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Home > Articles > 2012 archive

Financial Remedy Cases: Piecing Together The Jigsaw

Grant Howell, partner, Collaborative lawyer and family law arbitrator, Charles Russell LLP, examines the pros and cons of the available methods for resolving financial remedy cases.















Grant Howell, Partner, collaborative lawyer and family law arbitrator, Charles Russell LLP

Introduction
The recent introduction of family law arbitration and the continued emphasis on non-court dispute resolution provide a jigsaw of approaches to resolve financial remedy cases.  How should a practitioner piece together that jigsaw to resolve matters in the inevitably difficult circumstances arising on the breakdown of a marriage or a civil partnership? 

The various alternatives should not be seen as competing with one another to see which is the best.  They are tools available to the practitioner to use either alone or in combination.  When attempting to resolve the often emotionally charged issues within the potentially wide parameters provided by the law in terms of outcome, the range of alternative approaches is to be welcomed.   Any resolution needs to be judged not only against the fairness or otherwise of the outcome but also having regard to the impact of how that outcome was arrived at, on both the parties and the family in general.

The possible methods of resolution to be compared and contrasted are:

• agreement direct between the parties;
• mediation;
• collaborative law;
• arbitration;
• court.

What are the pros and cons of each taking  key elements in turn?

Autonomy
The importance, if possible, of both parties accepting and owning jointly the outcome has often been stressed.  Considering the ability of the various approaches to deliver on this objective, there is a spectrum running from agreement between the parties at the most effective to the court process as the least effective.

There is the need though to balance autonomy against the need to protect the uninformed or vulnerable party.  This is particularly the case where no third party is involved in the discussion.  Both spouses may have unrealistic expectations as to the outcome or its implications in the future.  They may not have the benefit of legal advice.  There may well be an imbalance of power between them, with one being a person who has been in control throughout the marriage.   Involving a skilled mediator can address such concerns.  Even though a third party has now been introduced, the parties will still be encouraged to reach their own decisions and retain their autonomy.

Similarly, mediators recognise the importance of parties having access to their own legal advice if possible.  Echoing the process in commercial matters, a model of mediation has been introduced where the lawyers attend the mediation itself but the more common model where discussions take place in the absence of lawyers, which the parties then take legal advice upon, still prevails.  If this is felt to be a disadvantage, the lawyer plays a more central role either in collaborative law, arbitration or the court process.

Collaborative law, since its introduction around ten years ago, has provided the best opportunity of retaining party autonomy in conjunction with the lawyer performing a valuable role.  For that possibility to be realised, everything depends upon the personalities of the parties and their respective lawyers.  The fact that the lawyers will be unable to continue to act unless there is an agreement certainly increases the emphasis on agreement being reached if at all possible and negates the argument beloved of the media that lawyers seek to perpetuate disagreement to run up fees.  Experienced collaborative lawyers stress that the need to invoke this provision is rare but it does lead to possible disadvantages as highlighted later. 

Those disadvantages can be avoided if the new approach of arbitration is used.  Although new to this country, statutory based arbitration has been in place in Canada for over thirty years and in Australia for over ten years.  It was also recently introduced in Scotland and is in place in other countries on a non-statutory basis such as in the US.  Under this process, the parties retain a degree of autonomy as they need to agree with each other to take this approach in the first place and then play a central role in determining what the arbitrator is to decide upon and the process to be adopted.   

Finally, autonomy is at its weakest in the court process.  However, its importance is still recognised by various measures introduced over the years.  An example would be the introduction of FDRs in 1996.  More recently, there is the requirement in the Family Procedure Rules 2010 to consider referring matters out of the court process to other dispute resolution which now includes arbitration.  Ultimately, however, just as with arbitration, there is the recognition that there will be a residue of cases where quite simply the parties can never agree and a decision still has to be made.

Privacy
With one exception, it seems fair to presume that parties prefer to keep all aspects, including financial remedies arising from the breakdown of their marriage, private.  All of the alternative approaches, including arbitration, deliver this objective except potentially the court process.  The exception to the general rule may be where in a high profile case the non-celebrity may play on the risk of the media taking advantage of the relaxation in the reporting of financial remedy cases since 2009 to pressurise the celebrity to resolve matters on disadvantageous terms.  While it is certainly true that the relaxation of those rules has not led to a general reporting of cases, it is still an eventuality that can be avoided if matters are resolved other than by way of court hearings. 

Trauma
By definition, the breakdown of a relationship is invariably traumatic.  The hope is that any means of resolving a resulting financial remedy case takes account of that trauma and certainly does not exacerbate it. The extent to which this is true in relation to agreements between the parties, mediation or collaborative law depends to a large degree upon the personalities of the parties themselves and the dynamics of their relationship.  Certainly skilled mediators and collaborative lawyers can identify and seek to ameliorate the problem without necessarily being able to negate it completely.  What of arbitration?  Much is likely here to depend upon the individual arbitrator but there is at least the opportunity to introduce a more informal approach in surroundings much more party friendly than a courtroom. This will assist.  That opportunity is simply not there under the court process which inevitably increases the stress and trauma for the parties if court hearings are required.

Process
Given the central importance of how matters are resolved and not just what the outcome is, process plays a key part.  Flexibility is at the centre of all of the available approaches, including arbitration, with the exception of the court.  Given its nature, arbitration is necessarily more formulaic than the other non-court based approaches but the parties can agree upon a process and, to quote just one example, it is possible for matters to be resolved on paper than by way of a hearing with oral evidence.  In contrast, the court process can be the proverbial sledgehammer to crack the proverbial nut insisting, purely to quote one example, on full blown disclosure to resolve a case purely about the variation of a periodical payments Order.  Even the existence of FDRs, whether as part of the court timetable or arranged privately, which undoubtedly assist and promote settlement, leads often to meaningful negotiations being postponed until the time of the FDR which under the court timetable is inevitably many months after proceedings have been instituted and even longer after the matter gets underway.

The ability to choose who is to either facilitate or make the decision resolving matters is key.  It exists in both mediation and arbitration.  In collaborative law, at least the party chooses their own lawyer although not the lawyer chosen by the other party.  Involvement in the court process gives no such opportunity.  To make matters worse, various judges are likely to be involved at various stages in the court process whereas the same mediator or the same arbitrator will deal with each stage of their respective processes, which must be to the benefit of the parties.

Finally, the lack of resources within the court system to deliver an efficient system of adjudication despite the best efforts of those working in the system such as judges contrasts sharply with well resourced mediators, collaborative lawyers or arbitrators who do not suffer in this way and are, therefore, able to offer a more effective service.  

Delay
It is rare that both parties start in the same place emotionally when a relationship breaks down.  Rather than a mutual decision, one party is usually further down the road of deciding there has been a breakdown and seeking to move on.  Accordingly, delay is not necessarily of itself bad as long as it gives time emotionally for both parties to accept the situation.  However, there will come a time when there is a need to move on for the good of all concerned.  Accordingly, when reviewing the alternative approaches the questions are, do they assist in giving parties the necessary time and do they enable matters to be moved on when required?

Taking the first of these questions, the court process does not give both parties time if one of them chooses to invoke its jurisdiction by filing Form A.  There is the possibility of the other party requesting mediation, for  example, but a spouse determined to press on will generally be able to do so.  In contrast, the other approaches rely to a lesser or greater degree upon the consent of the parties to move matters forward.  This is less so in arbitration where, although the parties need to consent to use the approach, an arbitrator decides on the process if they do not agree.  That potential disadvantage however, turns into an advantage if the need arises to move matters forward.  That can then easily be done in the arbitration process whereas the other non-court based alternatives simply grind to a halt if one party chooses not to progress matters.

Costs
All depends here on the level of agreement between the parties.  Clearly, a fair agreement reached between the parties themselves, endorsed by lawyers and converted into a consent order of the court is by far the cheapest option.  If this does not prove to be possible but the involvement of a mediator facilitates that outcome quickly, that could be more expensive, but not significantly so.

What, however, of the substantial number of cases that do not fall into these categories?  Obviously, contested court proceedings which are not resolved until a final hearing are the most expensive option but relatively rare with proportionately few cases reaching that stage.  Most court proceedings are resolved at or around the time of the FDR, if not earlier.  Compared with the cost of that, collaborative law or arbitration is likely to be more cost effective, even allowing for the fact that in arbitration the arbitrator will need to be paid.  Advantages of a quicker more tailored process than using the court are likely to cancel out the cost of the arbitrator's services. 

As for recovering costs from the other party, those practitioners who mourn the loss of the Calderbank letter in the court process now have the opportunity, by agreement, to utilise it in arbitration.

Outcome
Whether an outcome is considered fair may depend upon who is answering the question.  Each of the available approaches is equally capable of delivering a "fair result" but in weighing up their pros and cons the key points are the likelihood of that being the perception and whether there will be an outcome. The likelihood of both parties perceiving the result as fair mirrors the conclusions under "Autonomy" above.  An agreement reached between the parties themselves, or having used the services of a mediator or by collaborative law is, given the nature of the approach, more likely to be perceived by both parties as fair.   The risk, however, is that there is a failure to reach any outcome at all due to an impasse which even the most experienced mediator or collaborative lawyer may be unable to break.  In the case of collaborative law, this means that the parties need to go off and find new lawyers to resolve matters with resulting delay and, inevitably, further expense.  Only arbitration and the court process ensure there will be an outcome. 

Enforcement
Enforcement is an area where the court comes into its own.  While, for example, a non-discloser of his or her financial position can delay or frustrate attempts to reach agreement between the parties themselves (even with the involvement of a mediator or collaborative lawyer), the court has a full range of powers.  The court has the power to either force disclosure or, if this is still not possible, to draw adverse inferences from that failure to disclose.  While an arbitrator will ultimately also be able to draw adverse inferences too, the powers are more limited and do not include, for example, the ability to make a freezing order to ensure assets are preserved.  Application can still be made to the court and the arbitration put on hold in these circumstances.

Finality
Only the court has the jurisdiction to make a final financial remedy order dismissing claims.  Accordingly, it is only the court that can provide finality which is why on entering into arbitration, the parties must specifically agree to make an application for a consent order in the terms of the award.  If one party subsequently decides that they do not wish to do so then it will be open to the other party to make application to the family court for notice to show cause as to why a consent order should not be made in the same terms.   Each case will, of course, turn on its merits but where the process has been followed properly and the award is in accordance with English law the expectation is that the arbitration award will be upheld by the court.
What of the availability of an appeal?  Although, of course, still available if the court process is used the ability to successfully appeal has been deliberately curtailed over recent years recognising the risk in such a discretionary area of law of appeals being made just because they might lead to a different outcome. Appeals are, therefore, relatively rare and successful ones rarer still and this is the context in which the more limited ability to overturn the award of an arbitrator should be seen. 

Conclusion
There is no doubt that the various approaches that can be taken to resolving financial remedy cases are here to stay.  They have not only received the support of successive Governments but also the judiciary at the highest level. With the introduction of arbitration, the practitioner has been given the final piece of the jigsaw,  breaking an impasse by referring a particular sticking point to arbitration is but one example of using the best pieces that fit the purpose.  There is a pressing need now for all family law practitioners to not only be aware of the various approaches but to use them creatively and flexibly to resolve individual matters.