Parties can be penalised in costs if they do not negotiate reasonably

Parties can be penalised in costs if they do not negotiate reasonably

Posted by Madeleine Harrington, on September 3, 2020. Tags:

Mostyn J has emphasised in the case of OG v AG [2020] EWFC 52 that parties must comply with their disclosure obligations and also negotiate reasonably on an open basis once financial disclosure has been obtained. 

The case of OG v AG [2020] EWFC 52

In the case in question, Mostyn J held the husband’s conduct in relation to his disclosure was ‘not only dishonest but futile and frankly inexplicable’.  Due to the fact full disclosure had not been provided there had never been an effective FDR and the parties had incurred legal costs in excess of £1 million. 

The wife’s conduct was ‘not above criticism’ as she had also been guilty of non-disclosure.  In addition, in June 2019, after the pre-trial review, the financial landscape had been clear enough for the parties to negotiate reasonably.  The wife’s stance, however, had been unreasonable as she proposed a division of the assets which the judge held as ‘untenable’.  In her proposal she sought to discount the value of one of the husband’s businesses, to divide the assets so that she received as much as the husband and asserted that he should pay 93% of her costs. 

Mostyn J thought felt this was a classic case for the application of the equal sharing principle as the marriage was long and all the property was matrimonial.  So far as conduct was concerned, the judge held it should be taken into account ‘not only where it is inequitable to disregard but only where its impact is financially measurable’.  He further commented it is ‘unprincipled for the court to stick a finger in the air and arbitrarily to fine a party for what it regards as immoral conduct’. 

The wife’s argument that there should be a costs penalty against the husband and a substantial departure from equality was rejected by Mostyn J.  The husband was penalised in costs to reflect the impact his misconduct and non-disclosure had on the parties’ costs.  So far as the wife’s costs were concerned, Mostyn J referred to the revised para 4.4 of the Family Procedure Rules, Practice Direction 28A, which requires parties to negotiate openly in a reasonable way.  Consequently, the wife would suffer a penalty in costs for adopting an unreasonable approach.  Mostyn stated ‘it is important that I enunciate this principle loud and clear: if once the financial landscape is clear, you do not openly negotiate reasonably, then you will likely suffer a penalty in costs.  This applies whether the case is big or small, or whether it is being decided by reference to needs or sharing’.

Overall, the wife received £9.055 million and the husband received £7.316 million, equating to 44.7% of the total assets.  The departure from equality was £869,741, which Mostyn J held was ‘the price that the husband has to pay for his conduct in setting up a competitive business and conducting the litigation so abysmally’. 

Conclusion

In conclusion, this case is a warning to litigants that, not only can parties be penalised in costs for deliberate non-disclosure, but Mostyn J has also made it clear that it is crucial for litigants to propose reasonable offers on an open basis once the financial landscape is clear in order to avoid being penalised in costs.

Madeleine Harrington is a Family Law Solicitor in Spratt Endicott’s Brackley and Buckingham offices. To discuss this article with her please email mharrington@se-law.co.uk

*Disclaimer: While everything has been done to ensure the accuracy of the contents of this article, it is a general guide only. It is not comprehensive and does not constitute legal advice. Specific legal advice should be sought in relation to the particular facts of a given situation. The information is accurate at date of publication, 3rd of September 2020 .

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