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You are here: BAILII >> Databases >> England and Wales High Court (Family Division) Decisions >> AB v CD [2016] EWHC 2482 (Fam) (11 October 2016) URL: http://www.bailii.org/ew/cases/EWHC/Fam/2016/2482.html Cite as: [2016] EWHC 2482 (Fam) |
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FAMILY DIVISION
SITTING IN LEEDS
Strand, London, WC2A 2LL |
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B e f o r e :
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AB |
Applicant |
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- and - |
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CD |
Respondent |
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Mr Tim Amos QC (instructed by Stewarts Law LLP) for the Respondent
Mr Edward Davies (instructed by Walker Morris LLP) attended part of the hearing on behalf of B Limited
Hearing date: 20 July 2016
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Crown Copyright ©
Mrs Justice Roberts :
The Law
28.3. Costs in financial remedy proceedings
(1) This rule applies in relation to financial remedy proceedings.
(2) Rule 44.2(1), (4) and (5) of the CPR do not apply to financial remedy proceedings.
(3) Rules 44.2(6) to (8) and 44.12 of the CPR apply to an order made under this rule as they apply to an order made under rule.44.3 of the CPR.
(4) In this rule
(a) "costs" has the same meaning as in rule 44.1(1)(c) of the CPR; and
(b) "financial remedy proceedings" means proceedings for
(i) a financial order except an order for maintenance pending suit, an order for maintenance pending outcome of proceedings, an interim periodical payments order, an order for payment in respect of legal services or any other form of interim order for the purposes of rule 9.7(1)(a), (b), (c) and ;
(ii) an order under Part 3 of the 1984 Act;
(iii) an order under Schedule 7 to the 2004 Act;
(iv) an order under section 10(2) of the 1973 Act;
(v) an order under section 48(2) of the 2004 Act;
(5) Subject to paragraph (6), the general rule in financial remedy proceedings is that the court will not make an order requiring one party to pay the costs of another party."
"[51] the wife's aspiration, following any setting aside of the orders made in 2001, was again to proceed with her application for ancillary relief. But her application for an order setting those orders aside was not itself an application for ancillary relief . So, although the proceedings before the judge were in connection with ancillary relief, they were not for ancillary relief. I would have been willing to give the phrase 'ancillary relief proceedings' in r 2.71(4) a wide purposive construction as so as to include proceedings in connection with ancillary relief as well as for ancillary relief if my view had been that such would better reflect the rule-makers' purpose. But such is not my view. The general rule in r 2.71(4)(a) is only a concomitant of the modern approach in applications for ancillary relief that the sum owed by each party in respect of his own costs will be treated as his liability for the purposes of calculating the substantive award."
.
"[53] Thus there was no 'general rule' in either direction for the judge to apply to his decision. He had before him a clean sheet: but, by reference to the facts of the case, and in particular, the wife's responsibility for the generation of the costs of a failed application, he remained perfectly entitled to record upon it, as he did, that he would start from the position that the husband was entitled to his costs."
"198. But even the "no order principle" is not inflexible: one would hardly suppose that it could be. The factors which a court should take into account when considering whether nevertheless to make a costs order are set out in the following excerpt from FPR 28.3:
"(5) Subject to paragraph (6), the general rule in financial remedy proceedings is that the court will not make an order requiring one party to pay the costs of another party.
(6) The court may make an order requiring one party to pay the costs of another party at any stage of the proceedings where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them).
(7) In deciding what order (if any) to make under paragraph (6), the court must have regard to
(a) any failure by a party to comply with these rules, any order of the court or any practice direction which the court considers relevant;
(b) any open offer made by a party;
(c) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(d) the manner in which a party has pursued or responded to the application or a particular allegation or issue;
(e) any other aspect of a party's conduct in relation to the proceedings which the court considers relevant; and
(f) the financial effect on the parties of any costs order."
199. PD28A para 4.4 adds to rule 28.3 that in considering the conduct of the parties for the purposes of rule 28.3(6) and (7) (including any open offers to settle), the court will have regard to the obligation of the parties to help the court to further the overriding objective (see rules 1.1 and 1.3) and will take into account the nature, importance and complexity of the issues in the case.
200. In the "clean sheet" situations referred to above, the following key parts of CPR rule 44.2 apply:
"(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including
(a) the conduct of all the parties;
(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and
(c) any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.
(5) The conduct of the parties includes
(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 its case or a particular allegation or issue; and
(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim."
"[20] Even if the rule in Gojkovic v Gojkovic and Another once again does apply it is by no means clear that this mother can be said to have 'won' this case. In fact, objective analysis would suggest that overall the father was rather more successful than the mother. A consequence of FPR 2010 r 28.2(1) and its incorporation of the Civil Procedure Rules 1998 (CPR) 44.3(4)(c) is that in relation to those proceedings excepted from r 28.3, protection in respect of costs can be achieved by making a Calderbank v Calderbank [1976] Fam 93, [1975] 3 WLR 586, (1975) FLR 113 offer. Yet no such offer was made in this case by either party. Only open offers were made and the result was much closer to the father's position than the mother's.
[21] It is certainly correct that by virtue of CPR 44.3(4)[1] (which is applied to these proceedings by FPR 2010 r 28.2(1)) the court has to consider the conduct of the parties; whether a party has been successful in whole or in part; and any admissible offers made by the parties (which, as I have pointed out, include Calderbank v Calderbank offers). These would be the first thing to write on a clean sheet. ."
The parties' positions
"In cases where there has been non-disclosure and deliberate non-disclosure, it is all too predictable in my experience that someone who is indeed a non-discloser would wish to wriggle, to chop definitions and to dispute terminology in providing the information required." (para 15)
"Furthermore, the wife, who is plainly highly intelligent, highly skilled and an experienced businesswoman, chose her words very carefully it seems to me, particularly in the statement because the issue is not whether or not there has been a shareholding now by Odey in [B Ltd]; but whether there is very shortly to be, and it has been agreed that there will be a very significant injection of capital which will increase the share price enormously, and indeed the wife's prospects as participant in that business." (para 30)
" Odey can confirm that it began discussions with [B Ltd] in May 2012 with a view to providing financial support to the company for its discussions with the Ministry of Justice . Odey would consider, subject to the structure and terms of a Ministry of Justice Contract being awarded, providing [B Ltd] with a proposal for the Board to consider for the financing of this contract. Neither [B Ltd] nor Odey is able to estimate the likely requirement, if any, for such funding. No commitment has been made either by Odey to provide this finance, or for [B Ltd] to accept it, and the terms would have to be negotiated between Odey and [B Ltd] when the requirement arose. Odey would not make an offer to buy [B Ltd] or any or all of the founder's shares." [my emphasis]
"For the avoidance of doubt, the loan referred to [i.e. the £150,000] was the only offer of investment received by [B Ltd] in 2012."
"Those letters make it clear beyond peradventure that (a) Odey began discussions with [B Ltd] in May 2012 (three months after the agreement reached between H and W0; (b) no investment has been made by Odey in [B Ltd] ". [my emphasis]
"In this context the first thing to say therefore is congratulations to H: if, as W believes, it has been H's aim to destroy W financially and reputationally, he has now achieved that aim."
"186. I have no hesitation in finding that non-disclosure to be material. First, the order was presented to the court as a consent order to which both parties had given their full agreement. Its terms brought to an end significant legal rights which each had against the other to bring financial claims and seek orders. Those rights were dismissed by the court in order to give effect to the clean break which each wished to achieve. H was deprived of the opportunity of deciding whether or not to agree to the terms proposed on the basis of a fully informed decision. He was not provided with the disclosure of information which he says would have been highly material to his decision to accept or reject the terms proposed, or to insist upon a renegotiation of those terms. In such circumstances, it is difficult to see how he can be said to have given full consent.187. Secondly, his evidence throughout was that he would not have agreed the package of terms reflected in the consent order had he realised the potential value of his shares. I accept his evidence on this point. It seems to me that, in this context, it matters not whether the Odey investment in B Ltd had been "transformational" in the window between October 2011 and February 2012. In his eyes, as an experienced venture capitalist, Odey's involvement had the potential, if not the guarantee, to make his personal investment in B Ltd significantly more valuable than the notional figure he had presented in his Form E. Because of W's far greater holding of shares, it also had the potential to increase her personal wealth to a point where the net benefit passing from H to W under the terms of the consent order became an unfair adjustment to their respective capital positions. That factor alone is one which would have had to be weighed by the court in deciding whether or not to make an order in the terms sought." [my subsequent emphasis]
" as is clear from the accounts, external investors were supporting the business on a speculative basis since the company was, and had been from the outset, loss-making. There was no tangible benefit in any of its underlying assets and expenses exceeded profits on a year by year basis."
The impact of H's own litigation conduct
Admissible offers to settle: CPR r 44.2(4)(c) and H's own litigation misconduct
A principled approach to the issue of costs
"The conduct of the parties in relation to an application concerning their financial affairs is a relevant consideration whatever the format of the litigation, and whatever the particular costs regime beneath which their application or applications fall to be considered. Where one party hatches a wholly deceptive presentation, pursues it persistently to the conclusion, and is found to have done precisely all of that, then he or she should expect no quarter from the court when it comes to costs. Such conduct unravels all and can and should in an extreme case where the conclusions are clear have clear costs condemnation meted out as the court's response. Such cases are relatively view in number but this is such a case. Such cases should be fewer in number, and may become so if the costs outcome for such reprehensible conduct is clearly in prospective focus from the off."
Quantum
Basis of assessment: standard or indemnity costs ?
"Indemnity costs are no longer limited to cases where the court wishes to express disapproval of the way in which litigation has been conducted. An order for indemnity costs can be made even when conduct could not properly be regarded as lacking in moral probity or deserving of moral condemnation: see Reid Minty v Taylor [2002] 1 WLR 2800. However such conduct must be unreasonable 'to a high degree. "Unreasonable" in this context does not mean merely wrong or misguided in hindsight': see Simon Brown LJ (as he then was) in Kiam v MGN Ltd (No. 2) [2002] 1 WLR 2810.
In any dispute about the appropriate basis for the assessment of costs, the court must consider each case on its own facts. If indemnity costs are sought, the court must decide whether there is something in the conduct of the action, or the circumstances of the case in question, which takes it out of the norm in a way which justifies an order for indemnity costs: see Waller LJ in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 8769."
"Where I believe W's conduct does properly attract censure is her response to the enquiries which were subsequently raised on behalf of H. Much time and expense would have been avoided if she had responded openly and at an early stage to his solicitors' questions. I accept that their initial letter sought the answers to a significant number of questions and required her to produce documentation which was confidential to the company. Nevertheless, despite the constraints under which she was put by the demands of the B Ltd board and her obligations of confidentiality, her responses were, in my judgment, unhelpful at best and misleading at worst. the rearguard action which she fought over many months to suppress his challenge to the consent order was, in my judgment, misplaced and gave rise to some exquisitely nuanced presentations which have not withstood the forensic scrutiny to which they were exposed. I find that she placed undue reliance on the terms of her employment contract in order to avoid some of the more penetrating questions which were asked of her. In this respect it is not without significance that her contract specifically provided for the provision of confidential information "where this is required by law". Once Parker J had ordered her to provide the information, there could have been no justification for anything other than a full and frank exposition of the position."
"Charles J described his knowledge of the case and his consequent ability to reach a fair conclusion as to the percentage of the overall costs burden which the husband should pay as 'having lived through the litigation'. In terms I can relate to that experience 'having lived through this litigation'. There is little about its course, the underlying facts or the parties' involvement with it that I do not know.'
Overall conclusions
(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.
Order accordingly
Note 1 In both this and the preceding paragraph, Mostyn Js reference to CPR r 44.3(4) must have been intended as a reference to r 44.2(4). [Back] Note 2 H was prepared to allow time for payment: he had agreed to accept monthly instalments over a 6 month period. [Back] Note 3 I was told that one of the requirements of an application for a director of a publicly listed company is to provide a negative response to the pro-forma question,Has an allegation of fraud ever been made against you ?. [Back] Note 4 Sharland v Sharland [2015] UKSC 60; Gohill v Gohill [2015] UKSC 61 [Back]