P v P (Treatment of costs in sharing cases) [2022] EWFC 158

Published: 14/11/2022 09:00

https://caselaw.nationalarchives.gov.uk/ewfc/2022/158

DDJ David Hodson. The court published this discrete judgment to address several issues of legal costs in a wholly sharing claim. This was a case which ‘should never have got to Form A, let alone a final hearing’; W had incurred £130,000 in legal costs whereas H had incurred £24,500. All costs paid at the date of the hearing were from marital funds.

W was 69, and H 70. They had been married 40 years and had two adult children. Income and pensions were modest, assets were worth £800,000–£900,000; all of which were matrimonial. There was an intractable dispute about W’s modest potential inheritance and the ownership of some jewellery. Neither influenced the outcome of the case.

In assessing costs broadly, a distinction was drawn between costs in civil litigation, where the parties’ finances are inherently separate, compared to matrimonial proceedings where so often the parties are working from a ‘combined marital financial pot’. Notwithstanding the disparity in expenditure, W’s spending did not amount to litigation conduct.

But what is the impact of no order as to costs in the context of the sharing principle? The judge’s view was that because costs owing are reflected on an asset schedule as a liability, and can form part of a needs analysis, the no order as to costs principle is rendered meaningless. The other party pays those costs, either on a needs basis or as part of the sharing principle if they are deducted before division of the pot, without any assessment as to whether they are reasonable or fairly incurred. As a result, ‘the no order as to costs starting point … does not do the justice now as it was intended or expected, specifically in the sharing scenario’; [75].

The solution was analogous to the dissolution of a professional partnership in which a departing partner may obtain, by agreement, an advance of partnership funds to provide for legal or accountancy assistance during the dissolution process; this is not a gift, it is an advance, an early payment. In the marital context, the amount already withdrawn by each spouse for their legal fees can be brought back and thereafter the gross amount divided to establish the share of the marital partnership resources. It was emphasised that the adding back of monies spent from the marital pot on legal costs should not be confused with the add-back principle where expenditure is wanton; this is ‘more by way of an advance … from the marital partnership resources’; [81].

The judge recognised the case in YC v ZC [2022] EWFC 137, published days after the handing down of this decision, and in which HHJ Hess grapples with similar issues regarding adding back funds in response to, as he puts it, ‘poor decision making’ in relation to costs. This judgment was therefore published with His Honour’s support.

Class Legal

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