Jersey Unreported Judgments

[2008]JRC155

royal court

(Family Division)

18^th September 2008

Before     :

J. A. Clyde-Smith Esq., Commissioner, sitting alone.

 

COSTS JUDGMENT

Advocate R. E. Colley for the Petitioner.

Advocate P. C. Sinel for the Respondent.

judgment

commissioner:

1.        On 18^th August 2008 I heard argument and reserved judgment on the costs of these proceedings.

2.        I adopt the definitions contained in the judgment of the Court delivered on 12^th August 2008 (JRC 128) which has to be read in conjunction with this judgment on costs.

3.        It is worth setting out again the concluding paragraphs of that judgment:-

"59.    As is clear from the above, the respondent has failed in her application to set aside the consent order on the grounds put forward.  She is therefore bound by the terms of the consent order which debars her from seeking further financial relief.  In making that application the respondent has incurred legal fees of some £153,000 (allowing for costs of the hearing at the same rate estimated by the petitioner) and the petitioner some £80,000 in defending it - a total of some £223,000.

60.      The respondent is left with the consent order under which, in addition to a share of the NHS pension, she is still to receive her share of the practice upon which, under liberty to apply, we give further directions below, but it can be seen that the fees that have been incurred in this application are grossly disproportionate to the assets that remain to be divided under the consent order.  Such expenditure has been incurred in the main on the basis of the respondent's suspicions, shared by her advisers, that the petitioner had not declared his income in the practice accounts to the extent of some £750,000.  Those suspicions were based on assumptions which have proved erroneous.  The respondent has thus embarked upon a speculative venture without any real evidence to support what is on any analysis a most serious allegation.  The court has yet to deal with costs but this is not a "big money" case and there can be no doubt that the outcome is financially disastrous for both parties".

4.        Somewhat surprisingly, Mr Sinel contended that notwithstanding his client's failure to succeed in setting aside the consent order on any of the grounds put forward, she was the successful party and should have her costs on an indemnity basis.  She was successful, he says, because having dismissed her application, the Court went on under the liberty to apply provisions, to make orders (by consent) for the transfer of the respondent's interest in the practice to the petitioner for a consideration of £95,896.66.  He contended that without these proceedings, no such order would ever have been made.

5.        The petitioner sought his costs on an indemnity basis on the grounds that he been the successful party and because the attempt to set aside the consent order was legally and factually flawed.

6.        Both parties drew my attention to the more flexible approach of the Court in relation to costs in matrimonial proceedings (see R v G [2006] JLR N 20).

7.        Mrs Colley argued that the rationale behind this more flexible approach was that the Court should not be obliged to make orders for costs when it has previously embarked upon a considered division of the parties' assets so as to achieve fairness that may be undone by a costs order.  Butler-Sloss LJ in Gojkovic v Gojkovic No. 2 (1992) 1 All ELR 267 (applied in R v G) stated at page 237:-

"In many cases the incidence of costs has a marked impact upon the availability of sufficient funds for the needs of the family.  It may substantially diminish the cake which has to be cut.  In some cases those costs are specifically allowed for in the substantive orders made.  The ambit and extent of the discretion of the Court is consequently, and rightly, far wider than in other civil proceedings".

8.        Notwithstanding this more flexible approach, Butler-Sloss LJ in Gojkovic went on to say the following:-

"However, in the Family Division, there still remains a necessity for some starting-point.  That starting-point, in my judgment, is that costs prima facie follow the event ..... but may be displaced much more easily than, and in circumstances which would not apply, in other Divisions of the High Court".

9.        Mrs Colley submitted that the Court was not charged here with determining how the parties' assets should be divided.  This was an action to set aside the consent order on the grounds, inter alia of non disclosure and therefore the ordinary principles in relation to costs in civil cases should apply. 

10.      At the hearing, Mr Sinel agreed that I should approach the matter following the principles applicable in ordinary civil cases and as set out in Watkins v Egglishaw [2002] JLR 1, which it is helpful to set out as follows:-

"(a)     the overriding objective in considering costs was to do justice between the parties;

(b)       that objective was fulfilled by making an award of costs in favour of the winning party, where a winner was readily apparent;

(c)       it was, however, a mistake to try to label one party as the winner when the complexity or other circumstances of the litigation did not lend themselves to such an analysis;

(d)       the wide discretion laid down in art. 2 [of the Civil Proceedings (Jersey) Law 1956] was not fettered by any particular practice, other than that the discretion should be exercised judicially and broadly in accordance with the accepted guiding principles;

(e)       it was, accordingly, open to the court to have regard to any and all considerations that had a bearing on the overriding objective of doing justice, including (i) whether a defendant brought the action on his own head, and (ii) whether litigation had been conducted in a manner which enabled the parties involved to know where they stood at the earliest possible stage and at the lowest practicable costs; and

(f)        it was implicit in this that (i) costs should not always automatically follow the event, (ii) it was no longer necessary for a party to have acted unreasonably to be deprived of his costs on a particular issue on which he failed, and (iii) the court should be ready to make separate orders reflecting the outcome of different issues.

(2)       It was, however, desirable for the court to take an overview of the litigation as a whole.  As the plaintiffs had succeeded in some issues and the defendants on others, justice was best met by making no order as to costs in either action, except that the first plaintiff should bear the defendants' costs of his application to adduce evidence by affidavit".

11.      In terms of indemnity costs, it is clear that they should be awarded exceptionally and only if there are special and unusual features in the case.  Mere success on the part of a party seeking costs, the hard fought nature and length of the hearing, the successful party's modest income and the Court's preference for that party's evidence do not amount to special or unusual features (see Jones v Jones [1985-6] JLR 40).

12.      I reject Mr Sinel's assertion that without these proceedings, no order would have been made in relation to the practice.  In my view, the respondent had a clear choice, either:-

(i)   to apply to set aside the consent order with its prohibition on the provision of any further financial relief, or

(ii)  to work within the consent order.

13.      The basis of the agreement underlying the consent order was that the capital assets of the parties would be divided equally with the parties otherwise providing for themselves.  The provision in relation to the practice envisaged its sale at the best market price reasonably achievable and an equal division of the proceeds.  The offers that were received were below the expectations of the parties and, by consent, the petitioner was released from his obligation to sell (by order dated 1^st May 2007) on the basis that the issue of the disposal (or otherwise) of the practice inter alia was, after a short adjournment, referred up to the Royal Court by order dated 13^th June 2007, when the Registrar had been informed that the respondent would be applying to set aside the consent order.

14.      All this Court has done, under the liberty to apply provision and following the respondent's unsuccessful attempt to set aside the consent order, is to give orders for the equal division of the parties interest in the practice by way of a transfer by the respondent of her interest to the petitioner at a fair value, as opposed to a sale on the open market.  This took up less than a morning of the five day hearing and involved little or no real contention between the parties. Indeed the parties readily agreed to proceed by way of transfer.  In my view the Registrar could have made identical orders at a fraction of the costs that have in fact now been incurred.

15.      The respondent chose however to apply to set aside the consent order on the grounds of bad legal advice, lack of judicial scrutiny, non disclosure and supervening events.  It is clear that of these grounds the respondent relied principally on non disclosure and bad legal advice.  Mr Sinel accepted in argument that his client's underlying suspicion and motivation in challenging the consent order, shared by her advisers, was that the petitioner was earning materially more than he had disclosed in the practice accounts, and that some £750,000 had been secreted away in a manner that can only be described as fraudulent.  The extensive questionnaire, devised by the respondent's accountant, was geared in the main to uncovering evidence to support this suspicion.  Nothing was found.

16.      In relation to non disclosure, on 8^th January 2008, Mrs Colley wrote an open letter to Mr Sinel in which she said the following:-

"Our substantive response to the questionnaire will follow but we wish to give you an opportunity to reflect before more significant costs are incurred.  It would seem to us that in reality your client is pinning her hopes on there being a "pot of gold" and it is clear that there is not".

17.      On 11^th March 2008, she wrote in the following terms:-

"We will argue that the scale of your client's attempts to show that our client has misrepresented his financial affairs when no "pot of gold" in fact exists should be taken into account in any finding as to costs".

18.      In relation to bad legal advice, on 7^th August 2007, Mrs Colley wrote to Mr Sinel in the following terms:-

"At the Directions Hearing, you made reference to there being legal authority that stated that a consent order could be re-opened due to the receipt of bad legal advice.  I believe that in fact the authority suggests the opposite but perhaps you could provide your authorities".

19.      Mrs Colley returned to the matter in her open letter of 8^th January 2008 as follows:-

"Whilst we do not accept that your predecessors can be categorized as negligent, if your client believes that she was poorly advised and has suffered loss, then she could take the appropriate action against Crill Canavan. "It is trite law that negligent advice from lawyers is not a ground to set aside a consent order". (her emphasis).

20.      As the Court found, (see paragraphs 29 and 30 of the judgment) the law on this issue is as contended by Mrs Colley and yet the respondent continued notwithstanding these clear warnings, Mr Sinel conceding at the hearing that he had to demonstrate that this was an exceptional case of the cruellest injustice.

21.      Mr Sinel placed great emphasis on the conduct of the petitioner producing a schedule of non compliance.  In my view, I cannot take into account the deficiencies in the petitioner's affidavit of means filed on 10^th June 2002 (see paragraphs 10 and 40 of the judgment) and the criticisms of the petitioner's conduct generally in relation to the period leading up to the consent order, as that consent order has not been set aside and those proceedings are therefore closed. 

22.      In relation to these proceedings, which in my view commenced on 13^th June 2007, when the Registrar referred the matter to the Royal Court, it is true that the petitioner filed his affidavit of means late and that summonses were issued in relation to the questionnaire prepared by Mr Tomes, comprising some 103 questions.  However, this questionnaire did give rise to issues of proportionality (see paragraph 24 of the judgment of 12^th August 2008 and the judgments of 25^th April and 19^th May 2008).

23.      Mr Sinel argues that the petitioner should bear the costs because he brought these proceedings on his head.  No one, he said, could have been more obstinate on disclosure.  By his conduct he "painted a picture of undisclosed assets".  His behaviour was "spot on for someone hiding assets". 

24.      In my view, the petitioner may have been slow and showed himself reluctant to provide some of the extensive information that was being sought from him going back many years, but the suggestion that, by so doing, he brought these proceedings on his head is unsustainable.  As made clear in paragraph 60 of the judgment, in the Court's view, the proceedings were launched without any real evidence to support the allegations upon which they were based.  It was presumably hoped that the disclosure process would produce the evidence to support the allegations.

25.      My overriding objective is do justice between the parties.  There can be no doubt that in relation to setting aside the consent order, the petitioner was the winner.  The respondent's overall costs are now estimated at approximately £176,000 and the petitioner's at £97,000, namely some £273,000, a sum which considerably exceeds the net value of the practice which is the remaining asset to be divided between the parties.  It is a sum which, as the Court noted, is grossly disproportionate, so that I find myself dealing with sums in this costs application which even on taxation will potentially exceed the net value of the practice.

26.      It seems to me that the clear policy of the Courts that there should be finality in litigation (see paragraphs 29 and 30 of the judgment) is relevant, in that parties who challenge consent orders unsuccessfully should ordinarily bear the penalty of the costs incurred in order to encourage finality and discourage meritless applications.

27.      Whether in the context of ordinary civil proceedings or applying the more flexible approach of the Court to matrimonial proceedings, it is my view that the petitioner should be awarded his costs in relation to the respondent's application to set aside the consent order. Should the petitioner have his costs on the standard or indemnity basis?  There are two features of the respondent's case which in my view can properly be described as special and unusual:-

(i)        The respondent launched her claim in non disclosure with no real evidence to support it.  It is fair therefore in my view for the Court to have regarded her application in this respect as speculative.  It is unusual for the accountant called by the respondent to give evidence in support of this allegation to confirm in evidence that he had not identified anything of significance or which was material which had not been disclosed, bar one matter which the court rejected (see paragraph 46 of the judgment).  This was not a hard fought case in which the Court preferred the evidence of the petitioner to that of the respondent.  There was in reality no evidence on the part of the respondent.  In her skeleton argument, Mrs Colley put it this way:-

"These applications should never have been brought.  They were legally and factually flawed.  That ought to have been evident to the respondent wife (or at least her advisers) from the outset.  It is grossly irresponsible for any litigant to bring proceedings hoping to discover evidence to support a hypothetical case by means of disclosure.  Litigants who embark on such perilous fishing expeditions must expect to bear the losses when their nets are hauled in empty".

(ii)       Assuming the respondent was properly advised as to the applicable law in relation to bad legal advice, her chances of success depended upon her persuading the Court that hers was an exceptional case of the cruellest injustice.  In my view the prospects of her so persuading the Court were hopeless.  The Court was not even persuaded that she was a wronged individual for whom it should have sympathy (see paragraph 32 of the judgment).

28.      I conclude that this is an exceptional case with special and unusual features and that the respondent should pay the petitioner's costs in relation to the respondent's application to set aside the consent order on an indemnity basis.

29.      There will be no order for costs in relation to the directions given under liberty to apply for the sale of the practice. In my view neither party was the winner in this respect. They were in agreement that they should proceed by way of transfer and the Court assisted in giving directions to bring that about.

Authorities

R v G [2006] JLR N 20.

Gojkovic v Gojkovic No. 2 (1992) 1 All ELR 267.

Jones v Jones [1985-6] JLR 40.