The general rule in family law matters is that each party bears their own costs of the proceedings. However, the Court has discretion to depart from the general rule and make any other order with respect to costs it considers “just”.
The justifying circumstances for an order for costs against a party should be of an “exceptional kind”, such as, for example, the conduct of one of the parties in the course of the proceedings that led to costs that could be otherwise avoided, or a failure by one party to comply with any of the orders of the Court.
One of the significant factors the Court must take into account in considering whether to make an order against one party to pay the costs of the other is whether either party has made an offer in writing to the other party to settle the matter by consent and the terms of the proposed offer(s). The purpose of such an enquiry is to ensure that offers to settle are considered seriously by both parties, to minimise the costs of litigation and reduce the workload of the Court. The Court also strives to eliminate any injustice that may occur if a financially stronger party is placed in a position where he or she can wear out the other party by dragging out the proceedings and mounting up costs.
In considering the offers made in the course of the proceedings, the Court has to give regard to the actual terms of the offer and possible outcomes of settlement ensuing from an offer, not merely to the fact that an offer has been made. If, for example, one party has failed to accept an offer, but as an outcome of trial has received greater share of the assets than what was offered, the Court, obviously, will not order costs against the party for the mere failure to agree to settle.
This does not mean that, where there has been a previous offer of greater or equivalent value to the outcome of trial, the Court will necessarily order the offeree to pay the costs of the offeror. On the other hand, the Court may still award costs against the offeree for not accepting an offer that was marginally less than the share he/she has received as a result of trial. In other words, in determining the question of costs, the Court may consider offers of any value and give it such weight as it considers appropriate in the specific circumstances in which the offers were made.
However, in situations where the offer for settlement is lower than the ultimate result determined by the Court, the closer such offer is to the final outcome, the more weight the Court will give it in considering costs. This is not, however, a stringent rule. The Court will consider every case on its facts, paying particular attention to the context in which the offer was made, including the knowledge of the offeree of the financial circumstances of the offeror, to determine whether it was reasonable to accept the offer in question. In some cases, for example, one of the parties may not privy to the financial affairs of the other party, or the family’s financial arrangements are so complex that more disclosure or investigation is required before an offer can be considered. In such cases, the offeree may not have been in a position to make an informed commercial decision at the time of the offer and it will not be just to ‘punish’ the offeree by making them pay the costs of the other party.
If an offer made in the course of the proceedings has been filed in Court, as is open to the parties is some circumstances, but subsequently withdrawn, the Court has discretion to still consider such an offer when determining the question of costs. In this situation, the Court will pay particular attention to the complexity of the proceedings and whether the offeror kept the offer open long enough for the other party to properly consider it.
Whatever the circumstances might be, before the Court makes any order for costs, it must give parties an opportunity to be heard and provide evidence in support of why the costs should or should not be awarded against a party to the proceedings. It will otherwise be a denial of natural justice to the party against whom a cost order may be made. However, an offer cannot be disclosed or even mentioned to the Court at any time in the proceedings until the hearing of an application for costs filed by either party at the conclusion of the proceedings, once the Court has made its final decision.
It is important that each offer of settlement made in the course of property proceedings be seriously considered by each party. To enable the clients to properly evaluate each offer for settlement, the lawyer must inform the client of the costs incurred and paid up to the time of the offer and estimated future costs to finalise the matter if the offer is not accepted. This will allow the client to make an informed decision about each offer and, possibly, avoid costs being awarded against him/her at the conclusion of the proceedings.
This article was written in September 2015 and it is possible that the law applicable to the issues discussed in the article may have changed.