Costs orders in financial proceedings on divorce
In the latest instalment of the long running case, Joy v Joy-Morancho & Others (2015) EWHC 2507, the High Court has made an order that the husband pay the wife 80% of her legal costs in the sum of £334,263.
In this case, the wife sought a lump sum of £27m, being 50% of what she believed to be the marital assets worth at least £54m.
However, the husband claimed that he faced financial ruin due to debts owed to a trust, debts which he said far exceeded his assets, and that he would no longer benefit from the trust going forwards. The husband therefore suggested that the court dismiss the wife’s capital claims and only make a nominal maintenance order.
If the husband’s case were true then this left no assets from which the court could make a financial award.
However, the court did not feel able to determine whether the husband was in fact facing financial ruin or whether this was a situation he had manufactured for the purposes of defeating the wife’s claims.
Instead, the court made an order that the husband pay the wife spousal maintenance of £120,000 per annum and adjourned her capital claims until such time as the position became clearer.
When doing so, the court also made an order that the husband pay 80% of the wife’s costs. This was intended as a ‘stern warning’ against misrepresenting your true financial position, if this is what it transpired the husband had done in this case.
This is a rare case for a number of reasons. Firstly, it is rare for capital claims to be adjourned in light of uncertainty surrounding the extent of debts owed. Secondly, it is also rare for a costs order to be made, particularly in such uncertain circumstances.
The starting position in financial proceedings on divorce is that each party pays their own costs and that the Court will not make an order requiring one party to pay the costs of the other (Family Procedure Rules 2010, rule 28.3.5).
However there are exceptional circumstances when the court will consider making a costs order, such as when the conduct of one party requires it or if not making an order would result in one party being left in an unfair financial position.
The conduct of one party must be litigation misconduct. It does not mean their conduct during the relationship. Examples of litigation misconduct include failure by one party to comply with the rules or orders of the court, the way in which one party has pursued or responded to allegations, or where one party has deliberately misrepresented their position by not providing full and frank financial disclosure, as was suggested to be the case in Joy v Joy-Morancho. These are all examples of where one party may be forced to incur unnecessary legal costs due to the behaviour of the other.
Costs orders can also be made to avoid one party being left with a disproportionate burden, such as where one party has very few assets but has incurred considerable legal fees, meaning that their financial award would be spent on paying legal costs as opposed to meeting their housing and income needs. However, this is rather rare.
If you are faced with financial proceedings on divorce but concerned about how you will be able to pay your legal fees then it is important that you speak to a solicitor as soon as possible to discuss your options. In some cases, it may be possible to apply for a Legal Services Order that your costs be funded from matrimonial assets not currently within your control or that your spouse make a contribution towards your costs from their income. Alternatively, you may be eligible for a litigation loan.