Peel J: costs awarded in needs case reducing substantive award.

In the substantive proceedings, Peel J awarded W £7.45m on a needs basis.

H applied for an order for costs (£310k), whilst W proposed no order. H rejected W’s proposal. W now sought her costs (£264k) of two interlocutory hearings, along with sums incurred following the final hearing.

Total costs amounted to c.£1.6m (W: £917k and H £709k), of which H paid c.£360k towards W’s costs.

Held

1. The starting point in FR cases is each party should bear their own costs (FPR 28.3(5)). The court retains a discretion to award costs (FPR 28.3(6)) against one, or other, or both parties, and the factors to be considered when deciding whether to make an order are set out at FPR 28.3(7).
2. When considering the conduct of the parties for the purposes of FPR 28.3(6) & (7), PD 28A (4.4) makes clear that the court will take a ‘broad view’ of the rule and:

‘will generally conclude that to refuse openly to negotiate reasonably and responsibly will amount to conduct in respect of which the court will consider making an order for costs. This includes in a “needs” case where the applicant litigates unreasonably resulting in the costs incurred by each party becoming disproportionate to the award made by the court.’

3. When the financial landscape is clear, failure to negotiate openly and reasonably in an attempt to settle will be a powerful factor one way or another when considering whether to make an order for costs (OG v AG [2020] EWFC 52).
4. It is not unfair for a party guilty of misconduct to have costs awarded against them and to receive a lesser sum than their needs would otherwise demand (Rothschild v de Souza [2020] EWCA 1215; Traherne v Limb [2022] EWFC 27; WG v HG [2018] EWFC 70). Parties must be aware that even in a needs case, they are not insulated from costs penalties, notwithstanding the impact on the assessed needs award.
5. It is improper to notionally add sums paid under orders for MPS, and other incidental orders, to the final award to present the total payable as more than has been assessed at the final hearing in aid of costs arguments. Peel J commented at [10]:

‘To do so might suggest that it is in the payee’s interests to attempt to secure interim maintenance during proceedings (by voluntary payments or court order) so as to assist in later costs arguments by totting up everything spent on him/her during the proceedings.’

Peel J considered the most influential factor in deciding whether to award costs was the parties respective negotiating positions. Whilst H could be rightly criticised for some of his litigation conduct, W’s disproportionate needs claim was far away from the ultimate award to which H was proximate. Looking at costs holistically, and the competing arguments, W was ordered to pay £150k towards H’s costs. Although her needs sum would be reduced, Peel J considered this to be a modest sum out of the £7.45m award, which incidentally had been rounded up from £7.319m at the final hearing, meaning £131k was available without any reference to W’s needs in any event.