Benefits of using Private FDRs and Arbitration for clients, an interview.

Robert Williams asks Tom Carter, a specialist Family Law Barrister and Arbitrator at 1 Hare Court, about some of the benefits of using Private FDRs and Arbitration for clients

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Robert

Tom, if I were your sister/brother how would you persuade me to use private financial dispute resolution hearings and/or arbitration – given the apparent significant extra cost – over the court.

Tom

Well, assuming that this is a conversation about finances, hopefully, I would be able to begin by reassuring my fictional sister/brother that, whatever dispute resolution route adopted, they were going to be more or less OK because they’d followed my original advice and had a suitable pre-nuptial agreement in place. And if they hadn’t followed my advice, I’d probably then invest some time in castigating them about that!

Your question refers to the apparent extra costs of private FDRs and arbitration, so I will focus on that. The only additional cost here, over and above what would be incurred anyway by staying in the court arena, is the fee charged by the tribunal (i.e. the private FDR ‘judge’, or arbitrator). All the other fees incurred in the process, for solicitors, barristers, expert witnesses, and so on, are still, on the face of it, going to be incurred. So of course my brother/sister might reasonably ask: “Why pay more, for a service I can get for free by staying in the court system?”. I think my answer to that would be unpacked as follows:

Firstly, what are we actually talking about in terms of “additional” costs for the tribunal? A few years ago, whenever one mooted the idea of a private FDR or an arbitration for a particular case, the same (short) list of names would crop up, time and time again. The market was dominated by a handful of retired senior judges, QCs and senior barristers. That has now undoubtedly changed. The pool of family lawyers who actually sit, regularly, as arbitrators and private FDR tribunals has deepened massively, with more solicitors and experienced ‘junior’ barristers making themselves available. That expansion of the tribunal “market” has not only brought about some healthy diversity, it has also introduced more competition generally. That competition is reflected in the level of fees being charged. The net result is that there is now a wider spectrum of tribunal options so that it is far easier to identify and agree upon a candidate with the right balance of experience and expertise (and charges!) to match the circumstances of each individual case.

Looked at another way, the vast majority of financial cases turn on the messy and difficult question of how to stretch finite family resources across two new households, rather than the arcane Grand High Principles of Matrimonial Finance. Ultimately, not many cases are truly going to warrant the full “clout” of a retired High Court judge or a QC. For most cases (including, incidentally, my brother’s/sister’s!) it will be entirely possible to identify a list of “safe pairs of hands” within a level of costs that is not disproportionate to the resources and issues involved.

Secondly, the idea that the court system is “free” is illusory. You may not pay for the judge’s salary (except that you do, through your taxes!) but you almost certainly will end up paying more in fees by staying in the court system. I think there are two key reasons for this:

  • The private FDR really does seem to “work” as a model of neutral evaluation that facilitates early settlement of financial cases. If clients feel that their case has been absorbed, understood and fairly evaluated, they are far more likely to have confidence in, and “buy into”, the tribunal’s indication. In my view, the most powerful factor in the private FDR model is that it gives the evaluator time: time to prepare, time to read, time to listen, time to ask questions and, ultimately, time to think. That time is incredibly valuable. A district judge in the family court will have a long list of various cases, sometimes multiple FDRs, and however diligent and experienced, they simply will not have the capacity to devote to any one FDR the time it truly deserves. The prospects of getting to a settlement at the FDR stage are, in my view and experience, hugely improved by facilitating the extra time for proper evaluation. Settling a case will stop the legal taxi meter.
  • It’s no secret that the family court infrastructure is buckling under the weight of cases. Depressingly, I am no longer surprised to see the time lag between issuing an application in Form A and the FDR stage as being more than 12 months. Admittedly, something will have “gone wrong” in such cases, such as an expert’s report not being ready, a hearing being cancelled for lack of a judge and so on – but the point is that with the current level of overload in the system, it only takes one minor wrinkle to bring about a considerable and unwelcome delay. The longer a case goes on, inevitably costs will increase as disclosure and valuations turn stale and need to be updated.

Thirdly, for those cases where the private FDR model has not yielded a settlement, I would say that arbitration is still probably more likely to lead to a lower overall incidence of costs. Again, I’d press two main reasons on my brother/sister.

  • Firstly, once an arbitration hearing is booked, barring illness or death of the arbitrator, you can be more or less guaranteed it will take place on the date scheduled. This is in complete contrast to the court system, where very regularly final hearings get “bumped” out of the court list and adjourned for several months due to a lack of judicial availability. All too often this happens at the very last moment (by which I mean the afternoon before the hearing). Advocates’ brief fees get wasted, disclosure becomes out of date, trial bundles need updating and all this means the legal costs continue to build. Arbitration effectively “locks in” a hearing date, which in my view is incredibly valuable.
  • Secondly, arbitration has an essential “agility” which is just not matched by the court system. Unexpected case-management issues bubble up all the time in many cases, whether disputes about disclosure, the remit of an expert’s report, or the general timetable. Sometimes these satellite disputes cause real paralysis in the management and progress of the case, and the overall timetable is put in doubt. In the court system, getting these ancillary disputes ironed out quickly and efficiently is a major headache, with delay so endemic that usually the argument is out of date by the time it finally reaches a judge’s desk. With arbitration, these case-management issues can very speedily be referred off to the designated arbitrator, who can deal with them expeditiously. This avoids the risk of “litigation log-jam” which, in my experience, is a major culprit for causing unnecessary legal costs.

So, I would try and persuade my brother/sister that the actual cost-benefit analysis of the private FDR / arbitration route comes down heavily in favour of staying out of court. If I didn’t persuade him/her, I would diarise another chat with him shortly after his/her First Appointment, as in my experience there is no more powerful recruiting-Sergeant for Alternative Dispute Resolution than a trip to the local family court!

Robert

Tom, your fictional sibling is very fortunate to have the benefit of your focused and pragmatic guidance and advice! I agree the trip to court can focus the mind (although the impact has undoubtedly been lost as video hearings do not – in my view – have the same impact and occasion as when the tension starts to build from the moment the party gets dressed for court, travelling to court, going through security, booking in, meeting their lawyers, being called in to see the judge and so on).

There are a few issues that I would like to pick up on if I may.

Choice – I entirely agree that the options are now significantly wider to ensure the tribunal is one that works for the parties based on availability, cost, location and gender.

I still think there is a good deal of nervousness in trying someone or something “new” in some parts of the profession. I still hear and read that nervousness about arbitration.  Ultimately, the client will be guided by their lawyer’s advice. The irony is that, historically, lawyers have not given a second thought to using the court and it puzzled me why arbitration was resisted to the extent I have experienced.  Before the advent of the financial remedy ticketed judge, there was every chance a trial may have been before a Deputy District Judge whose work in the field of family law may have been extremely limited. How many times have we all been at FDRs when there is a real sense that the tribunal has not been prepared sufficiently or had the requisite knowledge or experience to express a view? Alternatively, how many times has an adverse view been diluted by a comment about the tribunal’s financial remedy experience?

Cost – again I entirely agree that the arguments in relation to costs – and I mean this even if it goes to trial – are, in my firm’s experience, lower. Your point about the legal taxi meter is a good analogy. As you say, as well as the updating disclosure there is the “white noise” of correspondence on issues that rarely end up troubling the court, but reflect the fact that the focus can often be on the peripheral and unimportant issues rather than the “big ticket” items.

With this in mind, I have a view that the present system is embedded with inefficiencies. For example, whether you have £100 to your name or £100m you still fill in the same form and, broadly, there is still the same process. If parties, in suitable cases, had the case triaged at an early stage then the focus can be on what the issues are, what evidence needs to be obtained to address those issues and the process which will result in an outcome within agreed timescales. I do accept that there are cases that would not be suitable and occasions when parties will want to go on a “go slow”, but if the system also had some form of sanction where a party was not co-operating then there would be processes that could be created to make the system more streamlined and efficient. The Surrey Initiative is an example of where practitioners are trying to find ways to improve outcomes for clients.

Tom

I completely agree. I think The Surrey Initiative is a really promising way of getting genuine hard focus on the costs-benefit analysis of ADR at an early stage of proceedings. To anyone unfamiliar with the principles, I’d urge them to have a rummage around the excellent website. Sorry, I didn’t mean to interrupt you…

Robert    

I recently judged a two-day trial where something like £85,000 had been spent. The equity in the matrimonial home and money from an inheritance probably came to around £650,000. One party was concerned about the inheritance being taken into account. Given the age of the parties and the matrimonial resources, it was a case which always was going to be driven by need. Had that view been expressed independently at a very early stage then the parties may have been able to find an outcome which would have meant there was significantly more in the pot to either meet their respective needs or to ensure that the inheritance did not need to be invaded to the extent it did. Of course, with the loss of a relative, the loss of “their money”, and the emotion of the separation itself, I absolutely accept the challenge that is then created in terms of making informed decisions.  That’s why we place such great emphasis on clients managing their emotional journey. Indeed, we are going as far as to embed a full-time family consultant/counsellor in our team from October.

Tom

Well, I have to say the inclusion of a counsellor in your team is a very interesting development. I think that all too often, as practitioners, we become so inured to the hard edges of family breakdown we fail to invest the time and effort to deliver advice in a way that recognises and reflects the acute emotional discomfit of our clients. Selling your home, terminating financial dependence, returning to employment after a long career break: these are all fairly seismic life events. I think that the private FDR model is especially useful in that it facilitates the time for the tribunal to demonstrate they have actually understood the full range of challenges faced by the clients.

Robert

I want to say something about agility – the beauty of the arbitral process is that you can create something bespoke for the clients.  By way of an example, I dealt with in arbitration at the end of last September where the events which had caused the significant reduction in one of the parties’ incomes was triggered from the beginning of August. Proactive steps by both sides meant the relevant information was shared quickly, they produced the evidence they needed and within two working days of the hearing they had a draft arbitration award. It was focused, quick and significant costs were saved.

Your point about case management decisions is also an extremely valid one. Anyone with experience of the Family Court will know how long it would take to list and have heard a part 25 application e.g. the appointment of an expert. In the arbitral process that can be dealt with within a few days.

Time is money and the focus can then be getting on with the gathering of the requisite evidence and focusing on the issues rather than risking the infection of the process by the challenges the parties may be facing and the white noise which can follow. I tend to remind myself that when parties have very often had difficulties communicating and agreeing things during the relationship and which may have been a factor in their separation, it’s hardly surprising that they find compromise easy after they separate.

I think we also need to think carefully about our role as family lawyers. We are often at the blunt end, particularly counsel. Why not flip what we do to get some headline indications at an early stage and then see how that might promote a more focused settlement. We will all regularly see positions where there is an unrealistic attempt to remain in a property which will inevitably be sold or where one party refuses to acknowledge the need to pay maintenance when actually the conversation should be about how much and for how long rather than whether or not there is any liability. Personally, I think we as lawyers have a responsibility to clients to address these issues rather than shrugging our shoulders and thinking they want the points argued so we will just argue them. I respect the fact that many people may disagree with that analysis, but if we are truly helping our clients – and acting in their best interests – then I think we have a responsibility to avoid them spending tens of thousands of pounds to be told something at the end of a case which is as plain as a pikestaff at the start.  But more particularly, recognising the experienced lawyer will have made the risks clear, of having a process which will ensure that the person who takes that bad point faces consequences if they continue to pursue it.  Often the independent indication comes far too late in the process.  Clients tend to be invested in the “fight” by then.

The busted flush – this is my rather inelegant expression for the Family Court at the moment. That is not to say that those working within the Family Court are not working incredibly hard and under immense pressure. Sitting one day a week as a Deputy District Judge I can see how hard everyone within the system works and in particular, the pressures experienced by full-timers. As much as I may enjoy certain aspects of the work, the hours spent drafting orders in the evenings and at weekends brings into sharp focus the pressures now brought upon the court by the increasing number of litigants in person. I cannot see it changing anytime soon.

Time to think  – your point about time is also absolutely valid. As diligently and focused as my preparation is on the morning of an FDR list when I am sitting, I will be looking at the file for the first time that morning. It will be one of a number of files. There may be competing schedules (in different formats) to consider, notes/updating paperwork which have been shared overnight, bundles to access and read and so forth.

The preparation for the private FDR is so much more focused and allows your tribunal to have considered the papers and, they are likely to have done so in a way which allows them to percolate the issues in their unconscious and conscious preparation. Having the time during the day to give the parties and their lawyers the full beam of the tribunal’s attention is of significant benefit in trying to achieve an agreed outcome. For example, the benefit of having a note of the tribunal’s views on the various issues is incredibly helpful and avoids a situation where interpretations may differ slightly but nevertheless significantly on key points. It also becomes harder to criticise the make-up of the tribunal when you have been part of the appointment process!  If you settle, the fee you pay will pale insignificance compared to the costs of going to trial. It never ceases to amaze me how much work ends up being done in the last two weeks of a trial and I think it is often an underestimation to think costs simply double between FDR and trial.

Even where agreement has not been reached at a private FDR you can divert into the arbitral process if agreed or you may have used the private FDR as part of the arbitral process in any event.

I think we should be using the early neutral evaluation and arbitration more extensively in the DR process.  For example, why does mediation have to end if there is an impasse on one or two issues?  Get an independent view or refer that issue off to arbitration and once resolved, get back to talking things through.

May I also mention a huge advantage of arbitration is where there may be only one or two unresolved issues, for example, it might be quantum on maintenance, term, the timing of the sale of the house, the division of a pension share and so forth. Why adopt the traditional method of “unless there is an agreement in respect of all issues cases must go to trial” when this creates stress, cost and uncertainty?   It seems entirely logical to me that where most of the heavy lifting is being done why you would not want one or two discrete issues to be dealt with rather than ending up making very few concessions and heading for trial. Leaving aside the costs, the impact this has on families and children is significant.

Tom, I didn’t need convincing but your analysis and views have been extremely helpful.

Tom Carter is a specialist Family Law Barrister and Arbitrator at 1 Hare Court

Robert Williams is the Managing Director at Family Law Partners and is an Arbitrator, Collaborative Lawyer and sits as a Deputy District Judge.

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