The Modernistaion of the Matrimonial Finances Process

The Financial Remedies Court – an update by Dr Alex Khan

Dr Alex Khan

As financial remedies practitioners, we often remind our lay client that the family court is not a tribunal that has the infrastructure to consider complex matters nor do district or circuit judges have the capacity [or legal recourse] to usually consider issues of costs. The lay client’s understandably limited knowledge, of how divorce decisions or settlements are arrived at, tends to be coloured with media reports of multi-million pound cases; ‘the Russian Oligarch at the RCJ’. The crushing reality is that, more often than not, agreement has to be reached before getting to the final hearing stage as the risk of achieving less, and of costs mostly being unrecoverable, makes time-consuming, contested oral evidence to be an inadvisable foray that can potentially lead to economic ruin.

A more structured approach in the form of the Financial Remedies Court [‘FRC’] is therefore long overdue. The FRC has been advanced by the ubiquitous Mr Justice Mostyn, as National Lead Judge of the nascent project. In June 2019, Sir Nicholas announced the advancement of the scheme:

‘Recognising that reported cases often involve very big amounts of money not found in the normal run of cases, we are working, with the support of the Law Commission, on a unique web-based scheme to capture case final order data which, in due course, we hope will assist the achievement of consistency and predictability in mainstream financial remedies cases.

We plan to move the approval of financial remedies consent orders away from Regional Divorce Centres to the FRCs as soon as this can be administratively achieved.’

From its inception in 2017, the FRC has developed into a specialist court that is now expanding its reach across the jurisdiction of England and Wales. In early 2018, the pilot scheme began with the West Midlands region being at its centre. From its Birmingham hub, the project was spun out this summer [2019] into eight new zones. Focusing on [my own] Northern Circuit, the pilot has begun in the Liverpool and Cheshire Zone, the lead judge being HHJ Greensmith sitting in the Liverpool hub at the Vernon Street family courts. It also seems that the FRC will shortly be coming to Manchester Family Court and hopefully by early 2020 as part of Phase 3 of the project. Of course, Liverpool, being the regional divorce centre, will remain the hub from where cases are to be allocated and distributed to other courts as appropriate, for Greater Manchester being the Civil Justice Centre, and Wigan and Stockport Family Courts.

The relevant judges allocated to the FRC will remain in their current locations and no specific physical provision is envisaged for this purpose. This is because an ultimate aim of the FRC is the introduction an on-line, user friendly fast-track service of issuing and processing, and currently being developed at a ‘well-advanced’ stage by HMCTS. The ambition is to establish virtual courts for the use of legal representatives [initially being trialled in Appeal Hearings]. Such proceedings will be supported by an ever-expanding database of comparable decisions that should ensure that an appropriate settlement can be assessed relatively early and so saving costs.

Mostyn J’s successor as President of the Family Division, Sir Andrew McFarlane, was equally clear about the importance of the newly-formed FRC. He provided a rather scathing review of a Deputy District Judge’s decision [obiter dicta] in Wodehouse v Wodehouse [2018] EWCA Civ 3009:

I hope that this decision is evidence of the value of creating a Financial Remedies Court – which is currently being piloted – so that only judges who are recognised for their knowledge of, and experience in, financial remedies cases following divorce will, in the future, sit on cases of this type.

Private FDRs and Other Forms of Alternative Dispute Resolution

Financial Dispute Resolution hearings [‘FDRs’] are, of course, the second stage of hearing in financial remedy proceedings and are listed after the First Directions Appointment [‘FDA’] when directions for an FDR are made by the court. The concept of ‘Private FDRs’ involves parties agreeing to meet at a neutral venue [usually lawyers’ offices / chambers] before a family solicitor, barrister or retired judge. An order at an FDA [the first hearing concerning directions] can record that such a private FDR is under consideration or, if both parties are in agreement as to this method, that the application is adjourned generally; although the latter approach is probably to be discouraged as it can lead to feet dragging from a reluctance ex-spouse. There is obviously a cost to this approach [potentially beyond some clients] but it should be a swifter process compared to listing for an FDR in busy family courts. The option of then seeking a listing for a final hearing will remain should settlement not be possible.

Other advantages of private FDRs, as promoted by Mostyn J, include the convenience of the parties being able to meet at a time and venue by mutual consent. Furthermore, the very commitment of parties to any form of alternative dispute resolution often results in lasting compromises. Should parties wish to seek a non-court resolution prior to the FDR stage, it is also open to them to seek an Early Neutral Evaluation [‘ENE’] and which involves the same principles and practicalities as a private FDR. Similarly, both arrangements are privileged but can nevertheless inform future proceedings and potential negotiations if settlement has not been arrived at. It should not be forgotten that mediation remains open to parties, subject to the court process allowing sufficient time between hearings, when proceedings already have been issued. A more modern affectation is the directive mediation where, should agreement not be arrived at, then at least directions can be agreed prior to the next court hearing.

In parallel with the FRC procedure, arbitration is also an alternative route being encouraged and became a formal route for determining family cases in 2012, deriving its authority from the Arbitration Act 1996. Hence, the Institute of Family Law Arbitrators was established in order to train arbitrator who were initially engaged in the financial remedy arbitration scheme and, following its success, trained and engaged in specified children’s disputes. A positive of this process is the level of flexibility so that, depending on the level of complexity of the dispute, the parties can engage with the arbitrator entirely in writing, via telephone or by face -to-face meeting(s). Another potential advantage over other forms of alternative dispute resolution is that arbitration awards are binding. Naturally, there is the opportunity to appeal via the 1996 Act either under section 68 (serious irregularity) or section 69 (a point of law). However, successful appeals are extremely rare.

The decision by a Deputy High Court Judge [Ms Clare Ambrose] in BC v BG [2019] EWFC 7 also provides useful, recent guidance regarding appeals from arbitration awards made under the IFLA scheme in reliance on the previous guidance set out by Mostyn J in DB v DKJ [2016] EWHC 324 (Fam) as a precursor to the FRC. One aspect to note that is the arbitration award involves aspects relating to a third party [usually a pension company/organisation] then it is good practice to seek a consent order from the family court incorporated the award and upon terms that will put the award into effect. Indeed, the primary purpose of the IFLA Financial Scheme rules is that the parties enter into arbitration with the intention of achieving finality in the resolution of their dispute.

It should also be noted that arbitration is now being suggested as a vehicle to determine discrete issues that the busy family courts do not necessarily have the time to consider. As Moor J recently observed in CM v CM [2019] EWFC 16 when the issue of drafting a letter of instruction to an expert arose:

‘Specific issue arbitration is perfectly proper and appropriate even in cases that are proceeding through the court system.’

Brief Summary of FRC Process and Guidance

What does the FRC procedure mean in practice? Naturally, gatekeeping is the starting point. First, the financial value of the dispute proposed by the party / parties allows for a filter into a relevant category. The lowest, most common track will be in consideration of net marital assets of less than £1 million [‘m’]. The ranges are then set at net assets of up to £7.5m, £15m and over. Beyond those ranges, income of more than £1 m is also a consideration for allocation. It is then necessary to complete a checklist of issue to gauge the complexity of the factual and legal arguments. A brief case summary is provided in support. Then, a decision has to be made as to whether the allocation of the case should be to the standard or fast track. The timescales are not yet abundantly clear but the goal of streamlining and accelerating the overall process is. Indeed, the early judicial evaluation should ideally lead to consideration of potential methods of alternative dispute resolution at an early stage of litigation and hence reducing costs. Hopefully, in conjunction with the proposed changes to non-fault divorce process, parties can, in future, have their divorce and associated finances completed in considerably less time and at less cost than can currently achieved.

Alex has practised as Chancery and Family Counsel for over 15 years. Before that, he spent 5 years in corporate management and marketing.

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