Playing by the Rules: Litigation Misconduct and Costs

Each year, Mediation Week takes place, to highlight the benefits (to clients and their representatives) of this vital form of alternative dispute resolution. As the court frequently expresses it is far better for the parties to reach an agreement which is tailored and bespoke to their own lives, rather than have a stranger impose a decision which may not suit anyone. We have seen great successes for clients going through the mediation process, with quality advice given from the sidelines, and a good mediator will be skilled at taking the heat out of the situation and steering the parties towards a mutually agreeable solution. 

However, there will always be cases where mediation is not suitable, as one recent judgment has forcefully highlighted. 

We have written previously about the court’s oft repeated expectation that the parties must comply with directions made, procedural rules and guidance issued. In The Rules are the Rules – Ignore them at your peril! | Hill Dickinson Joanne Raisbeck commented on the decision of Xanthopoulos -v- Rakshina, in which Mr Justice Mostyn deplored the disregard of the parties for the procedure, the proper rules and the orders made. 

However, in some cases, one party’s conduct goes far beyond the ‘forensic cheating’ described in Xanthopoulos, and becomes wholly one-sided litigation misconduct resulting in a costs order being made against the offending party. In these circumstances, the offending party’s conduct may become ‘conduct’ as an s25 factor which the court cannot and should not disregard.

In the recent case reported as ‘A former wife -v- A former husband’ recorder Laura Moys tackled a final hearing addressing the financial division arising on divorce, in near impossible circumstances. As she states early on in her judgment ‘This case could – and should – have settled long ago without the need for costly, protracted, and acrimonious litigation’. It was the husband, and the husband alone, whose ‘unreasonable and hostile attitude’ meant there was ‘no conceivable chance of these proceedings settling without a contested hearing’. In addition, the husband’s conduct throughout the hearing made it ‘much more difficult than was warranted’.

In brief, the assets were fairly modest and the case ought to have progressed in the same way as many successfully resolved in courts (or through sensible negotiations) up and down the country.  

However, at every stage, the husband was obstructive, offensive and intransigent. No effort was made to negotiate reasonably. The impact on the wife must have been extremely harmful, not least in circumstances where in the bitterly contested divorce proceedings the courts had earlier found that the husband was ‘obsessive’ towards the wife, that he had physically assaulted her and that he had demonstrated ‘controlling and emotionally abusive behaviour’. In brief, his behaviour included the following:

1. Contesting the jurisdiction of the UK courts, despite the issue being previously resolved, but paradoxically seeking that the court effectively make an order in his favour
2. Considering the parties still to be married under Egyptian law
3. Prior to the hearing, failing to cooperate with the wife’s solicitors in the preparation of the bundle and documents, but then filing a significant ‘alternative’ bundle (508 pages so in excess of the directed length in any event), as well as a supplemental bundle and 26-page case summary document
4. Continually seeking that the wife agree to reconcile, including during her evidence
5. Asserting his financial contributions justified him having 100% of the liquid capital assets, and failing to make any sensible concessions ‘even in the face of clear documentary evidence’ supporting the wife’s case
6. Deflecting and failing to answer questions asked of him in a helpful, straightforward or honest way
7. Interrupting the proceedings with frequent angry outbursts, which the judge reported including ‘shouting at and over me and the applicant’s counsel on numerous occasions’ and interrupting the wife’s evidence
8. Turning on his camera during the wife’s evidence, despite having agreed to a direction that it be turned off to give the wife some protection and reassurance during that stressful time
9. Being disrespectful and abusive, making various allegations of racism and corruption
10. Holding up offensive messages when he had been muted by the judge 

Efforts by the judge to warn him of the consequences of his actions were not heeded, so that for part of the hearing the husband was simply removed from the remote hearing. He refused to allow his McKenzie Friend to listen in his stead. 

The judge delivered an extremely careful and clear judgment, no doubt doing her level best in difficult circumstances, and concluded [from paragraph 236 on her judgment] to address the issue of costs. 

This section of her judgment bears setting out in full:

236.
The starting point for costs in financial remedy proceedings is that each party should bear their own costs. By FPR 2010 28.3(6) the court may depart from the starting point and make a costs order against one, or other, or both parties. Factors to be taken into account are listed at 28.3(7) and include: 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.

237.
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.’

238.
I am quite satisfied that the length and cost of these proceedings has been increased by virtue of the respondent’s intransigent and wholly unreasonable position (seeking, in effect, 100% of the liquid assets) and the manner in which he has conducted himself during the litigation, including ignoring court orders and refusing to cooperate sensibly and reasonably with the applicant’s solicitor.

239.
Equally, I take into account that the applicant did not make an open offer until 21 November 2022 and that much time was also spent during this hearing (and in the preparation for this hearing) on the issue of the Cairo flats notwithstanding that they are inherited and of relatively modest value in comparison with the value of the matrimonial assets (although the respondent played his part in the delay caused by exploring this issue by refusing to cooperate with disclosure and the valuation in the first place).

240.
Overall, I consider it fair that the respondent pay a contribution towards the applicant’s costs.

241.
I intend to summarily assess costs. It is not in either party’s interest for there to be a further costly hearing to assess costs and I have no confidence that the respondent will agree a sensible figure with the applicant.

Of the total costs incurred at the date of the hearing by the wife (£58,593), the judge ordered that the husband ought to pay £30,000 towards the wife’s costs, to be taken from the husband’s share of the parties’ joint account, presumably to avoid any enforcement issues. 

The judge goes on to cite Mr Justice Francis in WG -v- HG [2018], a case which addresses whether the court could and should make an order for costs against one party when doing so might leave them unable to meet their assessed needs from their settlement. 

‘It might be said that I have assessed…needs at a given figure. If I have done that, then how can I leave [that party] with a lower sum which, by definition, does not meet [their] needs? This conundrum happens in so many cases. People who engage in litigation need to know that it has a cost. [They] … will have to make the sort of decisions about budget managing that other people have to make day in day out, but I am satisfied that people who adopt unreasonable positions in litigation cannot simply do so confident that there will be an indemnity for the costs of the litigation behaviour, however unreasonable it may have been.’

Whilst cases as extreme as the above should be rare, and most litigating parties can be expected to do their best in very difficult and stressful circumstances, examples from case law show that a party cannot behave reprehensibly and expect to get off scot-free. Nor is it enough to plead that meeting such a legal costs award would leave that party unable to meet their needs.

Readers might be interested to refer to the following:

• M -v- M [2013]. The husband had created complex offshore companies to hold the family assets. The husband and his companies failed to engage in proceedings, leading the court to draw adverse inferences. The judge made findings of serious litigation misconduct. The judge stated ‘Looking at the factors set out in under Part 28.3 and CPR Part 44.2(4) I have no doubt in my mind but that the conduct of both the husband and the Companies has been such that the making of an order for costs against both the husband and the Companies is inevitable’. The wife was awarded in excess of £1 million in her costs against the husband, in addition to a further award against the husband and his various companies for a further period of costs of nearly £500,000.
• Rothschild -v- de Souza [2020]. The Court of Appeal clearly confirmed that it was not unfair for a party to receive less than their needs would otherwise demand if they were guilty of misconduct.
• OG -v- AG [2020]. The court held that this ought to have been a straightforward case in which the equal-sharing principle applied. The marriage was long, and all the property was matrimonial. Neither party emerged unscathed, but the court found that the husband had failed to comply with his duties of disclosure, he had behaved dishonestly in trying to alter a material email and had opened a competitor business to the family business. The wife had also failed to comply fully with her duties of disclosure and had failed to negotiate openly once the ‘financial landscape was known’.
• Despite the husband’s behaviour it was not too late for the wife to come to the table and negotiate and she ought to have done. An award for the wife’s costs was made against the husband but reduced as a sanction for her own non-disclosure. The husband was ordered to pay in excess of £230,000 towards the husband’s costs.
• WC -v- HC [2022] These proceedings arose in circumstances where the parties could not agree the appropriate financial settlement on divorce, despite the existence of an (unsigned) post-nuptial agreement. The husband refused to countenance any move away from the incomplete post-nuptial agreement until final hearing. However, the wife had unreasonably sought £10.6 million at the point of final hearing, and therefore fell short of that in the final outcome. The wife was ordered to pay £150,000 towards the husband’s costs (the husband having sought £310,000), to be deducted from her needs-based award of £7.45 million, due to her unreasonable negotiating position, despite criticism of the husband’s litigation conduct. The judge stated as follows: In this case, although H is to be criticised for aspects of his litigation conduct, W must bear, in my judgment, greater responsibility in the light of her disproportionate needs claim. The most influential factor to my mind is the negotiating stances of the parties. W missed the mark by a wide margin whereas H was proximate to my decision.’ And further: ‘The authorities make it clear that the fact of an award being based on needs does not prevent the court from making a costs award which reduces the claimant below the level of assessed needs. If that were not the case, no court could ever make a costs award in a needs case (and needs cases account for the vast bulk of litigation in this field). That cannot be right. Otherwise, the payer runs the risk of, directly or indirectly, being responsible for all costs on each side even if the payee has litigated unreasonably.’

In short, while extreme and shocking in the detail of the specific case, recorder Moys’ judgment serves as a strong reminder that litigation misconduct will not be ignored, and each party must come to the table with a sensible, respectful and realistic attitude.

If you require any more information or assistance, please contact Ellie or Joanne from our family team.