A client who is successful in most forms of civil litigation can expect to recover some if not all their costs. Since the abolition of the Calderbank offer, it has been difficult to obtain cost orders in financial remedy litigation and the general rule is that the court will not make an order requiring one party to pay the costs of the other (FPR 28.3 (5)).
However, Rule 28.3 (6) contains the exception to the general rule and provides:
The court may make an order requiring one party to pay the costs of another party at any stage of the proceedings where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them).
Rule 28.3(7) provides the matters to which the court must have regard when considering whether to make an order for costs:
1. any failure by the party to comply with FPR 2020, and any order of the court or any relevant practice direction;
2. any open offer to settle made by a party;
3. whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
4. the manner in which a party had pursued or responded to the application or a particular allegation or issue;
5. any other aspect of the party’s conduct in relation to proceedings which the court considers relevant, and
6. the financial effect on the parties of any costs orders.
Despite these provisions cost orders have remained rare, considered punitive and usually reserved for parties falling under the heading of conduct (r. 28.3(7)(5)). Further, rule 28.3(7) (6) operated as protection for any potentially paying party in a needs case. Alternatively, awards were calculated to include provision for outstanding costs as part of the needs calculation.
The rules are backed by PD 28A, para 4.4 which provided that
“The court will take a broad view of conduct for the purposes of this rule and will generally conclude that to refuse to openly 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. Where an order for costs is made at an interim stage the court will not usually allow any resulting liability to be reckoned as a debt in the computation of the assets.”
In WG v HG [2018] EWFC 84, a robust approach to costs was taken by Francis J. The W’s claim was limited to her needs. She had outstanding costs of £915,000 for which she was awarded £400,000 (on top of her housing and Duxbury needs). This meant that she had to dip into her Duxbury award (by £500,000) to meet her costs. The judge commented that “no one ought to enter litigation expecting a blank cheque”.
In MB V EB [2019] EXHC 3676 where the parties combined costs were £1.25 million. The husband was found by Cohen J to have conducted the litigation in a manner that was “irresponsible and unreasonable” by not responding to the wife’s offer or entering negotiations. Once again, the husband’s costs shortfall had to be met from his Duxbury fund, which in this case left him with little left over. He was awarded £325,000 Duxbury Fund ad W was ordered to meet £125,000 of his outstanding costs bill of £380,000.
It remains to be seen whether this will apply in cases involving children where the court has decided that a parent should have a sum of money to provide a home for children and to make a costs order or not take into account outstanding costs in the calculation will make it impossible for that parent to purchase a home.
The Family Procedure (Amendment) Rules 2020 (SI 2020/135) comes fully into force on 6 July 2020 introducing new procedural requirements.
These new rules make it more important than ever for parties to be thinking about the cost of taking litigation to the next stage and, moreover, the economic impact that is going to have on any outcome.
New rule 9.27 (Estimate of Costs) provides that as well as costs information in advance of each hearing, anticipatory costs to the next hearing must be provided.
This means that at the First Directions Appointment, in addition to costs to date, anticipatory costs to FDR must also be provided.
The costs information at the FDR must include anticipatory costs to the final hearing.
All cost estimates are to be recorded on the face of the order and any failure to comply will also be recorded on the order.
The Forms H will now include a statement of truth and confirmation that the costs have been discussed with the client.
New rule 9.27A (Open Offers) provides a duty to make open offers 21 days after the FDR and if no FDR, 42 days prior to a final hearing.
To avoid costs orders or incurring disproportionate cost (which could water down a client’s award even in a needs case), it is vital to narrow the issues and state a parties’ case as soon as possible.
This should include thinking carefully about the statement of issues and related questionnaire. It will also include managing client’s expectations to ensure the issues pursued are worth pursuing and that responses to offers are timely and reasonable.
If faced with a tactical or high conflict opponent, costs orders should be actively pursued at each stage of the proceedings to deter delay or the proceedings being used as a vehicle to perpetrate abuse.
Coincidentally, as we face a backlog of financial remedy cases following the pandemic, the new cost rules may help implement a more focused and streamlined approach to financial remedy litigation.
