Financial remedies: when one party’s costs are significantly higher
Generally speaking, the legal costs incurred by each party in a financial remedies case are usually taken into account by the court when it considers what financial orders to make.
Accordingly, whether the costs have already been paid or remain outstanding, the effect of taking them into account is of course to reduce the amount of assets remaining available for division between the parties.
But what if one party has incurred significantly more costs than the other? Isn’t the inclusion of costs unfair to the other party, who would effectively be contributing towards their spouse’s legal bill, and could receive a smaller settlement as a result?
The issue was recently considered in a case that took place in the Central Family Court in London.
In the case the wife had incurred a total of £243,904 in legal costs, and the husband a total of £489,433, double the wife’s costs. The wife argued that the difference between the two figures, £245,529, should be ‘added back’ to the assets, to ensure that she did not receive a smaller settlement as a result of the husband’s greater expenditure on legal costs.
The reason that the husband had incurred significantly more costs was related to certain financial arrangements he had with his father. We need not detail those arrangements here, but suffice to say that initially the husband was not entirely clear about them, which caused the wife’s solicitors to be suspicious, and to seek further details from the husband.
The husband then made further disclosure, and eventually the position did become clearer, proving that the husband had not actually been hiding anything. In view of this, the husband sought the reimbursement of what he said had been the extra costs involved by arguing about these matters.
Hearing the case, His Honour Judge Hess confirmed that the court could penalise a party overspending on costs, for example by excluding from the assets a portion of the over-spender’s unpaid costs and/or adding back a portion of the over-spender’s costs already paid.
However, in this particular case he decided that it would be wrong to penalise either party. There were arguments on both sides and, whilst it was a great pity that the costs were incurred, he did not think this was an obvious case for blaming one party or the other.
The end result in the case was that the matrimonial property was divided equally, leaving each party with some £3.4 million.
You can read the full report of the case here.
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