When you’ve got a disagreement with your former partner, the general rule about the costs of sorting it out is that each of you pays for yourself. This is the case whether you’re trying to resolve things through solicitors, through mediation, through collaborative practice or by using the courts, and whether the issues are about the children or about money and property. This can feel unfair, as it can mean that the party with the higher income or more assets is the one with the better access to advice. Legal aid used to be available to those on low incomes to assist with equality of provision, but other than for family mediation there is now no state provision. It is, of course, open to each former couple to agree that costs will be dealt with in a different way.
In disagreements about children, it is very rare for the court to order that one parent should pay the legal costs of the other. Only in exceptional circumstances will the court make an order that one side should pay, or make a contribution to the other’s costs. We’ve written about one or two of those before.
In financial cases, the standard practice now is for no order to be made about costs at the end of the day. It used to be the case that after the end of a final hearing, the judge could look at letters sent by each side with offers to settle, and if either side had refused a reasonable offer to settle which was in line with, or less favourable than, what the court finally ordered, they would be ordered to pay the costs of the other. However, this practice was swept away as it had a tendency to disrupt carefully-constructed judge’s orders about housing and capital in divorce cases, leading to unintended and unwanted financial consequences (including in some cases for children). Now, the rule is that there should be no order for costs unless the court considers that it is justified by one party’s conduct in the court proceedings.
A case just reported gives a good idea of what this might mean. By way of background, the husband and wife separated after a short marriage. They negotiated and finalised a consent order that separated out their assets, and that should have been the end of it. However, after the consent order had been approved the husband found out – through reading an article in the financial press – that there had been a huge injection of cash into a company owned by the wife, and she had failed to disclose this during the negotiations following their divorce.
The husband asked the court to overturn (or set aside) the consent order on the basis that the wife’s failure to disclose the change in the circumstances of her company had materially affected the settlement, as he would not have agreed to those terms if he had known. The court found that the wife’s non-disclosure was material to the terms of the settlement, and was highly critical of the wife’s failure to deal openly, promptly and comprehensively with the husband’s subsequent enquiries about the cash injection. The husband’s application to have the order set aside was successful, and there is to be a hearing next month to determine his entitlement instead.
Following on from this, the husband asked the court to order that the wife should pay his costs relating to the application to set aside the order. Amazingly, together, they have spent about £1.32m on legal fees up to this point. The judgment notes that the costs have now led to the wife having to sell her shares in the company that is the root of the current dispute.
In working out the costs issue, the court repeated that the wife and her solicitors had been at fault by repeatedly refusing to disclose the investment, and had gone so far as to be misleading. When encouraged to settle the costs element by the final hearing judge, the wife had not made an acceptable offer to do so. However, the husband’s litigation conduct had also been worthy of censure: he had disclosed confidential information from the wife’s financial disclosure to a Daily Mail journalist who had written a piece in the media about the wife which her barrister referred to as a “smear” piece, a description which the judge considered probably accurate. He said, “I am entirely persuaded that his intent towards [the wife] was not innocent: on the contrary, it was on any view spiteful and can only have been designed in some manner to harm her reputation or standing.” Her financial position now is insecure and her reputation is damaged.
Taking all of this into account, the court made an order that the wife should pay 50% of the husband’s costs on an indemnity basis (this means that more of the work done will be taken into account than normal). The order will be postponed from taking effect until after the final hearing of the husband’s application for a financial order on divorce next month.
Following on from last week’s blog, this is another warning about the perils of not disclosing your full and true financial situation when trying to reach an agreement or get an order from the court about money or property following divorce. You have to do it, or the consequences can be very serious: financially, legally, emotionally and practically. If you’ve got any questions about this or any other aspect of family law, please call us on 01223 443333 and make an appointment to see Sue, Simon, Gail, Tricia or Adam.