The family courts occasionally have to decide issues of costs.  Often there is a “no costs” presumption. In AB -v- CD Limited [2016] ewhc 2482 (Fam)Mrs Justice Roberts determined the liability for costs in a case where that presumption did not apply. The wife in that case was ordered to pay 50% of the husband’s costs on an indemnity basis. It is of interest to civil lawyers because it contains a detailed consideration of the negotiation process and the part played by both parties.

To an extent, each is the author of his/her own misfortune”


The former husband had successfully applied to set aside consent order made on divorce. The judge found that there had been material non-disclosure by the (former) wife of a substantial equity investment in a company she ran.


  1. I now have to determine where the burden of costs should lie following the set aside hearing and those which preceded it. The combined bill of costs which the parties have together run up is a fraction less than £1.32 million, an astonishing figure after a very short marriage of little more than two years (or no more than months, on H’s case). Whilst W’s costs have been contained to a limited extent by her recent status as a litigant in person, she has nevertheless incurred costs of almost £478,000. H’s costs are now £841,700. It is a particular tragedy for this couple since, whilst H’s shoulders may be financially broader than W’s, neither can afford to have spent these sums on their legal teams in what should have been a relatively straightforward financial remedy case. Perhaps the final irony is that W has now had to liquidate her shares in B Ltd in order to meet pressing debts. This was the very entity over which they were in dispute. Notwithstanding her resignation from the board of directors and subsequent (or impending) cutting of all ties with the company, H maintains his claim to ownership of his shares in B Ltd (a 4.6% minority interest).


The judge had an opportunity to consider the history of the offers to settle [something that rarely happens in a civil case].

  1. Mr Amos has produced for me a supplementary court bundle containing a number of written offers which have been made over the course of these proceedings. Given the enormous costs which this case has generated, I read this bundle with a sinking heart. It is little short of a tragedy (and I make no apologies for using the word again) that this case was not settled over two years ago. Both parties would have been spared the significant emotional toll which this litigation has taken; they would be hundreds of thousands of pounds better off; and each would now be getting on with a life independent of the other.
  2. On 9 February 2014, W sent a letter to H’s solicitors, Vardags. Her offer was no doubt a response to the pre-trial review which had taken place three days earlier on 6 February 2014. By that stage, the parties were facing a five day hearing before King J in a little over six weeks’ time. H’s legal costs were then in the order of £214,000 (or £234,000 by Mr Yates’s reckoning, depending upon the apportionment of the costs of hearings which had already taken place before Coleridge and Parker JJ).
  3. By her offer, which was expressed as being ‘without prejudice save as to costs’, W agreed to extend on an indefinite basis clause 5 of the consent order (i.e. the ‘anti-embarrassment clause’[5]), thereby preserving indefinitely into the future H’s ability to take advantage of any increase in the share value in B Ltd. That ‘open window of opportunity’ was extended to him unless and until such time as W was able to terminate his beneficial interest in the shares by paying to his daughter from a previous marriage a sum of £659,446. He had originally proposed his daughter as the intended beneficiary of his interest in the B Ltd shares and W, in this offer, developed that road to compromise by offering this liquidated sum. It was calculated on the basis of the difference between the share price of £11.59 per share proposed by H in his Form E and the price of £45 per share reflected in that paid by the latest round of “angel investing” in 2013 (the Numis offer). In all other respects she proposed that the terms of the original consent order should stand. The offer was time-limited for two working days at which point it was withdrawn, no doubt with an eye on the costs which would then be accumulating in preparation for the forthcoming final hearing.
  4. At that point in time, W did not have the liquidity to make an offer which involved an immediate cash payment to H or his daughter, on his behalf. She had left the door open by allowing him to benefit from any intervening uplift during the indefinite period of deferment she proposed. For so long as the liquidated sum remained unpaid, any benefits which might flow from the so-called “Odey effect”, be they ‘transformational’ or otherwise, would enure for the benefit of H, or to those to whom he might direct that benefit should pass. Thus, the fundamental complaint he had made about the fact that he would not have parted with his shares had he known of the Odey investment was addressed. In my judgment, this was a serious offer from W. It was a sensible offer which should have received serious consideration from H. In my judgment, it would have represented a sensible compromise at a time when his costs, whilst excessive, were containable.
  5. H’s response to that offer did not come until 14 March 2014, about a fortnight before the five day hearing before King J. This offer, too, was expressed to be ‘without prejudice save as to costs’. What H did was to take W’s offer of paying a liquidated sum of £659,446 for his shares and convert it into a proposal for payment of that sum, not at her election, but within a fixed period of 12 months. He sought a sale of Fawler Farm. Further additional proposals were put forward in relation to the top-slicing of the mortgage payments which H had made following which the net proceeds would be divided on a 50/50 basis. There would be nothing further to pay in respect of the unpaid balance of £150,000 relating to the lump sum order; neither would he seek to claw back the £200,000 already paid. On this basis, he offered to forgo any contribution from W towards his costs of some £400,000.
  6. At this point in time, it seems to me that both parties could, and should, have used that offer and counter-offer as a platform for further negotiations. W may not have had the confidence that she could raise the cash funds within a twelve month period but there might have been scope for extending by negotiation the payment period. For his part, H should have given further consideration to how W’s offer of an indefinite extension of the operation of the anti-embarrassment clause might have brought about a settlement with which each could live.
  7. Instead, by the time W’s response came through her new solicitors, Bishop & Sewell, on 14 March 2014, some three days later, she had withdrawn her previous proposals and was seeking the reinstatement of the terms of the order of District Judge Gordon Saker sealed on 10 April 2012. On that basis, she had calculated that, with interest, H owed her a sum of some £173,213. In addition, she sought the entirety of her costs of the set aside application and on an indemnity basis.
  8. Thereafter, the negotiating positions of the parties became entrenched once again. A valuable opportunity to settle once and for all these long-running proceedings had been lost. By the time of the most recent offers in May and June this year (2016), W was offering £50,000 towards H’s costs and he was seeking a contribution of £450,000.
  9. Mr Amos, on W’s behalf, invites me to view her 9 February 2014 proposal and H’s reaction to it as part and parcel of his litigation misconduct. Notwithstanding the counter-proposal which came from his solicitors the following month, his personal actions in going to the press in what he described as “flagrant contempt of court” effectively “poisoned the well”. This, says Mr Amos, is conduct which I cannot ignore and particularly in circumstances where this husband is an educated and financially sophisticated individual who understands only too well the consequences of potential reputational damage in the City. When I enquired as to what reputational damage either W or the company had suffered as a result of this litigation, I was told that three of B Ltd’s main board directors had resigned as a result of my judgment and the findings in it. Thus, says Mr Amos, H knew exactly what consequences might flow from his actions and, to this extent, he appears to have achieved his aim.
  10. Mr Amos makes further criticism of H’s litigation conduct in inviting his brother to take over his legal representation after the hearing in April 2014 before King J. He submits that his presentation of his case in relation to W’s alleged fraud reflects poorly on him given the personal nature of the attack upon her integrity and the familial relationships involved. H’s brother is one of the senior partners in the firm which represented him throughout the substantive hearing before me. Mr Yates informed me that H’s brother had been present throughout the hearing in April 2014 with a view to taking over the conduct of H’s case in the absence of a settlement at that hearing. He tells me (and, of course, I accept) that it was common knowledge that H would be dispensing with the (no doubt more expensive) services of Vardags. His presence at that hearing was intended to smooth the transition. Given the level of costs he had incurred by that point in time, I do not accept that H can be criticised for electing to change ‘legal horses’ in this way. The move will undoubtedly have saved costs in the long run and I can see no basis upon which his representation since the change can be criticised apart from the fact that the case has not settled. That outcome has been largely in the hands of the parties themselves for it is they who deliver their instructions to their legal representatives albeit on the basis of having reflected on the advice they have received.
  11. As to the actual likely value of the shares in B Ltd at the time the original deal was brokered, that finding must await another day. I am considering costs and the destination of that liability in this supplemental judgment. At the heart of H’s set aside application, as I have found, was his own subjective impression of the future hope value in the shares once Crispin Odey had come on board. As I said before, he (H) was particularly well placed as an experienced investor to weigh and consider that hope value. Whilst his subjective appreciation of the potential for future value might have been different from W’s, he was nonetheless entitled to be told of that fact before he signed up to the deal which was struck in February 2012. For her part, I am satisfied that W, by her offer of 9 February 2014, had sought to address that position. But at the end of the day, I cannot ignore the fact that she lost in relation to the substantive issue of set aside. Mr Amos submits that the costs which were wasted by the abortive hearing before King J cannot form any part of the financial penalty (or “punishment” as he put it) to be laid at W’s door. That hearing was nevertheless a milestone in the chronology of the journey which this litigation has taken through the courts. I accept that H did not succeed in his April 2015 attempt to adjourn the final hearing before me but I suspect that the costs of that appearance are a relatively insignificant element of the global bill which he now asks W to pay.


  1. Some two years further on, I find myself in much the same situation in relation to this long-running litigation. I have tried my very best to encourage the parties to settle. They have not done so and I do not now shirk from the decision which I must impose upon them in relation to the costs of the set aside application. My order has to be fair and it must be proportionate. I have taken on board and carefully considered all those matters which are contained in CPR 1998 r 44.2(4) and (5). These factors have informed my analysis of the parties’ conduct of this litigation and the offers which each has made in an attempt to settle the proceedings. At the end of the day, W has lost on the substantive issue but H’s conduct is by no means beyond critical scrutiny and a degree of judicial opprobrium. I have no doubt that his conduct in approaching a Daily Mail journalist in the early stages of the set aside application did indeed ‘poison the well’, to adopt Mr Amos’s terminology.


  1. These are my conclusions.
  2. In relation to the original financial remedy proceedings to which the ‘no order’ principle enshrined in FPR 2010 r 28(3) applies, I propose to make no order at this juncture. I will be much better placed to determine the respective merits of the application which H makes for the costs of those proceedings once I have heard the evidence in November this year. Those costs amount to some £89,000 odd. I am merely adjourning a decision in relation to those costs. Mr Yates will be free to relaunch his application for those costs at the conclusion of the rehearing and I shall determine that application on its merits at that stage.
  3. The overwhelming burden of costs which I am currently considering relates to those incurred in the set aside application. There can be no argument but that H has primarily succeeded in his primary case in relation to that issue. However, because of the view which I take in relation to both parties’ litigation conduct in these proceedings, I consider that W is entitled to a discount in respect of her liability for those costs. That discount falls to be assessed by reference not only to H’s own litigation misconduct in approaching the national press during the currency of these proceedings but by reference to the additional factors that:-
(i) W succeeded in resisting findings of fraud in relation to several aspects of the case which H was seeking to run against her; and
(ii) I have found that she made a realistic and sensible offer to compromise these proceedings as long ago as February 2014.
  1. To an extent, each is the author of his/her own misfortune. I take on board all that has been said on W’s behalf in relation to the early offers which she made and H’s response to them. That response (including the approach to a member of the national press) has, in my judgment, significantly soured the relationship between them and their ability to co-operate in finding a practical and pragmatic way through this litigation. Nevertheless, I cannot ignore the fact that W has failed on the substantial issue of her defence to the set aside application. That failure has to find reflection in my award of costs which is underpinned to a significant extent by the matters which I have set out at some considerable length in this judgment. My conclusion taking all these factors into account is that W must pay to H 50% of his costs of the set aside application. Notwithstanding the financial impact on her of such an award, it properly reflects all the facts and matters which I am obliged to take into account in these very long-running and hard fought proceedings. Having given her the benefit of a substantial discount for the reasons set out above, I can see no reason why her 50% liability for H’s costs should not be assessed on an indemnity basis. In my judgment, to do otherwise would be to penalise H unfairly and to accord too little weight to the consequences of her own litigation misconduct.
  2. As advertised at the conclusion of argument in the July hearing, and in the particular circumstances of this case, I shall direct that no steps shall be taken by H to enforce that costs award or progress the detailed assessment until the conclusion of the November rehearing. I decline to order a payment on account for the reasons I have given and notwithstanding Mr Yates’s otherwise persuasive submissions flowing from the decision of Lord Justice Christopher Clarke in Excalibur Ventures LLC v Texas Keystone Inc & Others [2015] EWHC 566 (Comm).