Financial Dispute Resolution – look out for these stumbling blocks
February 24, 2009 70 comments
A Financial Dispute Resolution (FDR) is a court appointment during which a divorcing couple can be helped towards a financial settlement. I usually welcome these hearings, but with new costs rules in place I have noticed an uncomfortable trend.
A typical FDR proceeds as follows. After an application has been issued to the court and formalities such as financial disclosure have been complied with, the parties are given the opportunity to settle the case on a “Without Prejudice” basis, similar to mediation.
A judge hears the parties in a courtroom – in most cases, this is a small private room – and attempts to effect a settlement. The parties are not called upon to give evidence, but listen to the arguments advanced on their behalf. The judge will have read the details of the parties’ respective positions beforehand. The judge indicates how the case is likely to play out, and the parties then go away to try and reach an agreement between themselves.
A successful outcome means that a couple can walk away from court ready to begin new lives. An unsuccessful outcome means that the case continues. When this happens legal costs will mount and several months later, a battle will be fought out in court. The cost, stress and worry of such a battle should never be underestimated.
However the pressure to achieve a successful outcome, together with the new rules requiring each party to pay their own costs, have become useful weapons in the unscrupulous spouse’s armoury.
It is worth bearing in mind that because judges are accustomed to an adversarial system, they don’t always approach FDRs as mediators. Many judges are excellent; however, if a judge does not use his or her skills to persuade the parties to negotiate, or to issue wake-up calls when necessary, a FDR can be a fruitless and expensive waste of time.
I am also beginning to think that in some cases, judges can be a little naïve when spouses decide to play to a dirtier game. This can happen when a wealthier spouse – and let’s say it is the husband, because it often is – makes his wife a deliberately low offer. For example, he may try to obtain a clean break rather than an agreement to pay maintenance, even when a clean break would be a highly unlikely outcome in court.
He knows his offer is too low, but he believes that he has little to lose. He can either force his wife into accepting the offer, because she is terrified about her mounting legal costs and the length of time it will take for the court hearing to take place, or he can force her to litigate and realise all those fears. If she litigates and he is ordered to pay her a greater sum, the only downside is his increased costs – and let’s remember, the wife still has her own bill to pay. For her, it can be a crushing defeat or a pyrrhic victory; for him, it can be a gamble that he is prepared to take.
As the economy goes from bad to worse, I have observed an increased number of such “gambles”. These can pose problems for judges. After all, faced with a commercially-minded, hard-headed litigant who is determined to push the other party into a corner, what can the court do? Very little, it seems. The court can merely conclude the FDR and make orders for the case to head for a final hearing.
In one case that I observed recently, the husband pulled this trick and the judge responded with a fruitless attempt to find some middle ground. But this middle ground suited no-one: the husband wouldn’t countenance it, and it came nowhere near what the wife was seeking. The judge did not give the husband the “hard word” to encourage him to move towards a financial settlement. So the husband left the court as he entered it: intending to take the case to a final hearing if necessary, but convinced that his wife will settle with him beforehand.
There are those who would argue that costs consequences may still arise if there is a failure to make sensible open proposals. However, Judges are more likely to regard this as an exceptional course of action rather than the norm.
If you are heading for a FDR, I wish you well – but please be aware of these potential pitfalls. When these hearings work, they work extremely well. However, it does concern me when spouses attempt to “game” them in the way that I have outlined above. In my opinion it is a failing of the system that needs to be remedied.