Private FDRs – what are they and are they really worth it?

• Any litigation involving your own family is undoubtedly very stressful. Add to the mix a long drawn out expensive process and the stress factors are compounded even more.
• Financial proceedings arising from divorcing couples are unique. No two cases are the same as the Court retains a wide discretion with the eventual objective of achieving a settlement that is ‘fair’ and ‘just’ in all the circumstances. This means there is no obvious or clear answer in many cases as each case is decided on its own facts. Those who are living in a house subject to dispute between the parties no doubt worry even more they are going to lose their home.
• Since the Covid-19 Pandemic, Courts and the justice system generally are looking at alternative ways in which disputes can be resolved outside of Court. Private FDRs are one of those concepts that have really increased in popularity since the pandemic. Before deciding whether a Private FDR is right for any client, they must have a good understanding of what they are, how they operate, how much they cost and if it is ultimately worth it for them.

What is an FDR?

• In financial proceedings, they are three main hearings; First Directions Appointment (FDA), Financial Dispute Resolution (FDR) and Final Hearing. This article focuses on the second of the three main hearings namely FDR and is often the hearing at which cases come to an end for many parties.
• A typical court FDR is confidential and without prejudice. The Court will have before it an Excel spreadsheet called an ES2 that summarises all the information the parties have provided in their financial disclosure so the Judge can see from one document what the assets are, which assets are joint, individually held and the areas of dispute. By the time the FDR is conducted, more often than not, the Court would have made directions to ensure assets are valued for example and properly disclosed.
• The purpose of a confidential and without prejudice hearing is to allow the parties to negotiate freely and confidently knowing the discussions at the FDR hearing will not be repeated to any subsequent tribunal. Judges too operate on a without prejudice basis and where possible will provide the parties with a steer in the right direction, often called an indication. Whilst not binding, any indication given by a Judge is designed to narrow the dispute between the parties and allow each party time to reflect on the likely approach the Court is going to take if their case was litigated to Final Hearing.

Private FDR

• A private FDR (often referred to as pFDR) is a tool available to parties that are becoming increasingly popular. They are not only available to or viable for celebrities or those with multi-million pounds assets. Indeed, it may be argued those with modest assets are better suited for pFDRs when the costs of ongoing litigation are likely to be disproportionate to the dispute.
• Sir James Munby, the former President of the Family Division, describes pFDRs as;

‘A private FDR is a simple concept. The parties pay for a financial remedy specialist to act as a private FDR judge. That person may be a solicitor, barrister or retired judge. No additional qualification is required. The private FDR takes place at a time convenient to the parties, usually in solicitors’ offices or barristers’ chambers, and a full day is normally set aside to maximise the prospects of settlement. It takes the place of the in-court FDR.’

• The pressure on the Court system is no doubt a factor to consider when deciding whether a pFDR is right for you. It is not uncommon for the typical divorcing couples to wait in excess of 6 months for an in court FDR. Most parties, for obvious reasons, wish to bring the entire ordeal of separating to a close far more expeditiously than that. Expediency is one of many factors to be considered when deciding to embark on a pFDR.

What happens at a pFDR?

• Prior to attending the pFDR, the parties effectively get to choose their Judge. This is unique to pFDRs. The parties can decide which Solicitor, Barrister or retired Judge they wish to assist them. Most professionals who sit as pFDR Judges have CVs readily available to download meaning the parties can easily see their experience and expertise. Once they have been chosen, a date is booked for the pFDR Judge and the parties’ respective legal representatives.
• Preparation is important for a pFDR. Both parties should advance at least one Without Prejudice Offer and the parties should agree the schedule of assets and the areas of dispute in advance to ensure the day of the pFDR is spent negotiating rather than arguing about matters that could have been resolved before hand. It is essential the day is spent negotiating.
• A significant advantage of a pFDR is they take place away from Court. Parties inevitably feel under pressure at Court to make decisions. Conversely, a pFDR often takes place at Barrister’s Chambers or offices.
• The person appointed as the Judge is allocated entirely to your case and your case alone. Unlike the Court FDR process where Judges often have other cases listed, the pFDR Judge is booked to consider only your case. This means in practical terms, the Judge is more readily available to assist the parties throughout the day. There is more time for negotiations, discussions, indications and scope for agreement. More often than not the pFDR Judge has read all of the papers in advance and will often assist the parties by providing their own analysis of matters in dispute, providing their own ES2 for example and sometimes providing a list of matters they consider need to be determined.
• The parties and their legal representatives attend the agreed venue on the day of the pFDR. Unlike the Court process, pFDRs are voluntary. This means those engaging in this process both have a desire to settle their dispute. Such a sentiment is encouraging and increases the chance of an agreement being reached.
• The pFDR Judge assists the parties more or less as and when they require it. It is not uncommon for multiple trips to see the pFDR Judge to take place during the allotted time; another unique factor of pFDRs.
• The indications provided by pFDR Judges are often more detailed and specific than those judges sitting at Court primarily, I suspect, because the pFDR Judge has the luxury of time to really get to grips with the case akin to a Final Hearing Judge. Court FDRs are rarely afforded that luxury.
• It is often better for parties to negotiate away from Court. Most hosts of pFDRs ensure the office space provided is comfortable, well maintained and refreshments are available throughout the day to ensure the parties remain as comfortable as possible. A more relaxed and comfortable environment is more conducive to reaching a settlement.
• The parties will spend as long as necessary negotiating and discussing the indications provided by the Judge with a view to reaching a settlement.

Are there any disadvantages?

• pFDRs have to be funded. The parties will need to fund their own legal fees (which they would need to do for a Court FDR in any event) but significantly they have to share the costs of the pFDR Judge.
• Whilst pFDRs are often dealt with much more quickly; it means legal fees may increase quickly during that period whilst the parties and their legal teams prepare for the pFDR. However, those additional costs need to be considered in the context of the case as a whole and the need, for example, for further updating disclosure and witness statements to be prepared ahead of any Final Hearing in lieu of any agreement being reached.
• As the process is voluntary, the parties are not obligated to agree a settlement. The whole purpose of a pFDR however is to nurture a common desire to settle. It is highly unlikely a party with no intention of settling at all would even consider, let alone fund a pFDR in the first place.
• The pFDR Judge cannot determine issues of fact. This is a potential issue for those who seek to run arguments pertaining to conduct, non-disclosure and adverse inferences. None of these issues can be resolved by the pFDR Judge. The pFDR Judge can give a view as to the extent to which they are likely to be relevant to any decision of the Court if proved, but ultimately cannot determine the veracity of what is alleged. Significantly, nor can a court FDR Judge but any Trial Judge at Final Hearing will be able to do so.

What happens if we can’t reach an agreement?

• If the parties are unable to settle at the pFDR, the parties should jointly notify the Court. The Court must be satisfied a proper and effective FDR has taken place before listing a final hearing. Assuming the Court is satisfied the pFDR was a proper and effective hearing, directions will be made for the case to be listed for a trial.
• Whilst the Court has the power to direct a further Court attended FDR, that is often unlikely. The parties will however need to fund an eventual final hearing.

What happens if we do reach a settlement?

• If the parties are able to resolve matters, a document called Heads of Agreement is often prepared. This document is approved by both parties and sets out the basic terms of the agreement reached.
• Thereafter, the parties’ lawyers negotiate the terms of a draft Order which is then submitted to the Court Judge for their approval. Whilst the Court Judge is entitled in theory at least to refuse parts or all of the Consent Order, more often than not, Orders are approved particularly when they immediately follow a pFDR at which both parties were legally represented.

Summary – are they worth it?

• As a practitioner, I would recommend pFDRs to many clients. They allow disputes to be resolved in a less adversarial way, at a time and place convenient to the parties. For those parties that need to maintain some form of relationship with each other such as those with children, negotiating matters in a less hostile environment than a Court room cannot be underestimated.
• The advantages in most cases will outweigh the disadvantages. There is much to be said for a process that allows the parties to choose their Judge and convene meetings at their convenience. pFDRs are not limited to one. Multiple attempts can be made if necessary which is another unique aspect not available to parties in the Court arena.
• For families going through divorce, time is often a key component. The prospect of being able to resolve their dispute sooner rather than later is often tempting and the cost of instructing a pFDR Judge is unlikely to exceed the amount of fees likely to be accrued over the length of typical financial proceedings.