Costs when allegations are withdrawn – a word of caution

Senior associate Sarah Colley reviews a recent judgment in the High Court, in Crowther v Crowther & Ors [2020] EWHC 3555 (Fam), which reiterates the principles surrounding when costs should be paid in circumstances where allegations of fraud and conspiracy have been made.

The case concerned a husband and wife, who had run a shipping business together worth approximately £7-£10 million, and their financial remedy proceedings which had been ongoing since 2019. There was dispute as to who the beneficial owners of the ships were hence Mr Knight and the ‘Castle parties’ being parties to the proceedings.

The wife alleged fraud and conspiracy against the husband and Mr Knight, who was the second Respondent in the financial proceedings, stating that they had set out to defraud HMRC and her in the proceedings mostly by concluding contracts with companies controlled by the husband to new companies. Both the husband and Mr Knight strenuously denied the allegations.

The case was listed for a preliminary hearing to consider the allegations and other issues such as whether the husband and wife were indebted to the ‘Castle parties’ and who the beneficial owners of the ships were.

A week prior to the hearing, the wife and the Castle parties reached an agreed settlement and informed the Court that they wished to vacate the hearing. The wife agreed that this would result in all allegations of fraud and conspiracy against the husband being discontinued.

The husband was not a party to the agreed settlement and subsequently applied for his costs, on an indemnity basis, incurred in relation to dealing with the allegations made by the wife and a payment of £80,000.

Mrs Justice Lieven confirmed in her judgment the principles and the case law in so far as claiming costs is concerned. The case-law makes it very clear that a party who pleads fraud unsuccessfully can expect to pay indemnity costs. The Judge was clear that there was no reason why that principle should not apply in this case. The wife was therefore ordered to pay the husband’s costs as sought together with £80,000 payment on account.

If you require advice or assistance with a financial remedy case from a specialist solicitor, contact Mavis on 020 8885 7986 for an appointment.