The costs conundrum

The costs conundrum

Graham Coy, partner at Wilsons LLP, considers the basic principles of costs, developments in case law, amendments to the Family Procedure Rules 2010 (FPR 2010) and lessons for family lawyers.

Legal fees can be a client's nightmare, but they are a family lawyer's life blood. Our clients will be concerned as to whether they will be able to recover their costs or liable to pay the costs of the other party. There are differences in approach depending on whether proceedings are for financial remedies or private law children orders, but the underlying principles are very similar.

Our clients need to know that costs orders are unlikely if proceedings are conducted sensibly and reasonably, whereas if one party or another is unrealistic, or even dishonest, they can expect an order for costs to be made.

Financial remedies

In proceedings for financial remedies, the starting point is that no order for costs will be made (FPR 2010, SI 2010/2955, 28.3(5)) (subject to exceptions). That general rule can be disregarded by the court at any stage in the proceedings in the light of (per (FPR 2010, SI 2010/2955, 28.3(7)):

  • any failure to comply with FPR 2010, court orders or relevant Practice Directions
  • open offers to settle
  • whether it was reasonable or not for one party to raise, pursue or contest a particular allegation or issue
  • the manner in which a party has pursued or responded to an application or to a particular allegation or issue
  • any other aspect of conduct in the proceedings which the court considers relevant
  • the financial effect on the parties of a costs order being made.

The discretion is therefore very wide, but in practice the discretion is currently not often used.

Some amendments came into force on 6 July 2020 as a result of the Family Procedure (Amendment) Rules 2020, SI 2020/135. The first was the introduction of revised Forms H and H1 requiring parties not only to record historic costs but also to estimate costs up to the next stage of the proceedings, for example up to the financial dispute resolution (FDR) appointment or up to the final hearing (per FPR 2010, SI 2010/2955, 9.27(2)-(4) as amended).

Second, after an unsuccessful FDR appointment, each party now must file and serve open proposals for settlement either by such date as the court directs, or where no such direction is made within 21 days after the date of the FDR appointment (FPR 2010, SI 2010/2955, 9.27A). This in itself is a much stricter requirement than previously, where open proposals were not required until the eve of trial by which time most costs had already been incurred.

So far as the judicial approach is concerned, there has been a noticeable hardening in approach so that dishonesty, unreasonable and unjustified conduct of financial remedy proceedings may well result in significant penalties with regard to costs.

In OG v AG [2020] EWFC 52, [2021] 1 FLR 1105, Mostyn J referred to the husband's conduct as being ‘…not only dishonest but futile and frankly inexplicable’ (para [27]). Costs exceeded £1m and Mostyn J concluded that of that sum a large amount was referable to the husband's conduct which led to a significant order costs being made against him. He was also critical of the wife's behaviour who had failed, in his judgement, to negotiate reasonably and called her stance unreasonable. In his judgment, Mostyn J recorded that ‘…if, once the financial landscape is clear, you do not openly negotiate reasonably then you will likely suffer a penalty in costs’ (para [31]).

What can happen when one or both parties conduct proceedings unreasonably was also highlighted in the decision in M v M (Financial Remedies) [2020] EWFC 41, [2020] 2 FLR 1048, where Robert Pell QC, sitting as a deputy High Court judge, was critical of both parties whose total costs amounted to just under £600,000. The only significant asset in the case was the proceeds of sale of the former family home which amounted to £630,000. The judgment records (at para [98]) that ‘[t]his self-defeating litigation is now over. It is scarcely credible that at the end of it all, they emerge with about £5,000 each of liquid assets, having incurred nearly £600,000 of costs, but such is the reality. There may be worse examples of disproportionate and ill-judged litigation, but none spring readily to mind.’

Private children proceedings

In contrast, orders for costs in private law children proceedings are less common and generally orders for costs are not made for a number of reasons, including that:

  • to do so may deter one parent or another from raising perfectly legitimate and justifiable concerns about the welfare of their children
  • making an order for costs may well make the relationship between parents even more difficult, and
  • in many cases, the funds available to meet the needs of the family will be reduced 

That does not mean that if one person behaves unreasonably in proceedings concerning children, they will not face penalties in relation to the costs that they have caused the other parent to incur.

Orders for costs may be made where:

  • the court concludes that one party raised issues unreasonably
  • there was no evidence to substantiate allegations (for example, physical or sexual abuse), or
  • a party has ignored the advice of CAFCASS or experts entirely without foundation

Conclusions

These developments show how clients can incur for themselves and for others a very considerable amounts of costs which are simply unjustifiable. In addition, judges are showing an increasing intolerance to such behaviour and a greater willingness to penalise those who they may consider to be responsible. What, therefore, are the lessons for us as family lawyers and what could we do better?

First, we need to ask ourselves in every single case whether we are providing value for money.

Clients are becoming much more aware of the rights they have and are much more willing to contest unreasonable amounts of costs and make complaints.

Second, we need to ‘triage’ all of our clients at the very outset and guide them to the most appropriate means of resolution. There are an ever-growing number of dispute resolution options. The main options remain:

  • negotiations between solicitors (and where the solicitors know and respect each other this can be very effective)
  • mediation
  • collaboration
  • early neutral evaluation, and
  • arbitration

The vast majority of clients do not want to go to court. They know that it is going to be costly, lengthy and they are unlikely to achieve all they want. As family practitioners we need to accept that court proceedings should be the exception not the rule.

The introduction of collaborative law was a success, but unfortunately that has not been maintained. At a time when the courts are at a breaking point, delays are getting worse and costs are increasing, collaboration ought to figure much more prominently on our list of priorities when discussing options with clients.

Both collaboration and mediation have developed enormously over the last 18 months or so, with remote meetings taking place, and insofar as mediation is concerned there is a growing trend to include lawyers in the mediation process. Family arbitration has been slow to take off in spite of the overwhelming advantages of speed, choosing the most appropriate arbitrator for the particular case, flexibility and saving costs.

If, at initial meetings, we as family practitioners discuss all the available options with our clients and make realistic suggestions as to what is going to be most appropriate for them and their partner and their children, it is more likely than not that they will accept that advice. It will not only help them find the most appropriate solution as quickly as possible, but also save in considerable expenditure in the way of legal costs.

Finally, we need to be much more aware than we sometimes are of clients' emotions: their anger, hurt, loss, fear of what lies ahead and suspicions (or even obsessions at times) for example that the other party has much greater wealth than they have disclosed. We do them and ourselves no favours allowing our clients to incur costs that they either cannot afford or should not be incurring. If we do not listen to what our clients are saying, and to what judges are saying, it is more likely than not that we will face increasing an clamour for fixed costs (no matter how much time and work is involved in a case), and ever increasing competition from outside the legal profession.

Graham Coy is a partner at Wilsons LLP

 

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