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H (S) v H [2005] EWHC 247 (Fam)

Cost appeal in ancillary relief proceedings

THE HON MR JUSTICE SUMNER

This judgment is being handed down in private on 24 February 2005. It consists of 22 pages and has been signed and dated by the judge. The judge hereby gives leave for it to be reported.

The judgment is being distributed on the strict understanding that in any report no person other than the advocates or the solicitors instructing them (and other persons identified by name in the judgment itself) may be identified by name or location and that in particular the anonymity of the children and the adult members of their family must be strictly preserved.

Case No: FD01D03798
Neutral Citation Number: [2005] EWHC 247 (Fam)
IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

Royal Courts of Justice
Strand, London, WC2A 2LL

Date: 24 February 2005

Before :

THE HON MR JUSTICE SUMNER
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Between :

Christine Joy H (S) Applicant
- and -
Alaric Innes H Respondent

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

Mr Bruce Blair QC and Miss Ann Hussey
(instructed by Messrs Hughmans) for the Applicant
Mr Philip Moor QC (instructed by Harcus Sinclair) for the Respondent

Hearing dates: 13th and 17th December 2004
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Judgment
The Hon. Mr Justice Sumner :

Introduction
1. This is the third substantive judgment arising from an ancillary relief claim brought by Miss Cristina S against her former husband Mr Alaric H in August 2001. I shall describe them as wife and husband for convenience and to distinguish Mr H from his brother Mr Rai H who plays a part in the proceedings. The husband sadly died on 1 November 2002 one day after the first judgment was given on the parties' original claims. It followed a 9 day hearing before District Judge Brasse.

2. The wife appealed seeking a larger lump sum than she had been awarded. I dismissed that appeal on 27 May 2004. The present hearing arises from a costs order made at the conclusion of the original hearing. The argument on costs and judgment took about half an hour before the District Judge on the final day. Before me it lasted a day when I reserved judgment.

3. The two earlier judgments run to 100 pages. I shall not refer to them in any detail. I shall summarise the nature of the dispute and the parameters of the present appeal. I do so in broad terms.

Background
4. The parties were married in August 1982. The wife was 37 years old. She had been married before. She had a 4 year old son. The husband was aged 36. Prior to the marriage the wife lived in her own home off Regents Park in London. It was sold the same year for £230,000. She ran a successful recruitment agency. It was sold 5 years after the marriage for £2.3m.

5. The husband's home was sold in 1983 for £100,000. He had savings of £75,000, and ran a horticultural business. It had fluctuating success, always modest. The husband was the largest creditor.

6. The parties then engaged in numerous financial ventures. By the time of the first hearing in October 2002 the husband was known to be very ill. After a week the hearing was adjourned for him to have chemotherapy. He was unable to give evidence. The hearing resumed finishing with lengthy submissions. District Judge Brasse, in a judgment to which I paid credit on appeal, said –

"The history is complicated; the factual disputes are legion."

7. The wife sought a lump sum of just under £600,000. The husband said that they had already resolved their financial disputes and no further order should be made.

The judgment on ancillary relief
8. The wife was found to have carried on her business career largely independently from the husband though he did benefit considerably from her efforts. District Judge Brasse followed through a series of complicated transactions involving purchase and sale of properties and a number of ventures in which they were engaged together or separately. In 1986 the wife started a new business, RR giving the husband a half-share interest. His brother Rai was involved in various financial deals with the wife usually to her disadvantage. She considered he had profited at her expense.

9. Amongst the assets acquired was HN bought in 1990 for £230,000 in their joint names. Most of the purchase money was provided by the wife.

10. Time was spent during the hearing on the wife's allegation that an agreement with the husband in July 1996 should be set aside. By that agreement she gave up her interest in HN in exchange for the husband relinquishing his shares in RR. The wife had hoped to float this business but felt Rai had let her down. She claimed unsuccessfully that the agreement was achieved by undue influence.

11. Subsequently she saw documents suggesting the husband was going to sell HN. She had a caution put on the property. She subsequently lifted it on an assurance from the husband that he would protect the interest she claimed in the proceeds of sale. It was held inequitable to disregard that assurance.

12. The matrimonial home was sold in 1998 for net £2.12m. The wife took the first £200,000 thereafter the proceeds were divided. HN was sold for £800,000 which went to the husband. By January 1999 when the parties separated the wife had her own home worth £650,000. The husband had purchased a home valued at £450,000. The husband had by then been diagnosed as suffering from mantel cell lymphoma.

13. He purchased an annuity from Diligent Finance in which Rai was involved for £1.4m. It provided him with an 8% income and the right to draw on the capital up to a further 8% a year. 30% of the capital was to be to returned to his estate if he died, as he did, within 3 years of its purchase.

14. The genuineness of that annuity was subject to a sustained attack by the wife. Further details about it continued to emerge right up until the hearing. In the first 18 months the husband drew some £500,000 from it. Some of those drawings were regarded as his assets.

15. District Judge Brasse calculated the joint wealth of the parties at £3.81m. If the husband's pension and annuity were included, he had about £1.97m or 52% of the capital. If all pensions and annuities were included the wife's share went up to 56%. However the wife could not draw on her pension whereas the husband was drawing on his annuity.

16. He held that the wife had not employed extraordinary flair in her contribution to the welfare of the family. She had come to the marriage with a business that helped produce the wealth which flowed through their ventures and property acquisitions. It was however a very significant contribution to the welfare of the family.

17. But the District Judge regarded as utterly reprehensible an incident after proceedings had started where she turned up at the husband's home. There was a row. She later accepted that she had assaulted him, though she pleaded provocation. It included kicking him when he had fallen down.

18. He held that there should be a modest adjustment of the husband's property rights in the wife's favour. There were 3 main reasons. They were that she had primed the wealth producing pump at the outset of the marriage. She had a need for further capital investments in her business. Finally the husband had made a promise to make some provision for her in respect of the sale of HN.

19. He divided between the parties a sum of £22,000 from a property transaction which went to the Larch account. He gave the wife a 50% share in the proceeds of the sale of C Gardens, the share being worth £225,000. This was deferred until sale or death of the husband.

The sum of £275,000 and the appeals in March and May 2004
20. Part of the allegations by the wife against the husband involved a sum of £275,539. I shall refer to it as £275,000. The wife had seen a letter from Rai to the husband asking him to send that sum to Angel Stockbrokers for use by Chalice International, a company associated by the wife with Rai. Based on that letter, the wife believed that the husband had sent that sum abroad.

21. The District Judge held that it was possible that this sum may have been transferred out of the country. However he could not make that finding on the evidence. It did not seem that the husband had such funds available to him at the time.

22. Before the hearing of the first appeal, the wife applied for bank accounts from the husband's estate to trace this sum. This was refused. She made an application on 3 March 2004 for leave to appeal. This was refused by Johnson J. on the grounds that the bank accounts should have been sought earlier. He held that it did not affect the fair disposal of the appeal.

23. One of the grounds of the appeal before me in May 2004 was that there should have been a finding that this sum was in existence. It had been sent out of the jurisdiction. It should have formed part of the husband's assets.
24. On the second day of the appeal there was an application by Mr Moor for further documents to be put in front of me. I permitted this. Documents were produced by Rai showing that the £275,000 had been used by the husband to purchase shares. He had not been successful and the balance of £105,000 had gone into the husband's account. I reserved the question of costs in relation to this late discovery.

25. I dismissed the other grounds of appeal. They were in brief that the husband's imminent death could not have been anticipated. The considerable contribution made by the wife to the parties' wealth had not been taken into account. Insufficient weight had been given to the husband's assurance in relation to the sale of HN. Finally undue weight was attached to the Respondent's wish to leave his assets to his 6 year old nephew.

26. At the conclusion of my judgment I identified 2 factors which had particularly concerned me. They were the life expectancy of the husband and the financial contribution of the wife. I held that I would have been likely to give the wife greater than a half share in the husband's property that she was awarded. The award was however within the bracket which would have been awarded on a proper exercise of judicial discretion. I did not at that stage make an award of costs which was reserved.

The judgment of District Judge Brasse on costs
27. It was very short but it was not taped. A brief note was taken by the wife's solicitor, Mr Black. It is in the following terms –

"Application for costs – I must make order which in parts given FPR 2.69 © ………… takes into account all circumstances of case. Wife claims £600,000 on two grounds, first stellar contribution, secondly cheated of a property through Cap Ferrat. Wife never put case ….. money introduced at date. I found that was the only contribution. His response not too far short to order in court, alleged misconduct which I find not proven, generated by wife's stance and costs bound to conclude misconceived and I have no choice. It is not just but I make an order for costs against wife either 12th February or 8th November. If wife had taken up the offer, real prospect the offer of the 8th November 2002 could have led to a settlement. From that date.
Deferred payment pursuant to FPR 2.69 ©(e), I agree that could undermine, therefore order costs payable on payment and charge of interest on judgment debt."

Representation
28. Miss Hussey appeared for the wife before District Judge Brasse. Mr Nathan appeared on behalf of the husband. On the appeal in May Miss Hussey again appeared for the wife, Mr Moor QC for the husband. Before me Mr Blair QC led Miss Hussey for the wife, Mr Moor once more acted for the husband.

The amount of costs
29. District Judge Brasse's order above meant that the wife pay the husband's costs from 8 November 2001. The wife's costs up to the date of judgment were about £100,000, those of the husband £80,000. Each party has spent some £60,000 on the appeals since then.

Test to be applied on appeal
30. This is not in dispute. Mr Blair accepts that he has to surmount the test set down in Cordle v Cordle (2002) 1 FLR 207. He must show that there was a procedural irregularity. Alternatively the District Judge took into account matters which were irrelevant or ignored matters which were relevant, or had otherwise arrived at a conclusion which was plainly wrong. Mr Blair says the decision to award the husband all the costs from the date of his first offer to settle was plainly wrong.

Offers by the husband and wife
31. To understand both the judgment and the costs submission it is necessary to consider the course of negotiations. I have been shown just the essential correspondence. It was between experienced solicitors. I shall summarise it.

32. It is against a background that the final award to the wife was a deferred half share interest in C Gardens. That half share was then worth £225,000. She was also awarded half of the Larch account, £11,000, a total award of £236,000.

33. The first offer came from the husband of 15 October 2001. It involved the wife in essence receiving the husband's share in a pension fund plus the Larch account then believed by both parties to be £35,000 making the final award £225,000 + £17,500 = £242,500 at the time. There were other less important terms.

34. That offer was increased on 8 November 2001, the 'November offer'. It was this offer which influenced District Judge Brasse. It was said at the time by the husband to record an agreement reached between the parties. It varied the original offer.

35. The husband offered to leave the wife £200,000 in his will rather than his pension rights. The wife was forthwith to remove the caution over the husband's property C Gardens. She would also receive the £35,000 now. There was to be no order for costs.

36. A number of points are made about this offer by Mr Blair:

i) It offered no irrevocable undertaking not to change the will later. This is just the sort of point argued Mr Moor that would have emerged and be resolved in negotiations but there were none. Mr Blair responded that if the safeguard was so readily available it would have been mentioned.
ii) It was, said Mr Blair, too risky. The husband might spend his capital and leave insufficient money by his will to make the payment.
iii) It required the wife to give up a present safeguard in the form of the caution for a future promise which might not be met.
iv) It came too early for acceptance at the time or within 28 days. The husband's Form E had not been received. It was sent 2 weeks later. It was not sworn for a further 2 months when a questionnaire was returned by the husband, because it was said that the Form E was deficient.

37. There was a further offer on 12 February 2002, the 'February offer'. The husband offered to resign from 2 limited companies subject to appropriate undertakings. The wife would remove her caution. This time it was not required to be forthwith. The husband offered to pay £200,000 not by his will but within 56 days to include the £35,000 Larch sum. There was to be, as with the other offers, no order for costs. This was the husband's final offer.

38. Thus between 15 October 2001 and 12 February 2002 the husband offered a share in a pension fund plus £35,000. He then offered no share in the pension fund but £200,000 by his will, £35,000 now, and sought the immediate removal of a caution. Finally he offered a total of £200,000 in 56 days and resignation from 2 companies, if the wife removed the caution.

Offers by the Wife
39. The time between then and the hearing in October was spent mainly by the wife trying to discover where the husband's money had gone. She did respond to the offers. On 1 February 2002, when the husband's disclosure was said to be incomplete, she offered to settle for £530,000. On 8 October 2002, a week or so before the trial, she said she would accept £395,000 plus £35,000 within 28 days.


40. Mr Moor relies on these offers from the wife. The original offer in February was twice what the wife was awarded. The second one only a week before the hearing was still 50% higher. The husband's offers were far nearer the final sum. They were never accepted. The wife did not negotiate. She sought at great length to recover a large sum and failed. She should expect to pay the costs.

The sum of £275,539 ('£275,000')
41. Mr Blair said that this was one of the key factors. The wife could not negotiate or make more realistic offers until the whereabouts of this sum was revealed. It never was. Instead she was misled as is now accepted. That factor has a major impact on costs.

42. I have been shown the correspondence, questionnaires, and answers concerning the sum of £275,000 and the efforts by the wife to track it down. It started with the husband's solicitors saying in reply to the questionnaire of 22 January 2002 that the sum had been paid into his pension fund. In February 2002 the wife's solicitors said that, if so, the sum had been reduced in value between August and December 2001 to £80,000. That could not be. They asked again for the whereabouts of the £275,000.

43. On 6 February the husband's solicitors said again the £275,000 had gone down to £80,000. The reason was that the investments in shares by the pension fund were not particularly successful. "This does not alter the fact that this is the actual position".

44. By May 2002 the husband was seriously ill. The same month the wife's solicitors said they were drawing up a Schedule of Deficiencies. In July 2002 they applied for further discovery. Part of that was a request for the husband to show by schedules the movement of the £275,000 paid to the pension fund and evidence that it was paid to the fund. In August the wife's solicitors said they were not in a position to deal with any settlement until they had the husband's responses.

45. On 3 September the husband's solicitors gave replies. In relation to the £275,000 the only information given was to exhibit a stockbroker's letter showing a decline in value of the shares. Proof that the £275,000 was paid into the pension fund was not provided, nor where the money had come from.

46. On the 18 September the wife's solicitors applied for an order in relation to the July Request for Information. A penal notice was sought. In the letter accompanying this the wife's solicitors asked the court to make an order on the papers as "….. the Respondent has only provided answers to some of the questions and there is a large amount of information and documentation outstanding".

47. On the first day of the hearing the husband produced a further raft of documents. It was only at the hearing that details of the husband's recent spending emerged. In the 18 months to July 2002 the husband had drawn about £500,000 from his pension. District Judge Brasse added back some £265,000. He regarded it as right to regard this sum as still being part of the husband's assets.

Main submissions for the wife
48. Mr Blair referred to the points I set out earlier about the 8 November offer. He argued that no lawyer could have considered such an offer given its uncertainties. If the husband was going to offer security to meet this obvious difficulty, it was for him to make that clear. He never did. His only offer of a substantial lump sum was on 12 February. That offer was worth £200,000. That is some way from the £236,000 awarded or as valued then £242,500, some 20% more. If costs are taken into account, it is even further away. Costs at that stage may well have been above £15,000.

49. In fact the figure of £450,000 on the value of the husband's home proved too high. It was bought after the death of the husband by the wife for £410,000. Mr Moor said this should be the figure now to be used for the assessment of the various offers. Mr Blair rightly challenged this. The property might well have gone up in value. I am satisfied that the correct valuations figures for me to use are those agreed or determined as correct at the time.

50. Mr Blair submitted that the offer had to be considered on the information then available and the further evidence needed properly to assess each party's assets. The £275,000 and the extraordinary annuity had to be investigated. The annuity took most of the husband's available capital in a form which, unless set aside, made it unavailable for the wife. Such a step within 2 years of the hearing required close inspection.

51. It was important he said, in relation to the sum of £275,000, to know where it had come from. How it was paid into the pension fund was never explained. Had this been done there would have been a considerable saving of money. As is now accepted, the £275,000 never went into the pension fund. The sum that went in in August 1998 was a quite separate figure of £259,943 paid to the fund in August 1998.

52. It featured as one of the grounds of appeal. The wife believed it had gone abroad. Her efforts to obtain the documents, which it was thought would show this after the hearing, were opposed successfully by the husband's estate. It was ironic that at the hearing of the main appeal the husband's estate should then for the first time prove that the money had not gone overseas. It could be accounted for within the sums he possessed here.

53. There had been a major failure submitted Mr Blair to give relevant disclosure. Information of a misleading nature was given, when all too easily a true account could have been given. It is a factor that the husband was ill. But if he could not do the necessary work to trace the sum then someone else had to do it.

54. This was a substantial sum. It was greater then the sum awarded. It cannot be ignored, especially when the facts are substantially no longer in dispute, and as shown the true position could be readily ascertained. It had an added significance when the husband was too ill to give evidence. Whether the misleading information was deliberate or not by the husband, the effect was just as great.

55. If the wife had recovered nothing but had been reasonable in bringing the claim it is likely that there would have been no order for costs. Here a wife who recovered more than was offered was ordered to pay the husband's costs. That is plainly wrong. Even if she lost on some matters, she won on others as his skeleton argument shows. At the most that might justify some reduction in the percentage of the costs she recovered. It could not justify her paying the husband's costs.

Main submissions for the husband
56. Against the strong attack mounted by Mr Blair, Mr Moor produced a no less strong defence. His opening submission summed up the essential elements of his case.

57. This was a simple case. The wife lost on all main issues and on the Calderbank offers. With a husband who was terminally ill every avenue to settle should have been explored. The wife made unrealistic offers and failed completely to negotiate.

58. In those circumstances it could not be said to be plainly wrong when she was ordered to pay the price for a 9 day hearing against a husband too ill to give evidence. In such a situation District Judge Brasse was ideally placed to balance the relevant factors and to decide on responsibility. He had looked at the main issues on which the wife lost.

59. Extracts from the judgment make plain the points made by Mr Moor. Thus on contributions District Judge Brasse said –


"There is another reason also for assuming this equivalence between the different kinds of contribution. It is plainly the hope of the courts to discourage divorcing couples who inevitably look back at failed relationships and they seek to blame each other for that failure, to embark on a retrospective accounting of who earned the most and who took the most from what was earned. Despite that discouragement, that is what happened in this case. Indeed, the wife actually drew up what she termed 'a profit and loss statement' in which she sought to evaluate what each contributed to the material wealth of the marriage and what each got out of it.

I studied it carefully and found it to be a tendentious enterprise from the word go because it was designed to make a case favourable to the wife. It was coloured by her belief that she had been cheated. Inevitably it was replete with unverifiable estimates. There was some double accounting in it, some figures were disputed, there were disputed assertions as to the provenance of payments for assets, and there were significant omissions. …….
….. The wife spent three and half days giving evidence in effect to support this profit and loss account. This approach to the case prompted disclosure of documents which have filled three lever arch files. …..

In this case the wife held the magnifying glass over the business side of the marriage. She neglected the other side, the non-pecuniary side altogether, and as I have said I have found her presentation in her profit and loss account to be highly partisan, and in many respects very unhelpful."

60. He found the wife guilty of some serious misconduct. She took away valuable chattels, and looked at the husband's private documents. More reprehensible was her assault on the husband to which I have referred.

"In my judgment, it cast a flood of light on her priorities in life and revealed a complete lack of sensitivity to what reasonable people would have regarded as the inhibiting factors to this behaviour, namely that they were embroiled in contested matrimonial proceedings and that the husband was a sick man. It revealed, in my judgment, a degree of arrogance and a wilful determination to safeguard her perceived rights at any cost. It utterly belies the impression she sought to portray to me of a woman whose will could be overborne at Cap Ferrat."

61. He referred to Mr Blair's skeleton argument where there was reference to the points won and lost by the wife. Mr Blair conceded she lost on quantification of contribution, stellar contributions, and undue influence. He then listed some 9 points on which the wife had been successful.

62. Mr Moor characterised these as small findings of fact compared to the 3 major points on which the wife lost. The significant ones in my view are –

i) The wife's greater interest in the purchase monies of HN than the husband agreed.
ii) The promise by the husband to make some provision for her from the sale of HN. "He made that promise because she had virtually paid outright for Halebourne (para. 130)".
iii) The husband's expenditure which were added back as part of his assets.

63. This was a wife said Mr Moor who carried on regardless in order to obtain more money. She was under a duty to negotiate when an offer was made, especially when it was close to the final result. It was not necessary to audit every transaction. There had been full and frank disclosure.

64. In relation to disclosure the issue of the £275,000 has been blown up out of all proportion. It was totally innocuous. The irony was that it in fact made no difference. The £275,000 was taken into account in relation to the husband's assets though wrongly attributed to his pension fund.

65. The real wrong was the wife's obsession with proving her rights and the resulting failure to come to terms with the prospective cost and the risk of losing. The 9 day hearing was down to her. She had to pay the price. The costs order did just that.

66. There is a heavy burden on any party seeking to prove undue influence and non-disclosure. This was added to when it was against a husband who was so ill and by a wife whose real character was shown by the misconduct of which she was found guilty. The appeal should be dismissed.

The Law
67. Those formidable arguments have not proved easy to resolve. I turn to the law. There Mr Blair and Mr Moor are again at odds. Whilst accepting that the construction of the present rules present problems, they reach differing conclusions. It is small comfort to know that the rules will change in 3 months time.

68. The difference can be put in the following terms. The husband says Mr Blair was the paying party. It was for him to make the sufficient offer. He did not do so. That is conclusive. If, contrary to his argument, any alternative approach is permissible, it cannot prevail when there is serious non-disclosure as here.

69. Mr Moor argues that is no longer a proper approach. It is a question of bracketing to use my expression. An example shows his point. A husband offers a wife for instance £100,000; the wife seeks £500,000 but is awarded £150,000. The wife should pay the costs as her offer was much further away from the judgment. At best for her there should be no order for costs.

70. No longer he says is it safe for one party to hold out for an excessive sum as here. It is based on the fake proposition that for the paying party to fail by a small margin means they also pay the costs. Both parties have to engage in negotiations. The one shown to be more unreasonable whether by offer or demand is likely to bear the costs.

71. I start by setting out the rules reading together the Civil Procedure Rules 44.3 with the Family Procedure Rules 2.69 as set out in Norris v Norris; Haskins v Haskins (2003) 2 FLR 1124 (the "Norris" case):

'"2.69 Offers to settle
(1) Either party to the application may at any time make a written offer to the other party which is expressed to be 'without prejudice except as to costs' and which relates to any issue in the proceedings relating to the application.
(2) Where an offer is made under paragraph (1), the fact that such an offer has been made shall not be communicated to the court, except in accordance with rule 2.61E(3), until the question of costs falls to be decided.

2.69B Judgment or order more advantageous than an offer made by the other party.
(1) This rule applies where the judgment or order in favour of the applicant or respondent is more advantageous to him than an offer made under rule 2.69(1) by the other party.
(2) The court must, unless it considers it unjust to do so, order that other party to pay any costs incurred after the date beginning 28 days after the offer was made.

2.69C (revoked)

2.69D Factors for court's consideration under rules 2.69B
(1) In considering whether it would be unjust, or whether it would be just, to make the order referred to in rule 2.69B, the court must take into account all the circumstances of the case, including –
(a) the terms of any offers made under rule 2.69(1);
(b) the stage in the proceedings when any offer was made;
(c) the information available to the parties at the time when the offer was made;
(d) the conduct of the parties with regard to the giving or refusing to give information for the purposes of enabling the offer to be made or evaluated; and
(e) the respective means of the parties.'"


72. The first remarkable feature of FPR 2.69 is the use of the words 'must' and 'unjust' in relation to the exercise of a discretion on costs where there is an offer. Many might be surprised by a rule that puts an absolute costs obligation on a judge and then seeks to temper the consequences with the concept of a judge being required not to be unjust.

73. The first point is whether 'must' in rule 2.69B(2) when qualified by "unless it (the court) considers it unjust to do so", means in such circumstances more than 'be just'. This can well be argued if the court is to take into account all the circumstances of the case including the matters set out under rule 2.69D (1)(a) to (e). It is only the first of the difficulties presented by the drafting.

74. To assist with this I turn to the cases to which I have been referred. The first is Gojkovic v Gojkovic (no.2)(1991) 2 FLR 233. There a wife was awarded £1m plus a flat. Less than a month before the hearing the husband offered £532,000 plus costs. This was rejected. The offer was increased to £600,000. The wife appealed the order granting her costs only up to the date of her rejection.

75. Butler-Sloss LJ as she then was said prior to rule 2.69 –

"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."

76. Later she said –

"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 serous 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 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."

77. In A v A (Costs Appeal)(1996) 1 FLR 14 in a claim by a husband under s.17 of the Married Women's Property Act 1882 the wife offered him £75,000. Two years later and 3 days before the hearing the husband said he would accept £80,000. He was awarded £75,280. The wife successfully appealed. She had been granted no costs after her original offer.

78. Singer J said –

"The lesson of this case, which litigants and lawyers alike must recognise and give effect to, is that just because ancillary relief applications have to be conducted and prepared in the fraught emotional atmosphere that so often and understandably exists after marriage and its breakdown, nevertheless that does not mean that common sense and commercial realities can be allowed to fly out of the window. A spouse who does not respond constructively to a Calderbank offer, whether a good offer as in this case or only one that is bad or indifferent, stymies whatever chance there is of settlement. Such a spouse cannot with impunity expect immunity from responsibility for that if, as her, his actions mean that only over 2 years and £60,000 of costs later, on the eve of the hearing, does it emerge that the difference between the parties is £5,000 and some chattels: and of course an argument about the £60,000 of costs."

79. A v A was an appeal where the husband made a low offer. The wife responded claiming £110,000. The husband further offered £50,000 or £70,000 with a charge back of one third. The wife was granted £80,000. The wife received no costs on the basis she should have lowered her demand.

80. Hughes J. in a decision in March 1999 said at page 3 –

"It is well-recognised that a number of factors may affect the exercise of the discretion as to costs in the Family Division which would not operate elsewhere. The need to use all available money for family purposes is likely to be an important consideration. I do not wish for a moment to be understood to reduce in any way the obligation upon parties to family litigation to engage in sensible, realistic negotiation. If they do not, they are at risk of being penalised in costs. That is shown conveniently by the decision of Singer J. in A v A [1996] 1 FLR 14. Indeed, under the new Civil Procedure Rules, it may be that similar approach will in future inform decisions upon costs in other divisions also."

81. Finally I come to the Norris case where 2 appeals were heard together. In the first Bennett J took into account that the wife had beaten the husband's Calderbank offer. He awarded her 80% of her costs to reflect that she had lost on one major issue.

82. In the second appeal Mr Blair sitting as a Deputy High Court Judge awarded the wife 85% of her costs. Her counter offer was very close to the final award but she had failed to negotiate until very close to the hearing. Neither appeal was successful.

83. The cases however gave the Court of Appeal an opportunity to consider the judgment of Mr Mostyn QC sitting as a Deputy High Court Judge in GW v RW (Financial Provisions: Departure from Equality) (2003) 2 FLR 108. In that case the facts were complex. The husband was ordered to pay 25% of the wife's costs and the wife 50% of the husband's costs in each case on an indemnity basis. There was an appeal which did not proceed.

84. Mr Mostyn pointed out that the former r. 2.69C contained provision relating to the court's discretion when each party made an offer. After criticism it was removed. He went on –

"Thus, we are left only with r. 2.69(B) which appears to contemplate the position where one party alone has made a Calderbank offer. Where the position is (as here) that each party has made such an offer, the rule becomes unworkable.

I agree with Mr Marks' submission that:

The surviving r. 2.69(B) is incomprehensible. It is impossible to divine what the draftsman had in mind. Very often in a case such as this the order ends up between the offers – in which case, under the rule, both parties pay "the costs."

85. He added –

"It is very easy to see why in an era where the wife's claim was perceived to be against the husband's money for a sum necessary to meet her reasonable requirements, costs should, prima facie, follow the event. Her position was comparable to that of an ordinary civil claimant. It is much more difficult to apply the analogy in the post-White era where the court's function is (per Thorpe LJ in Cowan v Cowan [2001] EWCA Civ 679, [2002] Fam 97, [2001] 2 FLR 192 AT PARA. [701]) to determine the parties 'unascertained shares' in the pool of assets that is the fruit of the marital partnership ……..

This is a submission that is often made: 'the wife has had to come to court to get her money'. But surely the husband has equally had to come to court to get his? Each party has had to come to the court to obtain an order which fairly disposes of the issues between them.

There are further objections. First, I agree with Mr Marks' submission that a presumption that the husband (for it is almost always him) should pay the costs until and unless he has protected himself with a Calderbank letter backed by full disclosure must be discriminatory.

Secondly, it seems to me that the present system in effect forces the parties to engage in a mandatory form of spread betting. The parties are required to guess the outcome of the case and to take a position. If they have guessed correctly then they win a large amount; if they have not then they lose. But there is one significant difference to a spread bet. With a spread bet the amount the gambler wins or loses is the difference between the result and the position-maker's spread. If he has bought and the result is higher than the top of the spread, he wins; if it is lower, he loses. If he has sold and the result is lower than the bottom of the spread, he wins; if it is higher, he loses. The closer the result is to the position-maker's spread the smaller the amount the gambler wins or loses."

86. I comment on these passages only to say that I have difficulties with the argument that different considerations apply in the post-White era. Whether it is reasonable needs or unascertained shares, there is a finite answer. The parties may have to apply a different formula to ascertain it, but there is still a calculation to be made. This is only possible when the husband, as it usually is, has made proper disclosure.

87. Nor do I see that it is necessarily discriminatory for the husband in such circumstances to pay costs until he makes a Calderbank offer. There is a salutary benefit of such a system. In a case where one party is plainly the paying party, it rightly puts pressure on that party to make full and prompt disclosure. It is difficult also for the receiving party to justify incurring much by way of costs until this process is complete. It is only then that the receiving party can check the disclosure, follow up points where reasonably required, and negotiate when a fair picture of the total assets are known.

88. The President in the Norris case pointed out that what was permissible –

"I recognise the difficulties which arise and which have been so trenchantly expressed by Mr Mostyn QC as set out above. The removal of r. 2.69C increases the awkwardness of the language of r. 2.69B and has presented problems. It does not, however, make that rule incomprehensible. In any event it is not for judges to deem a rule or a section of an Act of Parliament incomprehensible or unworkable. If passed by Parliament, whether it be primary or secondary legislation, it is the duty of the court to do its best to make sense of it. Judges do not have the right to dump the awkward passage wholesale. In my judgment, therefore, Mr Mostyn QC in his judgment in GW v RW (Financial Provision: Departure from Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108 was wrong to treat the rule as incomprehensible and to substitute his own approach by making a decision which was not based on the existing rules………….

The court is, nonetheless, obliged to apply the rules unless or until they are amended. Rule 2.69, as amended, provides the current code on Calderbank offers to be followed until any further rule changes are made. Sub-rules 2.69(1) and (2) give statutory authority to the Calderbank practice in ancillary relief proceedings. The starting point in r. 2.69B is whether the offerer offers more or less than the court order. If less, he/she will pay the costs incurred after 28 days after the offer was made, unless the court considers it would be unjust to do so. ………

In my judgment, therefore, r. 2.69B and 2.69D can be managed and, where the court considers it unjust to apply r. 2.69B, it can make a different costs order to reflect the justice of the case. Mr Pointer QC, in his thoughtful and comprehensive skeleton argument, sets out in a bar chart a series of permutations arising from a court order to a wife of £1 million. I take one hypothetical situation. If a husband offers £800,000 and the wife asks for £1,200,000, neither has achieved the figure of the order and each is wide of the mark by the same amount. In broadly comparable situations, not tied to exact percentages since each case must be decided on its own facts, the result might be termed, as Mr Cusworth for Mr Norris suggested, a draw. In my view, in some offer and counter-offer cases, the proper approach might well be, under the present procedure, to make no order as to costs and leave each party to pay his/her own costs.

A complication in subr 2.69B(2) is that the order for costs dates from 28 days after the (relevant) offer was made. Neither judge in the two cases before us had his attention drawn to that part of the sub rule. It seems to me, however, that the costs prior to the relevant offer are to be dealt with in the exercise of the court's discretion. ………

The difficulties which undoubtedly arise from r. 2.69, set out by Mr Mostyn QC with clarity in his judgment in GW v RW (Financial Provision: Departure from Equality) [2003] EWHC 611 (Fam), [2003] 2 FLR 108, do now urgently require a rethink and it is time for further amendments to the rules governing awards of costs in ancillary relief cases. The present rules may affect disproportionately the payers in big money cases."

89. That costs in the most sensitive area of family finance should have reached this state of confusion is a sad reflection on the Rules and much hard work by experienced officials, advocates, and judges. But for such diametrically opposed argument to be placed before me shows that reform is overdue. In the meantime I am left in a case already over-litigated to provide finality on the critical question of costs.

90. Here the proper course for me is to apply the rules in the light of Norris. To do so I must first identify the main features of this complex litigation. In my judgment on the first appeal I set out the background of the case and the judgment at some length between paragraphs 29 and 89. For the purposes of this judgment I adopt those paragraphs and the conclusions I reached.

91. I should highlight features from that summary. In doing so I add my own conclusions to those reached by District Judge Brasse.

92. The marriage lasted 17 years. The wife brought to it greater wealth and a good business sense. They entered into a series of financial ventures joint and single. They were not all successful. The wife was generous in giving the husband a share of her new company.

93. The balancing of interests under the Cap Ferrat agreement caused the wife great upset especially when her company failed to be floated and she had parted with her share in HN. The husband's assurance in relation to this was given value by District Judge Brasse in his full and clear judgment.

94. On the wife's figures at the beginning of the October 2002 hearing she had assets of £1.18m plus a pension of £540,000, £1.72m. She calculated the husband's annuity at £990,000, other assets of £600,000 and a pension of £45,000; £1.735m. But as the judgment acknowledged her pension could not be drawn on, the annuity could be.
95. She had 43% of the non-pension assets. She claimed to have contributed £3.17m and taken out £1.6m. The husband she said had contributed £480,000 and taken out £2.8m. This was all set out in an 8 page document produced by the wife.

96. These figures alone go some way to explain why the wife fought at such length to recover the assets she plainly felt to be hers. She considered she had been deprived of them by the husband and Rai's pressure and deception. She felt entitled to redress. The same determination which lay behind her successful business ventures was now devoted to obtain what she felt to be her just reward.

97. The result of the 9 day hearing can be shortly expressed. The main allegation of undue influence failed. The 8 page document was shown to contain flaws. The extent of her contribution was not accepted. But there were points found in her favour which I have summarised.

98. The main figures as found were set out helpfully by Miss Hussey. They show the husband's total assets without pension at £1.183m and the wife's as £1.177m (£2.36m - £1.184m). She only reached these figures by taking the £275,000 at full value. This is not right because £275,000 as reduced was unknowingly taken into account.

99. District Judge Brasse's calculations gave the wife 56.5% of the assets, pensions and all. Excluding pensions and annuities, the wife's share goes down to 48.2%. There is then the adjustment of £220,000 plus ½ of the Larch account or £237,500 in all. This it was felt reflected in part the illiquidity of the wife's pension fund.

100. Into all of that the offers and counter offers must be fitted. I look at the Rules. The former rule was that the unsuccessful party will pay the successful party's costs though the court may order differently as that rule can more readily be displaced. That favours the wife who received an award. But I have regard to r.2.69 which includes conduct and disclosure. Furthermore the wife recovered more than she was offered by a significant figure. Is it plainly wrong to order her to pay the costs from November 2001? I make the following additional findings.

101. The November offer should rightly have been rejected by the wife then and at all times later. I have set out the main criticism made by Mr Blair which I accept. In essence it was too low, too risky, and too early, matters I must take into account under r 2.69D. The chance of a nil estate were always there as I am informed is the current position. It was before Form E was sworn. There is also the £275,000.

102. It was therefore in my judgment wholly wrong on any view of the wife's conduct or the length of the hearing to take the date of the November offer as the one from which costs should run. It was no less plainly wrong to order the wife to pay the husband's costs from that date based on an offer which was so flawed. It could not be based on any failure by the wife at that time to negotiate.

103. In so far as the order was said at the time not to be far short of that ordered by the court, I find that was again plainly wrong. It was payable only on death, unsecured, and with no binding condition not to change that provision subsequently. This may have been overlooked by District Judge Brasse.

104. Once I have so found the question of costs are at large. I must consider each stage of the subsequent negotiations and ask the same questions as provided under r.2.69D. In an area where clear principles are called for, precision is not possible. The starting point under Norris is whether the paying party offers more or less than the court orders.

105. But because of r 2.69D that can only be the starting point. It may lead to a result which is unjust such as the example given by Mr Pointer QC and cited by the President. Once it is shown to be unjust the court will look at all the circumstances of the case. This will include the factors set out in r 2.69D(a) to (e). It will also include whether one party has been unreasonable and the impact that has on costs whether as specified in (a) to (e) or otherwise.

106. That is the exercise I have endeavoured to do. It means I find Mr Blair's submission too restrictive. Mr Moor's submission arises if applying Mr Blair's argument I find the result unjust. To give the wife the costs of the 9 day hearing is unjust for reasons to which I shall come. It is unjust because of the way the wife conducted the litigation. Accordingly I now apply r.2.69D(a) to (e).

107. I consider next the February offer. The husband's Form E had by then been sworn. The offer was much closer to the final award of £237,500 than the wife's counter offer of £530,000. This could be regarded as a situation placing a burden on the wife to begin negotiating in earnest. But that is neither an absolute burden nor one applicable here.

108. The narrative shows that by that date the wife's hunt for the elusive £275,000 had started. It continued until trial unresolved. It could and should have been clear by then. The responsibility lay with the husband. If he could not manage it through illness, then instructions for others to do the necessary work had to be given. That was not done.

109. I take into account the information then available and the refusal then and subsequently to give the further necessary detail to enable the February offer to be evaluated. £275,000 was of a sufficient size to affect materially the final outcome. The information given was wrong and misleading. It had not gone into the husband's pension fund. It was never corrected. Questions were asked which if answered would have revealed the truth. They were not answered until I permitted the relevant information to be admitted. This was nearly 18 months after the hearing.

110. If I am to avoid injustice I have to give effect to r.2.69D (c) and (d). The weight to be given in this case on the non-disclosure I have set out is bound to be substantial. It is no answer to learn that the sum, reduced by ill-advised dealing to less than half the original, has been taken into account. Where wrong information is given and then relevant and important questions are not answered, the price to be paid may be high.

111. It is rightly not argued that the wife should have been more vigorous in her approach or sought more punitive measures to discover the truth. This was not appropriate when the husband was so ill. But she had made her position sufficiently clear. It did mean that any obligation on the wife to negotiate could properly remain on hold or could only be tentative until the question was resolved. It never was.

112. Accordingly I place on the £275,000 an importance beyond that accepted by Mr Moor. In a highly charged situation with serious allegations about conduct being raised on both sides, the obligation on proper disclosure is if anything heightened. Giving wrong answers and then failing to answer further questions or give relevant disclosure which was available can only inflame the situation. Suspicions are unnecessarily heightened.

113. If the answer was that the husband was too ill to deal with the matter, that had only to be said. To give incorrect information and avoid answers as happened here not only reduces or removes the prospect of settlement. It also means that the hearing is likely to become more bitter and prolonged. It adds to costs and causes unnecessary stress.
114. I therefore consider the February offer against that background. I consider the wife could reject that offer and seek to obtain necessary further information without being penalised in costs. That her counter offers were too high is a factor. But it is one to be balanced against the supply of incorrect information and her legitimate pursuit of answers which were only finally resolved on appeal.

115. I therefore conclude that to order the wife to pay the costs up to the first day of the hearing would be wrong. Mr Moor makes a strong case for saying that the wife should have begun negotiations short of the hearing. There is also her very late counter offer of £395,000. It shows he argues such a lack of understanding of the litigation and such unjustified demands that in combination it should be measured by an adverse costs order.

116. This merits careful consideration. In other circumstances it might well be determinative, meritorious though I considered the wife's claim to be. As it is I would be reluctant to order a party to pay costs where they are faced with conduct of the order of the husband in this case.

117. If a spouse acts as here they can hardly complain if their conduct attracts an adverse order in costs. Accurate disclosure and the need to answer proper questionnaires are fundamental to early settlement and a reduction in costs. If this case establishes nothing else it is the price that may result from the departures I have set out, for which I note no explanation has been put forward.

118. Accordingly if the wife had been awarded a deferred sum of £237,500 after a hearing of appropriate length I would have expected her to be awarded most of her costs. This was not such a hearing. The determination of the wife to run all the arguments available to her with such disregard to time and cost as Mr Moor argued has to come at a price. It is not only that she lost on a number of significant points. It is that she was unable to adopt any reasonable approach to the litigation. To spend 3 ½ days on proving or rather failing to prove her contribution is an example of this.

119. I have to take a broad approach to the 9 day hearing, appreciating that their affairs were complex, and so much was in dispute. I have not found this easy. It is I am satisfied not just a question of considering what the proper length of the hearing might have been. It is also taking into account the serious allegations on which the wife lost and her reckless approach to the cost of the litigation.

120. I have deliberated long on this. I have borne in mind on the other side that this was a hearing where non-disclosure was a feature and where on the first day a mass of documents were produced by the husband, all of which had to be considered. I also appreciate the unusually difficult task that I have when the original hearing was before another Judge.

121. I have at this stage stopped to re-read this judgment, the admirable judgment of District Judge Brasse, and my earlier judgment. Doing the best that I can in all the circumstances in the exercise of my discretion I award the wife 20% of the costs of the 9 day hearing. I therefore allow the appeal and substitute that order for the earlier order for costs.

122. That does not complete the picture. The wife was ordered to and has paid the costs of the unsuccessful appeal by her to Johnson J. That was to obtain disclosure of bank statements in an attempt to trace the £275,000. I cannot upset that costs order. However I did not determine the question of costs on the first appeal to me. Specifically I reserved the costs of permitting Mr Moor to make further disclosure at that time.

123. I appreciate that the bank statements might not have proved helpful even if ordered by Johnson J. as Mr Moor points out. But I do not regard that as a good point. For a party in such default to claim that a reasonable effort to remedy the situation was mistaken is wholly un-meritorious. This is even more so when Mr Rai H, realising on the appeal what had happened, was able to remedy the position overnight. I have to ask what costs would have been saved if that had been done in the summer of 2002.

124. Mr Blair submits that though the wife would ordinarily pay the costs of the unsuccessful appeal before me, that should not happen here. There should be a discount to reflect the last minute disclosure. Mr Moor points out that I found that even without that disclosure I might well have found against the wife on this point. He is of course correct and I bear that in mind.

125. Again I have considered this unusual situation with care. Firstly I consider it wrong for the wife to pay any sum arising from her efforts after the hearing to obtain proper disclosure. I cannot alter the costs order on the appeal. I can reflect it in relation to the appeal before me when the truth about the £275,000 finally emerged. If I order the wife to pay 70% of the costs of the appeal that meets the justice of the case as best I can.