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24 FEB 2016

Choosing a process for financial arrangements in divorce proceedings: what are the options and why do they work?

In January I wrote about practical tips for parties facing separation after the Christmas and New Year holidays, and my article in February suggested books that parents could read with children to help them cope with the impact of that January decision to separate. In March, what might those same people be doing?

They will be starting to think about financial decisions they need to take, and one of the first things a solicitor will discuss with them is how they want to approach sorting out financial arrangements in their divorce proceedings. This might come as a surprise to the uninitiated client. People are aware of the headline-grabbing cases in which judges sitting in the High Court decide often enormous financial settlements, as in the case of Laura Ashley boss Dr Khoo Kay Peng for example. However, quite often people embarking on divorce, fresh from the painful decision to separate, are surprised to find that obtaining a divorce and resolving a financial agreement are two almost entirely separate things.

The divorce ends the marriage and gives the court the ability to make orders recording the financial decisions made for the family's future. This is, in fact, a relatively straightforward process, and more often than not people will spend the majority of their time and energy on working out what the financial arrangements are going to be. The client must come to terms with these two separate processes, and thereafter choose which way they want to approach resolving the financial side of the process.

Court proceedings

Most people rule out going to court from the outset, and why wouldn't they? The disadvantages heavily outweigh the advantages. It is an expensive and lengthy process, and whilst it is a system designed to encourage negotiation, it is adversarial in nature. It is sometimes too blunt an instrument when fine-tuning a nuanced settlement which is balanced to meet the parties' needs and those of their children.

This is not to say that it does not have its place, where one party is not providing comprehensive information about their finances, or not engaging in the process, the sanctions and timetables of the court process can be used to good effect. However, very few clients walk away from the process feeling good about their experience.

Therefore, the decision to rule out court proceedings is often an easy one. But how else should people try to resolve matters?

Mediation

Mediation, increasingly encouraged by the government, is an appealing option because it is both cost-effective and efficient in enabling the two parties is to work together in order to craft a solution that works for their family. The two parties work with a trained mediator who will facilitate the necessary discussions and exchanges of information. The parties can employ some creativity about the arrangements that they want to put in place; the sense of ownership that this provides means that the decisions taken are workable and long-lasting.

However, this process is not right for everyone, and the increasing emphasis on mediation often makes people feel that they have no alternative but to pursue it. Good planning, a careful choice of mediator and sensibly planned legal advice throughout the process can go a long way to alleviating anxiety. However, clients should not be allowed to forget that this is their future, and if they are not comfortable with mediation (either at the outset or at a later stage) they are not compelled to do anything more than explore and receive information about it, as this is a voluntary process.

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Collaborative law

Collaborative law has proved more popular in some areas of the country than in others. It is not clear why it has not been adopted more widely. Perhaps it is difficult to 'sell' a procedure that's title is not instinctively comprehensible to an already distressed and confused client, or perhaps it is the commitment not to proceed with the same lawyers if it does not work, when the connection between a client and their family solicitor is so important.

However, research has shown that divorcing couples who choose to use 'collaborative law' to work out their financial arrangements are generally satisfied with the process and would recommend it to others. Both parties are required, with their specialist trained lawyers, to enter into a participation agreement that commits them to the process and prevents them from continuing to seek advice from the same lawyers if the collaborative model breaks down and court proceedings are required.

Arbitration

The new kid on the block is family law arbitration. In place since 2012, it has been rapidly increasing in popularity. The process can be tailor-made to avoid delay and expense, providing both parties sign an agreement to arbitrate and a properly qualified family law arbitrator is appointed. Arbitration proceedings can be flexible; either mimicking full-blown court proceedings; adopting a 'pick and mix' approach to the process; or even just an evaluation on paper of a single issue. Family lawyers generally feel that arbitration will increasingly have a vital role to play, particularly in light of the ongoing funding cuts to the courts and the systematic problems that these are causing, and will continue to cause.

Alternatives

What if a formal named process is not the right one? Negotiations led by solicitors still have a key role to play. While this can be long-winded and has no formal sanctions in place if one party does not co-operate, it allows clients to be more 'hands off', and sometimes that formality is required to ensure that people feel their position has been protected.

The form of the negotiations can be dictated by the parties' requirements. For a couple with limited assets and a full working knowledge of each other's finances, the negotiations might be straightforward and achieved through an exchange of correspondence and phone calls. For others, a formal financial disclosure process might be warranted, with round table meetings (perhaps involving barristers on each side), or an early neutral evaluation from an experienced family law practitioner.

So where do most people end up? Increasingly, the answer is 'in mediation', preferably with supportive legal advice throughout the process, or with solicitors acting on both sides and talking to each other directly to try to negotiate a settlement.

But don't forget: the clients can talk to each other. If it can be done, there is often no better starting place for all of these processes than a discussion around the kitchen table to give both parties an equal starting point to work from.

Register now for Family Law Update 2016 – our annual nationwide seminar series is the essential one-stop shop for all family law practitioners providing the latest on financial remedies, public and private children law, all things procedural, plus a range of need-to-know hot topics.

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