An Exercise in Self Destruction”: Azarmi- Movafagh v Bassiri- Dezfouli [2021] EWCA Civ 1184. A Look At Costs In Needs Cases.

This case involved a second appeal in a financial remedy case in which the costs had become so disproportionate relative to the assets that King LJ described the course of litigation as “an exercise in self destruction”.   It is a helpful guidance to how the court should consider costs in a needs case but has 2 other points of interest the first being a firm reminder of the limited role of the appellate court and the second that caution should be exercised in the use of a deferred charge in financial remedy cases.

The Background

The parties were both in their fifties.   They had one child (“T”) who was 8 years old.   The parties contracted an Islamic marriage which was followed by a civil marriage in March 2007.   The marriage ended in December 2017.   The parties were involved in bitter proceedings following their separation, including Children Act proceedings in which a finding was made that H had been violent to W even though he had been acquitted in criminal proceedings

W was a barrister, but a substantial amount of her income came from rental income she received on a number of properties that she owned prior to the marriage. W also owned the FMH, which was valued at c.£720,000 with a mortgage £370,000. The total value of the assets was £2,347,000 and £1,781,389 after deduction of the wife’s debts of £300,000 and the husband’s debts of £257,000).    W had been the main breadwinner throughout the marriage whilst H had a significant role in caring for T.   H had no assets and, at the time of proceedings, was living in a rented one-bedroom flat and receiving universal credit.

The first instance trial took place over 3 days before HHJ Robinson.   He concluded that this was a “needs” case and that H needed £400,000 to buy himself a property that would be suitable for T to come and stay in.   Additionally, the judge ordered a further £25,000 to cover the cost of a small car.   At the conclusion of the trial H’s costs were c.£187,000.   This included the financial remedy claim, the Children Act proceedings, and money spent in relation to the criminal proceedings.   H’s other debts were added to the costs of litigation leading to a total indebtedness of c.£257,000.    The Judge determined  the husband should receive a lump sum of £200,000  to meet his debts.   The wife appealed that decision.   On the first appeal, Judd J upheld the provision of a sum to meet the husband’s needs, but held that the £200,000 referable to his costs should be secured by way of a charge over any property that he acquired and would become repayable to the wife in the event of the husband’s death, remarriage or permanent cohabitation.

The Appeal

Both parties appealed and the matter came before the Court of Appeal.   The leading judgement was given by King LJ who gave a  “firm reminder” that the appeal court should only interfere with the decision of the first instance judge if they are satisfied that they were wrong and that their decision was beyond the generous ambit within which disagreement is possible.    She referred to the wisdom of Piglowska v Piglowski (itself a small money case) having stood the test of time.  King LJ stated:

“In my judgment particular caution should be exercised by any judge when hearing an appeal from an experienced specialist Judge in a case such as this where the costs have got out of control with the consequence that the payment of those costs has inevitably had a significant impact on what may otherwise have been the outcome’.

In relation to the use of deferred charges in financial remedy cases King LJ observed that Judd J had not invited Counsel to make focused submissions on such a possibility.   Had she done, noted King LJ, she would have been reminded of the court’s “ambivalence” towards the use of deferred charges.  Having referred to the classic authorities are Minton v Minton [1979] AC 593; Mesher v Mesher and Hall [1980] 1 All ER 126; Mortimer v Mortimer-Griffin [1986] 2 FLR 315; Clutton v Clutton[1991] 1 FLR 242 and Schuller v Schuller [1990] 2 FLR 193 she concluded such a charge remains a useful tool in certain limited circumstances, but only rarely will the advantages outweigh the disadvantages of making an order designed to maintain the tie between the parties long after divorce.

In relation to the proper approach to costs in a needs case she observed that although the “no order” principle is the starting, and usually the end, point, the court does retain the jurisdiction to make costs orders in financial remedy proceedings pursuant to FPR r 28.3(6) “because of the conduct of a party in relation to the proceedings (whether before or during them)”.

Following an examination of three cases where the payment of debts referable to costs has recently been considered by specialist financial remedy High Court judges at first instance (WG v HG [2018] EWFC (Fam) 84; Daga v Bangur [2019] 1 FLR 1340 and MB v EB (No 2) [2019] EWHC 3676 (Fam)  King LJ said

“All these cases turn on their own individual facts and, in my judgment, the most significant principle to be drawn from them, either individually or collectively, is that the judge at first instance has a wide discretion as to the extent to which it is appropriate to order an enhanced lump sum to a party in receipt of a needs award designed wholly or in part to satisfy their outstanding costs bills”

At Para 63 she said

“It is undoubtedly the case that there is no specific rule requiring the first instance judge to carry out an analysis by reference to the principles applicable to costs orders and in my judgment to do so would not be compatible with the wide discretion of the judge to determine the extent of a party’s needs and the extent to which they should be met. Having said that, in my judgment in cases where it is argued that an order substantially in excess of the sum required to meet a party’s assessed needs is sought in order to settle the outstanding costs (or debts referable to costs) of that party, the judge should:

  1. Consider whether in any event the case is one in which consideration should be given as to the making of an order for costs under FPR 28(6) and (7) in particular by reference to FPR PD 28 para 4.4;
  2. Whilst not carrying out a full costs analysis, the judge should have firmly in mind what the order which they propose to make by way of additional lump sum to meet a party’s costs would represent if expressed in terms of an order for costs. To do this would act as a cross check of the fairness of the proposed order.”

King LJ concluded her judgement as follows:

  1. Whilst understanding entirely the desire of Judd J to achieve a result which she believed to represent a fairer outcome than that reached by Judge Robinson, in my view the order made by Judge Robinson which allows the parties to achieve a clean break, cannot be regarded as being outside his wide discretion such that it was appropriate for his order to be altered on appeal.
  1. Further, Judd J was in error in making an order placing a charge on the husband’s property without having heard submissions on the point and in circumstances where neither party sought such an outcome. I note that Judd J said that it was likely that she would make an order not wanted by either party, but that does not mean that such an order (particularly one as here which is regarded by many as outdated and by all to be one that is only rarely used) can be made without the parties having the opportunity to make submissions in respect of the same. For the reasons set out in this judgment, the findings of domestic abuse made against the husband do not justify making what would otherwise be an inappropriate order.
  2. It follows that in my judgment the appeal against the judge’s order imposing a charge on the property the husband hopes to buy will, if my Lords agree be allowed.”