Whilst the starting point for costs in financial remedy proceedings is that each party should bear their own costs, the court may depart from the starting point and make a costs order against one or both parties. There are many factors that the court will take into consideration when deciding whether to make a costs order. Those factors can be found at FPR 2010 28.3(7). 

Rule 4.4. of Practice Direction 28A states that:  “The court will take a broad view of conduct for the purposes of this rule and will generally conclude that to refuse openly to negotiate reasonably and responsibly will amount to conduct in respect of which the court will consider making an order for costs. This includes in a ‘needs’ case where the applicant litigates unreasonably resulting in the costs incurred by each party becoming disproportionate to the award made by the court”.

These rules were recently considered in the case of HO v TL (Costs) [2023] EWFC 216 (01 December 2023) where a stark and clear warning was given by Mr Justice Peel. In his judgment, he stated “…incumbent on the legal team to explain clearly that a failure to negotiate reasonably on an open basis carries costs risks. If the party persists in an unreasonable stance, they can have no complaints if they are on the receiving end of a costs order.”. 

Ultimately a costs order was made against the wife on the matter, with an award being made that she should pay £100,000 towards the husband's costs, such sum to be deducted from her award. 

When reaching his judgment, Mr Justice Peel commented that there were three particularly relevant considerations, which can be summarised as follows: 

• That the husband was “somewhat evasive and legalistic about his trust interests”, a matter which was a central issue to the case, with a significant amount of time and expense being spent on the issue. The husband's approach would justify a costs order against him. 
• That whilst the wife didn't formally pursue conduct, she made pejorative comments about the husband in her documents which had absolutely no relevance to the outcome of the matter. Mr Justice Peel commented that it is not appropriate to make unnecessary allegations and ordinarily, this might justify a costs order being made.
• That the wife did not reasonably negotiate. In his view, the wife maintained an unrealistic and speculative approach. She did not modify her position for months and her approach to negotiation was unreasonable. Mr Justice Peel emphasised that those who run an untenable case risk costs orders being made. 

Ultimately it was the third consideration which carried the most weight with Mr Justice Peel supporting costs order being made in both big money and smaller value cases alike “even if only in a modest amount, to register condemnation of the party”. 

This is a stark warning to litigants that the court will not shy away from making a costs order if it determines that a parties approach to negotiation has been unreasonable. It is therefore important for advisors and parties alike to take stock of the assets in the matter at an early stage and ensure that a realistic approach is taken to negotiating. If a party is adopting a position that the court may view as being unreasonable, warnings must be provided as to the risk of costs orders being made.