The rise of Financial Dispute Resolution in transforming family law disputes

Alternative dispute resolution is increasingly being embraced in the family courts system as a means of easing the severe congestion that many have described as a crisis. Most notably, this culminated in the Ministry for Justice announcing it would mandate mediation services for separating couples back in March, however there are a variety of emerging formats of dispute resolution in family law which show promise as alternatives to lengthy, contentious court proceedings.

Financial Dispute Resolution (FDR) hearings are the point in the proceedings when agreements are usually reached. They are the second hearing that parties are engaged in when court proceedings are issues. FDR hearings are a good mechanism for settling as they offer a decisive and cost-effective means to settling financial cases, thanks to the binding, constructive settlements they can quickly produce.

An FDR hearing is effectively a mediation hearing with a judge’s input. Prior to the FDR hearing, all evidence is gathered regarding valuation and liquidity of assets, and each party will have set out their position in an offer letter. The judge hears both sides set out their position, before giving a view on the offers and a ‘judicial nudge’ to try and encourage parties to reach an agreement.

The FDR hearing is usually allocated one or two hours at court, however parties can be at court all day if negotiations are proving constructive, since the aim is to get a deal done and finalised as swiftly as possible. An advantage of an FDR is that the parties are able to hear a judge’s opinion on offers made, with parties benefiting from the judge’s extensive experience in the financial arena. Each party must have set out their position in terms of what they seek settlement-wise, meaning that most cases resolve at the FDR or shortly after, thereby demonstrating the efficacy of the model.

FDRs are also beneficial since they prevent legal costs increasing if an agreement is reached, while also delivering finality so that parties can move on with their lives. Counsel is usually instructed, who bring their own experience to the table and give their input and advice for how best to negotiate a deal. Parties are in ultimate control of the outcome, since the judge merely offers their opinion rather than making a decision as they would at a final hearing.

However, FDRs do present challenges to parties, since both sides are under pressure at court to negotiate and make decisions, and once an agreement is reached parties are bound by it and cannot resile from the agreement in the future. There are also issues regarding the time it takes to actually get an FDR hearing listed, given the pressure the courts are under.

Recently, scenarios have occurred where the judges themselves have removed cases from their lists thereby meaning costs have been incurred for the preparatory work, only for the case to be adjourned and the parties forced to wait even longer to settle their disputes.

There are also issues surrounding the facilities at court available for FDRs. While it is certainly preferable to have private conference rooms in which to discuss matters, in many cases there may not be rooms available, adding to the stress for both parties. Judges will usually have more than one case on their daily list, and thus will not be able to dedicate all of their time to one set of disputing parties. Also, the Judge’s powers at FDRs are limited to only being able to approve a final agreed order or list the case for a final hearing if a resolution cannot be reached at the FDR hearing. If there are other issues parties wish to be dealt with, they have to make a specific application and list for a hearing, thereby increasing costs and the amount of time taken to reach a conclusion.

Overall, however, FDR hearings – with their blend of judicial weight and non-adversarial character – can be an effective means of resolving disputes and are preferable to a lengthy trial. Alternative methods of dispute resolution outside of the courtroom, such as mediation, round-table meetings, ongoing correspondence, and arbitration, also offer separating couples a good chance of reaching a swift and final settlement of their issues. While such methods won’t work without a degree of common ground, they should be duly considered as a means of aiding the severe family court backlogs arising from a high number of cases and a shortage of available judges.

Indeed, while it is compulsory for parties to attend mediation prior to issuing court proceedings, it is also possible to suspend such court proceedings at any time if there is a willingness on both sides to try mediation. Mediation usually proves to be a cheaper, and quicker alternative to court proceedings, with parties benefiting from the input of independent, trained and experienced family mediators. Once agreement has been reached at mediation, parties’ solicitors prepare court orders setting out the agreement, and lodge the papers at court for a judge to approve.

Round-table meetings to reach settlement are another alternative, involving parties and their solicitors (and possibly barristers if so instructed) coming together to negotiate outside of the court timetable. Parties are free to conduct such meetings at any time, and both sides may feel more relaxed if their solicitor and/or barrister is present and the meeting held in the more informal atmosphere of a solicitor’s office.

Ongoing correspondence also presents another route to arduous court proceedings, with parties free to make offers to the other side and continue negotiations on paper at any time. The correspondence will usually be drafted jointly by solicitors and their clients, since they are the ones who are most familiar with the case.

Private FDR hearings are also becoming more and more frequent, involving parties agreeing to appoint a private ‘judge’, usually an experienced family barrister. The ‘hearing’ takes place at a solicitor’s office or barrister’s chambers. Private FDRs have the advantage of the ‘judge’ being dedicated solely to the one case and being fully briefed and prepared ahead of the hearing. The-same input and comments are made by the ‘judge’ as if it were a real court hearing, with parties benefiting from ample time to try and negotiate a deal with one judge on hand for the one case. Private FDRs are also far quicker to arrange than court FDRs, and while many parties cannot afford the cost of such a method of dispute resolution, for those who can it is proving a particularly popular option.

A final method of settlement is the deployment of arbitration between parties, in which an arbitrator is appointed-who is qualified to hear cases. Parties sign up to the process, and once they have signed are bound by the arbitrator’s decision. Arbitration brings the same advantages as with private FDR, in terms of one specialist being appointed to deal with one case alone.  Hearings can be held before the arbitrator, or alternatively the arbitrator’s written decision can be sought.

Generally, all of the above options require both parties to enter into the process positively, thus giving the parties the power to have an input into the outcome rather than the court making a ruling at its own discretion. However, these forms of mediation will not work if there are fundamental differences in parties’ offer positions or findings of fact that need to be dealt with by the court. In such cases, the only way to resolve the dispute between the parties is by final hearing, with the court making the ultimate decision. Given the difficulties with court in terms of the sheer number of cases being dealt with and the lack of availability of judges, parties should always consider alternatives to court hearings in order to bring about as cost-effective and timely resolution as possible to their disputes.

Lesley Smythe is a partner at Lowry Legal