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Liars and Divorce Lawyers: can an OS/DS hearing help and a possible future for split hearings in financial remedies?

Byron James, barrister, Fourteen considers the utility of OS/DS hearings in the resolution of financial remedies disputes

Byron James, barrister, Fourteen

Family lawyers spend a lot of their lives being paranoid that someone is lying to them, none more so than those who work in financial remedies. There is an inescapable subjectivity in the determination of whether someone is a liar and rarely in life is there an objective truth by which one can fairly and objectively measure the truthfulness of anything: the difference between a truth and a lie can often simply be a matter of perception. Much comes to rely on trust, something easily lost and hard to gain back, in proceedings as in life; trust can be irrationally placed in people, in proceedings as in life, and again is a matter of subjective perception.

Determining someone as having lied, or that someone should not be trusted, comes with a burden of significance; it casts a shadow over them that can lose them the sunshine forever, whether justly or not. Most of the time in proceedings the importance of demonstrating someone to be a liar takes a backseat to achieving a negotiated settlement, the parties will often agree to disagree, or the prima facie demonstration of the case at final hearing proves a sufficient catalyst to overcome any barriers to agreement.

There are cases however where such is the nature of the lying at hand, or the perception that someone is lying, that one simply cannot move past it such as where one party asserts impecuniosity whilst the other asserts them to be a millionaire. In such cases, where the polarisation of the positions provides a gap that is simply too wide to negotiate, a decision has to be made: "is this person a liar?" There will always be people quick to call someone a liar, to irrationally find reasons to lose trust and try and assert that others, such as the Court, should lose trust too; in proceedings, unlike in life, there is a mechanism by which a definitive answer can be given, one party vindicated either way, être en vogue, OS/DS hearings. 

In OS v DS (Oral disclosure: Preliminary hearing) [2004] EWHC 2376 (Fam)  Mr Justice Coleridge approved a settlement which was achieved by 'a procedural route [which] was novel and, dare I say, innovative' [para 1]. He gave judgment as he thought the 'procedure adopted in this case [was] potentially of wider professional interest'.  At the first appointment, 'many of the orders for disclosure were by consent' [para 4] and the Husband indicated that he would 'use his best endeavours' to obtain the information.  Such a stringent promise did not in fact seem to bear out, as by the time of the next hearing, described as a case management hearing, there were 'as far as the wife was concerned, dozens of unanswered questions' [para 5] with a final hearing listed for ten days later in the year. "It was at this stage that the procedure took a novel turn" [para 6]. 

Coleridge J stated that he considered it would be 'highly desirable before making any further decisions about disclosure or production of further documents or joinder of other parties, to have the opportunity of hearing from the husband on oath in relation to a number of the crucial, central and highly contested financial issues, both historical and current' [para 7].  This was considered as likely to 'shorten the whole [process] and dispense with the need for many of the further documents and/or joinder of intended parties'. The "preliminary/oral discovery hearing" was set down for three days and the directions given listing the same are set out at paragraph 9 of the judgment. 

The hearing took place and during the same a negotiated settlement was reached. Coleridge J set out seven points which had emerged as 'advantages to the process':

a. At a far earlier stage than would otherwise be the case explanations and factual issues can be fully tested.

b. The need for production of further documents can be more rigorously considered. Trips down blind alleys can be ruled out or at curtailed.

c. Preliminary indications or even findings can be made.

d. The parties (and particularly the party under scrutiny) are able to appreciate at an early stage what they face in terms of examination both orally and in terms of the production of further documents and the involvement of other parties.

e. Advisers are in a far better position to make accurate assessments of outcome and so negotiations are more likely to be fruitful.

f. No time overall is wasted as the final hearing, where these issues would normally be explored, is almost certain to be shortened.

g. The Court is able to immerse itself in the detail at an earlier stage and give more focussed directions and, in the right case, indications.

Coleridge J pointed out that this would not be appropriate in all cases and the right to a fair hearing must be ensured, but in such a case where it was needed for everyone 'to lay their cards on the table' this would be a proportionate way to overcome the perceived dishonesty of a party being a barrier to settlement.

Where one is dealing with the polarisation of asserted positions, between the fabulously wealthy and the terribly poor, one cannot pass over Young v Young [2013] EWHC 3637 (Fam) in which earlier in the proceedings Mostyn J had conducted an OS/DS hearing over the course of 4 days. The procedural issues of the Young case are well known with the case described by Moor J as being 'beset by difficulties' [para 83]. The case saw 'long periods of time [elapsing] with little happening followed by intense periods of litigation activity'.  The OS/DS hearing before Mostyn J had involved 'extensive evidence' undermined somewhat by 'all those witnesses' having to give evidence again before Moor J at the final hearing.

Moor J had 'considerable reservations about the [OS/DS hearing] procedure' [para 84)]. He found it hard to follow the transcripts and had to have the 'important evidence repeated before [him]' (ibid). He '[came] to the conclusion that the OS/DS hearing [has] not assisted the progress of this case whilst taking up considerable court time at, no doubt, significant expense' (ibid).  It was held as necessary, where one was looking to utilise the 'important role' of taking oral evidence before a final hearing, to ensure that the same was not 'an unfocussed, wide ranging trawl through the evidence without findings of fact being made at the conclusion of the hearing.' Whilst not wanting to be too prescriptive, Moor J set out two courses of action where it would be a 'proper use of court resources': firstly where there is a preliminary issue, such as a post nuptial settlement or disputed trust, and second where one seeks very specific evidence from a witness about the source or explanation of a document, perhaps in accordance with Part 21 Inspection Orders. 

An OS/DS hearing was recently undertaken in US v SR [2014] EWHC 175 (Fam) J Roberts QC (sitting as a Deputy High Court Judge) stated [para 33]: 

'Because there is common agreement that it will not be possible to move forward with decisions as to distribution until findings of fact have been made as to computation, I need say no more at this stage about the powers available to me under sections 23 and 24 of the Matrimonial Causes Act 1973, nor the factors set out in section 25 which will guide the exercise of my discretion.  Absent agreement between the parties, that will be an exercise for another day.'

The judge described how counsel for both parties 'produced lengthy schedules of the findings which they seek in terms of computation issues' [paragraph 250]. This having hallmarks of Re L hearings as they were formerly conducted prior to the May 2010 Practice Direction, whereby one seeks findings of fact on allegations of parental misconduct in a schedule before one can move onto the welfare stage; herein, one seeks findings of fact, referred to by one side as 'marital misconduct', prior to conducting the section 25 'distribution' exercise. 

Extensive findings of fact were made, but some important, and detailed, issues remained for determination [see paragraph 251]. These issues pertained to non-disclosure on both sides and their determination could arguably have an overall effect on a final hearing judge's view of the parties, the assets and how they should be distributed. One can see similarities here between the position Moor J found himself in following the OS/DS hearing of Mostyn J and the future final hearing  judge in US v SR following on from the OS/DS hearing before J Roberts QC. If, in US v SR, the matter is not to be heard before the same judge, will they be able to follow the lengthy transcripts of evidence and judgment sufficiently to enable them not to require evidence on the same issues from the same witnesses? Can a different trial judge realistically manage issues of veracity being partially bound by the decisions made in the judgment already given but with issues of fact and veracity still outstanding?

The concept of Res Judicata was referred to by Moor J as being potentially preventative to a re-hearing of issues ("where it leads to specific findings of fact that become res judicata so that the issues need not be revisited at the final hearing" – [para 85(a)] However, there is an important difference between action and issue estoppel, whereby the former provides an absolute bar and the latter does not, which might render this point more complex (see Coke-Wallis, R (on the application of) v Institute of Chartered Accountants in England and Wales [2011] UKSC 1 per Lord Clarke JSC at para 26). Clearly, where an OS/DS hearing has been conducted and findings of fact made, it is only issue estoppel which potentially prevents a re-run of those issues, rather than action estoppel, meaning that there is no absolute bar on the re-running of those factual issues. If, for example, in US v SR, a different final hearing judge came to the case, took a different impression of the parties on the remaining factual issues, which called into question the facts and judgment already given, they might find it appropriate to overcome issue estoppel and revisit the decisions already made. This especially if the findings already made ran contrary to what was in their judgment a fair outcome in the case. 

It seems therefore that the practice whereby different judges conduct such 'split hearings' is one of the potentially problematic barriers to their successful operation. If the same judge were ensured to undertake both limbs of the split hearing, then much of the practical and technical issues which they seem to cause could be overcome. Alternatively, different judges could perform the different hearings, but only where issues of fact are finally determined and capable of being considered separately to the section 25 distribution exercise. Where issues of conduct exist, this is especially hard to envisage.

This would provide some scope for a wider application of OS/DS hearings and a consequential widening of the preliminary issues the Court could be asked to determine. The difference between OS v DS and Young was that in the latter the parties were so entrenched that more was needed than to resolve the issues between them than just a judgment pertaining to veracity or a preliminary judgment on the content of the asset schedule. The parties were so opposed that a final decision on all issues between the parties was required from the Court; little was capable of agreement between them. OS v DS settled, and was a settlement directly referable to the preliminary discovery hearing in the view of Coleridge J.

There are often factual issues between the parties which, at varying stages of the proceedings, can prevent settlement. Sometimes these can be resolved by jointly obtained valuations, but this is hard when the dispute pertains to the existence of the asset or the valuation is disputed. These factual issues can provide an enduring barrier to the matter settling and further, in such a case, it might be that all other issues fall into place once that factual issue is resolved. These issues can exist without there being allegations of conduct and their resolution not require determination of any other matters, they are capable of consideration in isolation.

Where there is such a point in issue, and the matter does not settle, why should the parties be required to provide oral and written evidence on every issue and have the Court impose an outcome on them, when they would, absent the factual issue(s) between them, be capable of reaching agreement (which they may already have done on a without prejudice basis) on the content of the asset schedule and its distribution. Whilst Moor J clearly is correct that wide-ranging enquires without final and proper findings of fact should not be attempted, there does appear good reason for practitioners to invite the Court to adopt a split hearing approach where there are narrow issues of fact preventing settlement.  Having resolved a valuation or other asset dispute (it could range from the existence and value of an asset to the earning capacity of a party), the Court could then list an FDR or final hearing, for decision on the distribution of the assets, thus avoiding the costs of a full final hearing and retaining the parties' autonomy of how their assets should be disposed.