Financial remedy proceedings in England and Wales refer to the legal processes used to resolve financial disputes between parties during or after the dissolution of a marriage or civil partnership. These proceedings are part of the family law system and are aimed at ensuring a fair distribution of financial assets and, where applicable, providing for ongoing maintenance payments.

The question of who pays the legal costs can be a significant issue in these types of proceedings. Traditionally, the legal costs in family law cases, including financial remedy proceedings, are handled somewhat differently compared to other areas of law.

Financial Remedy Proceedings Costs – General Rule

The general rule in financial remedy proceedings is that each party bears their own legal costs. This approach is based on the principle that it is preferable not to add financial stress to what is often already a difficult and emotive situation. It also encourages parties to negotiate and settle disputes rather than litigating to the fullest extent, hoping the other party will be ordered to pay their costs.

Exceptions to the General Rule

There are exceptions to this general rule where the conduct of one party can impact the court’s decision regarding costs. The court might order one party to pay all or part of the other party’s costs in certain circumstances, such as:

• Failure to comply with court orders: If a party fails to comply with procedural requirements or court orders, such as not providing financial disclosure.
• Litigation misconduct: This includes dishonesty or unreasonable behaviour in the conduct of the proceedings.
• Unreasonable refusal to negotiate: If a party refuses to engage in negotiations or alternative dispute resolution, like mediation, without good reason.

Under the Family Procedure Rules PD 28a 4.4, the family courts have wide discretion in making a costs order for unreasonable behaviour.

“In considering the conduct of the parties for the purposes of rule 28.3(6) and (7) (including any open offers to settle), the court will have regard to the obligation of the parties to help the court to further the overriding objective (see rules 1.1 and 1.3) and will take into account the nature, importance and complexity of the issues in the case. This may be of particular significance in applications for variation orders and interim variation orders or other cases where there is a risk of the costs becoming disproportionate to the amounts in dispute. 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. Where an order for costs is made at an interim stage the court will not usually allow any resulting liability to be reckoned as a debt in the computation of the assets.”

In the case of OG v AG [2020] EWFC 52, the costs incurred by the parties exceeded £1 million. Mostyn J noted that post the Pre-Trial Review, the wife had the opportunity to negotiate fairly but chose not to.

In his judgment, he highlighted the significance of the amended paragraph 4.4 of FPR PD28A, which emphasises the necessity for parties to conduct negotiations transparently and reasonably.

He criticised the wife’s use of the husband’s shortcomings to seek a disproportionately favourable settlement as an unreasonable litigation strategy. Consequently, he imposed a costs penalty on the wife for her unreasonable conduct in the proceedings. The wife was therefore responsible for bearing the husband’s costs. 

“The revised para 4.4 of FPR PD28A is extremely important. It requires the parties to negotiate openly in a reasonable way. To take advantage of the husband’s delinquency to justify such an unequal division is not a reasonable way of conducting litigation. And so, the wife will herself suffer a penalty in costs for adopting such an unreasonable approach.”

Financial Remedy Proceedings Costs Orders

During the proceedings, the court can make specific costs orders at various stages, such as after a preliminary hearing or at the conclusion of the case. For example:

• Costs thrown away: If a hearing is adjourned due to the actions of one party, that party may be ordered to pay the costs caused by the adjournment.
• Costs of non-compliance: Costs incurred due to the need for additional hearings or submissions because of one party’s failure to comply with rules or orders may be charged to that party.

How can ARC Costs assist?

We regularly assist Solicitors, Legal Executives and other legal professionals in a wide array of costs matters and disputes, and as independent experts we can assist either Receiving or Paying parties. 

If you are currently involved in Financial Remedy Proceedings, one of our experts will be able to provide expert legal advice on costs law. Our team also specialise in the production of costing instruments, such as Form H and Bills of Costs.

Please contact us on 01204 397302 or via email at info@arccosts.co.uk to find out more.