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OG v AG [2020] EWFC 52 – Party penalised in costs where she refused to negotiate reasonably

Posted on 3 February 2021

The parties had been married for 25 years and set up a successful ducting business together (X). They agreed that the wife would take over that business. However, the husband set up another competitor business in another country. The wife alleged conduct on the part of the husband, including (i) non-disclosure, (ii) setting up a competing business (B), but denying ownership of that business, and (iii) concealing transactions regarding the parties' property portfolio. She sought a division of assets of 1/3 to the husband and 2/3 to her, largely relying on the husband's conduct to justify the departure from equality.

The case was one where equal sharing would ordinarily have been the outcome. It was a long marriage and all the assets were matrimonial. Although the court had found that, despite his protestations, the husband was the true owner of B, Mostyn J considered the way to deal with this was to apply a discount to the value of X to reflect the fact that B was now in direct competition with it. The husband had been guilty of material non-disclosure and dishonesty.

In the circumstances, Mostyn J considered that the husband's conduct was such that he should pay a sum towards the wife's costs. He ordered that the husband pay a costs penalty to the wife of 45% of her costs (amounting to somewhat more than £320,000). However, he then discounted this by £50,000 on the basis that the wife had failed to negotiate reasonably. Although the husband had been guilty of non-disclosure, once the wife had known the financial landscape, she did not openly negotiate reasonably. Her suggested 1/3 to 2/3 split was wholly unreasonable.

Sandra Davis says:

"This case is a reminder to litigants that everyone needs to take a sensible approach to negotiation. Although the husband was the one who had acted wrongfully in the litigation, it was not sufficient for the wife to sit back and let costs spiral upwards. She also had a responsibility to fully participate in negotiations, and to take a reasonable stance in those negotiations. One of the great advantages of the Calderbank system was that a party was likely to be penalised in costs if they did not negotiate reasonably, at least on a without prejudice basis. The recent changes to the Family Procedure Rules have emphasised that the court intends to keep a keener eye on the costs that are being incurred. This case illustrates that the court will also be more willing to penalise the parties if their open positions are unreasonable, regardless of what may have been said on a without prejudice basis."

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