and will often make an order for costs if either party openly refuses to ‘negotiate reasonably and responsibly’.

The courts are now standing firm on costs, with no less than 10 noted cases which involve cost orders being awarded, reduced or costs not included in matrimonial debt as a result of parties refusing or failing to openly negotiate reasonably and responsibly. The most common approach being a reduction in costs awarded in recognition of a parties’ failure to negotiate.

For example, In MB v EB [2019] EWHC 376 the court found that the husband had not conducted his case reasonably or responsibly, with his offer (made only a week before the hearing) being ‘as far wide of the mark as can be imagined’. As a result, the husband’s costs payment was limited to only cover 40% of his legal fees. The rational behind this order, per Cohen J’s judgement was that the wife should not have to bankroll the husband’s unreasonably conducted litigation.

Similarly, In OG v AG [2020] EWFC 52 the husband disclosed clear information which should have allowed the parties to negotiate. However, the wife continued to seek a disproportionate and unequal division of matrimonial property. As a result of her unreasonable stance on negotiation, the court reduced her award by £50,000. In his judgement, Mostyn J stated, ‘I hope that this decision will serve as a clear warning to all future litigants: if you do not negotiate reasonably you will be penalized in costs.’

A final example is LM v DM (Costs Ruling) [2021] EWFC 28 in which involved a wife’s application for maintenance pending suit, interim periodical payments, and a legal services payment order. Interestingly, the outcome of the applications was much closer to the wife’s position than the husbands. However, Mostyn J’s impression was that the wife had just chosen to litigate the applications as she had made no serious attempts to negotiate. Resultingly, the wife’s cost order was reduced by 50%.

All three financial remedy cases are examples where litigants had their costs orders reduced for failing to openly negotiate reasonably and responsibly. The court is remaining strong on the issue and practitioners are now advising litigants that can now expect to be penalized on costs if they fail to engage with negotiations throughout court proceedings. 

If agreements cannot be reached outside of court, it is hoped that this robust approach might discourage individuals from ‘playing games’ throughout financial remedy proceedings and urge them to negotiate towards a mutually agreeable settlement.

To talk to one of our family law advisers, please call us on 01689 887887.