This months case summary comes from Lexis PSL.
P v P (treatment of costs in sharing cases) [2022] EWFC 158
https://www.bailii.org/ew/cases/EWFC/HCJ/2022/158.html
Background
The judgement was solely concerned with several issues of legal costs in a wholly sharing case, following Judgement given in a financial remedy case. The husband had lawyers from the beginning. The wife had instructed well regarded central London lawyers. Total costs were in excess of £150,000, a large sum when the asset base gross of legal costs was less than £1m, and those costs came out of the marital pot, diminishing what would otherwise be shared equally. While neither party raised costs, in fairness according to law and in circumstances, the court considered how to deal with the outstanding costs liability of each in the sharing exercise, especially that of the wife, and the costs each had disproportionately taken out of the marital pot. Also, the costs order that the court was inevitably going to make against the husband because of the conduct of the case.
Issues and decisions
(1) Whether the duty of fairness required family court judges to raise issues of costs (a more inquisitorial role) where the parties had not raised any such issues around costs.
Having regard to the duty of a judge, it was considered correct to have raised the issue of costs in order to produce a fair outcome according to both statute and case law, including as appropriate in circumstances in which a party, very probably without representation but possibly with poor representation, simply was not aware or alert to distinctive issues. The Family Court of England and Wales had a quasi/hybrid inquisitorial role and status (see [27] of the judgment).
In a financial remedy case, where the court exercised a quasi-inquisitorial function, it would be a dereliction of its inquisitorial duty if it allowed a case to be decided under procedural rules and customs which prevented a just decision being rendered on a particular set of facts because a litigant-in-person had, for whatever reason, chosen not to advance the relevant arguments applicable to those facts (see [28] of the judgment).
(2) How should costs, owing by either party to their lawyers at the final hearing, in the sharing exercise be treated, if they were materially different in any way.
The amount each owed was quite different, about £8,000 of the husband compared to about £28,500 of the wife. The present was not a needs-based case. But if in the sharing process, working out what was the total available marital pot before equal division, the liability for the outstanding legal costs were brought into account as if they were genuine marital debts of one or rather, there was a real risk the court was going down the needs approach in an entirely sharing case. If the differential was minor, then the court was unlikely to be troubled. If the outstanding costs were deducted before the marital pot was assessed, and then the pot was shared equally, one party was in effect funding or subsidising the costs of the other. That seemed to be inconsistent with the expectation that the marital partnership assets, acquired during the marriage, should be divided equally (see [30], [31] of the judgment).
In the present case, the costs were included as part of the sharing partnership as the applicant would have had to have undertaken more running to get the case into a state of play for settlement than would a respondent. The ‘advance’ element was also decided. The feeling of fairness was strong with judges in the family court, however sharp was the dividing line of equal division (see [32] of the judgment).
If the court had not anticipated the ‘advance’ element, the court would have directed that each party took responsibility for their own outstanding legal costs. However, it was part and parcel of the far bigger issue on how the legal costs of each party should be dealt with in the sharing exercise (see [33], [34] of the judgment).
(3) Whether a cost order was appropriate between the parties in a sharing case.
When a judge was looking at the outcome, and had an application by one party that the other party should pay costs, how was that dealt with, brought into the outcome (see [35] of the judgment).
In the present case, a costs order was appropriate. On the facts, the criteria for a costs order had been fully made out. A cost order of £43,000 would be made although the courts did not always quantify the figure (see [36], [37] of the judgment).
Where there was a minimal or no discretionary exercise, when the role of the court was to ascertain what should be in the marital sharing pot and the forensic science approach then it was not helpful to the parties, and potentially very confusing to understandable justice, then to interfere with the equality division by some sort of discretionary element to reflect litigation misconduct and other circumstances which would ordinarily give rise to a costs order (see [38] of the judgment).
Where it was possible, the assessed costs order route was invariably preferential. A straightforward costs order in a particular quantum payable by a certain date (see [39] of the judgment).
Where the division was a relatively straightforward, the court should invariably strive to a quantified costs figure rather than fallback on discretionary outcome, of nudging the percentage or final outcome to take account of what would otherwise be a reflection of the costs unnecessarily incurred (see [41] of the judgment).
No order as to costs principle with each party being responsible for their own costs could not, in a case like the present, lead to arbitrary and unfair outcomes, with relatively random and very different amounts which might be owing at a particular point in time of the settlement by each. Instead, it should be a more holistic, rounded and comprehensive analysis of the costs incurred by both parties in coming to the point where the overall marital assets were divided up and on the basis that each would be responsible for their own costs (see [77] of the judgment).
4) How should costs orders between the parties be treated in a wholly sharing case.
The point and potential unfairness was that in a sharing case, where one party had taken significantly more out of the marital pot for their own legal costs than the other party, was it fair to divide up the pot net of those costs already withdrawn predominantly by one party or was it fair only to do the division once those costs have been notionally brought back in. In the present case, the former wife had taken almost precisely £84,000 from the marital pot more than the former husband. If that was added back in, he would have an additional £42,000 (see [43] of the judgment).
The costs, precisely known from their lawyers, which either party drew from the marital partnership assets to fund their legal costs in the resolution of the marital partnership dispute shouldn’t be theirs alone, safeguarded from the division process and consequently meaning there was less in the pot for division. But more in the way of an advance from the marital partnership assets due to them on the division, whether by agreement, at an FDR or by ADR settlement or by judicial adjudication (see [81] of the judgment).
Bringing back legal costs drawn from marital resources predominantly by one of the two spouses in order to have a fair division of the marital assets was not going against authority. Instead, it was fair and just outcome in a sharing partnership case (see [84] of the judgment).
The question of costs payable by one spouse to the other should wherever possible in a sharing case, the keywords, be quantified and separate to the marital partnership division.
Withdrawing funds from the marital partnership resources for legal fees, did not represent litigation misconduct (see [85] of the judgment).
Daniel Mutton (instructed by Penningtons) appeared on behalf of the applicant former wife.
The respondent former husband was in person
Digest prepared by Tara Psaila, Barrister, for Lexis PSL
