Readers are referred to the article by Melanie McIntosh “Financial Remedy: Snapshot Eclectic Update” drawing attention to the Statement on the Efficient Conduct of Financial Remedy Proceedings given The Hon. Mr. Justice Mostyn has again expressed exasperation due to the “utter disregard” for guidance, procedure and orders in the family courts roundly critising the case preparation in the recent case of Xanthopoulos v Rakshina [2022] EWFC 30 which is worth repeating in full here because there are likely to be stringent penalties for failure to comply, potentially including reports to regulatory bodies for professional misconduct as follows: Mr. Justice Mostyn held [2] that “the preparation for this hearing can only be described as shocking:
i) Paragraph 15 of the High Court Statement of Efficient Conduct of Financial Remedy Proceedings provides that skeleton arguments for interim hearings must not exceed 10 pages. The husband’s skeleton argument ran to 24 pages and the wife’s skeleton argument ran to 14 pages.
ii) Skeleton arguments were due by 11.00 am on the working day before this hearing. Both parties filed late. The husband’s skeleton argument was filed only on the morning of the hearing. The wife’s skeleton argument was filed at around 17.30 on the day before the hearing.
iii) Paragraph 18 of Sir Johnathan Cohen’s order dated 15 March 2022 provided that the husband’s statement was to be filed and served by 12.00 on 21 March 2022. The husband’s statement is dated 22 March 2022. I do not know when it was filed, but I am told by the wife’s representatives that it was only served on her on 24 March 2022.
iv) Paragraph 20 of the same order provided that the parties’ statements to be filed and served for this hearing would be limited to 6 pages each with any exhibit accompanying the same limited to 10 pages (a total of 16 pages). The husband’s statement ran to 11 pages and its exhibit ran to 15 pages (a total of 26 pages). The wife’s statement also ran to 11 pages and its exhibit ran to 28 pages (a total of 39 pages).
v) FPR PD 27A paragraph 5.1 provides that unless the court has specifically directed otherwise that there shall be one bundle limited to 350 pages of text. I have been provided with four bundles respectively containing 579 pages, 666 pages, and 354 pages (a total of 1,878 pages).
The learned Judge held further [3] that the utter disregard for the relevant guidance,
procedure, and indeed orders was totally unacceptable. He indicated that he struggled to understand the mentality of litigants and their advisors who still seem to think that guidance, procedure and orders can be blithely ignored. He referred to Re W (a child) (Adoption Order: Leave to oppose) [2013] EWCA Civ 1177, [2014] 1 WLR 1993, paras 50 -51, where Sir James Mumby P, identified “a deeply rooted culture in the family courts which, however long established, will no longer be tolerated”, and continued:
“I refer to the slapdash, lackadaisical, and on occasions almost contumelious attitude which still far too frequently characterises the response to orders made by family courts. There is simply no excuse for this. Orders, including interlocutory orders, must be obeyed, and complied with to the letter and on time. Too often they are not. They are not preferences, requests, or mere indications; they are orders.”
He pointed out [3] that Re W was nine years ago but nothing seems to change. He referred to the very recent decision of WC v HC (Financial Remedies Agreements) [2022] EWFC 22 where Peel J “astutely pointed out” at [1(i)]:
“Court Orders, Practice Directions and Statements of Efficient Conduct are there to be complied with, not ignored. The purpose of the restriction on statement length is partly to focus the parties’ minds on relevant evidence, and partly to ensure a level playing field. Why is it fair for the complying party to be left with the feeling that the non-complying party has been able to adduce more evidence to his/her apparent advantage ?”
Mostyn J indicated [3] that it should be understood that the deliberate flouting of orders, guidance and procedure is a form of forensic cheating, and should be treated as such. Advisers should clearly understand that such non-compliance may well be regarded by the courts as professional misconduct leading to a report to their regulatory body. [Emphasis added]
Costs
Mostyn J [4] was also highly critical in Xanthopoulos of the “self-harming” amount of costs incurred and referred to Peel J’s decision in Crowther v Crowther & Others (Financial Remedies) [2021] EWFC 88 where he described the litigation as being nihilistic where the parties had run up costs of over £2.3m and had argued “about almost every imaginable issue, no matter how trivial”.
Whilst these are “big money cases” and the parties’ combined costs in Xanthopoulos were estimated to be around £8 million, it is an issue of proportionality applicable to every case and with assets of around £16 million and despite the husband alleging undisclosed assets in Siberia Mostyn J expressed the view that even if this were true, to run up this level of costs in domestic litigation is “beyond nihilistic”. The only word he could think of to describe it was “apocalyptic” [12]. And further at [13] & [14] he said:
“It is difficult to know what to say or do when confronted with such extra ordinary, self-harming conduct. Periodically the judges bemoan the heedless incurring by divorcing parties of huge costs. What was regarded in 1996 as gross costs inflation was the principal driver for the ancillary relief pilot scheme of 25 July 1996: Practice Direction [1996] 2 FLR 368. In 2014 in J v J [2014] EWHC 3654 (Fam), [2016] 1 FCR 3 I exploded with indignation at the rate and scale of costs incurred in that case and solemnly pronounced that “something must be done”. With the benefit of hindsight these costs – a total of £920,000 – now seem almost banal. The rules have been changed so that orders have to record the costs incurred and to be incurred (see FPR 9.27(7)). Para 4.4 of FPR PD 28A has been introduced to try and force parties to negotiate openly and reasonably to save costs (and readers are of reminded OG v AG [2020] EWFC 52, [2021] 1 FLR 1105 where Mostyn penalised the parties for failing to negotiate reasonably). Yet costs continue to go up.”
He indicated [14] that in his opinion “the Lord Chancellor should consider whether statutory measures could be introduced which limit the scale and rate of costs run up in these cases. Alternatively, the matter should be considered further by the Family Procedure Rule Committee. Either way, steps must be taken.”
The husband’s application for a further legal services payment order was refused [35] on the grounds that as a general proposition [39]:
i) A legal services payment order should only be made in respect of outstanding costs to current solicitors where, without payment, those current solicitors would likely cease acting for the party in question (i.e., so to ensure that that party can continue to access representation).
ii) The position in entirely different in relation to former solicitors as they have already ceased acting for the party in question (i.e., so payment of their outstanding costs has no relevance to the question of whether a party can continue to access representation).
He found [40] that the husband’s solicitors in this case came off the record the day before the hearing and therefore fell into the second category and were held now to stand as a creditor to the husband.
He further indicated [41] that he doubted that even if the husband’s previous solicitors had remained on record he would have made any substantive award in respect of their outstanding costs where the husband had previously been provided with a substantial sum of money and was therefore considered by the Judge to have overspent.
The learned Judge referred [42] to the decision of Cobb J in Re Z (No 2) (Schedule 1: Further Legal Costs Funding Order; Further Interim Financial Provision) [2021] EWFC 72 where the Judge in that case was presented with a “similarly unhappy situation” where despite having made an award designed to cover the mother’s future costs there was a significant overspend. The mother returned to court seeking the shortfall to be made up by way of a further award. Cobb J stated:
“[32] …I must confess to being dismayed to discover that the solicitors in this case have billed the mother significant sums in excess the amount which I awarded .. they can only have assumed that this overspend would be retrospectively authorized by the court. They were not entitled to make that assumption.
[34] … In November 2020, I set a budget within which I expected the mother’s solicitors to work. I did so having regard to a number of factors including:
i) the issues in the case,
ii) the ballpark likely value of the claim,
iii) My recognition that this is a big money Schedule 1 claim,
iv) The father’s current and projected costs (see Theis J at [21] in PG v TW (No 1) (Child: Financial Provision : Legal Funding [2014] 1 FLR 508) and
v) The professional standing of the lawyers instructed.
I cross checked my assessment with what I considered to be reasonable and proportionate in all the circumstances. I expected – as all judges would expect- that the lawyers in the case would conscientiously work within the budget which I had set. Sadly, I sense that they have not tried very hard to do so.”
Cobb J went on to hold that in Re Z due to a finding that additional costs had been incurred due to an unexpected prolongation of a hearing by 2 days, the mother was awarded two thirds of the sum sought which was reduced by a further 30% to reflect a notional standard assessment.
Mostyn J stated [44] that he might have adopted a similar approach by awarding a proportion of the outstanding costs reduced by a notional standard assessment percentage. Equally, he indicated he may have declined to make any award at all, the husband having been provided with a substantial sum to take him to the conclusion of the two hearings identified and should have budgeted with greater care than he had done so.
He found [45] on the basis the husband’s solicitors had come off record that their cost schedules were redundant, and it would not be appropriate to make a speculative award. Additionally, in respect of future litigation costs, the judge indicated that it was unlikely that he would have granted much if any of the relief sought even if the solicitors had remained on record (i) on the basis future costs of an appeal were entirely speculative as permission to appeal had not yet been granted, costs to cover a 5 day hearing in the event his application for permission to appeal and the substantive appeal were successful were “obviously premature” and (ii) the costs of £233,295 to cover the period from the current hearing to the First Appointment (12 April – 28 April) were “on any objective view, exorbitant” .
As a matter of principle, he found [59] that it could not be right when a legal services payment order has been made on the basis that it is to fund costs for a certain period for there to be an enormous overspend with consequences that an applicant returns for a further order seeking more costs for the same period.
In conclusion, in a system which is overburdened, litigants and practitioners are reminded of Part 1 FPR 2010 of The Overriding Objective and have been warned to litigate proportionately and comply with procedural rules and orders or face increasingly stringent consequences.
