COST BITES 133: £196,000 AWARDED ON A SUMMARY ASSESSMENT (IN A FAMILY CASE)

The judgment of Mrs Justice Arbuthnot in  KS v VS [2024] EWHC 278 (Fam) shows why it is important that family lawyers are fully aware of the principles relating to inter-partes costs orders and also the procedures governing summary assessments.  The judge held that it was appropriate for the wife respondent to an application to pay the husband’s costs which were assessed at £196,000.

“… each part of the justice system should have a costs framework which is consistent, proportionate and predictable. This will be of great assistance to parties as they enter the system. If costs are treated in that way and parties become aware that they may not be able to recover every penny they have spent, that might have the effect of first encouraging parties not to change representatives frequently and second, in parties looking for solicitors who charge less for similar work. This may drive down the costs of litigation in financial remedy proceedings, in particular.”

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THE CASE

The judge had earlier allowed the husband’s application for a stay of divorce and financial remedy proceedings on the basis that there was no connection with England and Wales.  There were ongoing proceedings in Monaco and that was the appropriate venue.

THE COSTS

The judge then considered whether an order for costs should be made.  Written submissions were made and the husband’s costs initially came to £421,576.10, which were then reduced to £331,448.50.

SHOULD AN ORDER FOR COSTS BE MADE?

The judge found that it was appropriate for an order for costs to be made in the husband’s favour.  This application did not come within the “no costs” provisions in the rules.  The wife’s position had been extremely weak, although there were grounds to question the husband’s conduct.

1. 1. The submissions were received alongside a form N260 where the costs claimed by the husband came to £421,576.10. After I questioned the total, the amounts in the N260 were amended and the costs claimed by the husband were reduced to £331,448.50.

1. After I received their submissions, I informed counsel that I was considering setting out some, “very loose guidance” about the recovery of costs in financial remedy and associated cases.

1. 1. I agreed with the positions taken by Mr Hale KC and Miss Perrins that an application for a stay does not come within Rule FPR 28.3 and that I should apply FPR 28.2. The, ‘no order’ principle in Family Procedure Rule 28.3 does not apply to an application for a stay of divorce proceedings or a stay of financial remedy proceedings. I should approach the application in accordance with Rule 28.2, on a ‘clean sheet’ basis where each party can make an application for and be subject to an order for costs.

1. 1. The rules for proceedings such as these are contained in parts of the Civil Procedure Rules which are applied by FPR 2010 Rule 28.12. I accept that the court must have regard to all the circumstances, including the conduct of the parties and whether a party has succeeded on part of his case, even if he has not been wholly successful. The conduct of the parties includes (CPR 1998, r. 44.2(5)):

a. Conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction (Pre-Action Conduct) or any relevant pre-action protocol;

b. Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

c. The manner in which a party has pursued or defended his case or a particular allegation or issue; and

d. Whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.

1. The first question is whether there should be no order as to costs. A short answer to that question is no. This is despite accepting that on the face of it the husband was a very wealthy man and that there was a large disparity between the financial positions of the husband and wife. When it came to consider the wife’s position in the proceedings, in my view her arguments were weak. She chose to continue with the proceedings and then lost the argument. She was engaging with the proceedings in Monaco. Those proceedings started first. I found that she had had the opportunity to request interim support from the Monaco court and chose not to do so.

SHOULD THERE BE A SUMMARY ASSESSMENT?

The judge held that it was appropriate for there to be as summary assessment.

1. 1. The next question for the court is whether a summary assessment should take place. Neither party argued against that and the wife contended that it would be good practice to follow the summary assessment procedure particularly in family cases to avoid further costs and conflict. I note in particular, that if the costs have to be assessed by a costs master, then that will cost further money, money that the wife at least cannot afford.

1. 1. I accept that the more usual summary assessment takes place in cases lasting up to one day although there is no rule to that effect. Although this became a three day case, it had been listed for a shorter period. It could have been concluded rather more quickly than it was. I had had conduct of the case throughout and I considered the issues were straightforward.

1. For those reasons, I have concluded that it is appropriate to make a summary assessment of the costs if I decide that a ‘no order’ decision is not appropriate.

SHOULD THE GUIDE TO THE SUMMARY ASSESSMENT OF COSTS BE CONSIDERED?

1. 1. I have taken into account all the circumstances, including the conduct of the parties and the other matters set out in CPR 1998, r. 44.2(5)) (see above). The husband’s conduct increased the costs. It should have been obvious that he should not have been pursuing the divorce in Monaco on a fault basis. The wife had a weak argument, the family home was never in London. She should never have launched these proceedings in London. Her other arguments failed.

1. 1. When it comes to the recovery of the husband’s costs, the husband argues that the civil ‘Guide to the Summary Assessment of Costs’ should not form part of a family court’s consideration and particularly not before this has been considered by the President of the Family Division and professional bodies.

1. 1. The application of the Guide was considered by DHCJ Colton KC in H v GH (supra). The hourly rate and band for the work is set out in Appendix 2: ‘Guideline figures for the summary assessment of costs explanatory notes’. The hourly rates were re-considered on 1^st January 2024 and a percentage uplift has occurred. To take just one example, for a grade A solicitor the hourly rate was increased on 1^st January 2024 from £512 to £546.

1. 1. Significantly the guide says that the general rule is that a summary assessment of the costs should be made in certain circumstances (when the case is a fast track case) and when the hearing has lasted “not more than a day”. The case I am concerned with lasted just over two days although perhaps it should have been shorter.

1. 1. In paragraph 51 DHCJ Colton KC said that, “strictly speaking, the guideline rates do not apply in the Family Court” but said that, “it would be a very odd result if hourly rates which, in civil proceedings, could not be recovered absent a ‘clear and compelling justification’, can readily be recovered in family proceedings. It is also undesirable that the benefits of guideline hourly rates (consistency, proportionality, and predictability) should be lost in the assessment of costs in family proceedings”.

1. 1. I accept of course that different considerations may apply in the Family Court compared to those in the Civil Courts, but these different considerations are perhaps not as obvious in financial remedy proceedings as opposed to ones about children and their welfare.

1. 1. In my judgment, each part of the justice system should have a costs framework which is consistent, proportionate and predictable. This will be of great assistance to parties as they enter the system. If costs are treated in that way and parties become aware that they may not be able to recover every penny they have spent, that might have the effect of first encouraging parties not to change representatives frequently and second, in parties looking for solicitors who charge less for similar work. This may drive down the costs of litigation in financial remedy proceedings, in particular.

1. 1. It seems to me the guidance is helpful as it sets out what a reasonable and proportionate hourly rate is in the various types of cases that come before the court. As a really rough, rule of thumb a top hourly rate of £546 which can be recovered from a losing party, seems a proportionate amount.

1. 1. In this case I am not going to give guidance, but I draw support from the Guide. Looking at the proceedings in the round and the findings as well as the relative positions of the parties, I make a summary assessment on the standard basis. I do not consider the wife should pay the full amount claimed by the husband because of his conduct as set out above which increased costs. A proportionate amount is 85% of the husband’s claim of £331,000. This amounts to £281,000. The next step is to consider how much of that amount is recoverable. Taking a broad brush approach and assuming a reduction of 30% on standard assessment, the amount to be paid by the wife is £196,000. I consider this to be a proportionate and reasonable amount in the circumstances.

1. In view of the financial situation of the wife, this amount will be paid at the conclusion of the proceedings in Monaco including any appeal process.