The default position in family law proceedings has, historically, been for the judge to make no order as to costs. However, a recent judgment highlights an increasing tendency for judges to depart from this.

Following his decision in HO v TL [2023] EWFC 215, Mr Justice Peel made an adverse costs order against the wife in the proceedings in a judgment that contained a warning to lawyers. Trainee solicitor Grace Horvath-Franco reviews the related costs judgment of HO v TL (Costs) [2023] EWFC 216.

Background

The financial remedy proceedings involved parties with a total combined wealth of approximately £22.4m. By the time of the final hearing, the parties’ combined legal fees were £1.55m. During the proceedings, which commenced in September 2021, the parties argued over the valuation of their hotel business and the husband’s trust interests and whether both had become marital assets that should be subject to the ‘sharing principle’ (ie the starting point is equal division upon divorce of a couple’s marital assets).

The wife initially sought £17.2m and only reduced her open offer (to £12.3m) nine months later, by which point the final hearing was two months away. She then decreased it again to £10.9m a month before the final hearing. In contrast, the husband’s offer was £5.9m, down from his initial position of £6.5m. After considered evaluation (including finding the wife’s claim for three properties to be “manifestly excessive”), the judge awarded the wife £7.75m based on her needs.

Costs order

In his costs judgment, Mr Justice Peel criticised the approach of both parties, saying:

• The husband had been “evasive and legalistic” about his trust interests, which took up a substantial amount of time and expense. He added that ordinarily, this would justify an order for costs against him.
• The wife made personal criticism of the husband in her filed documentation despite not formally raising conduct as an issue. The judge was unimpressed by the wife’s comments, particularly given they had “absolutely no relevance to the outcome of the financial remedy proceedings”. He stated that this behaviour ordinarily might justify a costs order despite the fact it may not have added significantly to costs in the case.
• Most importantly, the wife maintained an unrealistic, speculative and unreasonable approach, having not modified her original offer of £17.2m for months, even though she was well-informed about the resources in the case (later found to total £22.4m) and knew that her position (amounting to a claim for 76.6% of the assets) was unsustainable.

Mr Justice Peel deemed that the wife’s failure to negotiate reasonably was unacceptable, and he ordered her to pay £100,000 towards the husband’s costs, notwithstanding that her award had been determined on the basis of her needs.

In his judgment, Mr Justice Peel also gave a warning to lawyers, stressing that they have a duty to advise clients clearly as regards to costs risks. He said the courts are increasingly willing to depart from the starting point of no order as to costs “so as to do justice to the party who has been put to unnecessary costs by the other party’s overstated proposals”.

Conclusion

Partner Sophie Chapman says: “Mr Justice Peel’s judgment is a clear reminder, once more, that the concept of no order as to costs in financial remedy proceedings may well be departed from if parties fail to negotiate reasonably on an open basis.

“This judgment also reminds practitioners of their duty to warn clients to be realistic when making an open offer. Where it is clear a proposal is overly ambitious, they must warn clients about the high likelihood of an adverse costs order being made against them.”

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