Price of success: the hidden costs of financial dispute resolution hearings

May 8, 2019

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FDRs (financial dispute resolution hearings) were going to make divorce proceedings fairer and faster but instead they have led to mechanical lawyering and divorce lawyers must now offer better solutions for clients, says James Pirrie director at Family Law in Partnership.

The current family court scheme first saw the light of day in 1996 with the launch of the pilot procedure. Part of the genius of the architects of the scheme is seen in the financial dispute resolution (FDR) stage. The aim was to provide direction for clients before all the costs are incurred and to ensure most of the relevant information would be before the court, with judges able to give clear direction and ultimately compel clients to settle at a lower cost than if they pursued further litigation. In its July 2014 report, the Financial Remedies Working Group’s interim report recorded that save where the court has deliberately ordered otherwise in truly exceptional circumstances, “the FDR hearing should feature in all cases as a compulsory requirement. Generally no listing for a final hearing should be given until an FDR hearing has taken place and has failed to bring about a resolution of the dispute.”

Impediment to settlement

This success, though, has come at a price. First, for those of us seeking settlement in all cases as early as possible, the FDR has been an impediment: it can be hard to have a truly ‘now or never’ negotiation to settle the case knowing that the compulsory FDR is over the horizon. The FDR requires offers to be provided to the judge, and instinctively professionals are likely to leave ‘something in the tank’ with which to negotiate at that hearing, and this must mean that in some cases a deal that would otherwise have been achieved will elude the parties. More usually the FDR is one of those black holes that provides a gravitational pull on all proximate negotiations.

Secondly, this phenomenon has permitted the arrival of lazy lawyering – it is safe, easy and profitable. It is also clearly contrary to clients’ interests. Under this model, the legal adviser in the solicitor’s firm sees themselves really as little more than an administrator for counsel, managing the case and the client to the point of FDR when, job-done, they stand back and wait for the outcome: either case closure or the second stage of litigation as the long march to the final hearing commences. Avoiding taking responsibility for the outcome, there is little that can go wrong.

For those of us seeking early release for our clients these are frustrating cases as we batter away trying to find solutions with largely uncooperative partners at the dance. Since the abolition of costs orders we have been left with few options save that of head down to the FDR – and if necessary the final hearing.

Cutbacks have made the situation worse. Some courts will now see seven-month delays between first appointment and FDR. Where we rely on the FDR to solve our cases, we impose on our clients a long hiatus in their lives at a time of extraordinary stress and one that is without doubt damaging to the children. During this period substantial costs are likely to continue to clock up. Against this background, we need to offer our clients something better.

The situation was put in stark relief recently at a telephone arbitration intake meeting: work on forms E was about to begin and we addressed the case and timetabled it in 34 minutes, and we then wrote up the directions that (absent settlement in the meantime) anticipate a final award on the case by the first week in March (contrast that three-and-a-half month timeline to the year or more likely through the court process and the difference between the costs of a telephone call to attendance at first appointment).

A second step might be the private FDR, enthusiastically recommended by the immediate past president this summer. That might work better if the court would stand four-square behind the privatised process: a recent private FDR has resulted in the court insisting on listing a hearing for directions despite the private FDR ‘judge’ having been addressed by experienced counsel and adopting their agreed time estimate and other preparations for a final hearing.

Weighing options

So what are the key lessons that we might draw together from the soup of options? I suggest as follows:

  1. Is negotiation worth it? Assess whether time and money should be invested in settlement. If you are really up against the lazy lawyering that will probably only really engage at the FDR then all settlement dialogue is likely to be building costs for no advantage. You simply need to get you and your clients’ heads down to the earliest dates the court can offer you and slice out all peripheral spend.

But if there is with the other side a shared enthusiasm for settlement then consider moving to the next stage:

  1. Skill sets. First we must be technically equipped to help our clients (through our skills and experience in assessment and managing negotiations etc.). We should secure the training we need to plug the gaps in our skill-sets.
  2. Process options. Secondly we should be able to offer a range of processes to find that most suited to the case (mediation/ collaborative/ round table meeting / Early Neutral Evaluation etc).
  3. Early settlement. Thirdly we will seek to bring the negotiation stage as early in the process as possible: the earlier we can have the negotiation, the greater the potential saving for the clients (and thus the easier it will be to bridge a gap between different stances in the negotiations, which, properly assessed are often closer than the costs that will be spent if there is no agreement).
  4. Anchor / aspirational statements. In settlement meetings, our clients are not just seeking ‘court-style-outcomes-but-cheaper’. Properly advised, they are looking for the best possible outcomes at a critical stage in their lives. We can often best help our clients (and avoid our own disappearance down the rabbit-hole of legal prediction) by having our clients describe what they really want as an outcome and sharing this information openly: the likely legal outcome remains a factor in the mix but it is not the only guideline in the room.
  5. Accept iterative disclosure. It follows that we may depart from the court process in favour of an iterative one. The court process sees a wide-ranging (and expensive) collection of all possible data covering all possible angles, before the FDR takes place. In our search for settlement, we might gather only the information that we need for meaningful dialogue. If options emerge that show that we need better information then further data gathering can be undertaken. This way we move into negotiations more quickly and when costs are lower but are able to refine our information as needs dictate.
  6. Avoid iterative discussion. But, we must be alert against the iterative discussion: it is all too easy, if agreement is not reached in a first meeting to return to have repeat discussions, as the parties invest more and more in trying to find a solution that is increasingly less likely to be found (particularly as costs are growing). Often our clients will benefit when we clarify at the outset when we will anticipate terminate the negotiation process and seek the imposed solution.
  7. The arbitration option. Think hard about whether arbitration may offer the better course to conclusion. It often will: if there has been proper engagement in negotiation then the FDR may simply repeat what has been done already – at higher cost and after considerable further delays.
  8. Private FDR / Early Neutral Evaluation. Where a barrister-led process offers a real chance to settle, then consider building in this step within the arbitral process to avoid delays and while the disclosure is still current. As an alternative, consider parachuting in a trusted barrister to the four-way discussions to help give guidance where the parties are hunkered down into a legal rights conversation but their positions are far apart.
  9. Plan the default process. Better still, make this assessment as to process prior to the settlement discussions commencing so everyone knows what will be the default determination process. My experience is that arbitration offers lower cost solutions, much more quickly and with less stress. Selection of the adjudicator by the parties in consultation with their professionals makes it much more likely that proper time will be given and an outcome that is respected and accepted by each side.

James Pirrie is a director at Family Law in Partnership. He specialises in complex financial issues and non-adversarial and cost effective approaches to divorce and separation including mediation, arbitration and collaborative law. He helps clients take control of the issues that affect them, clarifying priorities, exploring all the options and identifying the best way forward. To find out how James can help you in your family law matters, contact James at E: hello@flip.co.uk or T: 020 7420 5000.

This article first appeared in Solicitors Journal and is reproduced by kind permission.