25 May 2022

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Judge orders costs against wife in divorce case due to litigation misconduct

Wife to pay £100,000 from £750,000 lump sum – it would have been more but for husband’s own misconduct

A High Court judge has ordered a wife to pay a portion of her husband’s legal costs in a divorce dispute as a result of her litigation misconduct.

In VV v VV [2022] EWFC 46, Mr Justice Peel said that, in the circumstances, it would not be unfair to “invade” her needs-based award to an extent.

At an earlier hearing, Peel J ordered H to pay W £750,000, of which £237,000 was to clear her net liabilities, mainly comprising unpaid legal costs. H had already paid £400,000 of W's costs. H then sought a costs order against W for £450,000.

Though the starting point for costs in financial remedy proceedings was that each party should bear their own costs, here “I am satisfied that it is appropriate for W to make a contribution towards H's costs”, the judge said.

In favour of not making the order was that H's maximum offer made to W was £400,000 by the time of trial, having first offered £30,000 – effectively nil once legal fees were taken into account. Peel J recounted that he had also described as “deplorable” H’s failure to comply with his obligation to give full and frank disclosure in relation to pre-sales of units in ‘AB Company’.

“It seems to me that a significant proportion of the costs incurred related to disclosure issues, for which H must bear considerable responsibility,” the judge said. “W's estimate is that it accounted for 60% of her costs. These matters point in W's favour on the costs dispute.”

On the other hand, W had sought more than £6m from H and also failed on two “critical” evidential issues which lay at the heart of the case. First she failed to prove a significant period of pre-marital cohabitation, while H established that W was guilty of misconduct “in that she caused him financial losses, probably running into tens of millions of dollars, by reason of having prevented H from selling part of his units following AB Company listing”.

Peel J observed: “Had those issues not been so hotly contested, the case would have been a relatively straightforward needs-based claim, and the costs on both sides would have been vastly reduced. The fact of those disputes probably rendered the case impossible to settle.”

The judge concluded that it would be “unfair for H to bear the burden of all his costs as well as all of W's costs” and that W should “not be entirely protected from costs consequences”.

He explained: “Their combined costs are over £1.2m, yet at the end of it all W achieved an award of £750,000, far below her open proposal, and having failed on either the cohabitation or the conduct issues.”

He made a costs order against W of £100,000 to be set off against the lump sum payment of £750,000.

“How she trims her needs to take account of this costs order will be a matter for her. She will still have total assets of about £1m and, for example, her income fund of £450,000 (£150,000pa for three years) might be reduced to £350,000.

“That is a consequence of her litigation conduct. The figure for costs might well have been higher had it not been for H's litigation misconduct.”

Brent Molyneux QC and Petra Teacher (instructed by Sears Tooth) for the applicant. Justin Warshaw QC and Kyra Cornwall (instructed by Michelmores) for the respondent.