Financial Dispute Resolution – look out for these stumbling blocks
Some spouses go prepared.
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.
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16 Comments
Justin Worden on July 23, 2009 at 1:13 pm
Dear Marilyn,
I found your blog searching for the term “FDR”, three letter acronyms are horrific but I guess nessecary? I have my Financial court hearing tomorrow and looking through some of your articles I have been cheered up and educated. Wonderfully written and easy to understand which I believe is a real compliment…..And your picture of the rabbit in the pan put a smile on my face, thanks for the understanding…..These things are never easy:-)
Regards
Justin….
Marilyn Stowe on July 23, 2009 at 3:12 pm
Thanks and good luck for tomorrow!
Jennifer Brown on April 16, 2010 at 1:05 pm
Dear Marilyn,
I am in exactly the same position as this. Being a housewife and mother of 3 young children and only divorced for a short time, my ex-husband applied for variation. He has since cut monthly maintenance, pays it late and did not pay any of the £79k annual sum for child and spousal maintenance. The FDR is in 3 weeks time and unlikely to settle as there are various undisclosures.
Every last penny I had has been paying for legal fees, and it will cost me a further £25-35k to a Final Hearing in a year’s time. I simply have no choice but to carry on.
There must be so many people who have no choice but to give in.
Regards
Jennifer
Neil on April 21, 2010 at 9:32 am
An interesting post from more than a year ago.
I hope you don’t mind me joining Jennifer, above, in resurrecting the discussion on this!
I wonder what the remedy could be.
It would be helpful to have some method where a Judge could record, at the Financial Dispute Resolution hearing, whether she or he felt that one party was adopting an unrealistic, tactical and unreasonable position, and perhaps give and record warnings on costs.
This could perhaps be done with a form, or FDR certificate, which is provided to the parties but not held on file, confirming or otherwise that the Judge believes the FDR has been conducted with appropriate openness, and readiness to settle, or has been used tactically.
That would focus the minds of the less realistic party and provide some evidence towards supporting a costs claim at a later date on the grounds of unreasonable conduct of litigation.
This could not be kept on the court file, in case it came to the knowledge of the Judge at the final hearing. The sanctity between the financial dispute resolution hearing and the final hearing require different Judges to hear each hearing and that should be preserved.
Or should it, I now wonder?
What would happen if, in such circumstances a Judge could make a finding that one party has sought to “game” the system, as you put it, and subsequently record such findings on the Court file itself to provide continuity through to the final hearing?
Would that inhibit tactically low proposals to settle?
Bearing in mind that proposals are meant to have been exchanged before hand, either party could give notice that they believe the other’s proposals are outside of the brackets of reasonability. Both parties and the court would then be on notice that this might be an issue. It becomes incumbent upon the recalcitrant settler to modify the offer beofre or at the final dispute resolution hearing or stand by his or her unreasonable proposal in full visibility copme the final hearing.
Without prejudice protection, after all, is to encourage and protect sincere attempts to settle. Why should it be allowed to be abused by the woefully inadequate, tactical, litigant?
Just some thoughts for debate.
Sion Burgess on July 3, 2010 at 7:49 am
The system plays both ways. Bitter, revenge seeking spouses are equally as capable of gaming the system.
The bottom line is that the system is broken. There should be a defined outcome from which parties have to justify deviation, rather than this woolly system to which the outcome is wholly random and based upon where it is heard. The focus of knowing your outcome will be 3 years maintenance at x% will both discourage frivolous divorce and excessive litigation.
cherylprior on February 3, 2011 at 8:32 pm
i have read your internet court appraisal relating to divorce. I find myself in a very similar sittuation. at the mercy of the courts.
I was married for a short while four years. I had a superior wealth to him but not only supported him financially and domestically now found that i may have to give hime half the substantial house i boughjt in total to him. Miller V miller case.
He did not contribute anything of capital and also procured a successful business because of my domestic and financial assistance. Whilst I understand in marriage each has to help each other in this situation he actually profits from the scenario. Surely this should not be the purpose of the court.
As you say at the FDR it was not possible to out forward facts regarding contribution merely negotiations towrds a settlement. It seems back to front. Surely at the FDR we should be able to put forward our claims regarding needs, compensation and contributions.
regards
cheryl prior
Lisa P on April 7, 2011 at 1:18 am
Hi Marilyn, I also found your blog after searching ‘FDR’ and I’m so glad I did as I wasn’t aware of the ‘new costs rules’ and I don’t think my sister’s lawyer has ever explained this to her.
My sister fled her home after her husband violently attacked her and has been in hiding ever since.
There are no children and the only significant asset is a house.
My sister has asked for a 50/50 split of assets and debts, and though her husband has agreed (via email), his actions contradict this as he has found every excuse possible for not putting their house on the market.
She is effectively being held to ransom.
When she first sought legal advice, her lawyer advised that they may reach a point where it is not worth continuing with legal action as there may not be enough equity in the house to settle her legal fees.
Jennifer (above) is right when she says ‘There must be so many people who have no choice but to give in’.
I’m so angry and frustrated that a spouse or partner can do what my brother-in-law is doing and my sister just has to take it.
If she does nothing, she gets nothing, but doing something, i.e. proceeding with a FDR, may still yield the same result…Arrrgghh!!
Thanks for the insight.
CJLeeUK on July 6, 2011 at 12:24 pm
The system definitely needs to be looked at and the loop holes closed!
A close friend of mine has just finished going through his fdr.
Basically, his ex has a part time job working 3 days a week. She has made no effort to find another source of income – this was also the case before the split and was a major contributor to the joint debt that they acquired. She stopped paying toward all of the joint debts as soon as he moved out 18 months ago. As a result, he has had to pay out significant amounts to ensure that his (and her) credit could remain reasonable unblemished to allow them both to get mortgages etc. She had a personal loan in her name which she put into debt recovery 10 months ago without telling him – because she couldn’t be bothered to increase her working hours to pay for it!!! But the result is that his credit has been adversely affected, as the mortgage is still in joint names.
All of the joint debts that he has had to pay by himself over the last year and half have not been taken into consideration when the decision was finally made – basically she got 50%!
How is that fair??? Surely he should have had a minimum of 50% + half of what he paid towards the joint debts over the last year and a half? Particularly as she was the respondent!
I am at the start of the whole process myself and I am not at all confident that the system is fair. Based on my friend’s experience and others I have read and heard about, I am tempted to be as unreasonable as I possibly can – that appears to be the way to go.
Too bad my ego won’t let me…
David on April 2, 2012 at 8:56 pm
I too have been subject to an unscrupulous spouse playing a dirty game. The difference this time is that I am the so called wealthy husband. All through the process I have tried to negotiate a reasonable settlement and have attempted mediation with a qualified lawyer. This resulted in me making an offer where she received half the value of the assets (excluding around £100,000 of money in her name that she claims to be her fathers), half my monthly income and half the cash value of the pensions, but this wasn’t enough for her – she wanted more of the pension. I am 55, she is 48 and she claims that she cannot work more than 10 hours per week, whilst I work 50 or more. There is enough money to go round, but we are certainly not super rich so I see no reason why she cannot contribute more to the household income. We recently sold the family house and she has moved into a new house with no mortgage. On the other hand I have a mortgage on my new property and she refuses to release any capital from the sale of the matrimonial home so that I can repay my mortgage. I offered to meet her in December to discuss the settlement but she cancelled the meeting. Her solicitor confirmed in writing we would meet in January but again this didn’t happen. She has refused to meet in February or March and now has decided to apply for an FDR because I won’t meet her demands for interim maintenance! The one benefit is that she will have to pay her own costs for the FDR which in my opinion is entirely appropriate as she has one of the most expensive law firms in London, whilst I have a fairly modest lawyer who is determined to help keep the costs down. The situation I find myself in is that my spouse is making unacceptably high demands knowing that she has little to lose at an FDR, whilst I am concerned about the mounting legal costs and find myself in the position where after paying substantial interim maintenance and an unnecessary mortgage each month, I do not have enough to pay my own solicitors bills.
Marilyn Stowe on April 4, 2012 at 3:29 pm
David
Why dont you suggest arbitration? An FDR may not produce an outcome, but will incur substantial legal costs.
Regards
Marilyn
"T" on April 20, 2012 at 7:17 pm
Your information on the FdR was very educative. I am going through the same issue right now, I will be attending my FDR next week.
My ex works away and he has done this since 10years that we have been together. We have two kids, had a home, I stayed at home to care for the children, while he worked. He is well paid and has only paid me minimal amounts for months to cater for my two young kids. He has now withdrawn all the savings from the accounts and has not given any reasonable cause for doing that. Now he is threatening not to pay me anything. I have now had to accumulate a massive debt just to care for the kids and pay my blls, whilst he has none. I have been adviced that he would he may keep the matrimonia home because there is not equity on it and pay some spousal maintenance, but no provision of a secured accomodation for the children and myself.
How can that be? My worry is that he works in countries that the British law has no jurisdiction over. I am uncertain that he might for one reason or the other, stop paying for this, wher will htat leave me and the kids then.
What is the best advice you can give me in this matter? I am really worried. Thanks
Marilyn Stowe on April 20, 2012 at 8:57 pm
Dear T
I’m sorry but you have given me insufficient information to advise you. I have no idea what your financial position actually is or that of your ex. However I assume you have a solicitor. Tell him or her what you have told me and make sure you obtain the advice you seek. Put it in writing. If I were you I’d make sure I was completely comfortable and finically protected going into my FDR and also fully aware of how an order can be enforced in the relevant jurisdiction. I agree with you it’s very important and its equally important that you have complete peace of mind.
Best wishes
Marilyn
'T' on April 22, 2012 at 8:09 pm
Thank you Marilyn for your response. I do have a solicitor, but was told that if the law cannot cover the jurisdiction then I am stuck. My ex earns over 70k per annum and I am merely surviving by with a minimum wage, with a yearly income of around £7,000 and depend mostly on benefits, as my earning income is low due to my caring for the children.
He has threatened to go bankrupt, retained the matrimonial home, which was put up for sale, but he took it off the market, and it is assumed that he might be allowed to have the house. He only stays in the country 2-3months in a year.
I have asked about these enforcements in different countries, but not received any concrete answer. Although, I have insisted on my full instructions on the maintenance and other issues be tendered in court, I am uncertain of how it will go.
Another issue if he does not appear on the day or if he does and we did not arrive at an agreement, will the final hearing favour myself or him?
Cheers.
A on April 28, 2012 at 5:26 am
Is there an appeal process that can be chosen after the FDR? I have just completed my FDR where I felt under pressure to give in to my ex because she has failed to provide information as to her earnings. I am employed in sales earning circa £45k whilst she is self employed showing £6.5K but drawing a wage on her business and in reality earning circa £30k but not disclosing this to the court or HMRC. She has walked away from all responsibilities of the joint home for 2 years which I have paid. I have made numerous offers which have all been refused and due to the costs and stress involved in trying to reach a resolution, ended up in hospital connected to an ECG. She is living with another partner – difficult to prove -taken a car loan in the meantime which she wanted me to pay and still does not have to pay any monies towards the house whilst it is bein sold. There are no dependants.
Marilyn Stowe on May 5, 2012 at 6:35 pm
Dear A and Concerned Brother
Thank you for your comments. In both cases it would be in appropriate to advise without full details.
I can only refer you to the respective lawyers, who are in a position to reply to you both.
More generally I would say that it is not uncommon for one party to try and back out of a deal done at an FDR and usually it is not possible. Your own lawyer can advise. Readers have often been warned by me that unless they are 100% satisfied they shouldn’t settle and later regret it. They should always ask for time to consider an offer in the clear light of day.
As to the costs, the general rule is there will be no order for costs. Readers should note that the court expects to see open offers to understand the parties positions during the proceedings. Without prejudice offers are also still made as additional efforts to try and settle the case. Court ordered requests for disclosure should be promptly complied with and if demonstrated to be oppressive and irrelevant, potentially a costs order might be made against the party who unnecessarily incurred the costs of compliance.
Regards
Marilyn
Concerned brother on April 29, 2012 at 1:18 pm
Marilyn, I found your FDR article very informative and also the link to “new costs rules” by David Hodson.
I am assisting my sister with her divorce and her FDR hearing was in February 2012. Following the FDR her barrister made a Calderbank offer to her husband (the Petitioner) which I now think is unusual after reading the article by David Hodson.
A final hearing is scheduled for June 2012. To date her husbands side has not responded to the Calderbank offer. Instead they have issued a further questionnaire even thought they have not made any discloures themselves (not even a single piece of paper) despite numerous requests from my sisters solicitors. My sister has made all her disclosures and proofs.
Could the fact that no disclosure has been received from the other side be the reason why a Calderbank offer was made rather than an open offer?
Her husband is playing a very dirty game and in an attempt to discredit her, has been pursuing untrue allegations that my sister is hiding money and earnings and is still involved in a small family business which she left 6 years before she and her husband separated. He hasn’t worked for over 4 years and is using Legal Aid wereas my sister is working hard to support her 3 children (with no financial assistance from her husband at all) and having to pay all her own legal costs.
I don’t think the FDR was of any benefit and my sister is now worried about her escalating legal costs with all the preparations now starting for the final hearing. I just hope that the law treats her fairly at the final hearing.