Private FDR’s (Financial Dispute Resolution)
When seeking to resolve financial matters on divorce, if it is necessary to engage in court proceedings, there are usually three main hearings. These are the first appointment, the financial dispute resolution hearing (FDR hearing) and the final hearing. At the first appointment the Court will usually consider what the main issues are and what further information is required. Directions are then made, which often include both parties replying to ‘Questionnaires’ provided by the other party and the instruction of any experts, such as for obtaining property valuations or preparing a pension report. The matter is then listed for an FDR hearing to take place once this information has been received.
The purpose of an FDR hearing is to enable parties to engage in constructive discussions/negotiations with the aim of reaching a settlement. FDR hearings usually involve parties spending most of the day negotiating. There is a judge available on the day who will provide ‘indications’ as to how they would expect the case or particular issues in the case to be resolved if it went to a final hearing. The purpose is to guide the parties as to what they could expect at a final hearing with a view to enabling them to settle matters beforehand. All discussions at an FDR hearing are ‘without prejudice’ which means that such discussions and any offers cannot be referred to or placed before the judge at a final hearing. The Judge who deals with the matter at the FDR is also prevented from sitting at the final hearing. The purpose is to enable parties to be open with one another, to make concessions and to put forward generous offers without feeling like they may compromise their position if the matter goes to a final hearing.
If parties are unable to settle matters by agreement at an FDR hearing then the Court will usually make directions for any further information required, including detailed statements from both parties setting out their case. The matter will then be listed for a final hearing at which both parties will give evidence and the Court will decide how the finances should be divided.
As can be seen, the FDR hearing is therefore a very important hearing. It is the opportunity for both parties to focus on negotiations with one another via their representatives with a Judge being available to offer guidance as to how the matter is likely to be dealt with at a final hearing. It is often the best opportunity to try to resolve financial matters by agreement and cases do often settle at this stage. Taking into account the considerable legal costs that are involved in proceeding to a final hearing, together with the loss of control as regards to the outcome, it is very much in both parties’ interests to have an effective FDR hearing in order to try to achieve a settlement.
Unfortunately, in recent years, due to increasing numbers of cases and limited Court resources, solicitors have increasingly encountered problems with FDR hearings. This has been exacerbated by the impact of Covid-19, which has led to an increasing backlog of cases. As a result, it is increasingly common for there to be a considerable delay before an FDR hearing is listed, sometimes six months or more. There have also been increasing instances of either (a) the FDR hearing having to be adjourned at late notice for several more months due to lack of Court time , or (b) the FDR hearing proceeding but with the Judge (i) not having had sufficient time to review the bundle and become familiar with the issues, or (ii) not having sufficient Court time to properly hear from the parties and offer useful guidance and indications to assist the parties with a settlement.
When FDR hearings are cancelled at short notice, both parties have usually already incurred considerable time and expense preparing for the hearing and instructing Counsel to represent them, which they will not get back. Furthermore, when an FDR hearing does proceed but the Court has insufficient time to deal with the matter properly, an opportunity to settle the matter is sometimes lost.
As a result of the above, it is becoming increasingly common for parties to consider arranging their own ‘private FDR hearings’ (also known as Early Neutral Evaluation) instead of the Court-based FDR hearings. This is something that is not only permitted by the Courts, but is being actively encouraged. Private FDR hearings effectively involve the parties paying for an ‘evaluator’, who is a financial remedy expert, to take the role of the Judge for the purpose of the private FDR. The evaluator is usually an experienced barrister or a retired judge, who will consider the papers and provide guidance/indications relating to the case in a similar manner to at a Court-based FDR hearing.
There are a number of advantages that can be gained by conducting a private FDR which include:
- The parties being able to choose who the ‘evaluator’ should be, hopefully ensuring that they have the trust and confidence of the parties and their representatives.
- Being able to arrange the hearing quickly, as opposed to having to face a long delay.
- Hearings can be dealt with in whichever manner the parties agree, whether that be in person, by telephone or video conference.
- Parties can choose where the private FDR hearing takes place with the evaluator travelling to a venue convenient to them if preferred. This can help ensure that the hearing takes place in a more relaxed environment and feels less adversarial.
- Parties can agree between themselves what preparations should be made for the hearing, and the format that the hearing should take.
- The evaluator will not have a number of cases to deal with on the day like a Judge would. They can therefore ensure that they are fully prepared, familiar with the case and available to give guidance/indications as and when the parties request it.
- The parties can decide whether the focus of the FDR be on the case generally or specific issues that are in dispute.
- As a private FDR is voluntary and the costs of the evaluator are generally shared between the parties, it is arguable that the parties feel more invested in and committed to the process thereby increasing the chance of a settlement.
Whilst there are a number of advantages, there are also some disadvantages of a private FDR compared to a Court-based FDR. These may include:
- The fact that the parties have to pay for the evaluator’s time. Costs do depend on the seniority of the evaluator and complexity of the case, but are typically around £2,000-£5,000 + VAT for a 1-day FDR hearing including preparation. These costs are usually shared between the parties.
- If a private FDR is unsuccessful, the parties are likely to need an additional case management hearing in which to report back to the Court and seek appropriate directions towards a final hearing.
- If a party is not really interested in settling and wishes to delay matters, it may be easier for them to do so when there are no strict court deadlines.
Private FDR’s were perhaps previously viewed as something that would only be considered in high asset cases, not least because of the additional cost of instructing the evaluator. However, given the increasing difficulties being encountered in Court proceedings and the additional costs that this can cause both parties, private FDR’s are now being considered in far more cases.
We are here to help
If you are engaged in court proceedings or anticipate being so engaged and would like further information about private FDR’s, or if you require general advice and assistance, please contact Craig Yeung-Williams Solicitor in our Family & Divorce team or call 01273 766915.