The case of WC v HC from 2022 has shone a light on the implications of failing to negotiate openly and reasonably when attempting to settle financial matters on divorce.
In this case, the total assets amounted to approximately £12.47m, the vast majority of which had been gifted by or inherited from the husband’s wealthy family. The parties had married in 2004 after living together for a couple of years prior, making this a marriage of 16 – 17 years in length (a long marriage in legal terms). They had two children together during that time.
Following separation, there were years of contested court proceedings, during which the husband incurred costs of about £709,000, an eyewatering sum, but the costs incurred by the wife were even greater (amounting to about £917,000). The sums are truly staggering.
After the final hearing, the husband made an application to recover a proportion of his costs from the wife on the basis of her conduct. Mr Justice Peel (lead judge of the financial remedies court) heard the application and held that:
- Openly refusing to negotiate reasonably and responsibly can amount to ‘conduct’ that could result in an order for costs being made.
- An order for costs on that basis can be made even in ‘needs’ cases (i.e. a case where there are not surplus assets over and above what is required to meet the needs of the parties). That means that the award received would be reduced by the amount of costs the party guilty of conduct is ordered to pay, irrespective of the fact that the award had been made on the basis it is required to meet needs.
- The most important factor for the Judge to consider when deciding whether to make a costs order is the negotiating positions of the parties.
In this case, the wife was ordered to make a contribution of £150,000 towards the husband’s costs because her negotiating position had been unreasonable throughout the case. She had consistently argued throughout that she needed in the region of £10m to be able to meet her needs (about 80% of the assets), which was found to be unreasonable. In the end, the court ordered that she should receive £7.45m (about 60% of the assets) which is close to what the husband had proposed before the final hearing.
This case should serve as a timely reminder for anyone in the midst of the divorce process that it is important to negotiate sensibly so that the costs do not become disproportionate to the assets in the case.
If you would like more information or advice on issues surrounding divorce negotiations, please contact our Family Law team.