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Family Law

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29 JUL 2009

PROPERTY: Hannan v Maxton [2009] EWCA Civ 773

(Court of Appeal; Carnwath, Toulson and Goldring LJJ; 8 May 2009)

The cohabitees lived in a property whose title was in two parts. The home in which the couple lived was in the man's name, while the structure from which a business operated was in the woman's name. When the relationship ended the man contended that the woman had no interest in the main property, and also sought repayment of alleged loans to the woman in the sum of £348,340 plus interest. The woman counterclaimed, arguing that each of them held the title to the relevant part of the property on trust for them both in equal shares, disputing the existence of the loans, and seeking an order for sale. The woman made an offer to the man, accepting only 45% of the property, and made a number of attempts to negotiate, including an invitation to alternative dispute resolution. Only shortly before the hearing did it become apparent that, given the drop in property values, the dispute concerned only about £25,000 (less if capital gains tax was an issue), whereas the costs were about £50,000. The case settled at the door of the court, subject to costs. By consent the court made a declaration that each party had a one-half beneficial interest in the title registered in the name of the other, dismissed the claims in respect of the alleged loans, and made an order for sale. Although the woman's counterclaim had been entirely successful, the judge merely ordered the man to pay the woman's costs in relation to the claim that the woman had owed him money, but made no order as to costs otherwise. The woman appealed.

The appeal was allowed. Given that the woman's suggestions for a round-table conference had been rebuffed, and that she had offered to settle on less favourable terms than those of the final order, costs should have followed the event. However, both sides bore some responsibility for what had happened, and indemnity costs would not be awarded, as there had been some fault on the woman's part. It was surprising that litigation such as this could be embarked upon without an up-to-date valuation of the net value of the property in issue. Notwithstanding remarks made by the judge in this case, the court did not want it to be thought that alternative dispute resolution (ADR) was only suitable for cases in which the facts were not in dispute. Experience showed that it was often in those cases in which the facts were most hotly disputed that ADR could be useful, because the process focused the attention of the parties on the commercial realities of the litigation and the costs involved, rather than on the very uncertain question as to which of them would ultimately be believed by the judge on the bare factual dispute.

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