AB v CD

In proceedings to set aside a financial consent order for material non-disclosure, the court has a clean sheet when deciding costs. The usual no-order principle for financial remedy proceedings does not govern the set-aside application.

The court should assess the parties’ overall conduct, litigation success, reasonable offers, the issues pursued and the financial effect of any order. Success on the central set-aside issue is a significant factor, but misconduct by the successful party and sensible settlement proposals may justify a substantial discount. Where non-disclosure and subsequent misleading conduct take the case out of the norm, the appropriate liability may be assessed on the indemnity basis.

The judgment concerned the costs of the husband’s successful application to set aside a financial consent order. The order had been made after the wife failed to disclose a substantial investment in a technology company. The substantive order had previously been set aside in AB v CD [2016] EWHC 10 (Fam).

The husband sought his costs, including costs incurred in the set-aside proceedings, on an indemnity basis. The wife relied on the husband’s litigation misconduct, her own settlement offer, her limited financial resources and her success in resisting other allegations. The central issues were the applicable costs regime, the effect of the parties’ conduct and offers, the appropriate percentage of liability, and the basis of assessment.

1. The usual no-order principle in financial remedy proceedings under FPR 2010 rule 28.3 did not apply to the application to set aside the consent order for non-disclosure. The court therefore had a clean sheet and a broad discretion.

2. The discretion had to be exercised by reference to the particular facts. Relevant considerations included the parties’ conduct, compliance with rules and orders, open offers, the reasonableness of pursuing issues, the manner in which the litigation was conducted and the financial effect of any costs order. The husband’s success on the central set-aside issue was a magnetic and critical factor.

3. The wife’s failure to give a clear and transparent account of the investment after enquiries had been made amounted to serious litigation misconduct. It justified requiring her to contribute substantially to the husband’s costs. Her conduct did not, however, have to be assessed in isolation. The husband had also engaged in serious misconduct by disclosing confidential litigation material to a journalist with malign intent. The wife had resisted unsupported fraud allegations and had made a realistic settlement offer in 2014.

4. Taking all matters into account, the wife was ordered to pay 50% of the husband’s costs of the set-aside application. That liability was to be assessed on the indemnity basis because the wife’s misleading response to the enquiries took the case out of the norm.

5. No order was made at that stage concerning the costs of the original financial remedy proceedings. The application for an immediate payment on account was refused. Enforcement and detailed assessment of the set-aside costs were stayed until completion of the forthcoming rehearing of the financial remedy applications.

This was a first-instance costs judgment in the High Court (Family Division). The judgment records that the substantive set-aside decision was given earlier in AB v CD [2016] EWHC 10 (Fam).