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Rothchild v De Souza [2020] EWCA Civ 1215

An appeal by H from financial remedies order in divorce.

The Court of Appeal dismissed an appeal by the husband ('H') from an order made by Mr Justice Cohen following lengthy financial remedy proceedings (see TT v CDS [2019] EWHC 3572 (Fam) for background 1). These proceedings were described by Cohen J in his December 2019 judgment as involving "the most destructive litigation." The legal costs in England at the time of the appeal were estimated to be in excess of £1m. The Court of Appeal agreed with the submission made on behalf of the wife ('W') that the costs would have been a fraction of what they were but for H's litigation conduct (Cohen J also having formed this view).

The basis of the appeal was that Cohen J had failed to take into account H's needs and had only considered W's needs in reaching his decision. It was asserted by H that Cohen J's decision was flawed because having stated that he was approaching the case on a 'needs' basis, the decision he reached could only be understood on the basis that he had taken into account H's litigation conduct. Litigation conduct being taken into account was not in and of itself an error (per s. 25(2)(g) MCA 1973) but, it was submitted on behalf of H, that the judgment was flawed as it failed to quantify the financial effect of that conduct in the final award made to W.

The Court of Appeal did not agree with H that Cohen J's approach had been wrong or that the award he had made was not justified in the circumstances of this case. The court considered it to be plain from Cohen J's judgment that H's conduct had been taken into account, as the court was entitled to do. The judge had approached the case with the needs of the children and their primary carer as his first consideration and taken H's litigation conduct into consideration when determining the final award. The Court of Appeal noted that if the sums of legal costs considered to be attributable to H's conduct (75% of W's costs or c. £600,000) were added to H's award, the disparity between the awards received by each party was reduced to almost nil. 
 
In respect of Cohen J awarding H less than it was asserted was required to meet his needs. The Court of Appeal made clear that within financial remedy proceedings, litigation conduct can justify the court awarding the guilty party less than their needs in the final division. Moylan LJ agreeing with Moor J's observation in R v B and others [2017] EWFC 33 that an order can be made which does not meet needs because to exclude that option "would be to give a licence … to litigate entirely unreasonably".

With respect to decisions needing to quantify the effect of a party's conduct, Lord Justice Moylan reiterated what he said in Moher v Moher, namely that "Every financial remedy judgment should clearly set out how the award has been calculated" [at 144(iii)]. Moylan LJ was clear that a structured approach which quantified the financial effect of each finding of conduct litigation on the final award was not required in every case, however, a judgment expressly setting out how conduct had been taken into account alongside a reasonably structured analysis of its effect on the ultimate award was to be encouraged and would protect decisions from challenge. 

The judgment is helpful to family practitioners as it sets out the legal framework with respect the correct approach to the issue of litigation conduct within financial remedy proceedings, including in 'needs' cases [61] – [80]. The Court of Appeal confirm that the depletion of matrimonial assets through litigation misconduct will not be (and often cannot be) remedied by an order for costs and that when it comes to the final distribution of matrimonial assets on divorce/ dissolution, the following must be remembered:

"[78] …What is important is that, whether by taking the effect of the conduct into account when determining the distribution of the parties' financial resources (both income and capital) and/or by making an order for costs, the outcome which is achieved is a fair outcome which properly reflects all the relevant circumstances and gives first consideration to the welfare of any minor children."

1 Commentary on this case can be found on the FLW weekly podcast episode with Zoe Bloom, season 2 episode 1

Summary by Rachel Cooper, barrister Coram Chambers

Read the full judgment of Rothchild v De Souza [2020] EWCA Civ 1215 on BAILII