Recent case law suggests the family court is taking a more robust approach when deciding applications for costs orders in financial remedy proceedings on divorce.

Senior paralegal Mollie Mann examines the case of Helliwell v Entwistle, in which the court exercised its discretion to make a £75,000 costs order against the husband (H) in financial remedy proceedings.

Facts of the case

The case concerns H and his wife (W), who had been married for three years before deciding to divorce. Before their marriage, the parties had executed a pre-nuptial agreement (PNA). The agreement stipulated that in the event of separation, neither party would make a claim against the other, each party would retain their separate property, and their joint property would be divided equally. H benefited from legal advice when the PNA was executed and fully understood its implications.

At the time of separation, W possessed significant assets worth approximately £50m to £70m, which had been gifted to her by her father. H, via his solicitors, made a claim for £10m against these assets. In his judgment, Mr Justice Francis highlighted the absurdity of this figure where the PNA, signed and agreed to by H, clearly stipulated that he would have no claim. The extravagance of the claim was further shown when, following legal advice, H reduced his claim by 75% to £2.5m.

Following a private Financial Dispute Resolution, W offered to settle the case for £500,000, which Mr Justice Francis noted was a “spot-on offer”. Despite this, H rejected the proposal and responded with a reduced counteroffer of £2.5m. W subsequently increased her offer to £800,000, which was again rejected by H. By the end of the proceedings, significant costs of £600,000 and £450,000 had been accrued by W and H, respectively. Mr Justice Francis awarded H £400,000 and pointed out that due to the litigation, H was “actually worse off now than he would have been if he never brought a claim”.

The judge found that H’s rejection of W’s initial and subsequent higher offer was unreasonable and ordered him to pay £75,000 towards W’s costs. Mr Justice Francis commented that “everything that has been spent since (W’s initial) offer was made is a consequence of his refusal to accept that offer”. The judge sent a clear message to both parties and practitioners that the court will no longer shy away from making costs orders.

A balancing act

This decision demonstrates how the court aims to balance the financial obligations between parties and fairness in the litigation process when making costs orders.

On the one hand, the general rule in financial remedy proceedings is that the court will not make an order requiring one party to pay the costs of another party. The Family Procedure Rules also require the court to have regard to the financial effect on a party of any costs order. Here, Mr Justice Francis set out that W’s costs claim of £150,000 out of H’s award of £400,000, along with his outstanding costs at the time of the judgment of £253,000, would mean that “anything (he) ordered H to pay of W’s costs is taking it away from his needs assessment”.

However, the family court will also consider the parties’ litigation conduct when determining these applications. For example, a judge must consider how each party sought to assist the court in dealing with the case justly, taking into account the nature and complexity of the issues. Mr Justice Francis said in exercising his discretion to order H to pay £75,000 in costs: “It is my assessment of a figure that will hurt him, not in a punishment sense, but in the sense that … judges in this Division have to send out clear messages to those that are advising people in this field of work that you cannot just litigate on a blank cheque, or on the basis that someone else is going to underwrite your fees.”

Non-court dispute resolution

The court’s increasingly robust approach towards costs orders is also interesting in the context of the new FPR rules, which require parties to attempt non-court dispute resolution (NCDR). These rules require both parties to engage in NCDR and are designed to encourage the resolution of disputes outside of the court. Failure to evidence this engagement with NCDR will place a party at risk of a costs order being made against them.

Partner Sophie Chapman says: “While we are yet to see the full impact of the new FPR rules in practice, the court’s departure from the usual ‘no order as to costs’ principle in this case shows increasing willingness to make these orders. Practitioners should be alive to the potential for costs applications in their cases, with both the new FPR rules and recent case law demonstrating the family court’s increasing willingness to make these orders.”