Divorce can feel draining, especially when legal costs seem like they are spiralling out of control. In financial remedy proceedings, excessive litigation can leave both parties with little to show for their efforts. In this article solicitor Vincent Ibekwe explores the impact of runaway costs, the court’s power to impose cost orders, the importance of good divorce lawyers and how divorcing couples can avoid unnecessary financial losses.
Broadly, costs are crucial in financial remedy proceedings (‘Proceedings’) as there could be significant or even disproportionate costs compared with the assets in contention. It may not be in the best interest of anyone, certainly not the parties, that the assets—the subject matter of the proceedings—are dissipated entirely on costs. This might seem like common knowledge, but it is a consequential consideration that parties and their legal representatives should always bear in mind.
The cases of Xanthopoulos v Rakshina and RM v TM are stark examples of runaway costs in Proceedings resulting in pyrrhic victories. In Xanthopoulos v Rakshina, Mr. Xanthopoulos did not respond to an open offer of £5,000,000 from his wife, thereby leading to proceedings incurring £9,000,000 in costs. In the end, the Court awarded him some funds for a property in Greece with mere occupational rights and a 4-year limited maintenance. This is much smaller than what he was offered. Similarly, in RM v TM, parties got £5,000 whereas the costs of proceedings was approximately £600,000. The Court in the latter case noted:
“It is scarcely credible that at the end of this litigation, 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.”
The other, but related, aspect is the Court’s powers to make cost orders. A party’s actions or inactions can drive up costs quite significantly. If, for instance, a party is unreasonably vexatious – throwing spanners in the works – or simply refusing to engage, inevitably, the costs will be higher if the other party proceeds with the matter in Court.
The general rule is that the Court will not make cost orders against a party.[1] However, as an exception, the court can before or during financial proceedings, award costs against a party where it is of the view that they conducted themselves inappropriately.[2] In coming to this conclusion, the court will consider:
- any failure by a party to comply with FPR 2010, any order of the court or any relevant practice direction
- any failure by a party, without good reason, to:
- attend a mediation information and assessment meeting, as defined in or
- attend non-court dispute resolution
- any open offer to settle made by a party
- whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue
- the manner in which a party has pursued or responded to the application or a particular allegation or issue
- any other aspect of a party’s conduct in relation to proceedings which the court considers relevant, and
- the financial effect on the parties of any costs order
Any of the above can impact what the offending party gets from the proceedings – they could therefore receive less than they would have needed. The rationale for this is that in addition to being a disincentive for litigation misconducts, if a party recklessly dissipates available resources and still has needs met with the remaining assets, it may amount to taking out from the available pot twice.
Practice Direction 28A, paragraph 4.4, was updated regarding the Court’s approach to parties’ conduct. It highlights that the court will take a broad view of conduct and will generally conclude that refusing openly to negotiate reasonably and responsibly amounts to conduct in respect of which the court will consider making an order for costs.
Those involved in proceedings should carefully consider any offers and avoid unreasonable behaviour throughout the process. When selecting lawyers to represent them, it is crucial to find a firm or individuals with the right skills and a practical approach to resolving financial disputes related to divorce.
[1] FPR 2010 part 28.3(5)
[2]FPR 2010 part 28.3(6)
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