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Costs and needs based awards

This short article is to draw attention to recent cases where the court has considered the effect of the parties costs on a needs based award.

Three recent High Court cases were referred to by the Court of Appeal in the decision of Azarmi-Movafagh v Bassiri-Dezfouli [2021] EWCA Civ 1184.[1]  They are examined in para 52 et seq of Lady Justice Kings judgement. 

Of importance this judge reminded us at para 53:-

‘All these cases turn on their own individual facts and in my judgment the most significant principle to be drawn from them, either individually or collectively, is that the judge at first instance has a wide discretion as to the extent to which it is appropriate to order an enhanced lump sum to a party in receipt of a needs award designed wholly or in part to satisfy their outstanding costs bills’

In a short article sometimes there is not space to enter into a meaningful precise of the facts of a case, or indeed any of the facts.  Soundbites or extracts from judgements can be more helpful.

The court considered the costs regime in financial remedy cases and explored:-

  • 28.3(5) - (general rule),
  • r 28.3(6) - (conduct)
  • PD 28A para.4.4 (conduct and the obligation of the parties to help the court to further the overriding objective) and
  • CPR 44.3(2) and (3) - (difference between standard and indemnity[2] costs)

At para 63 King LJ said ‘… there is no specific rule requiring the first instance judge to carry out an analysis by reference to the principles applicable to costs orders, … to do so would not be compatible with the wide discretion of the judge to determine the extent of a party's needs and the extent to which they should be met. … in cases where it is argued that an order substantially in excess of the sum required to meet a party's assessed needs is sought in order to settle the outstanding costs (or debts referable to costs) of that party, the judge should:

  • Consider whether in any event the case is one in which consideration should be given as to the making of an order for costs under FPR 28(6) and (7) in particular by reference to FPR PD 28 para 4.4;
  • Whilst not carrying out a full costs analysis, the judge should have firmly in mind what the order which they propose to make by way of additional lump sum to meet a party's costs would represent if expressed in terms of an order for costs. To do this would act as a cross check of the fairness of the proposed order.

At para 64 she added  ‘The fact that the proposed award might amount to the equivalent of an indemnity costs award may be a powerful argument and is undoubtedly a matter which the judge should take into consideration, but it is not a cap on the judge's discretionary power to make such award as he or she determines will meet the needs of one of the parties. Similarly, the fact that one or other party has run up unreasonable costs will be taken into account, but does not act as an absolute prohibition on the making of an enhanced lump sum.

At para 68 the judge approved Counsels approach - that the judge was entitled to award the husband a sum towards his debts particularly in circumstances where, the husband's litigation conduct was not criticised, and the level of his costs was not criticised and he needed to clear his debts in order to meet his basic housing needs.

At para 69 et seq, the court rejected argument that raised violence within the marriage, but not raised as s25 conduct, as a factor to interfere with costs.

As said earlier each case turns on its own facts, and the court will examine the litigation conduct of each party when considering a costs award in addition to a needs based award.  There is little point in making a needs based award which is eroded by a party who then has to pay their costs. 

It is difficult for practitioners to take a route in litigation which satisfies a clients emotionally charged instruction, which is then later criticised by a court.  Clients have to be warned in writing.  Also, sometimes a route which seems reasonable at the time, is viewed by a court in retrospect, to be unreasonable.  It is a difficult job we do. 

Judgements seem to be getting more meticulous in examining the litigation conduct of parties. 

Of note, in LF v VF[3] (12/8/21) the trial judge found this case of help, having handed down his decision before this case was reported but before perfecting the order, his reasoning being in line with this decision, a cause for self congratulation no doubt!

 

[1] Francis J in WG v HG [2018] EWFC (Fam) 84; [2019] 2 FCR 124 ('WG v HG'); Holman J in Daga v Bangur [2019] 1 FLR 1340 ('Daga') and Cohen J in MB v EB (No 2) [2019] EWHC 3676 (Fam) 3676; [2020] 1 FLR 1086 ('MB v EB')

[2] The court approved JM v CZ (Costs: ex parte order) [2014] EWHC 1125 Fam; [2015] 1 FLR 559 at [26] Mostyn J worked upon the basis that the 'standard' basis which is by far the more usual form of order made, is commonly assumed to equate to approximately 70% of the overall costs bill.

[3] https://www.lexisnexis.com/uk/legal/auth/checkbrowser.do?t=1631781901700&bhcp=1