WK v HN

I turn now to deal with the husband’s (i.e. HN’s) application for costs relating to effectively defending the conduct case brought by the wife (i.e. WK). I have been provided with very detailed and helpful notes by counsel for both parties. I have been provided with relevant case law. I have heard detailed and lengthy submissions from both counsel.

Let me say at the outset that this has been a very difficult case. Feelings are very high. I have commented on the nature of the relationship between husband and wife and the difficulties arising from this litigation which has been unfortunate, particularly given that the parties have a young daughter. I hope that once this order has been made today and money paid out to the wife by the husband that that will serve as an end to this horrible chapter in their lives and that the parties will move on and treat each other in a polite manner. They have to move on from this litigation if they are to have meaningful and positive relationships with their daughter and if they want to avoid damage being caused to their daughter by their acrimonious dispute.

The general rule is that the court will not make an order requiring one party to pay another’s costs. The exception to that rule, and the factors I have to consider are set out at (6) and (7) of the rule. Subsection 6 says the court can make an order where it considers it appropriate. Subsection 7 says the court must have regard to various factors. I will deal with each matter and address counsel’s submissions.

In terms of (7)(a), the court has to have regard to any failure by a party to comply with rules, orders or practice directions. Ms Huyton has taken me through some of the bundle and to the various orders made in the wife’s favour in relation to specific disclosure. What she says is that the husband did not deal adequately with the wife’s initial questionnaire and that the wife subsequently made applications for specific disclosure. Mr Speakman says that is only part of the picture. There were other orders made as a result of the husband’s requests. There were orders made only to a limited extent and that issue is not really a relevant factor.

I have to deal with matters proportionately. I cannot go through the bundle and all the orders that have been made. But it seems entirely appropriate that both sides will have had orders made for provision of documents and that only part of the wife’s requests were granted. I can see at times that District Judge Jones-Evans, now the most senior district judge in Wales, has been very critical of the husband, particularly concerning his attempts to remove the wife as a director from one of the companies. He made orders for specific disclosure. But I am also told that there were instances where there were orders made for certain requests but not others and also orders made in favour of the husband. In reality, I don’t think that aspect is particularly relevant. They cancel each other out.

Subparagraph (b) says I must have regard to any open offer to settle. This is an important issue. I note from the offers to settle that the wife has ultimately recovered considerably less than had she accepted the husband’s open offer. The husband’s open offer was made on 31 October 2025. He proposed that the wife would retain the net proceeds of sale of the family home; that I have ordered. He proposed that there would be a lump sum of £500,000. In contrast, the wife will receive significantly less than that. There are other provisions in relation to pension share which were agreed prior to trial.

The wife’s open offer letter is 31 October 2025. In that offer letter, she lists the total gross assets as over £5m. Her offer is to receive the net sale proceeds of the family home, so that is not disagreed. The big issue is that the wife requests payment of a lump sum of £2.281m in respect of the value of Pharmacy 1. Then there are issues of other details such as dividends, adding back assets. I do not think I need to go into precise details. The significant thing is the lump sum payment. The wife wanted over £2m, whereas the husband was offering £500,000. That is a huge difference, and the wife will recover a lump sum of £341,000, considerably less than the husband’s open offer.

What counsel for the husband submits is that the wife’s offer did not make financial sense. It was based on a contention that the husband had warehoused funds and should be added back. There are issues about dividends which had already been accounted for, so there was in effect double accounting. So even accepting her conduct issues, the offer did not make financial sense.

What Ms Huyton says is she accepts the husband has bettered his offer, but that is not as simple as that. But I cannot disregard that there have been open offers made that the husband has beaten very significantly. What I would say though, to justify or explain the wife’s offer, is that the issue of conduct had not been vented. The wife’s case, it is clear from her demeanour in the witness box, was that the husband had deliberately dissipated assets. That explains her offer. It’s not as if she plucked the offer from thin air. That explains her figure of over £2m. It is certainly something I have to have regard to, but it is explained by her pinning that to her conduct argument.

The next point is subparagraph (c), whether it was reasonable to raise, pursue or contest a particular issue.

What counsel for the husband says is that the costs schedule and costs sought, some £160,000 only run from when the wife starts to pursue the conduct issue. He makes the point that the fact that the wife has run this argument is fuelled by anger. He quotes in his skeleton from my draft judgment, now my formal judgment, in which I say;

“The wife was in the witness box for almost an entire court day. She is very angry and is clearly utterly convinced that the husband has dissipated funds with a view to excluding them from the financial remedy proceedings. Indeed, describing her as angry is somewhat of an understatement. She is furious. She is consumed by fury. She was almost shouting throughout her evidence. In my judgment, she will never accept any other explanation for the dissipation of assets from the businesses.”

Mr Speakman has referred me to 3 cases in support of his argument. He anticipates, rightly, that the wife says that whilst unsuccessful, it was right to raise conduct as she did. He relied heavily in that regard on the judgment of Eleanor King J, as she then was, in M v M [2009] EWHC 1941 (Fam). What she says in her judgment, at Paragraph 31, is;

“Given the identical terms of CPR rule 44.3(5) (b) & (c) and FPR rule 2.71(2) (c) & (d) relating to the pursuit by a party of a particular issue, it follows that any observations of the Court of Appeal (and the High Court) relating to the interpretation of CPR rule 44.3 (6) and (7) apply equally to applications for issue based orders whether made in ancillary relief proceedings or in pure civil cases.”

She goes on to consider a civil case at Paragraph 34, and she quotes from Christopher Clarke J, Travellers Casualty and Sureties Company of Canada v The Sun Life Assurance Company of Canada UK Ltd [2006] EWHC 2885 where he says at Paragraph 13;

“On the other hand if the party raises a discrete issue which involves very substantial costs, and upon which he fails, justice may require that he bear his costs and pay those of his opponent on the issue……”

And at Paragraph 16,

“…even if in relation to a particular issue, it is appropriate to order the overall winning party to bear some of its costs or pay the overall loser some of his, the issue in question, such as quantum, may itself have contained a number of sub issues, in respect of which the proper incidence of costs is not straightforward. One sub issue on which the overall winner lost may have had significant monetary value but taken little time to determine; another may be one which was of a much lesser value but took more time. Another sub issue may be one on which the overall winner won.”

In that particular case, M v M, what Eleanor King J has done is to find that the application was ‘wholly misconceived, based on number of false premises…’. On the basis of that, she finds at Paragraph 64 that…

“I have decided that this is a case where the court should properly make an issue based order for costs. Mr. Marks ambitiously submitted that the proper order in such an event is one whereby W has to pay 50% of H’s costs. I bear in mind that this was a case where there had been very few interlocutory hearings, so an unusually high proportion of the costs relate to trial preparation. However, an order that W pays 50% of H’s costs would not in my judgment adequately acknowledge:

a)

the inevitability of substantial costs in this case and

b)

that the starting point is that costs lie where they fall.”

Counsel for the husband submits that the wife has been unreasonable raising conduct. She has never had a full grasp of how the businesses have operated. She has become mistrustful and angry. He recognises that questions will have arisen about, for example, the Town B building for the hub and spoke pharmacy and the building was effectively derelict. He recognises that there will be questions, but there comes a point where reasonable suspicion tips into obsession.

Ms Huyton makes the point that I have questioned some of the husband’s business decisions. Certainly there were significant concerns about the Town B operation. In the face of that issue, confusion about the DLA, invoices for work done by others, dormant companies and Mr C’s conduct and that of Mr D and that neither agreed to come to court, the true question is not whether litigation is fuelled by anger, but whether it was reasonable to raise that issue of conduct in the face of those issues. She says that the wife was a director of Pharmacy 1 and yet she was locked out of it. Whilst she may not have taken a huge interest in the businesses, post-separation she was entitled to seek that information. She says one cannot disregard the conduct of the husband in seeking to remove the wife as a director. Whilst the husband had a costs order against him, nevertheless one has to look at what was going on then in the context of what happens thereafter.

Looking at that test, at subparagraph (c), I do consider that it was reasonable for the wife to raise the conduct allegation. She had legitimate questions to ask and she needed answers, particularly in the context of going to Town B and seeing the state it was in. But what I also have to consider is whether it was reasonable to pursue the conduct issue. And I think that there came a time when the wife, with the benefit of a good legal team, and I don’t criticise her current legal team and barrister, should have sat down and considered the evidence and whether it should realistically have been pursued, either whether it should have been pursued or to limit the issues raised at trial.

Then I look at subsection (d). What counsel for the husband says is that whilst it may have been reasonable to raise conduct, the wife should know when to restrict or drop the issues. He says a number of applications were made for specific disclosure and the husband responded as best he could. It was impossible for the husband to provide everything and it was disproportionate to do so. He said ‘we faced a constant barrage of questions’. There were arguments about whether the Husband should disclose till rolls, for instance, and he relies in essence on what I say in my judgment that there is nothing the husband could have said that would have satisfied the wife, and she has built up costs that are entirely disproportionate.

Wife’s counsel says that the husband has in essence drip fed disclosure and he has lost almost every application made. That, I’ve addressed before, and it is not as straightforward as that. It is disproportionate to go through every application and the run up to it to see what was allowed and what was not.

Counsel for the husband goes on to consider the expert evidence. He notes that Nick White’s report was not relevant as to the value of the business. The wife accepted in her witness statement Mr Houghton’s view in relation to value and said that she wanted Mr White’s report as conduct evidence. But then there was an attempt to introduce valuation evidence during the trial on behalf of the wife. He also says in relation to conduct, the evidence of Mr White wasn’t helpful on its own terms, and he quotes from para 15.10. He goes on to say that matters are within the public domain or set out in the wife’s witness statement. He says that there is nothing ‘new’ or ‘expert’ that Nick White brings to the case, but that expenses have been occurred because of it. A significant part of the parties’ overall bill has been utterly wasted.

Counsel for the wife submits that the evidence of Mr White was of assistance. It highlighted the suspicious nature of, for example, Mr C’s companies and whether they were dormant or not. But nevertheless, one cannot disregard that much of the report was available in the public domain. He wasn’t able to come to conclusions that transactions highlighted were fraudulent or not. That ultimately should have caused the wife to query whether it was reasonable to proceed to trial or to question the usefulness of his report. I really do question the merits of that day of trial. I would include the SJE in that as well, as his evidence was difficult to challenge and the wife indicated that she accepted the valuation evidence in advance of trial.

I then turn to the issue set out at (e). This is not something on which counsel for the husband relies, but it is something that the wife relies upon. This is other conduct that the court considers relevant. She says that the husband’s conduct in seeking to exclude the wife as a director, whilst he may have been penalised by a costs order against him, it cannot be disregarded in the context of the overall case. She also makes the point that only 3 months after the wife raised conduct, that aspect of the case was stayed so that parties could deal with the issue of her being removed as director and it was stayed for a considerable period of time thereafter. Counsel for the husband says quite simply, the husband has been punished because an order for costs has been made and that should be an end of that.

I have to consider the financial effect on the parties of a costs order at f. Counsel for the husband says that this is a sharing case. The award will see the wife rehoused in substantial housing free from charge with a substantial lump sum, even if a costs order is made. He relies on HO v TL [2023] EWFC 216 which establishes that costs orders can even be made where the award is a needs based one. This factor is unlikely by itself to weigh significantly into the discretion. Looking at the figures, if I were to make an award that the wife pay the costs as set out in the schedule, £165,000, the husband would recover over £1m and the wife’s award would come down to just over £600,000. Counsel for the husband says that is sufficient to pay costs and buy a house. Counsel for the wife says she cannot raise credit, cannot refinance her car, though I did point out she can pay it off with the lump sum.

The question is, what do I do in terms of today. What Ms Huyton says, and both counsel rely on Mostyn in OG v AG [2020] EWFC 52, is that piecemeal disclosure means the wife did not know the financial position until trial. The correct order should be no order as to costs.

I note that OG v AG related to the need to negotiate openly in a reasonable way. The husband had hidden assets in that case. There was never an effective FDR. The parties had run up excessive costs. He said that a large amount of the £1m costs was referable to the husband’s conduct. So it is a very different type of case. But he concludes at Paragraph 72 that;

“But times have changed. The financial remedy court is no longer a court of morals. Conduct should be taken into account not only where it is inequitable to disregard but only where its impact is financially measurable. It is unprincipled for the court to stick a finger in the air and arbitrarily to fine a party for what it regards as immoral conduct.”

Where does it all leave me? I have very carefully considered the rules. I consider that an order of no order as to costs is inappropriate. I understand the context in which the wife was suspicious regarding troubling transactions, and I find that she did not behave unreasonably in bringing this issue in relation to conduct, but she was unreasonable in pursuing it to the trial. She should have appreciated, having considered the bundle and the issues, and the evidence of her own expert, that the writing was on the wall for her and that whilst she had suspicions, and whilst I have commented that I found the evidence odd, she should have appreciated that she would not have been able to prove her allegations. Also, it seems to me that the number of allegations she was seeking were wholly disproportionate for a 5 day trial. With that in mind, what do I do? It would be wholly disproportionate to order detailed assessment. I am not going to make an order that a percentage of costs are allowed. I think it is right that I look at the overall amount, that I look at counsel’s brief fee. I appreciate no disbursement vouchers were attached, but that can be sent if Ms Huyton wants it along with all other disbursement vouchers. There would be costs incurred in preparing for the trial in any event. On a very broad brush approach, and because I am conscious that this will reduce the wife’s lump sum, and she is primarily looking after the child, and earns less than the husband though she can do more hours, but can’t work the hours expected in a high street pharmacy, I am going to adopt a cautious approach in terms of my broad brush approach. The amount I am going to order her to pay is £30,000. The draft will need to be amended to reflect that.