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AB v CD [2016] EWHC 2482 (Fam)

Application by husband for costs on the indemnity basis, with an immediate substantial payment on account, following a successful application to set aside a consent order in ancillary relief proceedings in 2012.

This is an application for costs made by H following a successful application to set aside a consent order in ancillary relief proceedings in 2012. The earlier judgment is reported as AB v CD [2016] EWHC 10 (Fam).  H sought an order on the indemnity basis with an immediate substantial payment on account.

W was found to have failed to disclose the existence of a substantial injection of cash from an external investor into a company which she had incorporated prior to the marriage. At the final hearing in the set aside application Roberts J had expressed no hesitation in finding that non-disclosure to be material. 

Following the making of the consent order and after the publication of an article concerning B Ltd in the Sunday telegraph, W was asked a series of very detailed questions on 21 May 2012. Until a very late stage W maintained that B Ltd had only been provided with a loan of £150,000. In fact, the company received a cash injection in 2011 in the sum of £3.5 million. 

Roberts J found that W's action in refusing to provide clarity and proper disclosure to H in response to his enquiries after the publication of the article was a clear dereliction of her ongoing duty of disclosure in the context of the matrimonial proceedings.  W was absolved of any deliberate attempt to mislead H in the disclosure she made in her Form E.  Nevertheless, Roberts J found that "as H clung tenaciously to his enquiries, W's responses became less helpful to the point of being thoroughly misleading".  Most of the current costs could, and should, have been avoided by a clear and transparent response from W at the outset. 

An analysis of the law and the relevant rules are at paragraphs 11 to 15 of the judgment.

H contended that the outcome was the starting point for the determination of his application.

W sought to rely on H's own litigation conduct, described by W's counsel as a crusade against W. H's disclosure of confidential information, including part of W's Form E, to a journalist was deprecated. H's course of conduct did not excuse W's failure to disclose relevant information at the early stages of H's enquiry but went some way to explain her unwillingness to engage following H's publication of his intent to overturn the consent order. W had genuine concerns that H would damage her reputation in the City by further 'leaks'.

Roberts J bore in mind the fact that she had not found W's non-disclosure to be fraudulent, although it was both material and a breach of her obligation to provide full, frank and complete disclosure of all matters. The learned Judge had accepted W's subjective belief in respect of its relevance to the valuation of the shares in B Limited and absolved her of deliberate fraud in relation to those stages. However, W was found to have been at fault through her failure to provide H's legal advisers at a very early stage with a transparent account of the cash injection in the company.

W's concerns about the potential for H to 'leak' information could not, and did not, justify the manner in which a series of misleading statements were made to H through his advisers, both in correspondence and in documents put before the court by way of evidence.

H had pursued his allegations of fraud at the set aside hearing before Roberts J and focused on an offshore company and alleged undisclosed offshore dealings during cross examination of W. W's counsel contended that the time estimate of the hearing had been doubled as H pursued these allegations of fraud. An intial set aside hearing before King J had been abandoned after 3 days for insufficient time. Roberts J took into consideration the fact that that H was being unreasonable in continuing to pursue the particular issues of fraud and non-disclosure in relation to other companies, at least insofar as they were found to be of no substance. Set against that was W's making and/or permitting the release of misleading statements by that point in time as to the situation regarding the investment in B Ltd. On that account, Roberts J found that the central issue before the Court in June/July 2015 was the circumstances surrounding the investment in B Ltd. H was successful on the application and his success on that fundamental ground is a critical factor regardless of his own misconduct.

At paragraphs 46 to 56, Roberts J analyses the admissible offers to settle made by each party. The learned Judge concludes that both parties could and should have used each other's offer and counter offer as a platform for further negotiations but had lost a valuable opportunity to settle the proceedings by March 2014. Although W had made a serious offer, the fact that she had lost the set aside application could not be ignored.

The Court has to look at W's conduct both prior to the agreement which resulted in the consent order and in the context of the disclosure which emerged during H's subsequent set aside application.  While W was absolved of any deliberate intent to mislead in the former, she was found to have displayed a significant lack of integrity and honesty in relation to the latter.  However, in this context, H, too, had fallen short of what might be expected of him in terms of his conduct in relation to the litigation.  The question which then arises is the extent to which the court's disapproval of H's own litigation misconduct should be reflected by applying a discount to any costs order which the court might be minded to make.  W's attempt to settle the proceedings at an early stage is an additional consideration in determining whether a discount should be applied.

The correct approach to the assessment of costs in this case, absent a combined approach from both parties, was to direct what percentage of H's costs should be met by W. Absent agreement, there will inevitably have to be a detailed assessment of those costs.

Applying the test propounded in the Excelsior Commercial case, the Court asked whether there was an aspect, or aspects, of this case which takes it out of the normal run of cases to which the standard basis of assessment would apply. Specific findings in relation to W's conduct were highly relevant. 

The order made has to be fair and it must be proportionate.  The factors contained in CPR 1998 r 44.2(4) and (5) informed the Court's analysis of the parties' conduct of this litigation and the offers which each has made in an attempt to settle the proceedings.

Roberts J considered that W was entitled to a discount in respect of her liability for those costs.  That discount fell to be assessed by reference not only to H's own litigation misconduct in approaching the national press during the currency of the proceedings but by reference to the additional factors including  W's success in resisting findings of fraud in relation to several aspects of the case; and the fact that she made a realistic and sensible offer to compromise the proceedings as long ago as February 2014.
W was ordered to pay to H 50% of his costs of the set aside application. 

Notwithstanding the financial impact on her of such an award, it properly reflected all the facts and matters which the Court is obliged to take into account in these very long-running and hard fought proceedings.  Having given her the benefit of a substantial discount for the reasons set out above, the Court could see no reason why her 50% liability for H's costs should not be assessed on an indemnity basis.  To do otherwise would be to penalise H unfairly and to accord too little weight to the consequences of W's own litigation misconduct. 

Roberts J imposed a stay on the enforcement of the order in relation to costs until the conclusion of a rehearing of the financial remedies proceedings in November 2016.  To that extent, H's application for an immediate and substantial payment on account was rejected.

Summary by Katy Chokowry, barrister, 1 King's Bench Walk
___________________________________

This judgment was delivered in private.   The judge has given leave for this version of the judgment to be published on condition that (irrespective of what is contained in the judgment) in any published version of the judgment the anonymity of the children and members of their family must be strictly preserved.   All persons, including representatives of the media, must ensure that this condition is strictly complied with.   Failure to do so will be a contempt of court.

Case No: FD11D02580
Neutral Citation Number: [2016] EWHC 2482 (Fam)

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION
SITTING IN LEEDS

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 11/10/2016


Before :

MRS JUSTICE ROBERTS

- - - - - - - - - - - - - - - - - - - - -

Between :

AB
 Applicant
- and - 
CD Respondent

(No. 2: COSTS)
- - - - - - - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - - - - - -

Mr Nicholas Yates (instructed by Bromets LLP) for the Applicant
Mr Tim Amos QC
(instructed by Stewarts Law LLP) for the Respondent
Mr Edward Davies
(instructed by Walker Morris LLP) attended part of the hearing on behalf of B Limited

Hearing date: 20 July 2016
- - - - - - - - - - - - - - - - - - - - -


Judgment
Mrs Justice Roberts :

1. On 11 January 2016 I handed down my judgment in relation to the applicant husband's substantive set aside application issued in July 2012.  The case is reported as AB v CD [2016] EWHC 10 (Fam).  This is my judgment in relation to the costs of that application.  As before, I intend to refer to the parties as 'the husband' ('H') and 'the wife' ('W') notwithstanding the fact that their marriage was dissolved some years ago. 

2. I do not propose to rehearse the background to this case.  The facts and my findings are set out at some length in my previous judgment which should be read in conjunction with my decision in relation to costs.  In essence, I found that the wife's failure to disclose the existence of a substantial injection of cash from an external investor into a fledging technology company which she had incorporated prior to their marriage amounted to material non-disclosure.  That non-disclosure resulted in the setting aside of a consent order dated 10 April 2012.  The terms of that consent order had been approved by the court on 21 March 2012 following negotiations between the parties the previous month at the First Appointment of cross-applications for financial remedy orders in the divorce proceedings.

3. Whilst I absolved W of any deliberate or fraudulent intention to deceive H in terms of the disclosure she had provided in her Form E, I was highly critical of her failure to deal openly, promptly and comprehensively with his subsequent enquiries about the cash injection from Odey Asset Management.  He had become aware of the investment following the publication of an article in the national press in May 2012.  In particular, I found that her failure to alert him to what I found to be an equity investment in B Ltd was material non-disclosure on her part since his decision to accept the terms of the compromise they reached was made in ignorance of a fact which, in other circumstances, would have been highly influential on any view he might have taken as to the global terms of that compromise.

4. I now have to determine where the burden of costs should lie following the set aside hearing and those which preceded it.  The combined bill of costs which the parties have together run up is a fraction less than £1.32 million, an astonishing figure after a very short marriage of little more than two years (or no more than months, on H's case).  Whilst W's costs have been contained to a limited extent by her recent status as a litigant in person, she has nevertheless incurred costs of almost £478,000.  H's costs are now £841,700.  It is a particular tragedy for this couple since, whilst H's shoulders may be financially broader than W's, neither can afford to have spent these sums on their legal teams in what should have been a relatively straightforward financial remedy case.  Perhaps the final irony is that W has now had to liquidate her shares in B Ltd in order to meet pressing debts.  This was the  very entity over which they were in dispute.   Notwithstanding her resignation from the board of directors and subsequent (or impending) cutting of all ties with the company, H maintains his claim to ownership of his shares in B Ltd (a 4.6% minority interest). 

5. In compliance with my decision in relation to set aside, W has recently executed a share transfer form by which her legal and beneficial interest in 19,738 shares in B Ltd is to be returned to H.  That document was sent to H's solicitors on 15 July 2016.  There is an ongoing issue between H and the company as to whether or not those shares are subject to the Article 12 rights of pre-emption which are set out in the company's Articles of Association.  Counsel for B Ltd, Mr Edward Davies, attended part of the costs hearing on behalf of the company.  I have already expressed my provisional view that, as a result of my set aside order, it is not open to the company to argue that H is not the beneficial owner of these shares.  However, that debate – if it is to continue – is a matter between the company and H and I propose to say no more about it in the context of my judgment in relation to the current costs application.

6. As to the parties' present positions, H seeks an order for costs against W.  On 18 March 2016, his solicitors wrote to W seeking a total of £538,873 in respect of his costs incurred in both the original ancillary relief application (just under £90,000) and the set aside proceedings.  That letter also contained his proposals in relation to the substantive financial proceedings.  To obviate the need for a full rehearing of the cross-applications for financial relief under the Matrimonial Causes Act 1973, he made an open proposal to accept a lump sum of £200,000 (in effect, the return of the sum he had paid over in part satisfaction of the original lump sum order).  On the basis that he would retain his shares in B Ltd, the property which they had bought together in the Oxfordshire countryside would be sold with H receiving reimbursement for all mortgage payments made since the 2012 consent order and any balance remaining would be split equally between the parties.

7. Between March and June 2016, there were various attempts to settle the matter in the round.  On 16 May 2016, in accordance with my direction, a settlement meeting was convened at the offices of Stewarts Law LLP.  That meeting did not conclude matters despite the earnest encouragement which I had given to both sides to stem the haemorrhage of costs which their ongoing dispute was continuing to generate.  By his most recent proposal on 22 June 2016, H offered to accept a liquidated sum of £450,000 from W towards his costs.  On this basis, he proposed that there would be no further cash adjustment between the parties and he would retain the entirety of any net proceeds of sale from the country property in Oxfordshire.  Under the terms of this proposal, his shares in B Ltd would be transferred into a Blind Trust for the exclusive benefit of one of his daughters.  That Trust would be administered by a professional trustee thus ensuring that he could exert no influence over any future dealings with the shares.  Clearly he hoped that this would reassure W (and the company) in relation to the absence of any future involvement by him in the company's affairs.

8. That offer was not accepted and, on behalf of H, Mr Yates now seeks his costs from W on an indemnity basis.  He asks for a substantial payment on account of the costs order which he seeks.

9. On behalf of W, Mr Amos QC submits that, despite the fact that W lost the set aside issue, there is substantial mitigation for her position in relation to costs because of H's own litigation misconduct in these proceedings.  On 25 May 2016 she made an open offer to contribute a fixed sum of £50,000 towards his costs.  That, Mr Amos contends, should be the limit of her exposure in relation to any costs orders.

10. Before turning to consider the merits of the parties' cases, I need to say something about the law and the approach I must adopt in my consideration of how to apportion the liability for the costs of this long-running litigation.


The Law
11. It is trite law that the usual order now in financial remedy proceedings is governed by the 'no order' principle.  That has been the position since April 2006 when it first appeared in rule 2.71 of the FPR 1991.  Since then, a number of different sorts of financial proceedings have been excepted from the 'no order' principle.  The relevant rule is now FPR 2010 rule 28.3 which provides as follows:

28.3. Costs in financial remedy proceedings
(1) This rule applies in relation to financial remedy proceedings.

(2) Rule 44.2(1), (4) and (5) of the CPR do not apply to financial remedy proceedings.

(3) Rules 44.2(6) to (8) and 44.12 of the CPR apply to an order made under this rule as they apply to an order made under rule.44.3 of the CPR.

(4) In this rule –

(a) "costs" has the same meaning as in rule 44.1(1)(c) of the CPR; and

(b) "financial remedy proceedings" means proceedings for –

(i) a financial order except 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 €;

(ii) an order under Part 3 of the 1984 Act;

(iii) an order under Schedule 7 to the 2004 Act;

(iv) an order under section 10(2) of the 1973 Act;

(v) an order under section 48(2) of the 2004 Act;

(5) Subject to paragraph (6), the general rule in financial remedy proceedings is that the court will not make an order requiring one party to pay the costs of another party."

12. As was made clear by the decision of the Court of Appeal in Judge v Judge [2008] EWCA Civ 1458, [2009] 1 FLR 1287, the general rule set out in rule 28.3(5) has no application in proceedings to set aside a consent order which is based upon non-disclosure.   Whilst that case was decided in the context of the former rule 2.71 of the FPR 1991, its application to that rule's statutory successor is clear.  At paragraphs 51 and 53, Wilson LJ (as he then was) said this:

"[51]  … the wife's aspiration, following any setting aside of the orders made in 2001, was again to proceed with her application for ancillary relief.  But her application for an order setting those orders aside was not itself an application for ancillary relief ….  So, although the proceedings before the judge were in connection with ancillary relief, they were not for ancillary relief.  I would have been willing to give the phrase 'ancillary relief proceedings' in r 2.71(4) a wide purposive construction as so as to include proceedings in connection with ancillary relief as well as for ancillary relief if my view had been that such would better reflect the rule-makers' purpose.  But such is not my view.  The general rule in r 2.71(4)(a) is only a concomitant of the modern approach in applications for ancillary relief that the sum owed by each party in respect of his own costs will be treated as his liability for the purposes of calculating the substantive award."
  ……….
"[53] Thus there was no 'general rule' in either direction for the judge to apply to his decision.  He had before him a clean sheet: but, by reference to the facts of the case, and in particular, the wife's responsibility for the generation of the costs of a failed application, he remained perfectly entitled to record upon it, as he did, that he would start from the position that the husband was entitled to his costs."

13. In the later case of Baker v Rowe [2009] EWCA Civ 1162, [2010] 1 FLR 761, Wilson LJ stressed that the fact that one party had been unsuccessful, and must, therefore, usually be regarded as responsible for the generation of costs, would often be a decisive factor in the exercise of the judge's discretion as to costs.

14. In the context of the FPR 2010, Sir Peter Singer sitting as a deputy Judge of the Family Division had to consider the application of different costs regimes to separate aspects of the financial remedy case which he had been hearing: see Joy v Joy-Morancho and Others (No. 3) [2015] EWHC 2507 (Fam), [2015] 5 Costs LO 629.  His Lordship stressed the inherent flexibility of r 28 FPR 2010.  He pointed to both the list of factors set out in r 28.3 and, in "clean sheet" situations, that set out in r 44.2 CPR:

"198. But even the "no order principle" is not inflexible: one would hardly suppose that it could be.  The factors which a court should take into account when considering whether nevertheless to make a costs order are set out in the following excerpt from FPR 28.3:

"(5) Subject to paragraph (6), the general rule in financial remedy proceedings is that the court will not make an order requiring one party to pay the costs of another party.
 
(6) The court may make an order requiring one party to pay the costs of another party at any stage of the proceedings where it considers it appropriate to do so because of the conduct of a party in relation to the proceedings (whether before or during them).
 
(7) In deciding what order (if any) to make under paragraph (6), the court must have regard to –

(a) any failure by a party to comply with these rules, any order of the court or any practice direction which the court considers relevant;

(b) any open offer made by a party;

(c) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(d) the manner in which a party has pursued or responded to the application or a particular allegation or issue;

(e) any other aspect of a party's conduct in relation to the proceedings which the court considers relevant; and

(f) the financial effect on the parties of any costs order."

199. PD28A para 4.4 adds to rule 28.3 that in considering the conduct of the parties for the purposes of rule 28.3(6) and (7) (including any open offers to settle), the court will have regard to the obligation of the parties to help the court to further the overriding objective (see rules 1.1 and 1.3) and will take into account the nature, importance and complexity of the issues in the case.

200. In the "clean sheet" situations referred to above, the following key parts of CPR rule 44.2 apply:

"(4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including –

(a) the conduct of all the parties;

(b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and

(c) any admissible offer to settle made by a party which is drawn to the court's attention, and which is not an offer to which costs consequences under Part 36 apply.

(5) The conduct of the parties includes –

(a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction – Pre-Action Conduct or any relevant pre-action protocol;

(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;

(c) the manner in which a party has pursued or defended its case or a particular allegation or issue; and

(d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim."

15. Thus, the discretion which I have in relation to the allocation of costs in this matter is a broad one, but one which must nonetheless be anchored to the particular facts of the case as I have found them to be.  In this context, Mr Yates reminds me of the observations made by Mostyn J in KS v ND (Schedule 1: Appeal: Costs) [2013] EWHC 464 (Fam), [2013] 2 FLR 698.  In that case, the 'excepted' proceedings with which the court was dealing were brought under schedule 1 to the Children Act 1989.  In this context, his Lordship noted that the decision of the Court of Appeal in Gojkovic v Gojkovic and Another [1992] Fam 40, [1991] 3 WLR 621, [1991] 2 FLR 233 had resulted in the application of "an equivalent, but perhaps less unbending, principle [which] should prima facie apply" in the absence of an appropriate Calderbank offer.  In other words, as Butler-Sloss LJ had held in Gojkovic, the starting point is that costs follow the event.  The court must look to see which party has primarily succeeded in its primary case (see para 18).  Mostyn J developed his point in this way:

"[20] Even if the rule in Gojkovic v Gojkovic and Another once again does apply it is by no means clear that this mother can be said to have 'won' this case.  In fact, objective analysis would suggest that overall the father was rather more successful than the mother.  A consequence of FPR 2010 r 28.2(1) and its incorporation of the Civil Procedure Rules 1998 (CPR) 44.3(4)(c) is that in relation to those proceedings excepted from r 28.3, protection in respect of costs can be achieved by making a Calderbank v Calderbank [1976] Fam 93, [1975] 3 WLR 586, (1975) FLR 113 offer.  Yet no such offer was made in this case by either party.  Only open offers were made and the result was much closer to the father's position than the mother's.

[21]
 It is certainly correct that by virtue of CPR 44.3(4) 1 (which is applied to these proceedings by FPR 2010 r 28.2(1)) the court has to consider the conduct of the parties; whether a party has been successful in whole or in part; and any admissible offers made by the parties (which, as I have pointed out, include Calderbank v Calderbank offers).  These would be the first thing to write on a clean sheet. …."


The parties' positions
16. In respect of the merits of his client's application for costs, Mr Yates' primary submission is that the outcome in terms of result is the starting point in relation to an assessment of where the liability for costs should lie.   In one sense, the preliminary - but 'stand alone' -  issue of set aside was always going to be binary in terms of outcome.  Either the original consent order would be set aside or it would not.  Regardless of any substituted order which the court might go on to make, one of these parties was always going to succeed or, alternatively, fail on that issue.  Here, says Mr Yates, H has undoubtedly succeeded.  Pursuant to my judgment handed down in January this year (2016), I have set aside the consent order made by District Judge Gordon Saker dated 21 March 2012.  The court has thereby relieved H of the consequences of an unfair order based on material non-disclosure.  In these circumstances, submits Mr Yates, my first consideration in determining the destination of any costs order should be that litigation success.

17. However, he buttresses that primary submission by reliance on the extent of W's subsequent failure to disclose the true state of affairs once H had started to enquire about the investment made by Odey Asset Management following publication of the Sunday Telegraph article some six weeks after the consent order was approved by the court.

18. In a schedule of key dates and what he has termed the "wife's mainframe lies", he has set out the essential instances of non-disclosure or 'lies' which he submits fall to be considered in the context of litigation misconduct.

19. I bear in mind that H's enquiry was instituted immediately and within 24 hours of the publication of the article which alluded to Odey having taken a "multi-million pound stake" in B Ltd.  The response from W's solicitors, written the following day on 22 May 2012, was to the effect that H's concerns were "totally misplaced".  It was said that the author of the piece in the Sunday Telegraph had "misrepresented the position.  Odey has not made an investment in [B Ltd] …" (my emphasis).  I am entirely satisfied that this letter was written on W's express instructions and, further, that she would have approved its contents prior to despatch.  In paragraph 91 of my substantive judgment, I referred to the fact that W presented as a witness who was meticulously careful to ensure that every statement of fact was carefully scrutinised by her in terms of both content and nuance.  Throughout the hearing, she was anxious to ensure that I had understood every aspect of her case and the emphasis she placed upon it.  Yet I found in paragraph 179 of my judgment that this statement, as recorded in Withers' letter of 22 May 2012, and the rearguard action which she fought over many months to suppress his challenge to the consent order could not, and did not, withstand the forensic scrutiny to which it was later subjected.  Even Mr Amos was obliged to concede the thoroughly misleading nature of this statement by short-hand describing this letter as "the lie-letter".   The letter continued that she "hopes that Odey will make a proposal" and stressed that there were no new documents which were relevant to the value of B Ltd since she provided her financial disclosure.  This was but one of what I described as her "actively misleading responses" which led in no small part to a ten day set aside hearing.

20. Exactly six months later, and no doubt on the express instructions of W, Mr Philip Marshall QC, her leading counsel at the time, was repeating W's position in those exact terms.  That pleaded stance led to the following remarks from Parker J who was dealing with the hearing on 22 November 2012:

"In cases where there has been non-disclosure and deliberate non-disclosure, it is all too predictable in my experience that someone who is indeed a non-discloser would wish to wriggle, to chop definitions and to dispute terminology in providing the information required." (para 15)

"Furthermore, the wife, who is plainly highly intelligent, highly skilled and an experienced businesswoman, chose her words very carefully it seems to me, particularly in the statement because the issue is not whether or not there has been a shareholding now by Odey in [B Ltd]; but whether there is very shortly to be, and it has been agreed that there will be a very significant injection of capital which will increase the share price enormously, and indeed the wife's prospects as participant in that business." (para 30)

21. Nearly a month later, H was provided with a letter from Odey itself.  The letter, dated 5 December 2012, was written by Mr David Fletcher and came via W's solicitors.  I am confident that she would have authorised its despatch to H's lawyers even if she had no hand in drawing its contents.  The letter included the following passage:

"… Odey can confirm that it began discussions with [B Ltd] in May 2012 with a view to providing financial support to the company for its discussions with the Ministry of Justice….  Odey would consider, subject to the structure and terms of a Ministry of Justice Contract being awarded, providing [B Ltd] with a proposal for the Board to consider for the financing of this contract.  Neither [B Ltd] nor Odey is able to estimate the likely requirement, if any, for such funding.  No commitment has been made either by Odey to provide this finance, or for [B Ltd] to accept it, and the terms would have to be negotiated between Odey and [B Ltd] when the requirement arose. Odey would not make an offer to buy [B Ltd] or any or all of the founder's shares." [my emphasis]

22. Whilst these statements were technically correct as statements of fact, the letter from W's solicitors which accompanied that letter stated in clear terms that "no investment has been made by Odey Asset Management, or other external investors …".  That statement no doubt reflected W's instructions at the time but it was not true and can only have been designed to halt in their tracks the ongoing attempts which H was making to get to the truth about the dealings between Odey and B Ltd.

23. H was plainly alive to the particular choice of words which had been expressed in Mr Fletcher's letter on behalf of Odey.  On 2 January 2013, his solicitors wrote to W's solicitors pointing out the fact that the letter had been framed in terms of possible financing for a future contract and did not deal with the separate aspect of any other investment or agreement.  Two days later came further reassurance through W's solicitors that the press speculation in the Sunday Telegraph was inaccurate and H's application to set aside the consent order "mis-judged".

24. These exchanges continued throughout the next five months.  W's solicitors offered repeated assurances that the only concrete, or completed, transaction between B Ltd and Odey was a loan of £150,000 which was made in November 2012.  On 13 May 2013, Lord Stevens, the Chairman of B Ltd, recorded in a separate letter the following:

"For the avoidance of doubt, the loan referred to [i.e. the £150,000] was the only offer of investment received by [B Ltd] in 2012."

25. That was the position which W was maintaining in instructions given to her junior counsel for the purposes of the next hearing before Parker J on 20 May 2013.  The note which was prepared by counsel for that hearing referred specifically to the content of the letters from both David Fletcher dated 5 December 2012 and Lord Stevens dated 13 May 2013.  W's position on instruction to her counsel was recorded in these specific terms:-

"Those letters make it clear beyond peradventure that (a) Odey began discussions with [B Ltd] in May 2012 (three months after the agreement reached between H and W0; (b) no investment has been made by Odey in [B Ltd] ……". [my emphasis]

26. The cat was only well and truly out of the bag when counsel instructed independently by B Ltd on that occasion confirmed in his own skeleton argument that Odey had indeed injected some £3.5 million into B Ltd in October 2011 (some four months before the agreement was brokered at the First Appointment).  Despite that concession, H's application for set aside continued to be opposed.  It was opposed by W notwithstanding the fact that, in response to the five direct questions formulated by Parker J at the conclusion of the May 2013 hearing, W had specifically confirmed the existence of the £3.5 million investment in her company in October 2011.  She maintained her opposition to the set aside application throughout the ten months or so which elapsed between that hearing and the five day final hearing listed before King J (as she then was) at the end of March 2014.  Eminent leading and junior counsel were instructed on both sides for the purposes of that hearing.  For reasons which I have already explained, that hearing was ineffective but H's application for set aside was still opposed when the case was listed for final hearing before me over a year later in June 2015.  It was not until that final hearing was up and running before me in June 2015 and Mr Fletcher was giving his evidence in the second week that the position emerged finally from Odey's perspective.  It had made an equity investment of some £3.5 million in October 2011 and had received a share certificate in respect of that investment.  Mr Fletcher could not have been more clear.

27. Thus, on H's case, his success on the set aside issue is a magnetic factor of significant importance throughout the period of almost four years during which this litigation continued.   Until very recently, H had been willing to compromise his claim for costs on the basis of a sum which represented a little more than 53% of his total costs bill to date (although his offer in June 2016 represented a higher percentage of closer to 75% as his global costs as at that date were somewhere in the order of £600,000 2).  W rejected that offer and proposes only a nominal contribution of £50,000.  That offer represents a recovery of no more than 6% of his total costs bill and Mr Yates invites me to reflect both his client's success and the absence of any reasonable offer from W as a sufficient foundation for an award of indemnity costs.

28. Mr Amos meets that case with his customary skill and eloquence.  As is quite clear from the opening paragraphs of his written submissions on costs, both he and W regard her experience of this litigation as "a crusade against her by H".  Mr Amos continues in this vein:

"In this context the first thing to say therefore is congratulations to H: if, as W believes, it has been H's aim to destroy W financially and reputationally, he has now achieved that aim."

29. He describes the costs order which H seeks against W as "a savage order" and points to the fact that, initially, H was reluctant to allow the court to be apprised of the current (and new) situation whereby W is currently in the process of severing her connection with B Ltd, having been forced to liquidate her founder's shareholding in the company as a result of pressing debt.

30. Mr Amos reminds me that throughout the latter stages of the litigation, W was acting as a litigant in person.  Throughout the final hearing in June 2015, she did not have the benefit of legal advice and support.  Unlike H who has called on Mr Yates throughout to represent him armed, as he is, with his detailed mastery of the facts and law gleaned through an unbroken timeline in this litigation, she had to conduct the final hearing herself.  Mr Amos refers to the fact that W's inability to put before the court evidence which she had (unilaterally) obtained as to the relevant value of the shares in B Ltd at the time of the consent order and as a result of an offer in April 2016 from UTC (which wanted to acquire the entire issued share capital in the company) should be considered in the context of costs alongside her failure to inform H about the true state of affairs vis à vis Odey's original investment of £3.5 million.

31. In this respect, I am prepared to accept, as I made plain in my substantive judgment on the set aside application, that W's subjective belief was always that her failure to disclose information about Odey's £3.5 million investment had made no difference to the paper share value as it stood at the time of the original agreement in 2012.  I found (at paragraph 173 of my judgment) that, had a forensic valuation been ordered by the court in default of settlement in February 2012, "in all likelihood Odey's recent investment/injection of cash in B Ltd would have been a potentially material factor in any such valuation exercise".  I further found (at paragraph 191) that "the potential undervalue of both parties' shares in B Ltd is a fundamental obstacle to the integrity of the 2012 consent order".   However, it is worth recording again what I found in relation to the materiality of her non-disclosure which went well beyond the question of the actual likely 'paper' value at that point in time.  I said this:

"186. I have no hesitation in finding that non-disclosure to be material.  First, the order was presented to the court as a consent order to which both parties had given their full agreement.  Its terms brought to an end significant legal rights which each had against the other to bring financial claims and seek orders.  Those rights were dismissed by the court in order to give effect to the clean break which each wished to achieve.  H was deprived of the opportunity of deciding whether or not to agree to the terms proposed on the basis of a fully informed decision.  He was not provided with the disclosure of information which he says would have been highly material to his decision to accept or reject the terms proposed, or to insist upon a renegotiation of those terms.  In such circumstances, it is difficult to see how he can be said to have given full consent.
 
187. Secondly, his evidence throughout was that he would not have agreed the package of terms reflected in the consent order had he realised the potential value of his shares.  I accept his evidence on this point.  It seems to me that, in this context, it matters not whether the Odey investment in B Ltd had been "transformational" in the window between October 2011 and February 2012.  In his eyes, as an experienced venture capitalist, Odey's involvement had the potential, if not the guarantee, to make his personal investment in B Ltd significantly more valuable than the notional figure he had presented in his Form E.  Because of W's far greater holding of shares, it also had the potential to increase her personal wealth to a point where the net benefit passing from H to W under the terms of the consent order became an unfair adjustment to their respective capital positions.  That factor alone is one which would have had to be weighed by the court in deciding whether or not to make an order in the terms sought." [my subsequent emphasis]

32. The only 'hard' evidence available to the court at the time of the set aside application was evidence of various share prices offered to the successive "waves" of angel investors.  However, of these various external investors, as I recorded in my judgment,

"… as is clear from the accounts, external investors were supporting the business on a speculative basis since the company was, and had been from the outset, loss-making.  There was no tangible benefit in any of its underlying assets and expenses exceeded profits on a year by year basis."

33. What cannot be gainsaid, however, is the fact that W's rearguard action in refusing to provide clarity and proper disclosure to H and his legal team in response to his enquiries after publication of the Sunday Telegraph article was a clear dereliction of her ongoing duty of disclosure in the context of these matrimonial proceedings.  I have absolved her of any deliberate attempt to mislead him in the disclosure she made in her Form E and I have already acknowledged the degree of dismay she is likely to have felt at the prospect of having to continue to engage with her former husband when she thought that all matters between them had been finally concluded.  I am conscious of the very detailed nature of the questions which Vardags had posed in their opening salvo on 21 May 2012.  Nevertheless, it is equally clear to me that, as H clung tenaciously to his enquiries, W's responses became less helpful to the point of being thoroughly misleading.  The tragedy of these current costs is that most of them could, and should, have been avoided by a clear and transparent response from W at the outset.  Had she taken this course, she would not have attracted the censure  which I recorded in my substantive judgment.

34. It was these considerations which led me to reject Mr Amos's primary submission that I should reserve the question of costs until the conclusion of the rehearing of the financial remedy applications in November this year (2016).  I had been very clear in my indication to W when I directed the parties to attend a round table meeting in an attempt to settle this litigation that a sine qua non of a final resolution would inevitably be a proposal from her in relation to the payment of a significant element of H's global costs bill.  That indication seemed to me to flow directly from the findings I had made in my substantive judgment.  I wanted to give these parties the maximum prospects of a final opportunity to resolve matters without another round of costs which would have to be expended on a formal costs hearing or, beyond that, on a further five day hearing later this year.

35. Thus, I turn now to consider Mr Amos's substantive response to Mr Yates's application for costs.  In paragraph 27 of his written skeleton argument, he sets out twenty-two separate points (numbered (a) to (v)) which he invites me to take on board when considering W's exposure to an order for costs.  I hope he will forgive me if I conflate some of these points into the generic headings which I consider below.


The impact of H's own litigation conduct

36. On behalf of W, Mr Amos submits that H's own conduct is relevant to my determination in relation to costs.  He points to the manner in which he has approached this litigation which amounts, in effect, to a 'campaign' which he has conducted against W in an entirely disproportionate and heavy-handed manner.  It is said that his repeated and consistent reference to her 'fraud' is a matter of significant concern in circumstances where she was meeting that allegation as a litigant in person.  Mr Amos suggests that, as part of his vindictive 'crusade' against his former wife, H was fully aware of the commercial consequences for her in terms of reputational damage were that charge to have been made out.  He contends that H has left no stone unturned in securing the result which he has now achieved.  Not only has their original agreement been set aside, but W has also lost everything which she invested into B Ltd over many years of hard and unstinting work and dedication to that company.

37. Mr Amos develops his submission in this way.  He points to the fact that H's obsessive approach has resulted in a much wider enquiry than would, or should, have been necessary.  He identifies (quite correctly, in my view) the central question which required an answer in the set aside application:  'Would H have entered into the deal he did, had he known about the Odey cash injection in 2011 ?'. The answer to that simple question, submits Mr Amos, became lost in a myriad of other questions and requests for much more detailed disclosure relating to the ongoing negotiations between B Ltd and the Ministry of Justice in its bid to secure the potentially lucrative Government contract.   I was reminded about the evidence which W had given me during the original set aside hearing as to the vast quantity of documentation which this bid had generated.  In circumstances where the company directors had specifically reminded her of the fiduciary duty of confidentiality which she owed B Ltd in the midst of these highly commercially sensitive negotiations, I can well understand how she felt herself to be in a very difficult situation.

38. It is at this point that it becomes important to highlight an aspect of H's own conduct which in my judgment has had a direct bearing on W's reaction to his ongoing enquiries.  During the course of these proceedings, as H has accepted,  he initiated discussions with a journalist from the Daily Mail to whom he disclosed confidential information from these proceedings, including the disclosure of part of W's Form E.  As I found in my substantive judgment, his reasons for this approach do him no credit at all.  I am entirely persuaded that his intent towards W was not innocent:  on the contrary, it was on any view spiteful and can only have been designed in some manner to harm her reputation or standing.  She is probably right in her description of his actions as the forerunner to a "smear" piece about her in the national press.

39. In these circumstances, it is hardly surprising that both W and the board of B Ltd (who knew about his actions) had deep misgivings about disclosing highly sensitive commercial information into the litigation arena.  I heard during the substantive hearing in June and July 2015 from Professor Kay that there was a genuine concern that H would seek to disseminate any new information provided to the detriment of both W and the company.  I heard, too, about an unsolicited approach he had made to one of the former investors in B Ltd.  I have little doubt that this approach had been designed to unearth more information about W's dealings on behalf of the company.

40. This course of conduct on H's part does not, and cannot, excuse W's failure to disclose relevant information at an early stage of the enquiry but, in my judgment, it does go some way to explaining her unwillingness to engage fully in the weeks and months following his statement of intent to overturn the consent order.    Mr Yates seeks to persuade me that any 'misconduct' on H's part in this context was dealt with by the terms of the order made by Coleridge J on 19 July 2012.  On that occasion, the court was considering cross-applications for injunctive relief in relation to the unauthorised disclosure of confidential information.  The court made no order as to costs as between H and W.  The mutual undertakings given on that occasion are unlikely to have done anything to dispel the fundamental mistrust which W (and her board of directors) had in H and, to this extent, he has by his own actions been responsible for much of the climate of hostility which exists between them.  In my judgment, there is much in Mr Amos's submission that, whatever reassurances W received from her lawyers at the time, these would not have alleviated her concerns as to his potential to damage through further 'leaks' her reputation in the City given the commercial realities of life in that sector 3.

41. I have to bear in mind, too, that at no point in my judgment did I find that W's disclosure during the course of the financial remedy proceedings had been fraudulent.  I found that her failure to disclose Odey's investment in B Ltd was both material and a breach of her obligation to provide full, frank and complete disclosure of all matters which were, or might be, relevant to H's decision to agree to the terms upon which the parties settled.  But, accepting as I did her evidence as to her subjective belief in its relevance to the valuation of the shares in B Ltd, I absolved her of any deliberate fraud in relation those stages of the litigation.  Where I did find fault, and deliberate fault, on her part was the failure to provide H's legal advisers at a very early stage with a transparent account of Odey's cash injection in the company.  Until a very late stage the only figure which was ever provided from W's side was a figure of £150,000 which was said to have been a loan made by Odey.  Details of the c.£3.5 million cash injection only surfaced eventually after H's legal team began to query the position when that figure emerged following publication of company's 2012 annual accounts.  Whilst W may have had a number of serious concerns about the potential for the 'leaking' of information which was put into H's hands via these proceedings, those concerns cannot, and did not, justify the manner in which a series of misleading statements were made to H through his advisers, both in correspondence and in documents put before the court by way of evidence.

42. H did not desist in his efforts to establish 'fraud' as the June/July hearing of 2015 unrolled.  He took up once again the allegation that W was the true beneficial owner of an offshore company called Zinc Ltd which was also a shareholder in B Ltd.  He had initially started this line of enquiry before the 2012 consent order: its path was trailed in his first questionnaire.  W was cross-examined about this by Mr Yates on a number of occasions during the set aside hearing.  Mr Amos has identified from the transcript of proceedings  a number of references to 'Zinc' over six continuous days of the hearing.  H was also raising against W more general and unparticularised allegations which suggested the existence of undisclosed offshore dealings.  I found that there was no substance to, or evidential foundation for, any of these allegations.  I found, too, that, on the basis of the evidence before me, W had no beneficial interest in, or connection with, Zinc.  Her shareholding in B Ltd was limited to the 162,000 founder's shares which she had disclosed.

43. Mr Amos submits that the reason for the enlargement of the 5 day time estimate before King J into the 10 day time estimate before me was H's pursuit of these fraud allegations against his former wife.   I do not know the precise reasons for the case management decision which was taken in March 2014.  As I recorded in my substantive judgment, it is plain that settlement negotiations were ongoing whilst the judge was reading into the case.    By the time she heard the parties, it must have become apparent that the four days remaining would be insufficient to complete the hearing and deliver judgment.  That much is clear from the recitals to the order of 26 March 2014 made by King J.  Her Ladyship then appears to have tried to assist the parties in their negotiations, albeit unsuccessfully.  Mr Yates tells me that the hearing was abandoned three days into the case on the Wednesday of that week. 

44. If one stopped the clock at that point in time for the purposes of assessing a liability for costs, it is difficult to see why, without more, W should be penalised for the insufficient time estimate and the subsequent duplication of work, brief fees and ongoing legal costs.  I fold into my overall consideration the fact that W is entitled to say now, with some justification, that H was being unreasonable in continuing to pursue these particular issues of fraud and non-disclosure, at least insofar as I found that they had no substance.  Mr Yates seeks to meet that point by his submission that, because we did not have at that point in time the judgments from the Supreme Court in respect of Sharland or Gohill 4, it was necessary to cast the net widely in terms of establishing fraud or misfeasance on her part.  However, against her success on those peripheral issues, I have to bear well in mind that she had by that point in time been responsible for making – or at least allowing the release of  – several misleading statements as to the situation regarding Odey's investment in B Ltd.  That was the basis of my criticism of her subsequent litigation conduct both before and during the set aside proceedings.  In those circumstances, it is difficult to see how she might have avoided an order in respect of at least a significant part of H's costs incurred in the set aside application as they stood in March 2014.

45. It follows, therefore, that the central issue of the circumstances surrounding the Odey investment in B Ltd was the fundamental 'driver' for the hearing before me in June and July 2015.  H was successful in establishing the grounds for the setting aside of the consent order.  Thus, whatever view I may or may not have taken about the quality and reliability of the third party witnesses fielded by both sides, his success on that fundamental ground is a critical factor which I must fold into my deliberations in relation to costs under CPR r 44.2(4)(b), irrespective of his own conduct under r 44.2(4)(a).


Admissible offers to settle: CPR r 44.2(4)(c) and H's own litigation misconduct

46. Mr Amos has produced for me a supplementary court bundle containing  a number of written offers which have been made over the course of these proceedings.  Given the enormous costs which this case has generated, I read this bundle with a sinking heart.  It is little short of a tragedy (and I make no apologies for using the word again) that this case was not settled over two years ago.  Both parties would have been spared the significant emotional toll which this litigation has taken; they would be hundreds of thousands of pounds better off; and each would now be getting on with a life independent of the other.

47. On 9 February 2014, W sent a letter to H's solicitors, Vardags.  Her offer was no doubt a response to the pre-trial review which had taken place three days earlier on 6 February 2014.  By that stage, the parties were facing a five day hearing before King J  in a little over six weeks' time.  H's legal costs were then in the order of £214,000 (or £234,000 by Mr Yates's reckoning, depending upon the apportionment of the costs of hearings which had already taken place before Coleridge and Parker JJ).

48. By her offer, which was expressed as being 'without prejudice save as to costs', W agreed to extend on an indefinite basis clause 5 of the consent order (i.e. the 'anti-embarrassment clause' 5), thereby preserving indefinitely into the future H's ability to take advantage of any increase in the share value in B Ltd.  That 'open window of opportunity' was extended to him unless and until such time as W was able to terminate his beneficial interest in the shares by paying to his daughter from a previous marriage a sum of £659,446.  He had originally proposed his daughter as the intended beneficiary of his interest in the B Ltd shares and W, in this offer, developed that road to compromise by offering this liquidated sum.  It was calculated on the basis of the difference between the share price of £11.59 per share proposed by H in his Form E and the price of £45 per share reflected in that paid by the latest round of "angel investing" in 2013 (the Numis offer).  In all other respects she proposed that the terms of the original consent order should stand.  The offer was time-limited for two working days at which point it was withdrawn, no doubt with an eye on the costs which would then be accumulating in preparation for the forthcoming final hearing.

49. At that point in time, W did not have the liquidity to make an offer which involved an immediate cash payment to H or his daughter, on his behalf.  She had left the door open by allowing him to benefit from any intervening uplift during the indefinite period of deferment she proposed.  For so long as the liquidated sum remained unpaid, any benefits which might flow from the so-called "Odey effect", be they 'transformational' or otherwise, would enure for the benefit of H, or to those to whom he might direct that benefit should pass.  Thus, the fundamental complaint he had made about the fact that he would not have parted with his shares had he known of the Odey investment was addressed.  In my judgment, this was a serious offer from W.  It was a sensible offer which should have received serious consideration from H.  In my judgment, it would have represented a sensible compromise at a time when his costs, whilst excessive, were containable.

50. H's response to that offer did not come until 14 March 2014, about a fortnight before the five day hearing before King J.  This offer, too, was expressed to be 'without prejudice save as to costs'.  What H did was to take W's offer of paying a liquidated sum of £659,446 for his shares and convert it into a proposal for payment of that sum, not at her election, but within a fixed period of 12 months.  He sought a sale of Fawler Farm.  Further additional proposals were put forward in relation to the top-slicing of the mortgage payments which H had made following which the net proceeds would be divided on a 50/50 basis.  There would be nothing further to pay in respect of the unpaid balance of £150,000 relating to the lump sum order; neither would he seek to claw back the £200,000 already paid.  On this basis, he offered to forgo any contribution from W towards his costs of some £400,000.

51. At this point in time, it seems to me that both parties could, and should, have used that offer and counter-offer as a platform for further negotiations.  W may not have had the confidence that she could raise the cash funds within a twelve month period but there might have been scope for extending by negotiation the payment period.  For his part, H should have given further consideration to how W's offer of an indefinite extension of the operation of the anti-embarrassment clause might have brought about a settlement with which each could live.

52. Instead, by the time W's response came through her new solicitors, Bishop & Sewell, on 14 March 2014, some three days later, she had withdrawn her previous proposals and was seeking the reinstatement of the terms of the order of District Judge Gordon Saker sealed on 10 April 2012.  On that basis, she had calculated that, with interest, H owed her a sum of some £173,213.  In addition, she sought the entirety of her costs of the set aside application and on an indemnity basis.

53. Thereafter, the negotiating positions of the parties became entrenched once again.  A valuable opportunity to settle once and for all these long-running proceedings had been lost.  By the time of the most recent offers in May and June this year (2016), W was offering £50,000 towards H's costs and he was seeking a contribution of £450,000.

54. Mr Amos, on W's behalf, invites me to view her 9 February 2014 proposal and H's reaction to it as part and parcel of his litigation misconduct.  Notwithstanding the counter-proposal which came from his solicitors the following month, his personal actions in going to the press in what he described as "flagrant contempt of court" effectively "poisoned the well".  This, says Mr Amos, is conduct which I cannot ignore and particularly in circumstances where this husband is an educated and financially sophisticated individual who understands only too well the consequences of potential reputational damage in the City.  When I enquired as to what reputational damage either W or the company had suffered as a result of this litigation, I was told that three of B Ltd's main board directors had resigned as a result of my judgment and the findings in it.  Thus, says Mr Amos, H knew exactly what consequences might flow from his actions and, to this extent, he appears to have achieved his aim.

55. Mr Amos makes further criticism of H's litigation conduct in inviting his brother to take over his legal representation after the hearing in April 2014 before King J.  He submits that his presentation of his case in relation to W's alleged fraud reflects poorly on him given the personal nature of the attack upon her integrity and the familial relationships involved.  H's brother is one of the senior partners in the firm which represented him throughout the substantive hearing before me.  Mr Yates informed me that H's brother had been present throughout the hearing in April 2014 with a view to taking over the conduct of H's case in the absence of a settlement at that hearing.  He tells me (and, of course, I accept) that it was common knowledge that H would be dispensing with the (no doubt more expensive) services of Vardags.  His presence at that hearing was intended to smooth the transition.  Given the level of costs he had incurred by that point in time, I do not accept that H can be criticised for electing to change 'legal horses' in this way.  The move will undoubtedly have saved costs in the long run and I can see no basis upon which his representation since the change can be criticised apart from the fact that the case has not settled.  That outcome has been largely in the hands of the parties themselves for it is they who deliver their instructions to their legal representatives albeit on the basis of having reflected on the advice they have received.

56. As to the actual likely value of the shares in B Ltd at the time the original deal was brokered, that finding must await another day.  I am considering costs and the destination of that liability in this supplemental judgment.  At the heart of H's set aside application, as I have found, was his own subjective impression of the future hope value in the shares once Crispin Odey had come on board.  As I said before, he (H) was particularly well placed as an experienced investor to weigh and consider that hope value.  Whilst his subjective appreciation of the potential for future value might have been different from W's, he was nonetheless entitled to be told of that fact before he signed up to the deal which was struck in February 2012.  For her part, I am satisfied that W, by her offer of 9 February 2014, had sought to address that position.  But at the end of the day, I cannot ignore the fact that she lost in relation to the substantive issue of set aside.  Mr Amos submits that the costs which were wasted by the abortive hearing before King J cannot form any part of the financial penalty (or "punishment" as he put it) to be laid at W's door.  That hearing was nevertheless a milestone in the chronology of the journey which this litigation has taken through the courts.  I accept that H did not succeed in his April 2015 attempt to adjourn the final hearing before me but I suspect that the costs of that appearance are a relatively insignificant element of the global bill which he now asks W to pay.


A principled approach to the issue of costs

57. In Joy v Joy-Marancho, cited above, Sir Peter Singer said this at paragraph 225 of his judgment:

"The conduct of the parties in relation to an application concerning their financial affairs is a relevant consideration whatever the format of the litigation, and whatever the particular costs regime beneath which their application or applications fall to be considered.  Where one party hatches a wholly deceptive presentation, pursues it persistently to the conclusion, and is found to have done precisely all of that, then he or she should expect no quarter from the court when it comes to costs.  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 view 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."

58. As is clear from the facts as set out in his Lordship's judgment, in that case the husband was guilty of deliberate and blatant non-disclosure from the very outset of the financial proceedings.  He had set out with deliberate intent to deceive both his former wife and the court.  The case was thus at the extreme end of the spectrum in the terms described above by the judge.  In this sense, it was not dissimilar from the husband's conduct in US v SR [2014] EWHC 175 (Fam) albeit that, in that case, the husband recanted at a late stage and accepted his non-disclosure prior to the final hearing.

59. In this case, I have to look at W's conduct both prior to the agreement which resulted in the consent order and in the context of the disclosure which emerged during H's subsequent set aside application.  I have absolved her of any deliberate intent to mislead in the former but have found that she displayed a significant lack of integrity and honesty in relation to the latter.  However, in this context, H, too, has fallen short of what might be expected of him in terms of his conduct in relation to the litigation.  He approached the Daily Mail journalist and released to him confidential material emanating from these proceedings.  I have found that he did so with malign intent towards W.  Whilst he has never provided me with a clear explanation as to why he took this course, I cannot ignore the fact that the individual journalist he approached had previously written a critical piece about another (unrelated) female entrepreneur.  When W described this previous piece of journalism as "a smear piece", her description was not challenged.  It is difficult to see how H could have failed to anticipate the effects of his actions on W should that approach have come to light during the currency of the set aside proceedings.

60. I do not ignore the fact that FPR r 28.3(f) requires me to have regard to the financial effect on the parties of any costs order but I do not believe that it would be a fair outcome to H if W were absolved of the responsibility for a significant element of his legal costs.  In this respect I do not regard her current offer of £50,000 as a sufficient contribution towards those costs.
61. The question which then arises is the extent to which I should reflect the court's disapproval of H's own litigation misconduct by applying a discount to any costs order I might be minded to make.  I also have to consider, pursuant to CPR r 44.2(4)(c), whether W's attempts to settle the litigation at a relatively early stage of the set aside proceedings (i.e. on 9 February 2014) should increase that discount.  It seems to me that my task in this context is to stand back and address the global perspective of this litigation with a broad brush, just as Sir Peter Singer did in Joy v Joy Morancho (see paragraph 226).


Quantum

62. In terms of the correct approach to the assessment of costs in this case, I agree with Mr Yates that, absent a combined approach from both parties, I can do no more at this stage than to direct what percentage of H's costs should be met by W. Absent agreement, there will inevitably have to be a detailed assessment of those costs, a process which in itself is likely to attract another significant layer of costs.    I am acutely aware of W's current financial position which is such that any order which I make is going to have a significant impact on her financial wellbeing.  She has now cut her ties with B Ltd (or is in the process of doing so) and, aside from the equity in her London flat (a sum which is in dispute), she has limited resources and a number of debts.  Her future financial wellbeing is likely to be influenced in no small part by the outcome of the rehearing of the parties' claims for financial remedy orders in November this year and her ability in the ensuing months and years to re-engage the drive, commitment and sheer force of personality which have driven her success to date.  These proceedings have been a bruising experience for both parties but I am satisfied that their effect on W has been emotionally and financially devastating.

63. As I made clear to both counsel at the costs hearing in July, I am going to impose a stay on the enforcement of any order I make in relation to costs until the conclusion of the rehearing in November 2016.  To that extent, I reject Mr Yates's application for an immediate and substantial payment on account.  I shall be much better placed to look at issues of enforcement and W's ability to meet her immediate needs once I have dealt with that hearing.   To that extent, as both counsel accept, any liability which she has for the costs of the set aside application will be transported into those proceedings as a crystallised liability which she must somehow meet once the page has been turned and all the section 25 factors have been reconsidered in the light of the updating disclosure which each is in the process of making.  The terms of the original consent order have been set aside but they may well be one factor which has to be weighed in the balance depending on the findings which the court makes on that occasion in relation to the value of the shares in B Ltd both as they were then and as they are now.


Basis of assessment: standard or indemnity costs ?

64. On behalf of H, Mr Yates submits that any order for costs which I make against W should be on the indemnity basis rather than on the standard basis.  He relies on two reasons for his submission.  First, H will recover less than 70% of his costs if they are assessed on a standard basis.  Second, W's unreasonable litigation conduct and her deliberately evasive approach in the aftermath of the Sunday Telegraph article take the case "out of the norm".  Mr Yates further contends that the reason why the costs in this case are so high is because of W's obstructive approach to H's enquiries and his questions about the Odey investment both immediately prior to, but mainly after, his application to set aside the consent order.

65. In this context, I bear in mind what Coulson J said in Noorani v Calver (No. 2/Costs) [2009] EWHC 592 (QB) at paragraphs 8 and 9:

"Indemnity costs are no longer limited to cases where the court wishes to express disapproval of the way in which litigation has been conducted.  An order for indemnity costs can be made even when conduct could not properly be regarded as lacking in moral probity or deserving of moral condemnation: see Reid Minty v Taylor [2002] 1 WLR 2800.  However such conduct must be unreasonable 'to a high degree.  "Unreasonable" in this context does not mean merely wrong or misguided in hindsight': see Simon Brown LJ (as he then was) in Kiam v MGN Ltd (No. 2) [2002] 1 WLR 2810.

In any dispute  about the appropriate basis for the assessment of costs, the court must consider each case on its own facts.  If indemnity costs are sought, the court must decide whether there is something in the conduct of the action, or the circumstances of the case in question, which takes it out of the norm in a way which justifies an order for indemnity costs: see Waller LJ in Excelsior Commercial and Industrial Holdings Ltd v Salisbury Hammer Aspden and Johnson [2002] EWCA Civ 8769."

66. Thus, applying the test propounded in the Excelsior Commercial case, I have to ask myself whether there is an aspect, or aspects, of this case which take it out of the normal run of cases to which the standard basis of assessment would apply.

67. In this context, my specific findings in relation to W's conduct are highly relevant.  At paragraph 179 of my substantive judgment, I said this:

"Where I believe W's conduct does properly attract censure is her response to the enquiries which were subsequently raised on behalf of H.  Much time and expense would have been avoided if she had responded openly and at an early stage to his solicitors' questions.  I accept that their initial letter sought the answers to a significant number of questions and required her to produce documentation which was confidential to the company.  Nevertheless, despite the constraints under which she was put by the demands of the B Ltd board and her obligations of confidentiality, her responses were, in my judgment, unhelpful at best and misleading at worst.   …… the rearguard action which she fought over many months to suppress his challenge to the consent order was, in my judgment, misplaced and gave rise to some exquisitely nuanced presentations which have not withstood the forensic scrutiny to which they were exposed.  I find that she placed undue reliance on the terms of her employment contract in order to avoid some of the more penetrating questions which were asked of her.  In this respect it is not without significance that her contract specifically provided for the provision of confidential information "where this is required by law".  Once Parker J had ordered her to provide the information, there could have been no justification for anything other than a full and frank exposition of the position."

68. Whilst her response to H's enquiries does not, in terms, qualify as the sort of case which Sir Peter Singer described as a "rotten edifice founded on concealment and misrepresentation and therefore a sham, a charade, bogus, spurious and contrived case" in Joy v Joy-Morancho, it was a response which, in my judgment, when taken as a whole, lifts the case out of the norm for the purposes of deciding whether or not the court's disapproval should be reflected in an award of indemnity costs.

69. I remind myself about something which I said at the conclusion of another costs case with which I dealt in 2014.  That case was US v SR (No. 3 Needs) (Adverse Inferences)(Costs Order Reflecting Litigation Misconduct) [2014] EWFC 24.  Echoing the observations of Charles J in M-T v T (Marriage: Strike Out) [2014] 1 FLR 1352, I said this:

"Charles J described his knowledge of the case and his consequent ability to reach a fair conclusion as to the percentage of the overall costs burden which the husband should pay as 'having lived through the litigation'.  In terms I can relate to that experience 'having lived through this litigation'.  There is little about its course, the underlying facts or the parties' involvement with it that I do not know.'

70. Some two years further on, I find myself in much the same situation in relation to this long-running litigation.  I have tried my very best to encourage the parties to settle. They have not done so and I do not now shirk from the decision which I must impose upon them in relation to the costs of the set aside application.   My order has to be fair and it must be proportionate.  I have taken on board and carefully considered all those matters which are contained in CPR 1998 r 44.2(4) and (5).   These factors have informed my analysis of the parties' conduct of this litigation and the offers which each has made in an attempt to settle the proceedings.  At the end of the day, W has lost on the substantive issue but H's conduct is by no means beyond critical scrutiny and a degree of judicial opprobrium.  I have no doubt that his conduct in approaching a Daily Mail journalist in the early stages of the set aside application did indeed 'poison the well', to adopt Mr Amos's terminology.


Overall conclusions
71. These are my conclusions.

72. In relation to the original financial remedy proceedings to which the 'no order' principle enshrined in FPR 2010 r 28(3) applies, I propose to make no order at this juncture.  I will be much better placed to determine the respective merits of the application which H makes for the costs of those proceedings once I have heard the evidence in November this year.  Those costs amount to some £89,000 odd.  I am merely adjourning a decision in relation to those costs.  Mr Yates will be free to relaunch his application for those costs at the conclusion of the rehearing and I shall determine that application on its merits at that stage.

73. The overwhelming burden of costs which I am currently considering relates to those incurred in the set aside application.  There can be no argument but that H has primarily succeeded in his primary case in relation to that issue.  However, because of the view which I take in relation to both parties' litigation conduct in these proceedings, I consider that W is entitled to a discount in respect of her liability for those costs.  That discount falls to be assessed by reference not only to H's own litigation misconduct in approaching the national press during the currency of these proceedings but by reference to the additional factors that:-

(i)  W succeeded in resisting findings of fraud in relation to several aspects of the case which H was seeking to run against her; and

(ii) I have found that she made a realistic and sensible offer to compromise these proceedings as long ago as February 2014.

74. To an extent, each is the author of his/her own misfortune.  I take on board all that has been said on W's behalf in relation to the early offers which she made and H's response to them.  That response (including the approach to a member of the national press) has, in my judgment, significantly soured the relationship between them and their ability to co-operate in finding a practical and pragmatic way through this litigation.  Nevertheless, I cannot ignore the fact that W has failed on the substantial issue of her defence to the set aside application.  That failure has to find reflection in my award of costs which is underpinned to a significant extent by the matters which I have set out at some considerable length in this judgment.   My conclusion taking all these factors into account is that W must pay to H 50% of his costs of the set aside application.  Notwithstanding the financial impact on her of such an award, it properly reflects all the facts and matters which I am obliged to take into account in these very long-running and hard fought proceedings.  Having given her the benefit of a substantial discount for the reasons set out above, I can see no reason why her 50% liability for H's costs should not be assessed on an indemnity basis.  In my judgment, to do otherwise would be to penalise H unfairly and to accord too little weight to the consequences of her own litigation misconduct. 

75. As advertised at the conclusion of argument in the July hearing, and in the particular circumstances of this case, I shall direct that no steps shall be taken by H to enforce that costs award or progress the detailed assessment until the conclusion of the November rehearing.  I decline to order a payment on account for the reasons I have given and notwithstanding Mr Yates's otherwise persuasive submissions flowing from the decision of Lord Justice Christopher Clarke in Excalibur Ventures LLC v Texas Keystone Inc & Others [2015] EWHC 566 (Comm).

76. I propose to send my costs judgment to both counsel who shall be at liberty to send a copy of the draft judgment to their lay and professional clients subject to an embargo on its dissemination to any third parties prior to formal hand down. In circumstances where we are now at the beginning of the long vacation, I want the parties to understand the reasons for my decision and they are unlikely to be able to do that without a copy of my draft judgment.  It will remain subject to editorial comment from counsel in the usual way.

Order accordingly          

1 In both this and the preceding paragraph, Mostyn J's reference to CPR r 44.3(4) must have been intended as a reference to r 44.2(4).
2 In both this and the preceding paragraph, Mostyn J's reference to CPR r 44.3(4) must have been intended as a reference to r 44.2(4).
3 I was told that one of the requirements of an application for a director of a publicly listed company is to provide a negative response to the pro-forma question, 'Has an allegation of fraud ever been made against you ?".
4 Sharland v Sharland [2015] UKSC 60; Gohill v Gohill [2015] UKSC 61
5 See paragraph 33 of my substantive judgment.