In a recent decision that a judge should not have dispensed with a Financial Dispute Resolution (FDR) between a wife and husband, the High Court recognised one of the most effective means of achieving settlement on divorce.

By overturning the unnamed judge’s decision to not to utilise the FDR process in GH v GH, Mr Justice Peel confirmed the value of an initiative which has, he said, been “proved time and time again” to be self-evident.

“In my personal experience, even the most intractable case can yield to settlement at the FDR,” he wrote in a short judgment.

The FDR, he accepted, is an “integral part of the court process”, that “facilitates settlement in a significant number of cases”, whether straightforward or complex.

This decision, which came after the earlier Family Division judge bypassed the FDR process because of a disagreement about the wife’s earning capacity, was an unequivocal endorsement of the FDR initiative.

So much so, Mr Justice Peel wrote, that scenarios which necessitated entering a final hearing without one would be “very few and far between”.

In the light of this recent High Court decision, it is worth re-examining the significance of FDRs.

FDRs as a framework for the settlement of financial disputes on divorce were introduced into matrimonial finance cases in 1996, initially as a trial and were formally adopted in 2000.

To this day, they remain one of the most effective mechanisms for agreement, even though they invariably do not grab headlines.

The quiet efficacy of FDRs is a product of being heard in private and on an entirely Without Prejudice basis – but few working in family law would deny that they are a mainstay of the system.

What is an FDR?

The philosophy of an FDR is that the parties are aided by the input of a judge in seeking to resolve the issues by reaching an agreement.

The judge hears submissions from each side and gives an indication of the outcome he or she considers likely were the case to continue to trial. This indication is not binding, it is merely a steer but regardless, it can be highly effective.

The whole FDR is a “Without Prejudice” hearing, affording parties the freedom to negotiate without concerns that any concessions or proposals made will simply be “banked” for the later trial.

Measuring the precise impact of FDRs is challenging due to the flaws and gaps in the gathering of Ministry of Justice information.

At present it remains difficult to assess regional variations and variations across individual courts, but those of us working in family law can say with confidence that FDRs have enjoyed nearly 30 years of positive outcomes.

The Private Option

A private FDR is a newer invention, one which mirrors a court FDR save that the FDR judge (or “evaluator” as some judges insist they should be called to differentiate from a “real” judge) is chosen by the parties jointly and paid for their services.

The judge in these circumstances tends to be a barrister, retired judge or occasionally a solicitor.

Anecdotally, and based on my experience, private FDRs have a very high success rate that is estimated to be above 80%.

The higher success rate is perhaps unsurprising as a private FDR affords the parties the luxury of time, a dedicated judge and a fully focussed team.  The location (generally barristers’ chambers or solicitors’ offices) tends to be more comfortable and conducive to discussions than most draughty court buildings.

In terms of the level of judicial input, the experience is similar to a High Court FDR but is available to all levels of cases, including those that would otherwise be heard at District Judge level.

The contrast to a court-based FDR, where a judge will often be juggling several FDRs in one day along with other cases that get slotted in with little notice, is very marked.

Sometimes the demands on overstretched courts are such that cases can fall victim to last minute adjournments due to “lack of judicial availability” and over-listing. Having a judge at all can feel like a fortunate lucky break even if he or she is spread very thinly across several cases and has had little or no opportunity to read any of the court bundle in advance.

Overall, the success of private FDRs often comes as a surprise to clients, the majority of whom are pessimistic about the prospects going into and FDR.  Very few genuinely believe before the FDR itself that settlement will be possible.

Mr Justice Peel’s comments in GH v GH, echo many practitioners’ own experience.

The courts have long endorsed the use of private FDRs. They take pressure off a creaking system. In 2021 Mr Justice Mostyn took a robust view in AS v CS that parties should be no more able to wriggle out of a private FDR that had been fixed than a formally listed court hearing.

Benefits

As a rule of thumb is that legal costs double between the end of the FDR and the end of a trial so settling at FDR saves significantly on legal costs.  This is a point made robustly by most FDR Judges when urging parties to negotiate.

Doing so avoids the litigation risk that proceeding to trial and a court-imposed outcome can bring, as well as the many more months of waiting for finality as the court system struggles with the sheer volume of cases it needs to get through.

But how can a party settle with confidence given matrimonial law has inbuilt judicial discretion? The answer lies in the experience of expert practitioners. If your solicitor and barrister between them have several decades of experience under their belt, they can effectively build into the negotiations, and advise as those negotiations unfold, on the possible swings that would be at play at trial. This ability to contextualise a proposal made during the course of an FDR is vital.

In my experience, settlement negotiations at FDR also allow for creative solutions and more elegant approaches to resolving matters than slugging it out at trial.

This might mean bargaining over items that are of particular importance to a specific client, but which would not be considered by a judge.

One party may pay a premium to keep a specific property that would otherwise be sold, another may give up a surefire pension share to take greater liquidity upfront.

When the FDR is doomed to fail (or should be)

Of course, the FDR model is not a perfect, universal model. There will always be a rump of cases where FDR is doomed to fail.

Often this can occur when there are residual and lingering doubts about the fullness or frankness of one party’s financial disclosure. Rumbling concerns about non-disclosure can infect the negotiations as a whole.

Along with many colleagues, I retain some concerns about the suggestions from the judiciary in recent years that almost every case is “FDR-able” (perhaps motivated by the allure of freeing up much needed court time) even at the expense of having a full and detailed financial picture.

Not only is there a real risk that something material may be missed, but this generates an understandable nervousness on the part of a client who feels the picture is still too murky to instruct his or her lawyers to negotiate with confidence.

A trial, with oral evidence and robust cross-examination, can be essential in certain cases. But even then, the FDR can be a useful “dry run” to test, refine or jettison arguments.

The other grumble is the perception that sometimes an FDR judge will appear to be plotting a middle course between the parties’ positions. Whilst perhaps motivated by a genuine feeling that this could help parties to reach agreement, in my view, the FDR judge’s job is not to broker a settlement (although of course that is positive if achievable) but to give an indication, based on their experience, about the likely outcome if the case were to go to trial.

In any event, even if the indication is far more in line with one party’s position than the other, that can provide the impetus that is needed to bring an unyielding party to the table.

It may not be obvious to a judge if one party’s position is motivated by intransigence, but a clear message from an independent third party that such a position will not wash at trial can sometimes be the catalyst that is needed to unlock negotiations.

A list of gripes

Other issues can arise in FDRs for a variety of reasons.

Poorly formulated positions by one or other party can derail negotiations.

More prosaically, starting too late (often because one party uses up time on the morning of the FDR to take advice that really should have been received beforehand) can result in a race against the clock for the rest of the day’s negotiations.

Overly long submissions – perhaps at a client’s insistence that certain points are vital – can cause problems if this pushes the indication back to mid-afternoon, by which time the parties are flagging and the time for negotiation is squeezed.

Well-meaning but sometimes unhelpful input from friends and family who are comfortably housed in a breakout room can be an impediment.

A party has not been properly advised or has not listened to advice, and so is not emotionally primed at the start of the FDR, can cause problems.

Given that lawyers in other fields, and the Chancery and King’s Bench Divisions, often appear to view the Family Division as an unpredictable and confusing place, it seems to me that it is incumbent on family lawyers to trumpet the parts of our system which work well.

Notwithstanding the gripes and recognising that an FDR is imperfect and will not be successful in every case, it remains arguably the most effective and the best tool available to us in resolving matrimonial finance disputes.

Caroline’s article was originally published in Family Law Week, here.