In an ideal world, sincerity and good faith would be at the heart of every divorce case. However, when relationships break down it often seems to bring out the worst in divorcing parties, which of course means that, in many cases, it is hard to achieve anything other than agitation, contention and acrimony.

And again in an ideal world, divorce lawyers would help divorcing parties understand that although their situation may look less than ideal, the best way to achieve divorce settlement goals is to act reasonably and litigate in good faith.

This message was one of the take homes from comments recently made by leading family law judge Mr Justice Francis when he said that “people who adopt unreasonable positions in litigation cannot simply do so confident that there will be an indemnity for the costs of the litigation behaviour, however unreasonable it may have been”.

This came while Francis J was ruling on a divorce financial settlement case, HG v WG, in which a wife sought £7.7 million from assets worth £12.3m. This included the provision of a £2 million “Duxbury Fund” – a lump sum payment to be invested in order to pay income for the remainder of the woman’s life.

Branding her objective “an unreasonable dream which cannot be afforded” Francis J awarded the wife £3.65 million, including a £1.5 million Duxbury fund. He also turned down her bid to reclaim the full £915,000 in legal costs and litigation loans she incurred, awarding only £400,000 for these, and saying that “the wife will, therefore, have to find some £500,000 in order to fund that part of the costs which I am not ordering the husband to pay.”

He added, “I recognise that this will deplete her Duxbury fund. I have very carefully considered whether this is fair.”

Calderbank v Calderbank

The case demonstrates that courts are increasingly adopting a position which seeks to encourage reasonable demands between divorcing parties – a position which traces its origins at least as far back as the position reached in Calderbank v Calderbank [1975].

Mr Justice Francis stated that “people who engage in litigation need to know that it has a cost.”

This is just one aspect of the ruling that chimes with the principles of Calderbank v Calderbank. The 1975 case clarified the principle that if a winning party has refused an earlier settlement offer made by the losing party, then the losing party can use the earlier offer as evidence of the appropriate level of recoverable costs. This is particularly pertinent when the winning party’s settlement award is less than the earlier offer as the losing party may then be required to pay reduced costs.

Together the rulings show us that the courts are prepared to make reasonable and realistic decisions even in cases involving those who are accustomed to and are trying to maintain particularly lavish lifestyles.

Francis J commented: “[The former wife] will have to make the sort of decisions about budget managing that other people have to make day in day out, but I am satisfied that people who adopt unreasonable positions in litigation cannot simply do so confident that there will be an indemnity for the costs of the litigation behaviour, however unreasonable it may have been.”

Calderbank and Open Offers

Calderbank v Calderbank heralded the advent of the “Calderbank offer”; a settlement offer made on a “without prejudice save as to costs” basis – Calderbank offers were not made available to the court until a ruling had been made.

To be considered as a Calderbank offer, it typically needed to meet the following criteria:

• It was made without prejudice save as to costs
• It was made in accordance with the principles of Calderbank v Calderbank
• It contained aspects that could be considered as genuine compromise

Calderbank offers were useful because of their flexibility and encouraged early and cost-efficient settlement without the cost and inconvenience of litigation. However, in 2006 it seemed that they had breathed their last when they were abolished as part of new costs rules.

Open offers (settlement offers shown to the court) have seemingly become the default position in all divorce financial remedy cases – with the starting point being that parties will be responsible for their own costs. However, the 2015 case of WD v HD demonstrated that a Calderbank offer could still be admissible in relation to an appeal.

Regardless, open offers have in many ways replaced the Calderbank offer. Furthermore, the court still has powers to awards costs against a party, but this is likely only to be in cases where the conduct of a party is deemed unreasonable.

There are down sides to open offers – they are seen as overly committal and, as the court can see the offer, likely to be less generous than a Calderbank, which makes the chances of early settlement less favourable. And so there is little certainty in relation to litigation costs and consequently the possibility of an upwards spiral.

Finding a Route to Amicable Settlement

It is always preferable to reach a financial remedy agreement without recourse to the stress and cost of litigation.

Oratto’s member divorce lawyers can work towards helping you reach a reasonable compromise when seeking financial remedy on divorce. If you would like to discuss the relevant merits of Part 36 or Calderbank offers to your case, Oratto can introduce you to a solicitor skilled in this area of divorce law litigation.

Oratto’s member lawyers offer assistance, advice and representation on all legal issues relating to divorce, financial settlements and child arrangements.

Contact Oratto today to find the divorce lawyer who is right for you.