Posted by Joanna Toloczko, Partner
Divorcing? Act reasonably or pay your ex’s costs
Divorcing couples, take notice: Family Partner Joanna Toloczko examines the changing rules and the courts’ attitude to costs awards in financial remedy cases.
In a financial remedy case, your main priorities will be to preserve your wealth as far as you are able and to ensure that you have a suitable home and sufficient income to meet your needs. However, it is important to consider the risk of having to pay your ex’s costs, in full or in part, if you fail to negotiate reasonably and realistically.
For many years, the usual costs order made at the end of divorce financial remedy cases was “No order as to costs” – which means that each party paid their own legal costs.
This all changed in spring 2019 when the relevant rules were amended.
What do the new rules say?
The new rules mean that the court will take a broad view of conduct when considering costs and will conclude that a failure to openly negotiate reasonably and responsibly will generally amount to conduct in respect of which the court will consider making an order for costs.
More recent changes also imposed an obligation on the parties to make an open (as opposed to without prejudice) offer within 21 days of a Financial Dispute Resolution hearing or by such other date as the court may direct.
An open offer is an offer that can be referred to before the court, whereas a without prejudice offer is one that cannot be referred to at a final hearing.
As these are relatively new changes to the law, legal practitioners have been interested to see how readily the family court would be prepared to order one party to pay the costs of the other, particularly in cases where the guiding principle behind the main financial decision was to meet the needs of the less financially secure party. In these cases, a costs award would presumably reduce the pot to a level which may not be sufficient to meet that party’s needs.
Lessons from recent case law
A review of the recent case law has shown that the court is willing to take a robust approach where it feels that a party has behaved unreasonably and persisted in pursuing an argument that was doomed to failure.
In the 2020 case of OG v AG, a costs order was made for a refusal to negotiate reasonably despite the other party’s previous non-disclosure and dishonesty. The judge declared:
‘It is important that I enunciate 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’
The 2021 case of AA v AB concerned a couple of modest means and was determined on a “needs” basis. Both parties had spent “ruinous” amounts on their legal costs. The husband sought an order that the wife should pay his legal costs from the date of a previous agreement. The judge acknowledged that the husband’s litigation conduct had been unacceptable at times, but felt that on balance the culpability for costs lay mainly with the wife due to her failure to negotiate and her focus on the issue of the pets. As a result, he ordered the wife to pay a contribution of £10,000 towards the husband’s costs.
A straw poll of solicitors attending this year’s Resolution Conference found that the majority felt that the cases on costs were the most significant family law cases in the last twelve months.
The message is clear: the importance of engaging in early and reasonable negotiations cannot be over-emphasised.
The message is clear: engage with your ex and their solicitors early, and be reasonable – or be prepared to pay at least some of their legal costs.
For advice on divorce and financial remedies contact Joanna Toloczko on:
020 7842 1515 Email us
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