Graeme Smith considers how financial dispute resolution could apply to chancery cases
As many solicitors know, there is a substantial area of ‘crossover’ between family and chancery litigation. In particular, claims for financial provision under the Inheritance (Provision for Family and Dependants) Act 1975 may be brought in either the family or chancery divisions, and disputes between cohabitees as to the beneficial interests in a property should often be transferred to a chancery county court pursuant to the practice note issued by Mr Justice Lloyd and Mr Justice Hart in 2004.
However, despite this crossover, the procedural codes governing civil and family litigation – the Civil Procedure Rules (CPR) and the Family Procedure Rules (FPR) respectively – are very different. It is therefore interesting to see a proposal that the Chancery Division adopts a procedure which is currently limited to family proceedings.
The recommendation appeared in chapter 14 of Chancery Modernisation Review: Final Report by Lord Justice Briggs, published in December 2013. Lord Justice Briggs recommended that the financial dispute resolution (FDR) procedure, which he described as ‘a valuable technique’ that has been ‘enthusiastically supported by consultees’, should continue in the regional trial centres and be formally introduced in London. This arises from the informal development of the FDR procedure by district judges who sit in the regional trial centres and who deal also with family proceedings, from where they have ‘borrowed’ and ‘cross-applied’ it to appropriate chancery cases.
For the benefit of chancery practitioners unfamiliar with the FDR, there follows a thumbnail sketch together with some questions about how it can apply to chancery cases.
What is a FDR appointment?
FPR 9.17 provides that ‘the FDR appointment must be treated as a meeting held for the purpose of discussion and negotiation’ at which the parties ‘must use their best endeavours to reach agreement on matters in issue between them’. To assist in achieving this, the judge conducting the appointment can have no further involvement with the case if it progresses beyond the FDR. This concept of a judicially led without prejudice meeting is fundamentally different to the interlocutory hearings to which civil practitioners are accustomed, and is more like a cross between a mediation and early neutral evaluation by a judge. It fits in well with the court’s duty to encourage the parties to use an appropriate alternative dispute resolution procedure and to facilitate this (CPR 1.4(2)(e)).
Who attends the FDR?
Unlike civil proceedings, the parties personally attend all hearings in family proceedings and so are required to attend the FDR (see Mann v Mann  EWHC 537 (Fam) – it would be ‘a serious contempt of court were a party recalcitrantly to refuse to do so’). This is essential if discussion and negotiation are going to take place. FPR PD9A also provides that the legal representatives who attend should have full knowledge of the case (paragraph 6.5).
When does the FDR take place?
On issue of an application under the FPR for a financial remedy, a first appointment (FA) is listed. Before the FA, financial statements and other documents must be filed and served. At the FA, the court will define the issues and give directions, and in most cases will fix the FDR (FPR 9.12, 14 and 15). Therefore at the FDR the issues should be clear and the parties should have exchanged sufficient information to ensure that they can form an accurate view of those issues. Of course the practice in civil proceedings is different and Lord Justice Briggs asks whether there could be a single hearing, particularly where modest amounts are at stake.
The key issue will be to ensure that the parties (and the court) have sufficient information available to negotiate meaningfully, while avoiding incurring costs at a level which will inhibit settlement. To this end, Lord Justice Briggs suggests a voluntary protocol whereby parties can follow standard form directions for exchange of information and position statements (paragraph 14.19). This will undoubtedly require a change of approach by both the court and the parties, which will need to be worked out in practice. In addition, the court will need to decide how costs management will be carried out in such cases. If the FDR is the first hearing, at what stage will the court consider the parties’ costs budgets?
How does the FDR work?
The FPR do not deal with the format of the FDR, and this varies from court to court. Typically, the parties are ordered to attend an hour before the FDR is listed to commence, to enable them to begin negotiating. Most courts block-list FDRs, and the district judge will see parties as and when the parties are ready. Some cases settle without any input from the judge, while in others the advocates make very limited submissions about the matters in issue, and the judge then expresses a personal view as to the likely outcome of the case if settlement is not reached (this is one of the reasons why the judge cannot have any further involvement in the case). The parties will then leave court to continue negotiations in light of the view given by the judge. They may return to seek the judge’s view on a distinct issue. In cases which settle, a consent order or heads of agreement are drawn up and signed. In cases which do not settle, the judge gives directions for a final hearing and records any issues which have been agreed between the parties. There is no reason why this format cannot be applied in chancery cases, although careful consideration will need to be given to listing arrangements.
Why does the FDR work?
A significant proportion of cases settle at, or shortly after, the FDR. It is impossible to identify the precise reasons for this, but the combination of the nature of the FDR and the incentives to settle must account for the high settlement rate. The FDR is held on a without prejudice basis, and neither anything said nor any admission made is admissible in evidence (FPR PD9A, paragraph 6.2). All documents filed are returned at the end of an FDR which does not result in a settlement. The judge who presides cannot be involved further in the case. The parties therefore have all the benefits of their ‘day in court’.
Judges will stress to parties the incentives for settlement: it stops costs increasing (the solicitors must file up-to-date details of costs, so the judge will have precise information available); it produces immediate finality and removes the ongoing stress of litigation and the greater stress of being cross-examined at a trial; and it removes the unpredictability inherent in litigation. This latter point is one to note. The nature of a financial remedy case does not enable a party to expect a ‘black and white’ answer. The same is true in some chancery cases (for example a
claim under the Inheritance Act). However, many chancery cases will receive a ‘black and white’ answer – did the deceased have capacity to make the will? Is there a valid right of way? It is perhaps for this reason that Lord Justice Briggs insists that the process should be voluntary in chancery cases.
District Judge Graeme Smith sits at Manchester Civil Justice Centre. He is a contributor to Civil Court Service (Jordans)