What Is the True Extent of FDR Privilege?

Published: 19/02/2024 16:04

In L v O (Stay of Order; Hadkinson Order; Security for Costs) [2024] EWFC 6 (26 January 2024) Cobb J considered whether a judge hearing a Barder (or Thwaite) application can/should be made aware of what took place at the FDR appointment where the original order was agreed and where this may be relevant to ‘foreseeability’:

‘[58] There has been some discussion about whether I should see any part of the transcript of the FDR appointment on 4 October 2021, or (at the very least) a note of the indication given by Moor J at that appointment. Some of the transcript of the appointment (and/or the indication) has regrettably already found its way into an experts’ report, and indeed into the husband’s witness statement. The wife, too, makes reference (albeit only in general terms) to what the husband and Moor J said at the FDR. I recognise that the FDR is a confidential process, and there is bound to be some sensitivity around what was said by and/or on behalf of the parties; it may well be that admissions were made in the FDR in a genuine attempt to reach a settlement. This is all the more delicate as the husband was unrepresented throughout the earlier process. I am conscious of the terms of para. 6.2 of PD 9A FPR 2010:
“As a consequence of Re D (Minors) (Conciliation: Disclosure of Information) [1993] Fam 231, evidence of anything said or of any admission made in the course of an FDR appointment will not be admissible in evidence, except at the trial of a person for an offence committed at the appointment or in the very exceptional circumstances indicated in Re D.”
[59] I note that in the husband’s Form E filed in 2020, he made a number of references to matters which may in fact be relevant to the Barder event, and their impact on assets. It seems to me that the parties and/or the Judge may well have picked up these points and developed discussions in this vein at the FDR. If comments were made in this regard at the FDR, then this may well be relevant to the Barder application. In short, I feel I should have some understanding of the factual basis on which the final order was agreed, and whether risks to assets were then in contemplation and if so to what extent. I have asked the parties to consider this more fully, and in default of agreement, have proposed that they refer the issue back to Moor J. In forming all of these views, I have borne very much in mind the judgment of Thorpe LJ in Myerson v Myerson [2009] 1 FLR 826.’

These are interesting observations. In an early judgment in what has become known as the ‘Level’ case, LS v PS and Q Company (a Litigation Lender) [2021] EWHC 3508 (Fam)1 Roberts J refused an application made by the wife’s litigation loan funder (who had intervened in the financial remedy proceedings) for disclosure of material and information for use in its application to set aside a consent order it alleged was deliberately structured to leave the wife with no means to repay her litigation loan of almost £1 million and hence (it was said) the agreement (and subsequent order) were vitiated by fraud. The funder (Q/Level) sought to admit (i) the parties’ without prejudice offers made before the private FDR; and (ii) material generated for the private FDR, including counsel’s notes, asset schedules and a report of negotiations into the set aside application. As Roberts J observed in the course of her judgment:

‘[28] The Financial Dispute Resolution appointment or hearing now forms an essential stage of all financial remedy proceedings. It was mandated as such by a Practice Direction introduced by Dame Elizabeth Butler-Sloss as the (then) President of the Family Division in 2000: see [2000] 3 All ER 379. That Practice Direction described such hearings or appointments as “meetings held for the purposes of discussion and negotiation”. They were intended as a means of “reducing the tension which inevitably arises in matrimonial and family disputes and facilitating settlement of those disputes”. Para 3.2 contains this direction:
“In order for the FDR appointment to be effective, parties must approach the occasion openly and without reserve. Non-disclosure of the content of such meetings is accordingly vital and is an essential prerequisite for fruitful discussion directed to the settlement of the dispute between the parties. The FDR appointment is an important part of the settlement process. As a consequence of Re D (Minors) (Conciliation: Disclosure of Information) [1993] 2 All ER 693, [1993] Fam 231, evidence of anything said or of any admission made in the course of an FDR appointment will not be admissible in evidence, except at the trial of a person for an offence committed at the appointment or in the very exceptional circumstances indicated in Re D.”
[29] That paragraph of the 2000 Practice Direction is now reflected in PD 9A para 6.2 of the Family Procedure Rules 2010. Its effect was considered by Sir James Munby in V v W [2020] EWFC 84. That case concerned a separate civil claim brought against a respondent husband (H) in financial remedy proceedings by a single joint expert who had prepared a company valuation report which was to be used in connection with those proceedings. An issue arose as to whether or not H should be permitted to rely on documents generated for the purposes of, or in connection with, the FDR hearing. The basis of his disclosure application in the Family Court was that H required the documents he sought to have disclosed in order properly to defend the civil proceedings and for the purposes of amending his defence and counterclaim. He had identified eight separate classes of documents, six of which related to the FDR hearing. They were these:-
(i) each party’s written submissions and asset schedules prepared for the FDR hearing (some 44 pages in all);
(ii) the transcript of the submissions made by each counsel at the FDR hearing (60 pages);
(iii) the transcript of the “indication” given by the FDR judge (4 pages);
(iv) copies of his counsel’s notes of the FDR hearing (54 pages);
(v) copies of his counsel’s notes of the FDR judge’s oral indication (5 pages); and
(vi) copies of notes by his legal representatives of the without prejudice discussions which took place after the FDR concluded (24 pages) and copies of the correspondence following the FDR which led to the consent order which both parties eventually signed and submitted to the court for approval (65 pages).
[30] Sir James Munby read all the privileged material for the purposes of his decision but considered himself bound by para 6.2 of PD 9A which he concluded was intended to operate as “an absolute bar” to any attempt by H to make use of anything said or done at the FDR in support of his defence and counterclaim in the civil proceedings …’2

Later at [65] Roberts J referred to the policy considerations:

‘which inform the privileged nature of the FDR hearing as an essential stage of the financial remedy process. If divorcing parties are to settle the financial issues flowing from the breakdown of their marriage at minimum cost (both emotional and financial), it is essential that they can conduct those negotiations with input from their lawyers under the protective veil of privileged discussions which they know will not then be exposed to the full glare of judicial scrutiny at a later stage if those negotiations break down.’

At [80] and [83] Roberts J stated that privilege was clearly engaged notwithstanding that this was a private FDR arranged by the parties outside the context of a court-listed FDR appointment. Thereafter she stated:

‘[86] … The importance of the policy underpinning para 6.2 of PD 9A needs no further elaboration over and above the issues which I have already highlighted in this judgment. The entire system of FDR-resolution would cease to run as efficiently as it does if negotiations and discussions, often taking place over several days in a complex case, were at risk of being opened up to wider scrutiny as teams of lawyers picked over which aspects of those discussions and/or the written material generated for the FDR might be admissible for purposes unconnected with those negotiations.’

The court then concluded that there was already a wealth of material open to the court (including the specific terms of settlement reached) which was either a matter of record or available as part of the evidence which has already been collected for the purposes of disclosure in the financial remedy proceedings that would allow Q/Level to seek to make out its case in relation to its set aside application:

‘[88] At the end of the day, … I have concluded that the court in March next year will have ample evidence available to it in the absence of the privileged material to form a view as to whether or not this order should be set aside. In the circumstances, I am not prepared to grant the application for the disclosure of the privileged material which Q seeks to adduce for the purposes of the forthcoming set aside application.’

Thereafter Roberts J concluded with a “footnote” as follows:

‘I take the view that, given the importance of litigation funding to the system, the Family Procedure Rules Committee may well wish to consider in due course whether the potential issues raised by this case require some reconsideration of the ‘absolute bar’ which Sir James Munby identified in his interpretation of para 6.2 of PD 9A. It is an interpretation with which I respectfully agree for the reasons set out in this judgment, although I hope that the different underlying factual matrix of this case (and, no doubt, others) might provide a basis for revisiting when, and in what circumstances, that bar might be lifted where a case can be established for justifying the introduction into proceedings of material covered by the FDR privilege.’

It is understood that Q/Level’s application for permission to appeal to the Court of Appeal was refused.

There have been few other published cases that relate to FDR Appointments. In Shokrollah-Babee v Shokrollah-Babee [2019] EWHC 2135 (Fam), mid-way through a two-day hearing dealing with cross-applications for enforcement and variation of a final financial remedy order, the husband stated from the witness box that he remembered the judge (Holman J) from the FDR Appointment, two years before. This was news not only to Holman J, who confirmed that he had no recollection of the case, but also the husband’s advisers, who had not acted for him in the FDR, in a case where (curiously) the trial bundle did not contain an order from the FDR because one was not drawn up.

Following this revelation, both parties invited Holman J to continue the hearing. Counsel for the husband relied on dicta from the only previous authority on point, the Court of Appeal decision in Myerson v Myerson [2009] 1 FLR 826, to the effect that, although the issue had not arisen for determination, it had been regarded as arguable that parties could invite the court to waive the prohibition against an FDR judge having further involvement in a case (see Lawrence Collins LJ at [35] and Goldring LJ at [61]).

Holman J declined this invitation. In a judgment that focused on FPR 9.17(2) he held at [17] that the purpose and policy of that rule must extend not only as far as the final hearing of a substantive application, but also to subsequent issues including the working out of an order, or enforcement of an order, and, indeed, variation as it was:

‘obvious that if a judge who has heard privileged matters or privileged concessions at an FDR appointment cannot hear the subsequent substantive application for a financial remedy, he cannot hear either some application, for instance with regard to enforcement, that follows on.’

Holman J referred to the lead judgment of Thorpe LJ in Myerson who stated as follows:

‘[26] … The underlying policy of the sub-rule is clear. Litigants distrustful of each other and made anxious by the complex tactics of contested litigation must be confident that conciliation within the court proceedings guarantees them the same confidentiality that they would enjoy had the dispute been referred by the judge to mediation by a mediation professional. So the intention and the meaning of the sub-rule are clear. The judge who has been armed to conciliate by the provision of all the privileged communications can only do one of three things that is to say set up a further FDR appointment, make a consent order or make an order for further directions, practically speaking directions for trial.
[28] However, where the contract presented to the judge at the conclusion of the FDR is incomplete in the sense that there are subsidiary or peripheral issues to be agreed, or determined by the court in default of agreement, it is otherwise. Where, as here, the parties did not reach agreement as to the nature and extent of the security, the dispute must be listed before another judge. So too must issues of enforcement be listed before another judge. Equally subsequent applications to vary or set aside the consent order achieved at the FDR appointment must be listed before another judge.’

This led Holman J to conclude:

‘[25] … So it seems to me that the binding effect of Myerson is that a judge, or the judge, who conducted an FDR at an earlier stage of financial remedy proceedings is completely debarred or precluded from hearing applications as to enforcement or variation, even after a substantive financial order has been made. As I have said, it seems to me that that must also necessarily follow from the underlying policy of the FDR procedure, because if privileged matters might even theoretically impact upon a judge hearing the substantive case, they may impact no less upon him hearing enforcement or variation proceedings later.’

Holman J then considered whether r 9.17(2) admitted of any exception or permitted waiver by the agreement of both or all parties to the proceedings. He concluded as follows:

‘[35] … it does, with respect, seem to me that if the requirement of the rule can later be waived, that might seriously undermine the “guarantee” to which Thorpe LJ had earlier referred in paragraph 26 of his judgment in Myerson, and also the very clear explanation that is required to be given to parties by their legal advisors under paragraph (10)(iv) of the Best Practice Guidance.3 It seems to me that if there is any room for waiver, that requires to be written into the rule itself or, at the very least, made clear in advance to parties as a result either of clear judicial decision or, possibly, some amendment of the guidance. But, as it seems to me at the moment, any subsequent waiver at all would run totally contrary to the absolute prohibition that the rule currently provides, as all judges and, I believe, practitioners have regarded it for at least the last ten years.’

And at [37]:

‘I have … given very careful and anxious consideration to whether … I might hold that the requirement of the rule can be waived by the parties. Whilst in some circumstances at some future date it may be open to the Court of Appeal to develop the jurisprudence in that way, it currently seems to me that it is not open to me to do so … As I have said, it seems to me that the policy as described by Thorpe LJ in paragraph 26 and his very clear statements in the last two sentences of paragraph 28 simply preclude waiver.’

Given the reference to ‘confidentiality’ by Thorpe LJ in Myerson at [26], to ‘privileged matters or privileged concessions’ by Holman J in Shokrollah-Babee at [17], that per Sir James Munby in V v W PD 9A para 6.2 was ‘an absolute bar’ to any attempt by the husband to make use of anything said or done at the FDR, and the refence to the ‘protective veil of privileged discussions’ by Roberts J in LS v PS and Q Company, the legal basis for Moor J prospectively acceding to Cobb J’s request in L v O is unclear.

It might well be the case that (as Cobb J states) in the FDR in L v O the parties and/or the judge may have picked up points made in the husband’s Form E and developed discussions that may be relevant to the Barder application and hence why Cobb J felt he should have some understanding of the factual basis on which the final order was agreed, and whether risks to assets were then in contemplation and if so to what extent. However, in LS v PS and Q Roberts J emphasised at [81] that:

‘notwithstanding my reading of the without prejudice material which has been put before the court, I have no knowledge of what, if any, observations were made by the FDR judge during the private hearing about the agreement or the position of the wife’s litigation lender. For obvious reasons I do not, and cannot, speculate about these matters.’

Further can it not be said that the disclosure sought by Q/Level also had relevance to its application to set aside the consent order? For as Roberts J observed at [86]:

‘I accept that Q’s path to that conclusion [i.e. its claim pursuant to section 423 of the Insolvency Act 1986 is made out] might well be facilitated in part by the release into those proceedings of the privileged material which I have read.’

It will be interesting to see where this case (and the wider debate) goes next.

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