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. However, 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).
Since 2006, it is fairly accepted that the rule in family proceedings is that ‘each party pays their own costs’. Prior to this rule, the case of Calderbank v Calderbank set the precedent. A Calderbank offer was a settlement offer expressed to be ‘without prejudice save as to costs’ which meant the court was unable to refer to the offer except when dealing with the question of costs at the end of the proceedings. The court would consider whether it was reasonable or not for a party to have rejected such an offer.
The current rule is that only open offers can be shown to the court during a costs argument in which the general rule applies. Calderbank and Without Prejudice offers cannot. Calderbank offers provide costs protection in all of the types of cases where the general rule does not apply. Without Prejudice offers can only be shown to the court at Financial Dispute Resolution Appointments. They offer no costs protection at all.
There has been some recent discussion amongst family practitioners about whether Calderbank offers should be reintroduced. The advantage of the return of costs orders is that it is the much needed push that parties need to urge them to settle their disputes, particularly in cases where the assets do not warrant continuous and protracted litigation. The reintroduction of costs orders would encourage parties to put forward sensible proposals for settlement.
This is in line with the recent judgment of Mostyn J in the case of OG v AG and LM v DM whereby he commented that ‘once the financial landscape is clear, if parties do not negotiate openly and reasonably, then they will likely suffer a penalty in costs. This applies whether the case is big of small and whether it has been decided by reference to needs or sharing’.
This is a reminder that negotiations should be taking place and should be seen to be taking places at all stages of litigation. Failing to do so means that there are going to be cost consequences if it is found that there has been unreasonable litigation. It is hoped that this approach will result in more constructive negotiations and less cases being taken to court.
