Thu, 10 Dec 2020
The Family Proceedings (Amendment) Rules 2020 contain, among a number of other procedural amendments, some important changes to the financial remedy costs regime. Two significant changes are set out in the form of an amended rule 9.27 and a new rule 9.27A.
Rule 9.27 now requires that the parties must file and serve a Form H which sets out, in addition to the costs incurred to date:
• an estimate of the costs to be incurred up to the next stage hearing; and
• not less than 14 days before the final hearing, “full particulars of all costs in respect of the proceedings which the filing party has incurred or expects to incur”.
The costs estimates must also confirm that:
(a) they have been served on each other party, and
(b) they have been discussed with the client.
In addition, any court order must include a recital recording of each party’s estimate of future costs and costs estimates must be accompanied by a Statement of Truth via an amendment to Practice Direction 9A. The parties are also required to bring a copy of any costs estimate filed and served in the proceedings to the hearing and any failure to comply with these provisions will be recorded on the face of the order and the defaulting party will be ordered to file and serve the costs estimates within 3 days of the hearing (or such other time as may be directed by the court).
These new provisions are clearly intended to ensure that all parties and their lawyers have an eye on the accumulation of costs throughout the proceedings and that the risk of costs ‘running away’ and becoming disproportionate to the value of the litigation is therefore reduced. Presumably, the hope is that parties faced with stark reality of ever-increasing and potentially disproportionate costs will be more inclined to compromise.
The new rule 9.27A imposes a duty on both parties to make open proposals within 21 days after an unsuccessful FDR (or within such other period as the court directs). If there has been no FDR, the parties are required to make open proposals not less than 42 days before the final hearing (or within such other period as the court directs).
This represents a significant shift as at present, the rules only require the applicant to make an open offer not less than 14 days before the final hearing, and the respondent not less than 7 days before the final hearing (rule 9.28). Incidentally, the new rules do not impact rule 9.28 so the requirements in relation to open offers set out under that rule apply in addition to the new requirements imposed by rule 9.27A.
The logic behind rule 9.27A appears to be to encourage settlement on two bases:
- The requirement that parties ‘nail their colours to the mast’ at an earlier stage of the proceedings could potentially result in meaningful negotiations being undertaken before the costs start to increase exponentially;
- Open offers are one of the matters the court is required to take into account when considering whether there should be a departure from the ‘no order’ presumption in relation to costs (rule 28.3(7)(b)). If an order for costs is made at a final hearing the amount of costs which might be payable by the unsuccessful party may well be significantly greater than under the current regime as a result of open offers now being made earlier in the process.
It remains to be seen whether these new costs rules will be utilised by the courts as a means by which to impose costs penalties upon parties who still regard the demise of the Calderbank process and the introduction of the ‘no order’ presumption as a licence to litigate unreasonably and at disproportionate cost. What is entirely clear, however, is that the cost/benefit analysis of settlement versus continued litigation will now need to be undertaken much earlier in the process and hopefully this will result in increased pragmatism and a decrease in the number of final hearings.