Claiming Costs in Financial Remedy Proceedings
April 7, 2021
If you find yourself litigating about the financial settlement following your divorce the general rule within those proceedings (known as Financial Remedy Proceedings) is that the Court will not make an Order requiring one party to pay the legal costs of the other party.
The Court’s unwillingness to make a Costs Order within Financial Remedy Proceedings (please note that the cost rules in relation to maintenance pending suit, interim periodical payments and an order for payment in respect of legal services or any other form of ‘interim’ order are not included in the general rule above) can be frustrating to say the least. There are cases where one party’s behaviour, whether that is filing documents late, missing court hearings or unreasonably and overzealously litigating a certain point can all serve to increase the legal costs of the other person.
With the amendments made to the Court Rules (Family Procedure Rules) however there may be a greater willingness by the courts to make costs orders against one party where appropriate. The Family Procedure Rules provide that the Court can make an Order requiring one party to pay the costs of another party at any stage in the court proceedings and where it considers it appropriate to do so because of the conduct of a party in relation to those proceedings (whether before or during the proceedings). In deciding whether or not to make a Costs Order, the Court is required to have regard to the following:
- Any failure by a party to comply with the Family Procedure Rules.
- Any Order of the Court or any Practice Direction which the Court considers relevant.
- Any open offer to settle made by a party.
- Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue.
- The manner in which a party has pursued or responded to the application or a particular allegation or issues.
- Any other aspect of the parties conduct in relation to proceedings which the court considers relevant.
- The financial effect on the parties of any Costs Order.
The Court will now take a broader view of conduct when interpreting the above and will generally conclude that to refuse to openly negotiate reasonably and responsibly will amount to conduct in respect of which the Court can consider making an Order for costs. This is an important change as regrettably there are those cases where one party very reasonably and responsibly makes a sensible settlement proposal early on in the negotiations or early on in the court proceedings but the other party either fails to put forward any proposals whatsoever or simply maintaining an unreasonable and unrealistic position so that the case proceeds to court.
The effect of the new Rules put increased pressure on parties and their representatives to negotiate openly and reasonably as confirmed by a leading Judge in recent case law. Mr Justice Mostyn warned that ‘it is important that I annunciate this principle loud and clear; if, once the financial landscape is clear, you do not openly negotiate reasonably, then you will likely suffer a penalty in costs. This applies whether the case is big or small, or whether it is being decided by reference to needs or sharing’.
Once therefore the ‘financial landscape’ is clear (i.e. you have a good understanding of the other person’s financial position and you have for example exchanged some form of financial disclosure), proposals for settlement should be formulated and put forward to the other party.
If you are concerned that the other party may not be negotiating openly and reasonably and is for example not forthcoming with any sensible offers then you should put them on notice that you reserve the right to seek an Order for Costs against them and where appropriate (for example if there is a forthcoming court hearing) prepare and file a Statement of Costs on Form N260 which should then be served on the other party or their legal representative.
Dominic Lee
John Hooper & Co
