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Behave unreasonably in litigation and pay the price. A reminder from the High Court

Article kindly contributed by Clarion Solicitors.

The High Court has delivered an important reminder to parties, of the potential repercussions in respect of costs if they act unreasonably throughout the litigation.

In VV v VV [2022] EWFC 46, Mr Justice Peel stated “I am satisfied that it is appropriate for W to make a contribution towards H’s costs. It does not seem to me to be unfair to invade her needs based award to an extent. She should not be entirely protected from costs consequences.”

The case was a divorce dispute, for which the default position in respect of costs is usually that the parties should bear their own costs. Pursuant to section 28.3 (6) FPR however, the Court may make a costs order against one, or both parties. The factors to be taken into consideration when making any potential awards are listed in section 28.3 (7) FPR and are as follows:

(b) any open offer to settle made by a party;

(c) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(d) the manner in which a party has pursued or responded to the application or a particular allegation or issue;

(e) any other aspect of a party’s conduct in relation to proceedings which the court considers relevant; and

(f) the financial effect on the parties of any costs order.”

Rule 4.4 of Practice Direction 28A states that:

“The court will take a broad view of conduct for the purposes of this rule and will generally conclude that to refuse openly to negotiate reasonably and responsibly will amount to conduct in respect of which the court will consider making an order for costs. This includes in a ‘needs’ case where the applicant litigates unreasonably resulting in the costs incurred by each party becoming disproportionate to the award made by the court”.

Following the division of assets, H sought an order for costs from W in the sum of £450,000. £400,000 of W’s costs had already been paid by H, and a lump sum payment of £750,000 which was awarded to W meant that the net outcome of the judgement was that H would have covered in full the costs incurred by W.

After considering the facts of the case, H was awarded £100,00 towards costs, to be offset against the lump sum payment to W of £750,000. The judge was critical of the fact W had fell short of her financial proposal by over a figure of £5 million and had failed to succeed on 2 key evidential points. One of which had cost H significant sums.

It was stated that this costs award would have been higher had it not been for H’s own unreasonable conduct, which included a failure to fully disclose financial assets.

The case serves as an important reminder to parties, that their behaviour can have a significant impact on their costs recovery, regardless of whether or not your opponent has also acted unreasonably.

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