Before : |
B. G. D. Blair, Q.C., Commissioner, and Jurats Nicolle and Clapham |
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Between |
A |
Petitioner |
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And |
B |
Respondent |
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IN THE MATTER OF L (MATRIMONIAL)
Advocate C. R. Dutôt for the Petitioner.
Advocate I. C. Jones for the Respondent.
judgment
the commissioner:
1. The Court's final task is to determine the order for costs which it is fair and appropriate to make at the conclusion of the Wife's application for ancillary relief, being the application which she made in immediate consequence of the Set Aside Order made by the Royal Court on 5th May, 2009. Needless to say, in conducting that exercise, I shall have regard to all relevant sections of the principal judgment of the Court which was handed down in draft on 11th May and has been finalised today. Any reference in this decision as to costs to a given paragraph number relates, unless the context otherwise makes clear, specifically to that judgment.
2. The sums expended by the parties on the ancillary relief relationship litigation between them since 2007 are not far short of £1 million. The Wife's entire costs amount to £460,000, of which, however, £15,000 was incurred in respect of the L Trust litigation, leaving a balance of £445,000 relating to her application for ancillary relief. The Husband (whose trust litigation costs were reimbursed to him) has incurred costs in the current ancillary relief proceedings totalling £474,000. In those poignant, it might be said tragic, circumstances my judgment requires to be made with great care and icy objectivity, for it will have serious consequences.
3. To place what follows in context, it is worth narrating that prior to April 2006 the law and practice as to costs in ancillary relief proceedings prevailing in Jersey on the one hand, and in England and Wales on the other hand, broadly coincided. It was recognised that in matrimonial (including financial) proceedings there was vested in the court a wider discretion than that available in other categories of civil litigation. That said, the procedure prescribed as an option to open negotiation in Calderbank v Calderbank [1976] Fam 93 was in force in both jurisdictions; and, unless a case's particular circumstances rendered such a decision inappropriate or unjust, the making of an order for costs in favour of the party properly to be deemed successful was the norm.
4. On 3rd April, 2006, there came into force in England and Wales The Family Proceedings (Amendment) Rules 2006, pursuant to which the default position (loosely to be described as a presumption) is that in such proceedings there will be no order as to costs, albeit that by reference to certain exceptional circumstances the court, pursuant to its wide discretion, is entitled to ordain a different solution.
5. Such a regime has not, however, been adopted in Jersey where the award of costs continues to involve the exercise of the Court's discretion pursuant to the Civil Proceedings (Jersey) Law 1956 Article 2, which provides:-
"(1) Subject to the provisions of this Part and to the Rules of Court made under the Royal Court (Jersey) Law 1948, the costs of and incidental to all proceedings in the Royal Court shall be in the discretion of the court and the court shall have full power to determine by whom and to what extent the costs are to be paid".
6. In Flynn v Reid [2012] 2 JLR 226 the Court of Appeal confirmed that in family, and in the current context ancillary relief, proceedings the court has a wider discretion as to costs than in other forms of civil litigation; that the court is not bound to, but may, have regard to relevant collateral considerations, including but not limited to the parties' needs and/or other financial circumstances; and that, accordingly, costs do not necessarily follow the event, albeit that in many cases the justice of the case will dictate that they should do so. In its judgment the Court cited with approval Watkins v Egglishaw [2002] JLR 1 , which was not, for avoidance of doubt, a matrimonial case and in which Commissioner Page set out thus the principles which in his view ought to guide the court in the exercise of its discretion when considering the issue of costs:-
"(a) The court's overriding objective in considering costs is, as in everything else, to do justice between the parties.
(b) In many cases that objective will be fulfilled by making an award of costs in favour of the "winning" party, where a "winner" is readily apparent. In any event the "follow the event" rule can still be a useful starting part.
(c) It is a mistake, however, to strain over much to try to label one party as the winner and one as the loser when the complexity or other circumstances of the litigation do not readily lend themselves to analysis in these terms.
(d) Discretion as laid down in Article 2 .... is a wide one and ought not to be treated as fettered by any particular supposed rule or practice, other than that the discretion should be exercised judicially ...............
(e) It is, accordingly, open to the court to have regard to any and all considerations that may have any bearing on the overriding objective of doing justice ...............
(f) It is implicit in this that, even though a party would otherwise be regarded as having been 'successful', justice may require that costs should not automatically follow the event."
7. Specifically, the Court approved as continuingly applicable in Jersey the decision of the English Court of Appeal in Gojkovic v Gojkovic (No.2) [1991] 2 FLR 233, which became a leading authority as to costs in ancillary relief proceedings following the introduction in 1975 of the Calderbank procedure.
8. The facts of Gojkovic (No.2) were necessarily specific to that case and need not be recited; but the following extracts from the Judgment of Butler-Sloss L.J. are instructive and clearly explain the Court's reasoning:-
"What are the principles governing costs in applications for financial relief in the Family Division and, in particular, in cases where open offers and Calderbank offers are made? In particular, what is the starting-point of entitlement to costs?
The general principles as to entitlement to costs in civil litigation are to be found in RSC Ord.62. Order 62, r. 3(3) states:
'If the court in the exercise of its discretion sees fit to make any order as to the costs of any proceedings, the court shall order the costs to follow the event, except when it appears to the court that in the circumstances of the case some other order should be made as to the whole or any part of the costs.'
Rule 3(5) states:
'Paragraph (3) does not apply to proceedings in the Family Division.'
However, in the Family Division there still remains the necessity for some starting-point. That starting-point, in my judgment, is that costs prima facie follow the event (see Cumming-Bruce LJ in Singer v Sharegin [1984] FLR 114 at p. 119), but may be displaced much more easily than, and in circumstances which would not apply, in other Divisions of the High Court. One important example is, as the judge pointed out, that it is unusual to order costs in children cases. In applications for financial relief, the applicant (usually the wife) has to make the application in order to obtain an order. If the financial dispute can be resolved, it is usual, and normally in the interests of both parties, that the applicant should obtain an order by consent; and if money is available, and in the absence of special circumstances, such an agreement would usually include the applicant's costs of the application. If the application is contested and the applicant succeeds, in practice in the divorce registries around the country where most ancillary relief applications are tried, if there is money available and no special factors, the applicant spouse is prima facie entitled to, and likely to obtain, an order for costs against the respondent. The behaviour of one party, such as in material non-disclosure of documents, will be a material factor in the exercise of the court's discretion in making a decision as to who pays the costs......"
The incidence of legal aid, the inadequacy of the financial assets available, for instance, to house both parties or even one spouse and the children, are major circumstances which may affect or even distort an order for costs that would otherwise have been expected to be made. In the vast majority of cases, where one party is, or both parties are, legally aided, and where the assets are insubstantial or at least inadequate for the needs of the family, the question of who pays the costs may be academic........"
There follows in the judgment a narrative as to the creation of and rationale behind the Calderbank procedure. The judgment later continues:-
".............It is, therefore, clear that Calderbank offers require to have teeth in order for them to be effective. This is recognised by the requirement in RSC Ord. 62, r. 9 (and the equivalent CCR Ord. 11, r. 10) for the court to take account of Calderbank offers, and, by analogy, open offers, in exercising its discretion as to costs. There are certain preconditions. Both parties must make full and frank disclosure of all relevant assets, and put their cards on the table. Thereafter, the respondent to an application must make a serious offer worthy of consideration. If he does so, then it is incumbent on the applicant to accept or reject the offer and, if the latter, to make her/his position clear and indicate in figures what she/he is asking for (a counter-offer). It is incumbent on both parties to negotiate if possible and at least to make the attempt to settle the case. This can be done either by open offers or by Calderbank offers, both adopted by the husband in this case. It is a matter for the parties which procedure they prefer. There is a very wide discretion in the court in awarding costs, and as Ormrod LJ said in McDonnell (above at p. 38, the Calderbank offer should influence, but not govern, the exercise of discretion.
There are many reasons which may affect the court in considering costs, such as culpability in the conduct of the litigation; for instance (as I have already indicated earlier) material non-disclosure of documents. Delay or excessive zeal in seeking disclosure are other examples. The absence of an offer or of a counter-offer may well be reflected in costs, or an offer made too late to be effective. The need to use all the available money to house the spouse and children of the family may also affect the exercise of the court's discretion. It would, however, be inappropriate, and indeed unhelpful, to seek to enumerate, and possibly be thought to constrain in any way, that wide exercise of discretion. But the starting-point in a case where there has been an offer is that, prima facie, if the applicant receives no more or less than the offer made, she/he is at risk not only of not being awarded costs, but also of paying the costs of the other party after communication of the offer and a reasonable time to consider it. That seems clear from the decided cases, and is in accord with the Rules of the Supreme Court and County Court Rules requiring the court to have regard to the offer. I cannot, for my part, see why there is any difference in principle between the position of a party who fails to obtain an order equal to the offer made and pays the costs, and a party who fails by the offer to meet the award made by the court. In the latter case, prima facie, costs should follow the event, as they would do in a payment into court, with the proviso that other factors in the Family Division may alter that prima facie position." [emphasis added]
9. The rationale in Flynn v Reid was echoed by the decision of the Jersey Court of Appeal in I v J [2014] JCA 235, in which the Court upheld a costs decision of Commissioner Clyde-Smith in a case between unmarried parents relating to the residence and financial arrangements for their daughter. The Commissioner had on the facts of the case made a costs award in favour of the mother in the sum of £30,000, her total costs of the litigation (child and money orientated) being, £146,000. The Court expressed its approval of the Commissioner's recitation of the law from which, it held, the following principles could be derived:-
"(i) The Royal Court has a wide power to award costs pursuant to Article 2.
(ii) Overall, costs awards should be based on two main considerations - the merits of the case (as adjudicated upon by the court) and the conduct of the parties in the litigation (as appraised by the court).
(iii) In making any costs order, the court's objective is to do justice between the parties.
(iv) In many cases that objective would be fulfilled by making an award of costs in favour of the winning party, where a winner was readily apparent - although deductions can be made if the overall winner fails in relation to some claims.
(v) Nevertheless the general (not universal) practice is to make no order for costs in children's cases.
(vi) [Refers specifically to children's cases]
(vii) [Ditto]
(viii) [Ditto]
(xi) Other than in family proceedings, the means of the parties are not relevant"
10. To turn to the facts of the instant case, in paragraph 71 of the main judgment the Court described the history of the negotiation in the current case as lamentable, and with good reason:-
(i) It is a fundamental proposition on the facts of this case that the Husband was at all material times in the position of offeror: the Wife, therefore, the offeree. It was for the Husband, in the first instance, to initiate a process of negotiation by making an offer of settlement thus, first, to provoke an (obligatory) response and, secondly, to put the Wife at obvious risk as to costs. The mode of presenting his proposals was a matter for him: he was able to make an open offer or a Calderbank (that is, without prejudice save as to costs) offer. Or, as is common practice, he could have done both those things.
(ii) At the commencement of the final hearing, five years after the (second) ancillary relief litigation commenced, the Husband, inexplicably, had made no proposals of settlement whatsoever. Paragraph 71 recites how the court became aware of that fact many days into the final hearing: previously, it had no way of knowing whether a Calderbank proposal had been made.
(iii) On the fourth day of the trial the Husband made what is now known to be his very first offer to the Wife, later superseded by another (and much improved) proposal when the hearing was in its ninth day. That latter proposal remained inadequate as to its structure; but for the first time its terms fell within close striking distance of the award ultimately made by the court. All this is explained in the main judgment: (see e.g. paragraphs [73, 120]. In his submissions today on costs Advocate Jones in effect described this offer as an opening gambit, emanating from a "commercial animal" who was looking to conduct a bartering process. This is barely credible, given the timing of the exercise, conducted well into the trial after the consumption (even then) of a sum well in excess of £ ½ million on costs. Let it be said also that the offer was initiated at a time shortly before the Husband was due to give oral evidence.
(iv) The Wife for her part did not attempt negotiation until, following receipt of the Husband's second proposal, she was directed by the court to make a counter-offer supported by appropriate rationale. I return to this omission on the part of the Wife in paragraph 14(iii) of this judgment.
11. The Husband's omission to make some offer of settlement in the period between 2009 and 2014 is, to repeat, beyond comprehension. On his own case, his disclosure was adequate and there was nothing to inhibit, still less prohibit, him from doing so. One wonders whether, despite the Order for set aside made by the Royal Court (the Bailiff presiding) in May 2009, the Husband was of the view that the Wife's application would fail and be dismissed on its merits. If that was his opinion, it was gravely (and, by him and his advisers, predictably) misplaced, as is now apparent. Indeed, the Husband himself came to recognise during the course of the trial and expressed himself accordingly that the claim must succeed. By that time, it is to be noted, the costs incurred by the parties collectively, as described in paragraph 2 above, were approaching a sum five times the capital award which the court has now conferred upon the wife. As to the Husband's costs alone, the multiple is not five, but between two and three, depending upon how precisely one treats the costs of the trust litigation.
12. Nor does it reflect well upon the Husband that the court has felt driven to express criticism as to the adequacy of his disclosure, not in terms of mendacity but because, from time to time, his responses have been tardy, insufficiently forthcoming in their detail or obstructive (see paragraph 53). By way of further example, at paragraph 78 is the Court's conclusion that the Husband's presentation as to his alleged liabilities in respect of Property R and Property W mortgages was plainly artificial.
13. All that said, however, in my judgment the Wife too is by no means invulnerable to criticism for the manner in which she has conducted the litigation. She is the overall "winner" in that she has recovered an award, both as to capital and income, which - by definition, in the circumstances described above - is in excess of the Husband's non-existent offer of settlement at commencement of trial. She has also been successful on various discrete issues, for example as to the state and consequential effect of her health and her earning capacity and her entitlement to an enhanced level of periodical payments.
14. There are, however, in my judgment, countervailing factors:-
(i) It was a key element of the Wife's case that she was confronted by, and the court was dealing with, a non-disclosing husband, in the sense not only that he had deceived her and the court in 2002, but also that he has, she alleged, continued to conceal assets that remain undisclosed. That was her position throughout the interlocutory applications over which I presided in 2014, at the outset of the trial and indeed at its culmination. When the Husband made his second and improved offer of settlement, Advocate Dutôt's cross-examination of him was substantially done, even if a minor residue remained. Paragraphs 81-91 explain in detail the assertions made on behalf of the Wife in Advocate Dutot's closing submissions which underpinned her continuing case that the Husband has hidden capital resources; and the court's reasons for finding those assertions unproven.
(ii) An example of litigation conduct which the Court found unattractive was the Wife's insistence, in her late-assumed role of, as Advocate Dutôt put it, financial ferret (see paragraph 69), upon delving far back to the late 1990's in seeking to establish non-disclosure on the part of the Husband. As explained in the main judgment, in this and many other respects the forensic arrows aimed by the Wife missed their target. Moreover, her energy and industry in terms of investigating many such matters, in concert with her lawyers and forensic accountant, was, respectively, generated and deployed largely in 2014, five years into the proceedings. Many questions were raised, and many paths trodden, which should, if that route was to be taken, have featured in the earlier stages of the case. To use the phrase which appears in Butler-Sloss L.J.'s judgment in Gojkovic (No 2), excessive zeal has in some respects been displayed by the Wife.
(iii) This links to the point that, in the Court's view, the Wife must bear some responsibility for the sheer length of the litigation. Not every delay was her doing, but the fact remains that the questionnaires deriving from her solicitors have been too voluminous in number and have spanned a vast period exceeding 5 years. She was the Applicant, and had available to her an inevitable measure of control over the pace of the proceedings, which have taken far too long. In making this and other related observations in this costs judgment, full account is taken of the fact that the Wife's index of suspicion (to use the phrase employed by Mostyn J in KS v ND [2013] 2 FLR 698, and referred to by Commissioner Clyde-Smith in J v I) was understandably raised to a high level by the facts that the Husband had already deceived her in 2002 and had created the L Trust in 2005. But it is impossible, doing fairness between the parties, entirely to ignore the extent to which the Wife fell short of establishing her case of non-disclosure.
(iv) I do not think, having regard to the costs figures and the multiples already mentioned, that, in justice, the Wife can wholly escape adverse consequence from her own failure to negotiate at any stage prior to December 2014. It is true that there was a heavy and primary onus on the Husband to make an offer. Moreover, the Wife was convinced that the Husband was, as before, guilty of non-disclosure: so in her perception she was to some extent hindered in making a proposal because she did not know what capital resources the Husband had. But that ignores the point that, whatever assets the Husband had, they were certain to be of substantially non-matrimonial character; and, as is apparent from the main judgment, the court's award was bound to be founded markedly upon needs considerations. In those circumstances she could have made an offer of settlement, whether openly or more probably without prejudice as to costs, even if the culpability in terms of failure to negotiate is very much heavier upon the shoulders of the Husband. All that said, the submission made by Advocate Jones to the effect that the parties have proven themselves as bad as each other in the conduct of the litigation is plainly untenable.
(v) What certainly the Wife was not entitled to do was rely on the 2009 finding of non-disclosure and fact of set aside as giving her carte blanche freedom to litigate without any risk at all as to costs in the fresh ancillary relief proceedings.
15. The decision of the court is made against the backcloth that orders for costs have already been made against the Husband. Plainly he is liable for the costs of the set aside application already ordered against him by the Bailiff on 5th May, 2009. There are also orders made at certain interlocutory stages in the ancillary relief proceedings. Those orders inevitably stand. I am dealing with the costs of the ancillary relief proceedings for which no provision has already been made. The parties are polarised in the positions which they argue before the Court through counsel, Advocate Dutôt contending for a full costs order on an indemnity basis, Advocate Jones for no order for costs.
16. In my judgment the merits fall between these positions. I deem the fair order in all the circumstances is that the Husband do pay 50% of the Wife's costs as just defined, to be assessed on the standard basis if not agreed.
17. I refer to paragraph 110. The suggestion made by Advocate Dutôt at a hearing in December and repeated today has been along the lines that the Wife's ability to discharge her full indebtedness in respect of costs was a fundamental need for which the court must provide by way of a full order for costs against the Husband: otherwise she would be at risk of such inroads being made into her award as will render it, at least in part, nugatory. This submission has to be rejected. It is tantamount to a contention for a carte blanche indemnity for the costs of the litigation, whatever the merits, whatever the level of success achieved by the litigants and regardless of the parties' conduct. It is particularly inappropriate in a case where the costs figures and the multiples are as already described.
18. I have no way of knowing the precise extent to which the Wife may find herself liable for payment of costs incurred whilst she has been legally aided or supported by the Legal Aid Vote. What, however, I do emphasise on behalf of the entire Court are the following key propositions, of which there was an indication in paragraph 122 and which we wish to make clear to all those who are in any way involved hereafter in what might be termed the "fall-out" from this wholly exceptional case, including her former lawyers and indeed the authority having responsibility for the administration of the Legal Aid Vote. (Whilst on the matter of the Legal Aid Vote, I briefly mention in passing that the meaning, force and effect of the undertaking given by Advocate Dutôt's firm to the Deputy Judicial Greffier in their letter of 25th November, 2013, is in my view, doubtful: see in this connection Advocate Jones' email on that subject dated 6th November, 2014. It would not be appropriate to say more on that subject, still less to express any conclusion, when the matter has not been argued with the Deputy Judicial Greffier present or represented; and in any event what I am about to say stands completely independently of this issue).
19. In the Court's judgment:-
(i) The facts of this case are without precedent, as the main judgment demonstrates.
(ii) The Wife would suffer both financial hardship and a fundamental injustice if she came away from the litigation without ultimately having achieved full beneficial, and mortgage-free, ownership of Property Y, the home where she has lived for now nearly two decades and where she has brought up the children of the family, sometimes in difficult personal circumstances.
(iii) In truth, what she has achieved in terms of capital award amounts to distinctly limited recovery when compared with the financial effect of the order made in 2002, the more so given that the hard core of the lump sum ordered will go simply towards the restoration of Property Y to a fully habitable condition. The main judgment demonstrates that the reasons for this situation are many and complex, but fundamentally the fault for it, in combination with the necessity for a continuing periodical payments order as opposed to a clean break, is not hers.
(iv) If and to the extent that the achievement of the objective referred to in subparagraph (2) above requires clemency - a scenario expressly envisaged by the Court of Appeal in Flynn v Reid (paragraph 43) - the Court, in striving for overall justice as the overriding objective demands, unhesitatingly and firmly encourages it.
Authorities
Calderbank v Calderbank [1976] Fam 93.
The Family Proceedings (Amendment) Rules 2006.
Civil Proceedings (Jersey) Law 1956.
Flynn v Reid [2012] 2 JLR 226.
Watkins v Egglishaw [2002] JLR 1.
Gojkovic v Gojkovic (No.2) [1991] 2 FLR 233.
KS v ND [2013] 2 FLR 698.