LE v EL (Costs)

An oral judgment was delivered at the conclusion of the final hearing of the application of LE (“the wife”) on 20 September 2024. I gave the parties 7 days to make any consequent application, subsequently extended at the parties’ request to 14 days.

On 23 September 2024 I received submissions about costs from both parties. This supplemental judgment addresses those submissions.

The application of the wife is that the husband should pay a sum in respect of her costs. While not specifying a sum, the application is targeted on the costs incurred between November 2023 when her first open offer had recently been made and the final hearing during which time her costs increased from £309,842 to £657,342: an increase of £347,500. Some other elements of the husband’s litigation conduct are also relied on. The total paid by the wife towards her costs is £203,955, leaving a large debt. The husband’s Form H1 showed a very similar picture, with total costs of £643,263 towards which £204,178 had been paid. This does not include a sum of £200,000 which, at the final hearing, it transpired has been provided for as a debit against his director’s loan account with G Limited, but not drawn down.

On behalf of the husband it is pointed out that the sums which have been paid by the wife have substantially come from LSPOs made in these proceedings, monies drawn from a joint account and a sum provided for a deposit on the purchase of a property which did not proceed. Additionally, the husband was ordered to pay £9,000 for the costs of an ineffective First Appointment and £3,736 in respect of a hearing of the wife’s application for a Legal Services Payment Order. I do not consider that these facts have any material bearing on the costs application since both parties have made similar contributions towards their costs from marital resources of one type or another, and all of these sums were paid before the first open offer.

The husband’s overarching position is that there should be no order as to costs and, in relation to this aspect of the case, criticism is made of the wife’s litigation conduct.

In the judgment delivered at the conclusion of the final hearing I described the total of £1.3M spent by the parties on costs in these financial remedy proceedings “as an appalling waste of resources for which both parties and their representatives bear responsibility”. This is the context in which I must decide the costs application.

Part 28(3) Family Procedure Rules 2010 sets out the landscape for costs in financial remedy proceedings. It provides, insofar as relevant, as follows:

The open offers in this case have been (in summary):

In my judgment the “magnetic” feature when determining costs is that the wife has secured an order involving a sale of the businesses and an equal division of the proceeds. That was by far the main issue in the case and the husband’s proposals did not materially alter and involved an inadequate cash payment to the wife. Her first offer of October 2023 involved a sale of the company. While she proposed a payment in respect of the family home which was greater than she is likely to receive from the final order, she did not in that offer propose any pension sharing.

Thus paragraph 7(b) of Part 28.3 is engaged by the wife’s success in securing an order substantially in the terms she had set out and an order for costs should result as part of the fair outcome to the case. Moreover, the husband placed excessive reliance on his own expert in the various offers he made, and the substantive judgment involved criticism of the manner in which Mr Bell approached the case. To the extent that evidence was given by the husband as to how he might secure the funds to meet the lump sum provision he proposed, for example loans from colleagues, this evidence was only given after questions from me to press the husband as to how he might meet the obligations he proposed. In these aspects the manner in which he dealt with the important issue of liquidity engages paragraphs 7(d) and (e) of Part 28.3.

However, my criticisms of the amounts expended on costs means that the wife’s target of £347,500 is excessive. Furthermore, it was reasonable for the parties to have attended the private FDR and for there to have been a period of reflection thereafter. I also have to factor in the fact that I gave permission to the husband to rely on the evidence of Mr Bell, and their joint meeting brought about a revision downwards of Mr Dodge’s valuation, albeit largely as a result of the updating information about the fortunes of the businesses.

Balancing these factors, I have decided that the proper figure to award the wife is £150,000, such sum to bear interest at 4% until payment. It will be paid from the husband’s share of the proceeds of sale of the businesses, and thereby I am satisfied that the effect of the order on him is taken into account. It is not appropriate to direct payment from the proceeds of sale of the family home, unless the husband wishes to do so to avoid the interest charge, as I have allocated those funds to the discharge of each party’s legal costs.