The Financial Remedies Court: The Road Ahead

Published: 06/07/2022 07:02

It is a great honour to be invited to contribute to issue 2 of the Financial Remedies Journal, which is an outstanding addition to the financial remedies landscape. As my illustrious predecessor, Mostyn J, remarked in the inaugural issue,1 there has long been a ‘gross and obvious gap’ in the market for a journal dedicated to this important area of law. That gap is now filled.

The journal has not disappointed. Articles in the first issue on company valuations,2 Galbraith Tables3 (which will surely be carefully studied by the At A Glance committee), deferred compensation,4 alternative dispute resolution (ADR)5 and much more besides, have whetted the appetite. It deserves to become an essential read for all financial remedies practitioners and judges. Its companion website contains a wealth of invaluable resources and will, I suspect, now appear in the Favourites Bar of us all. I congratulate HHJ Hess and his editorial team on a stellar achievement.

Among many informative articles, I particularly enjoyed reading the chronological narrative of the origins of the Financial Remedies Court (FRC) by Sir James Munby,6 who was President when the idea was first mooted by Edward Hess and Jo Miles in a prescient article in Family Law in 2016.7 Despite hiccups along the way, by 2018 a pilot scheme was in place, and in February 2021 the FRC was formally initiated nationwide by Sir James’s successor as President, Sir Andrew McFarlane. By the normal standards of our legal system, this was an astonishingly swift process. In such a short space of time it has become an integral part of the family justice system with a clear structure, 18 zones and some 900 judges (full and part time). For that, enormous credit must go to many who have worked tirelessly to bring the project to fruition where it now enjoys full status as part of the Family Court. It would be remiss of me not to record my unstinting admiration for Mostyn J for his leadership of the FRC through its gestation, birth and beyond, as well as his astonishing contribution to the landscape of financial remedies over the decade. Others deserve honourable mentions as well; in particular, HHJ Hess who has been a tireless Deputy National Lead Judge, and the past and current Presidents whose support for the project has been rock solid.

The need for a cadre of specialist financial remedies judges working in a specialist court has, in my view, never been clearer. Further, the devolved regional structure with zonal leaders is an indispensable part of the FRC, allowing local leadership, local judges and local court users to develop relationships, practices and guidance which suit local needs. Of course, nationwide guidance must be, and is, given from time to time, but I strongly support the ability of local zones and courts to operate proactively in developing their own, bespoke practices.

The FRC is barely a year and a half old, yet already well established. I am determined that we should continue to strive to make it an outstanding part of the family justice system in its own right, taking the lead where we can on practice and procedure. The aim must always be to combine fairness and efficiency. I firmly believe that financial remedies law is not, or should not be, as complex as sometimes it is made out to be. Dare I suggest that the law, centred on familiar principles of sharing and (most commonly) needs, within the overarching section 25 matrix, is reasonably settled. The vast majority of cases, dealt with by specialist judges, can be dispatched relatively swiftly.

I encourage all judges to exercise robust case management, and all practitioners to assist the court in that regard. The Statement on the Efficient Conduct of Financial Remedy Hearings proceeding in the Financial Remedies Court below High Court Judge Level, rolled out on 11 January 2022 and to be seen in conjunction with FPR PD 27A and the President’s Memorandum: Witness Statements, dated 10 November 2021, is there for a purpose. It contains essential requirements as to length of narrative statements (which must relate evidence, not rhetoric or argument) and skeleton arguments (all to be done in 12 pt font with 1.5 line spacing), a composite asset schedule template, a composite case summary, trial templates for the final hearing and more besides. The bundle limit at 350 pages should be scrupulously complied with, absent a court order to the contrary. The aim is to ensure that practitioners (and litigants in person, who are not exempt) present a case in a proportionate way, concentrating on the relevant facts and issues which the court must decide. Or, as Mostyn J recently put it in Xanthopoulos v Rakshina [2022] EWFC 30, non-compliance is a form of ‘forensic cheating’ and should not be tolerated. I hope to see a developing culture of robust case management in the FRC, and compliance by practitioners. It should not be too much to expect that the following words of Cohen J in AG v VD [2021] EWFC 9, [144] will not need to be repeated by any judge: ‘I stated at the start of this judgment this case has been conducted as if the rules for efficient conduct have never been devised’.

It has sometimes seemed to me that many cases could be fairly disposed of with no oral evidence. After all, most financial dispute resolutions (FDRs) proceed upon the court being presented with the essential facts and figures in a bundle and written skeleton arguments, supplemented by oral submissions. The majority of FDRs (court or private) result in agreement. It is arguable that a perfectly fair outcome would be achieved at a final hearing with a similar approach, devoid of oral evidence. I suspect that many parties would willingly embrace such a process if it meant less delay and cost: most people would be willing to live with a figure, imposed on them, provided always that it is within a reasonable range of outcomes. Sir James Munby said something similar in his final View from the President’s Chambers8 before retirement; his perceptive remarks bear re-reading.

Of course, that is not the system we use, and I do not suggest that we abandon the traditional trial process. Oral evidence is, and will remain, a bedrock of the right to a fair hearing. But the point is that rigorous case management, and an emphasis on efficient conduct, will enhance, not diminish, the fair decision-making process. It will allow the judge to focus on the wood and not the trees, and reduce the length of hearings, delay and costs.

There is continuing impetus towards out of court resolution, which I welcome. The government is currently conducting a review of ADR in all areas of law, including family law. Financial remedies law and procedure have in some respects blazed a trail. The FDR was introduced on a trial basis as long ago as 1996, and implemented nationally in 2000. A fully established arbitration scheme is in place, and may receive further take-up after the Court of Appeal decision in Haley v Haley [2020] EWCA Civ 1369. Mediated agreements are a familiar route to settlement. Private FDRs have become increasingly common in certain parts of the country, particularly in London and the south-east where stretched judicial resources, pressure on court time and consequential listing delays all combine to encourage parties to opt out of the court FDR system. The vast majority of financial remedies cases are resolved by agreement before the final hearing. I encourage all court users and judges to encourage out of court settlement processes and, where appropriate, adjourn the court proceedings accordingly. I hope, and fully expect, that ADR processes will grow in popularity, and become part of the landscape around the country. May I commend the Financial Remedies Journal for creating the first Directory of Private FDR judges.9 The popularity of private FDRs has increased dramatically. They are (in my view, rightly) seen as a very valuable tool in reaching settlement, but there has hitherto not been a comprehensive directory of those who put themselves forward as private FDR judges. This is a long overdue initiative and will, I hope, allow wider access to a broad range of specialists across the country, at different levels of seniority and experience, charging competitive and varying fees.

While each practitioner and judge will have their own preference, I believe that electronic bundles are here to stay, and paper bundles will become increasingly rare. E-bundles are, in my experience, quicker to navigate and easier to access. The days of witnesses being asked to go from hard copy Bundle C, p.323aa to Bundle G, p.27 are, I hope, the exception rather than the norm. However, I am acutely conscious that the Digital Contested Cases System, also known as the financial remedies portal, is, to put it politely, unpopular. I have met many users of it who are uniformly critical. Solicitors who upload documents, and judges who access documents, experience intense frustration at a system which is clunky, at times inadequate and not always accessible. HM Courts & Tribunals Service, which is responsible for delivering the portal, has acknowledged that much work needs to be done. I regard this as a priority for the FRC and its users, and there is much work going on behind the scenes to improve the portal as rapidly as possible. All judges to whom I have spoken are enthusiastic about the possibilities of digital systems, but are understandably frustrated by the slow rate of progress. The teething problems will, I hope, not deflect the FRC from embracing digital processes which will undoubtedly be rolled out throughout the court system in time.

Legal costs continue to shame financial remedies law. In M v M [2020] EWFC 41, the parties ended up with £5,000 each having spent £600,000 on costs. In Crowther v Crowther & Ors [2021] EWFC 88, where the costs were some £2.3m against net assets of barely £700,000, I described the litigation as ‘nihilistic’. In Xanthopoulos v Rakshina [2022] EWFC 30, Mostyn J described the costs as ‘apocalyptic’. There are many similar examples. The exasperation of judges is matched by an apparent inability of the family justice system to bring about change. In 2006, Calderbank offers were done away with and since then the starting point in financial remedies cases has been no order as to costs. There have been some advantages to the current costs regime, including allowing the court to survey the whole financial landscape, but there is no evidence that costs have reduced as a result, or that there is a greater incidence of early settlement. My personal recollection of Calderbanks at the Bar is that they incentivised parties to settle cases for fear of a costs order otherwise being made against them, and lawyers advised accordingly. I fear that the incentivisation has disappeared. The problem with the no order as to costs starting point is that parties and their lawyers are willing to contest cases on the basis that they have little to lose. The introduction of FPR 9.27A, which should be seen in conjunction with FPR PD 28A, para 4.4, makes plain that parties must negotiate openly. As Mostyn J said in OG v AG [2020] EWFC 52, [31]: ‘if, once the financial landscape is clear, you do not openly negotiate reasonably, then you will likely suffer a penalty in costs’. Unless it becomes apparent that these words are heeded, and parties routinely negotiate reasonably on an open basis, it may well be that a modified form of Calderbank should be considered for re-introduction.

The vexed question of transparency in the family justice system is being considered by the President’s Transparency Implementation Group, which in turn includes an FRC sub-group headed by HHJ Stuart Farquhar. There are strong views on both sides of the debate. At one end of the debate, in Xanthopoulos v Rakshina [2022] EWFC 30, my predecessor challenges the whole basis upon which cases are conducted privately, and judgments anonymised; the judgment is essential reading, whatever one’s point of view. On the other hand, there are those who argue that family proceedings are quintessentially private, there is no great call for change in the reporting of financial remedy cases, there would be a heightened risk of abusive or coercive behaviour should one party be fearful of publicity, and the logistics for hard pressed judges would be onerous. The debate will no doubt be vigorous. The balance of Articles 8 and 10 of the European Convention for the Protection of Human Rights and Fundamental Freedoms is a delicate one, but I welcome the opportunity to achieve clarity on this difficult issue.

Also under review, but this time by the government, is the proposal made by the Farquhar group last year (endorsed by the FRC leadership and the President) for a pilot scheme to evaluate a new fast track of cases where the assets (excluding pensions) are below £250,000. Having sat on the group myself, I am a firm supporter of this proposal. The current procedure is, in my view, unwieldy for cases where the assets are modest, usually consisting of a property subject to mortgage and some additional indebtedness. The fast track would significantly reduce the time required to reach final hearing. I hope that the Ministry of Justice, when it completes its review later this year, will see the transformative possibilities of such a scheme, and give its blessing to the pilot.

Other items on the agenda include a proposed new enforcement procedure pilot scheme; the roll out of the new Form D81 and an ongoing project (currently tangled in technological weeds) to find a way to harvest and analyse the information; a review of the ticketing process and training for the FRC judges; training requirements; and, I hope, more judgments on BAILII (or its successor, the National Archives) from judges below High Court level, to build up a corpus of case law relevant to the more modest financial remedies cases.

While there are a number of ongoing projects, I am acutely conscious of the demands placed on hard pressed judges, including regular missives from regional and national leadership across multiple civil and family jurisdictions. Judges are expected to absorb and implement a great deal of guidance, practice and procedures almost as if by magic. In the spring 2022 issue of Family Affairs,10 Jarndyced’s column reflected on ‘an overwhelming period of change’ and demanded ‘Stop!’. I think Jarndyced goes too far; we should not be enemies of change when such change is designed to improve the system of justice. But I am keen for the FRC to bed in, and for judges and practitioners to become accustomed to the multiple recent promulgations. The FRC leadership will have much to engage with, but I intend, as a last word in this article on my hopes for the road ahead, that the demands on judges for the foreseeable future will be kept to a manageable level.

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