Costs in Financial Remedy Proceedings: Time for Greater Discipline?

The cost of litigating financial remedy proceedings is one of the most serious and largely unaddressed problems facing the Financial Remedies Court. Too often, parties emerge from proceedings financially damaged not merely by the breakdown of the marriage itself, but also by the scale of legal costs incurred in the process of resolving the dispute. Costs erode the matrimonial pot with devastating consequences. Sometimes one of the parties cannot re-house.

The parties are emotionally vulnerable, anxious about their future, and fearful of making a mistake in litigation that may determine where they live or how they support themselves and their children.

The structure of financial remedy proceedings can also encourage unreasonable litigation. An angry or entrenched party can effectively force a matter to trial with relatively little fear of adverse costs consequences. Whilst FPR 28.3 and PD 28A permit the court to depart from the general rule of no order as to costs where litigation conduct justifies it, the practical reality is that substantial costs orders remain comparatively rare. This creates a culture in which disproportionate litigation can flourish.

The contrast with civil litigation is striking. In the civil jurisdiction, costs are central to case management and settlement strategy. A party who fails to beat a properly pitched Part 36 offer will ordinarily face severe financial consequences, including liability for the other party’s costs after the expiry of the 21-day period up to and including trial. The regime creates meaningful costs discipline and exerts pressure upon parties to negotiate realistically and proportionately.

Financial remedy proceedings are, however, more nuanced. A strict transplantation of the civil costs model into financial remedy litigation would risk injustice. A judge may carefully structure an order to enable both parties to re-house, only for a substantial costs order to undermine the fairness of the outcome entirely. A needs-based case may leave little room for punitive costs shifting without causing real hardship. Financial remedy judges are therefore understandably cautious about making costs orders that would materially damage one party’s ability to rebuild their life following separation.

Financial remedy proceedings frequently involve dependent children whose housing and welfare needs will inevitably take priority over any punitive approach to costs. Where limited assets are available, the court cannot realistically impose substantial costs penalties if doing so would undermine the ability of a primary carer to provide suitable accommodation for the children. In that sense, some departure from the strict civil costs regime is both inevitable and justified. The Financial Remedies Court jurisdiction must always retain sufficient flexibility to ensure that the welfare consequences of any costs order are properly considered.

Nevertheless, some of the discipline and proportionality found within civil proceedings should find its way into the financial remedy arena. FPR PD 28A already emphasises that the court should take a broad view of litigation conduct and may regard a failure to negotiate reasonably as conduct justifying an adverse costs order. The Financial Remedies Court of England & Wales: Financial Remedies Guide 2026,[[1]] issued under the leadership of Mr Justice Peel and His Honour Judge Hess, also places significant emphasis upon efficiency, proportionality, and sensible case management within the Financial Remedies Court. Paragraph 30 states:

‘At all hearings the court will require to be informed of the parties’ compliance with the duty to negotiate openly and reasonably pursuant to FPR 2010 PD 28A para 4.4. To enable the court to examine the attempts at achieving a negotiated settlement, position statements for each hearing must contain short details of what efforts the parties have made to negotiate openly and reasonably. The parties will be warned that, whatever the size of the case and whether it is being decided by reference to needs or sharing, a failure to make reasonable attempts to compromise cases in open negotiation once the financial landscape is clear may be met by an order for costs.’

This guidance contemplates adverse costs orders being made even in needs cases.

However, we need to go much further. This could be achieved at the first appointment. The court would allocate the case to a complexity band with set recoverable costs in each band. Such an approach would draw a parallel with the intermediate track in civil proceedings and its four graduated complexity bands.

For example, Band 1 cases might involve disputes where the only significant asset is modest equity in the former matrimonial home together with equally modest pensions and savings. Recoverable costs in such matters could be capped at, say, £15,000 per party to trial and £10,000 to FDR. Higher bands would accommodate increasing factual and legal complexity, including business valuations, inherited wealth, allegations of dissipation and misconduct, or offshore trust structures. A Band 4 case involving substantial company interests and international assets might justify costs in the region of £250,000 to trial inclusive of expert fees and other disbursements. Within each band there would be additional provision for satellite add-ons such as intervenor proceedings and third-party claims.

Any fixed costs regime would require teeth to be effective. Some pain may be necessary to achieve this. As in civil proceedings, a party seeking to depart materially from an allocated band approved at the first appointment would be required to demonstrate good reason for doing so by D11 application. This should very much be the exception to discourage satellite litigation. Applications should be discouraged by awarding costs against the party who made the application if it is unsuccessful. Costs should be summarily assessed by the judge at the hearing. Any party seeking costs should place the other party on notice using form N260 as in civil proceedings to enable the judge to summarily assess in a few minutes at the end of any hearing.

Absent such justification, costs incurred beyond the approved budget would not generally be recoverable. Nor should such excess expenditure be capable of recovery indirectly through the back door by being presented as a liability within the ES2. This practice should cease.

As things stand, an unreasonable litigant can diminish the matrimonial pot through excessive or unnecessary expenditure and thereby reduce the resources available for distribution, sometimes causing one of the parties to be unable to re-house. The principle therefore reinforces the broader objective that parties should conduct litigation proportionately and with proper regard to the preservation of family assets.

If costs discipline is to be meaningful, parties must understand from the outset that disproportionate litigation expenditure will ultimately remain their own responsibility even in a needs case.

Such a system would not eliminate judicial discretion. Judges would retain a residual discretion to depart from fixed costs where justified by exceptional complexity or misconduct. However, it would impose an external framework of proportionality upon litigation that currently lacks meaningful restraint. It would also encourage practitioners and clients alike to focus upon the issues that genuinely matter and avoid expensive sideshows.

There is also a strong argument for reconsidering the role of Calderbank-style offers. Prior to the changes introduced in 2006, Calderbank letters played a significant role in encouraging settlement within ancillary relief proceedings, as they were then known. In civil proceedings a well-pitched Part 36 offer will often achieve settlement. The reintroduction of Calderbank offers could provide a more effective mechanism for penalising parties who pursue unrealistic positions. Any such regime would need to preserve the court’s ability to avoid outcomes that interfere disproportionately with the substantive financial award itself. But judges should not shy away from a punitive costs award where it is clear an offer should have been accepted, even in a needs case. If a party fails to beat a Calderbank offer the court should ensure there is an adverse cost consequence, even if modest as in a needs case or a case with limited assets.

Ultimately, judges should not shy away from disallowing costs where a party has failed to litigate reasonably, whether by the front or back door. The current culture allows disproportionate expenditure to become an accepted feature of financial remedy litigation, notwithstanding the frequent howls of protest from the judiciary.

The money spent on legal costs is money removed from the resources available to the family. Greater costs discipline, sensible budgeting, and more robust consequences for unreasonable litigation would not undermine fairness in financial remedy proceedings. Properly implemented, it would enhance it.

[[1]]: www.judiciary.uk/guidance-and-resources/financial-remedies-guide-2026/