COSTS AND “ABSURD” CONDUCT IN LITIGATION: HOW TO WASTE £1 MILLION…

This blog rarely looks at family cases. When it does it is often in relation to costs.  Which is why the judgment of Mr Justice Francis in ABX v SBX [2018] EWFC 81 caught my eye. It raises one fundamental dilemma for the family courts. The “Calderbank” principles no longer apply, this means that little pressure can be put on a recalcitrant litigant.

“… this issue occupied days of court time and far more money has been spent on the issue than the value of the transaction which it is sought to set aside. It would not be an exaggeration to say that it is plainly absurd to spend more on an issue than the monetary value of the issue (perhaps unless some fundamental principle is at stake).”

COSTS

The opening lines of the judgment set the scene:-

1.         In this Judgment I shall refer to ABX as “the husband” and I shall refer to SBX as “the wife”. This is my Judgment in relation to the husband’s application dated 31 May 2016 for a financial remedy order although, in reality, the true applicant is the wife. This is also my Judgment in relation to the wife’s application dated 20 June 2017 for an order pursuant to section 37 of the Matrimonial Causes Act 1973 against the husband’s father DX, who, very clearly contrary to his wishes, has been brought into this unfortunate litigation, which has cost him some £100,000 in legal fees.

2.         In this case the husband and the wife between them have incurred costs of almost £1.1m.  I dare say that, by the time my Order has been implemented, that sum will be somewhat larger.  According to whichever schedule is to be preferred, a subject to which I obviously return, the total net assets in this case are somewhere between £1.5m and £5.4m, although it is common ground that significant parts of those assets are currently illiquid and some of them may never be realised.  Whilst costs of this level are not at all uncommon in what might be termed the “very big money” cases, it will be obvious to anybody reading this Judgment that the costs incurred in this case are wholly disproportionate to the size of the assets, whichever version of the asset schedule is ultimately adopted. I have been able to form a clear view as I have heard the evidence in this case as to how and why the parties have been unable to settle a case that is not, at the end of the day, particularly complicated.  Their failure to settle is in spite of the fact that they attended a Private FDR before extremely experienced and highly regarded leading counsel.  I also venture to suggest that were the Calderbank provisions still applicable the parties might have been forced to take a very different attitude towards this litigation. I say this because a party who turned down an offer that they failed to beat, under that regime, could be staring at a substantial costs order.  I recognise all of the pitfalls that were associated with the Calderbank principles, but I fear that there are cases where litigants now feel able to continue without the sanction of costs, save in cases of serious litigation misconduct.

3.         The position in relation to the section 37 application is even more dire: this issue occupied days of court time and far more money has been spent on the issue than the value of the transaction which it is sought to set aside. It would not be an exaggeration to say that it is plainly absurd to spend more on an issue than the monetary value of the issue (perhaps unless some fundamental principle is at stake).

CONDUCT

Litigation conduct

7.         This is not in any sense a conduct case and neither party has run it as such (although the wife has run an argument in relation to add-back). However, there are two aspects of the husband’s litigation conduct which need to be mentioned from the outset of this Judgment. I have little doubt that, had things been handled differently by the husband (and those acting for him), the litigation could have taken a different, and less adversarial, course. I cannot and of course do not make any criticism of the husband for his decision to end the marriage. It is not the business of judges in these cases to engage in such things. However, the manner in which the husband chose to inform the wife of the end of the marriage, if true, is remarkable, although I appreciate that the parties’ positions differ. On 5 January 2016, the wife received a letter from the husband’s solicitors setting out that he considered that the marriage had irretrievably broken down. The wife told me that “this came completely out of the blue and without warning, which was traumatic for me”.  The husband disagrees and said in evidence that he informed the wife of his intention to divorce in person on 5 December 2015, as also recorded in the agreed chronology, having first discussed the deterioration of the marriage in Summer 2015.  The letter from the husband’s solicitors enclosed draft particulars of unreasonable behaviour without giving the wife any time at all to come to terms with the news that she had received (the fact that it came just after the Christmas and New Year festivities would have ended could only have added to the trauma). The husband’s solicitors attached a draft divorce petition to their letter. I have read the particulars and they are, to be fair to the husband, perfectly anodyne. As it turned out, however, the husband was already engaged in an affair and it would have been easy, and in my judgment the right thing to do, to invite the wife to petition him on the grounds of his adultery. 

8.         It will rarely be appropriate to send a draft petition at the same time as informing the surprised recipient of the shock news.  Certainly, in my judgment, it was likely to cause offence, and in the event did cause offence, to send a draft petition in the way that he did. Of course, there can be cases when such action would be necessary, for example to secure a jurisdictional advantage, but no such situation applied here.

9.         On 26 May 2016, the husband’s solicitors sensibly wrote to the wife’s solicitors asking for confirmation that the wife would not make any application to the court prior to at least 1 June so that they could try to resolve finances through a voluntary process. The following day, the wife’s solicitors quite properly wrote to the husband’s solicitors confirming that the wife would not take any steps to issue a Form A before receiving the husband’s response (by 1 June) about agreeing a timetable for voluntary disclosure. On 1 June the husband’s solicitors informed the wife’s solicitors that the husband had unilaterally lodged a Form A at court. As is evident from the Form A (which appears in the bundle at pages C8 to C12) the husband in fact issued his Form A on 31 May, i.e. the day BEFORE their agreed deadline. When I heard in court about this unfortunate series of events, I made it clear that I was likely to be critical of the husband’s solicitors in relation to their part in this and I gave them the opportunity of making representations to me, either orally or in writing, giving any explanation that they may wish to offer.

10.       On 21 May 2018, I received an email from the partner with conduct of the husband’s case at Payne Hicks Beach explaining that the issuing of the financial remedy proceedings was in no way intended to upset or prejudice the wife and was merely done “to put a structure and timetable in place”. It was explained to me that the letter written by Payne Hicks Beach to Stewarts on 23 May 2016 was a holding letter written without the husband’s solicitors having had the opportunity to take his instructions. The husband’s instructions were later taken and a Form A was issued. Whilst I am prepared to accept that, at the end of the day, solicitors are only as good as the instructions they receive from their client, I regard it as plainly wrong that the husband’s solicitors should have acted in this way.  Quite what advantage they, or the husband, thought that they could secure is beyond me. Certainly, at an earlier directions hearing, the husband’s counsel had attempted to present the husband as the applicant. I am not sure whether there is any real advantage in being the applicant, and in some ways there is a disadvantage, but I know that there is sometimes a perception by the advocates that there is an advantage in opening the case and then in making the last closing submission. At that earlier directions hearing I put the husband’s counsel on the spot by asking whether it was conceivable, in any circumstances, that the husband would be seeking a transfer of assets from the wife to him or would be seeking a periodical payments order from the wife. It was conceded that it was not possible that such an order would be made and I therefore ruled that the wife would henceforth be treated as the applicant.  In my judgment the applicant should (absent special circumstances) be the person actually seeking an order in his or her favour, not the person who is in every respect the natural Respondent but who happens to have stolen a march by issuing first.

11.       As I have already said, I do not in any sense regard it as conduct that would be inequitable to disregard for the purposes of the ancillary relief application. I do, however, wish to say that I regard the conduct of the husband’s solicitors in acting in this way as having been likely to exacerbate the difficulties between the husband and the wife. This is contrary to the duties of solicitors in such cases, particularly having regard to the fact that this very well-known and highly regarded firm is a member of Resolution. The Resolution website sets out the history of this important organisation of which most family law solicitors are members. The website refers to the first gathering of an influential group of family lawyers who “believed that there was a better way of conducting family law cases and of serving their clients. They wanted to improve the practice of family law to prevent the legal process increasing acrimony between separating couples and to avoid family law being seen as simply another type of litigation.” The Resolution code of practice states that Resolution members will “reduce or manage any conflict and confrontation; for example, by not using inflammatory language”. I cannot find any justification for the way that the husband’s solicitors behaved in acting as they did in relation to the issue of the Form A. If, although this has not been suggested to be what actually happened, they had a client who insisted on the issuing of the Form A in circumstances where it had been agreed by the other side that they would not do so, then at the very least, I would expect them to contact the solicitors acting for the wife (and I observe that the personnel in these firms would have been very well known to each other) and explain that, contrary to what had been said in an earlier letter, they were on instructions to act in a particular way. In reality, I expect that, in this case, had the husband’s solicitors advised the husband against the course of conduct that was adopted, they would have been able to deal with things differently.  Plainly I cannot and do not wish to know what advice was given; that is obviously subject to legal professional privilege.

12.       On 8 June, the wife’s solicitors not unreasonably complained about the issuing of the Form A, only to be met with this response: “… there is no merit in further discussing the events leading up to the current position and whether an application should or should not have been made”. The reassurance, later in the letter, that the husband’s “genuine desire is to endeavour to resolve matters amicably and away from the court procedure if at all possible” must have had a hollow ring to it when read by the wife.

13.       The consequence of the events that I have described above has, in my judgment, significantly contributed to the fact that this couple had become locked in contested litigation from the outset and any possibility of trust was removed. To make matters worse, there were in due course contested occupation order proceedings, even though the husband, on his own case, was now rarely using the matrimonial home. I cannot understand why, in cases when there is sufficient money, one of the parties does not move out of the matrimonial home. Sometimes it may be because there would be a perceived advantage or disadvantage in relation to occupation long-term of a property. In other cases there will be some perceived advantage or disadvantage in relation to contested issues relating to where, or with whom, the children might live. But here, the husband had effectively moved out to live with his new partner but wanted to reserve to himself the right to come into the home when it suited him. In my judgment, the wife’s health played an important part in all of this. Her solicitors’ letter dated 20 July 2016 informed the husband’s solicitors that, over the weekend of 9 and 10 July, the wife suffered a worsening of her disease which required her to attend the urgent care centre at a Hospital on 11 July, where she was prescribed medication to improve the symptoms. In spite of this, the husband’s solicitors replied indicating that the wife’s application for an occupation order “will be robustly defended”.  The husband went on to challenge the medical evidence that the wife’s stress levels needed to be reduced. Furthermore, I am told that the husband refused even to move out of the matrimonial bed for some 10 weeks following his admission of the affair.

14.       On 22 September 2016, DJ Alderson heard the contested occupation order application and made the order as requested by the wife. The husband was ordered to pay her costs. I am told that the total cost of the occupation order proceedings was £100,000. I regard this as an egregious waste of money and it demonstrates at best a severe lack of judgment on the part of the husband, at worst it reflects a callous and bullying attitude. I note that the District Judge found that “the husband has litigated in an inflexible and controlling way which has been done purely to further the views of the father and not that of the family as a whole”.

15.       With all of the above background, one can begin to understand how it has been that this couple have spent over £1 million of their precious resources on litigating this case.  I have some sympathy for the wife when she referred, in her statement dated 6 August 2016, to her husband’s actions as “calculated and manipulative and were demonstrative of a hostile and bullying approach”. I very much hope that some lessons can be learned about how not to commence divorce and financial remedy proceedings, albeit that one might have thought that these lessons had been learnt many years ago.