Divorcing a bully – and seeking an Indemnity Costs order
June 11, 2010 39 comments
Suppose that you are going through a very nasty financial case in the course of your divorce.
Suppose that your former spouse is behaving very badly during this process.
Suppose you both know that the court is likely to make the usual costs order in the case, with each side being asked to pay their own costs.
The party who decides to behave badly decides there is not much to lose. This party takes a gamble and increases their own costs in an effort to minimise the eventual settlement, safe in the knowledge that he or she will not have to pay the costs of the other side.
On the other side the frustration is clear. Costs are going through the roof and a nasty game is being played out. It is extremely difficult to find out what the opposing spouse is worth at all. Smokescreens and mirrors prevent anything other than a lengthy and convoluted legal process. The stronger spouse, confident the weaker one is getting nowhere, makes derisory offers.
It is pretty clear to all concerned that the intention (usually unspoken, but obvious nevertheless) is to rack up costs as much as possible, raise as many obstacles as possible to avoid disclosure, to avoid coming to the table and in general, to make life as hard as possible so that those derisory offers become more “palatable” as an end to this protracted saga.
This type of behaviour is not uncommon, especially when a spouse has much to lose. One of the worst examples I encountered recently was a client who told me her husband had telephoned the solicitor she had previously instructed, and personally threatened him and his firm with ruin if they touched her case. When she instructed another firm, he did exactly the same.
Suppose you are at your wits end, you are approaching court and you believe that you will ultimately succeed. However your costs have cleaned out all your savings. You desperately need to have your legal costs met, or your struggle will have been in vain. What can you do about it? How can you make the court depart from the normal “no order” principle?
Here is my advice:
1. Your starting point should be a clear understanding as to how a financial case should be conducted.
The relevant pre-action protocol can be found here, at the HMCS website. If you read it carefully you will note that the protocol is designed, in common with other court based protocols, to “build on and increase the benefits of early but well informed settlement which genuinely satisfy both parties to the dispute”.
This intention is also expressly enacted in the Family Proceedings Rules (known as the FPR, they govern the operation of family law cases) and is, importantly, described as “the overriding objective”. Cases should be conducted in accordance with the pre-action protocol and the FPR.
Reading through the pre-action protocol, you will note how the process should ideally be conducted and what is expected of both parties.
I would expect that if you are dealing with a particularly hostile spouse, you will find a breach of practically every paragraph: the wrong tone of the correspondence; failure to make full, frank and clear disclosure of documentation; failure to carry out the procedure with minimum distress to the parties; failure to act in a manner designed to promote as good a continuing relationship between the parties and any children affected as is possible in the circumstances, and so on. You will also note that “trial by correspondence”, the raising of irrelevant issues or causing the other party to adopt a polarised or hostile position should all be avoided if possible.
The overall intent of the pre-action protocol is to establish and narrow the issues so that even if settlement is not ultimately possible, the court should be assisted to do so. Has that happened in your case? I doubt it. So go through all the correspondence carefully, and put your arguments together.
2. If there is evidence of breaches galore, collect it.
Under Rule 2.71(4) (5) of the FPR, “The court may make such an order at any stage of the proceedings where it considers it appropriate to do so because of the conduct of the party in relation to the proceedings (whether before or during them)”. Under Rule 2.71 (5) the court must take into account the following:
(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 to settle 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.
Consider all the breaches in your case and fit them in, one by one, under each of the above sub-headings. In particular, bear in mind (f) and the financial position in which you find yourself, chasing your spouse uphill and down dale.
3. At the conclusion of the case, ask the Court for your spouse to pay your costs.
4. You can also go one step further. Ask for an award of ‘Indemnity Costs’.
When there has been what lawyers call litigation misconduct, the court may not only make a costs order against one of the parties to the case. The court may also make an order for Indemnity Costs, if the conduct of the losing party warrants it.
What does that mean? Usually when the losing party is ordered to pay costs, the order would be Party and Party costs so that only costs reasonably incurred in the proceedings are to be paid by the other spouse.
Take for example an application for variation of a periodical payments order. The case is evenly fought between the parties, both having good arguments, but ultimately the order is varied. The court will probably make a costs order against the losing party, but only the costs that are payable on a party and party basis. The court would then have discretion to reduce the charge-out rate of the successful party’s lawyer, and a greater discretion to reduce the overall amount to be paid, to a sum that the court considers reasonable to be paid by the losing spouse to the winning spouse. So if the winning spouse has instructed a lawyer costing say £500 per hour, the court might find that £200 per hour is more reasonable and make an award on that basis. The losing spouse would pay costs but typically, in my experience, up to about two thirds of the winning party’s legal bill.
However if the conduct of the losing party warrants it, and if the court is satisfied it takes the case out of the norm, the court will award Indemnity Costs, and thus the costs of the recipient party will normally be paid in full.
Under the Civil Proceedings Rules 44.4 and in particular, sub-rule (3), “where the amount of costs is to be assessed on an indemnity basis, the court will resolve any doubt which it may have as to whether costs were reasonably incurred or were reasonable in amount in favour of the receiving party”.
This type of costs award can be a massive body blow for a losing party who has been playing games and racking up both sets of costs, instead of following the overall objective of the pre-action protocol and the Family Proceedings Rules. Not only would the losing spouse be paying the settlement, but also their own legal fees – and potentially could end up paying double those legal fees, or more than double, if the recipient party lawyer is even more expensive than their own.
If you are in this situation: play hardball, refuse to despair – and use the law. I wish you the best, and please feel free to leave any questions in the comments section below.
June 11, 2010
Categories: Finances and Divorce