Costs in Financial Proceedings on Divorce : Dishonesty doesn’t pay!
It is often assumed by the “wronged” party of a Divorce that the legal fees and court costs incurred to resolve their financial affairs will be met by their Ex who “put them in this position in the first place”. However the general rule in financial proceedings is that the court will not make an order requiring one party to pay the costs of the other party. This is often very disappointing to hear especially at a time when resources are limited and emotions are high.
The Courts do have the power to make a Legal Services Order to order a party to make a payment to their spouse or civil partner for legal costs in connection with divorce proceedings or financial relief proceedings provided it is satisfied that:
- the receiving party would be unable to obtain legal services without the legal services order; and
- the receiving party is unable to secure a loan for their legal costs or grant a legal charge over assets in the proceedings to secure payment of their legal costs. The general rule does not also apply to an application an order for maintenance pending suit, an order for maintenance pending outcome of proceedings, an interim periodical payments order, an order for payment in respect of legal services or any other form of interim order for the purposes of rule 9.7(1)(a), (b), (c) and (e) CPR;
- The court may make an order for costs any stage of the proceedings where it considers it appropriate because of the conduct of one of the parties. The question being what is the definition of “Conduct”
- This means that if your ex-spouse has savings or investments and you have no other means of funding your case, you may be able to request the court to order them to pay your legal costs, to enable you to pursue divorce or financial proceedings. However it is often difficult to overcome all the necessary hurdles to substantiate such an application.
In the recent case of Joy v Joy-Morancho  EWHC 2507 (Fam) the High Court made it clear that his costs judgment against a dishonest party should act as a deterrent to others considering deceiving the court.
This was a very complicated case because it involved a claim from a wife on substantial and varied assets (themselves situated in several foreign jurisdictions) which were proved to have not belonged to the husband, but to a trust set up long before the marriage. During the course of 18 months it was systematically successfully proved during multiple hearings that none of the assets the wife was seeking to claim actually belonged to the husband and those that he did have were already encumbered. As a result the court was unable to transfer any of them to the wife and in fact no capital whatsoever was awarded to the wife in this case. Despite this however the judge said the husband should pay all of the Wife’s costs for proceedings since May 2013 – amounting to around £334,000 to be paid within 14 days.
The judge said the husband’s conduct in trying to explain his financial circumstances amounted to ‘blatant dishonesty’ and that he had deliberately set about obscuring the true situation as to his past, present and future.
One lie about the evidence of a witness was described as ‘breathtaking’.
The judge said it would be ‘grossly unfair’ to the wife not to regard the husband’s conduct as the ‘prime touchstone’ in the case, and he characterised the husband’s case as a ‘rotten edifice founded on concealment and misrepresentation and therefore a sham, a charade, bogus, spurious and contrived’.
‘Such conduct unravels all and can and should in an extreme case where the conclusions are clear have clear costs condemnation meted out as the court’s response,’.
‘Such cases are relatively few in number but this is such a case. Such cases should be fewer in number, and may become so if the costs outcome for such reprehensible conduct is clearly in prospective focus from the off.’
The husband had proposed that a nominal maintenance award was the only financial remedy his ex-wife should receive, whereas she sought a lump sum pitched at £27m, on the basis that his total assets were at least £54m.
Part of her argument was related to a portfolio of vintage cars, valued at £20m and owned by a trust.
The Wife was however awarded periodical payments of £120,000 plus an adjournment of her capital claims, although he conceded that ‘the correct analysis is that neither party has won’.
Such matters are always complicated and unique to your specific set of circumstances. To seek advice please contact one of our experts here