Francis: Costs wholly disproportionate to the size of the assets
A top family law firm has been criticised by a High Court judge for exacerbating the conflict in a high-value divorce.
Mr Justice Francis said he could not find “any justification” for London firm Payne Hicks Beach (PHB) issuing a Form A – a notice of application for a financial order – during a period when the other side had agreed not to do so.
The firm was acting for the husband in ABX v SBX [2018] EWFC 81 – a decision made in July but only published last month – in which Francis J said the two sides had already incurred costs of almost £1.1m, despite the case being “not… particularly complicated”.
The total net assets were disputed but no more than £5.4m, a significant part of which were illiquid and some of which might never be realised.
“Whilst costs of this level are not at all uncommon in what might be termed the ‘very big money’ cases, it will be obvious to anybody reading this judgment that the costs incurred in this case are wholly disproportionate to the size of the assets,” the judge said.
Francis J went on to highlight two aspects of the husband’s litigation conduct: “I have little doubt that, had things been handled differently by the husband (and those acting for him), the litigation could have taken a different, and less adversarial, course.”
There was a disagreement between the parties over whether the first the wife heard from the husband that he believed the marriage had irretrievably broken down was a letter from PHB on 5 January 2016 – this would be “remarkable” if true, the judge said.
The letter also enclosed a draft divorce petition and draft particulars of unreasonable behaviour “without giving the wife any time at all to come to terms with the news that she had received (the fact that it came just after the Christmas and New Year festivities would have ended could only have added to the trauma)”.
Francis J continued: “I have read the particulars and they are, to be fair to the husband, perfectly anodyne.
“As it turned out, however, the husband was already engaged in an affair and it would have been easy, and in my judgment the right thing to do, to invite the wife to petition him on the grounds of his adultery.
“It will rarely be appropriate to send a draft petition at the same time as informing the surprised recipient of the shock news. Certainly, in my judgment, it was likely to cause offence, and in the event did cause offence, to send a draft petition in the way that he did.”
On 26 May, PHB “sensibly” wrote to the wife’s solicitors, Stewarts, asking for confirmation that the wife would not make any application to the court prior to at least 1 June so that they could try to resolve finances through a voluntary process.
Stewarts agreed not to take any steps to issue a Form A before receiving the husband’s response by 1 June about agreeing a timetable for voluntary disclosure.
However, on 31 May, the husband unilaterally lodged a Form A at court.
The judge said he sought representations from PHB about this before criticising this action.
PHB told the judge that the financial remedy proceedings were issued merely “to put a structure and timetable in place”.
It was a holding letter written without PHB having had the opportunity to take the husband’s instructions. The husband’s instructions were later taken and a Form A was issued.
Francis J said: “Whilst I am prepared to accept that, at the end of the day, solicitors are only as good as the instructions they receive from their client, I regard it as plainly wrong that the husband’s solicitors should have acted in this way.
“Quite what advantage they, or the husband, thought that they could secure is beyond me.”
He speculated that it might have been a bid for the husband to be the applicant – “I know that there is sometimes a perception by the advocates that there is an advantage in opening the case and then in making the last closing submission” – but given that there would be no transfer of assets from the wife to the husband, he in any case ordered that the wife be treated as the applicant.
While stressing that this was not conduct which would affect his decision on ancillary relief, Francis J went on: “I do, however, wish to say that I regard the conduct of the husband’s solicitors in acting in this way as having been likely to exacerbate the difficulties between the husband and the wife.
“This is contrary to the duties of solicitors in such cases, particularly having regard to the fact that this very well-known and highly regarded firm is a member of Resolution.”
He spelt out the aim of Resolution to reduce acrimony between separating couples, continuing: “I cannot find any justification for the way that the husband’s solicitors behaved in acting as they did in relation to the issue of the Form A.
“If, although this has not been suggested to be what actually happened, they had a client who insisted on the issuing of the Form A in circumstances where it had been agreed by the other side that they would not do so, then at the very least, I would expect them to contact the solicitors acting for the wife (and I observe that the personnel in these firms would have been very well known to each other) and explain that, contrary to what had been said in an earlier letter, they were on instructions to act in a particular way.
“In reality, I expect that, in this case, had the husband’s solicitors advised the husband against the course of conduct that was adopted, they would have been able to deal with things differently.
“Plainly I cannot and do not wish to know what advice was given; that is obviously subject to legal professional privilege…
“The consequence of the events that I have described above has, in my judgment, significantly contributed to the fact that this couple had become locked in contested litigation from the outset and any possibility of trust was removed.”
Francis J also criticised the husband for pursuing a contested occupation order, even though he was rarely using the matrimonial home. The application was dismissed, though the proceedings cost around £100,000.
“I regard this as an egregious waste of money and it demonstrates at best a severe lack of judgment on the part of the husband, at worst it reflects a callous and bullying attitude,” Francis J said.
“With all of the above background, one can begin to understand how it has been that this couple have spent over £1m of their precious resources on litigating this case…
“I very much hope that some lessons can be learned about how not to commence divorce and financial remedy proceedings, albeit that one might have thought that these lessons had been learnt many years ago.”
PHB had no comment.
The judge also suggested that, were the Calderbank provisions still applicable, the parties might have been forced to take “a very different attitude” towards the litigation.
“I say this because a party who turned down an offer that they failed to beat, under that regime, could be staring at a substantial costs order.
“I recognise all of the pitfalls that were associated with the Calderbank principles, but I fear that there are cases where litigants now feel able to continue without the sanction of costs, save in cases of serious litigation misconduct.”
Calderbank should never have been abrogated and should be restored. It might be necessary to postpone payment of the costs – on stringent terms as to interest – during the minority of issue but not a day longer.