A Guide to Financial Remedy Proceedings

1.What Are Financial Remedy Proceedings?

The term “Financial remedy proceedings” describes a type of court process relating to divorcing couples’ assets and finances. This area of law is also known as “matrimonial finance” or “finances on divorce”. Financial remedies proceedings are a category of divorce proceedings because a financial remedies application can only be made within divorce proceedings.

When two people get married, the law creates a series of legal relationships between them. For example, they both effectively acquire an interest in the family home, irrespective of which of them legally owns the property. Similarly, a low earning spouse may become financially dependent on a high earning spouse in a way that creates an obligation on the high earner to pay the low earner money even after separation. Financial remedies proceedings are about disentangling these financial relationships in a way that is fair and just according to the law.

Two fundamental themes run through financial remedies proceedings: first, computation, i.e., the value of the parties’ financial assets and income. Secondly, distribution, i.e., the court’s view of how the assets and income should be divided. These are summarised below.

2. Computation: Who has what?

As stated above, the court will try to establish the value of parties’ assets and income. To help achieve this, the Family Procedure Rules Part 9 contains rules which require parties to disclose documents at the outset of the proceedings, on a form known as “Form E”. This is a lengthy form in which a party must give detailed information about their financial circumstances, including: their assets, liabilities, income and financial needs.

The Form E must be verified by a Statement of Truth. This is a  declaration at the end of a document such as a form or a witness statement, in which the author states that the information contained in the document is true to the best of their knowledge. The Form E must also be accompanied by any document either required in the form itself or “necessary to explain or clarify any of the information contained in” the form (see Rule 9.14). The purpose of Form E is thus to provide the Court with full details of a party’s financial affairs so that an informed decision on distribution of assets can be made.

If you are completing a Form E yourself, then you must try to do so accurately. If you don’t, then errors in the Form could be held against you by the court in later stages of the proceedings.

3. Distribution: How Does the Court Decide?

The main legislation governing financial remedies proceedings is the Matrimonial Causes Act 1973. This is an old piece of legislation but somehow it has withstood the test of time and is still in operation.

Section 25 of the 1973 Act sets out the factors to be considered by the Family Court when making a financial order.

Accordingly, the court will have regard to all the circumstances of the case, including:

• the welfare of any (minor) child as a paramount consideration
• the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future
• the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
• the standard of living enjoyed by the family before the breakdown of the marriage
• the age of each party to the marriage and the duration of the marriage
• the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family
• the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it
• The list above is not exhaustive (i.e. it does not contain everything that the court may take into account) and generally the court may apportion such weight to any particular consideration as it deems appropriate. However, in cases where there are no minor children involved, family law barristers often make legal arguments to the court based on three general principles namely: sharing, need and compensation.

For a more detailed consideration of the sharing, need and compensation principles, see our article: What does the family court take into account when making a Financial Order?

4. Types of Financial Remedy Orders

Once the court has (i) computed the assets and (ii) decided what a fair distribution of those assets is as a matter of principle, then it must decide how to give practical effect to its decision. In order to do this, the court has available to it, a range of orders as set out below:

• Lump Sum Orders – this means one-time cash payments (sometimes the payment are split into several payments). For example, the court might order that “the wife shall pay the husband a lump sum of £50,000”.
  
• Maintenance (Periodical Payments) – this means ongoing payments. For example, the court might order that “the husband shall pay the wife maintenance at the rate of £2,000 per month for a period of 5 years”. The purpose of maintenance orders is to enable the receiving spouse to make a transition to financial independence based on the standard of living during the marriage.  However, as the court stated in the well-known case of SS v NS (spousal maintenance) [2014] EWHC 4183 (Fam), “[a]s time passes how the parties lived in the marriage becomes increasingly irrelevant. And too much emphasis on it imperils the prospects of eventual independence”. In short, the court will order maintenance for the minimum period needed to achieve financial independence. The events that trigger the end of the maintenance order are usually: the expiry of the term set by the court; the receiving party’s remarriage; or, the death of either party.
  
• Secured Maintenance – this is where maintenance payments are secured on assets.
  
• Orders for Sale – this is where the court orders that a property be sold.
  
• Property Adjustment Orders – this is where the court orders that the rights in a property (often referred to as the “legal and beneficial ownership”) will be transferred from one spouse to another. For example, the court might order that “the husband shall transfer all his legal and equitable interest in [insert name of property] to the wife”. For a property adjustment order to be effective, the party to whom the property is transferred must be able to “step into the shoes” of any person who has a mortgage on the property. This is formally referred to in terms of “procuring the other party’s release from the mortgage”. If the lending bank does not consent to the existing owner being released from the mortgage, then the parties will reach an impasse and the matter will need to return to court. In such cases, the court will consider exercising a default power of sale. Thus, the bottom line is that if parties cannot transfer assets between themselves then the court has the power to order the sale of the assets.
  
• Pension Sharing/Attachment Orders – this is where parties’ pensions are divided between them in a way that  allows for a fair distribution of the pension benefits that they have accumulated during the marriage. The purpose of such an order is to ensure that both parties have adequate financial security in retirement. The court usually considers pension sharing orders separately from orders relating to other assets, i.e., the court does not “mix and match” pensions with non-pension assets such as houses. It is therefore highly unlikely that a judge would say something along the lines of “well the wife can have the entire house and the husband can have the entire pension”.
  
• Clean Break Orders – this is an order that all financial ties and claims between the divorcing parties are to end so that neither spouse may make claims of a financial nature against the other in the future. Wherever possible, the court will try to achieve a clean break; in fact, there is a specific legal principle that the court should try to do this. This makes sense, after all, the entire point of divorce is that the parties wish to go their separate ways. In practice, the clean break principle meets resistance when one party asks for maintenance (periodical payments).

5. The Financial Remedy Procedure: What happens in court?

• There are three stages in financial remedies proceedings:

• The FDA (“First Directions Appointment”) hearing, also known as the “First Hearing”

• The FDR (“Financial Dispute Resolution”) hearing

• The final hearing

The FDA

• The objective of the FDA in financial remedy proceedings is set out at Rule 9.15(1) of the Family Procedure Rules. The main purpose of the hearing is to define the issues in dispute. FDAs therefore, tend to be dominated by procedural issues, i.e., discussion about what steps will be taken next in the case. The court will usually give directions about issues such as: the valuation of properties; the instruction of joint experts for the purposes of such valuation; and any deficiencies in disclosure by either party.

The FDR

• After the First Appointment, the Court will ordinarily list an FDR.

• The FDR is technically a meeting held for the purpose of negotiation. As the FDR entails negotiation, it is covered by the principle of FDR “privilege”. Under the principle of FDR privilege, discussions between the parties and the court at the FDR are effectively “without prejudice” and cannot therefore be referred to in future hearings if the case does not settle. Similarly, the judge hearing the FDR must have no further involvement with the case.

• Parties attending the FDR must use their best endeavours to reach agreement on matters in dispute between them and must negotiate with each other reasonably. For an example of what the court regards to be negotiating unreasonably, see our article: OG v AG: a reminder to negotiate reasonably in financial remedy proceedings.

• If the case settles at the FDR, then the Court may make a Consent Order (this is an order based on consent between the parties, as opposed to adjudication by a the court, but nonetheless formally approved by the court). If the court does not make a Consent Order, then it must give directions for the future course of the proceedings, including for further evidence to be submitted, and for a Final Hearing date to be fixed.

The Final Hearing

• As the name suggests, this is the hearing at which the court will make its final decision.

• The format of the hearing itself is similar to that in other legal proceedings. The hearing will normally start with the judge discussing the case generally with the representatives, i.e., the family law barristers.

• Following the initial discussion, the applicant will be invited to adopt their witness statement. For the next part of the hearing, the person adopting the statement will be a witness. Once adopted, the witness statement is deemed to be evidence and does not need to be repeated orally. Supplementary questions may however be asked by the family law barrister. This process is known as “Examination-in-chief“.

• At the conclusion of examination-in-chief, the opposing barrister will question the witness. The purpose of this questioning is to undermine the witness’ evidence by pointing out weaknesses and inconsistencies, as well as advancing the opposing barrister’s own client’s case. This process is known as “Cross-examination”.

• After cross-examination, the family law barrister may ask the witness questions arising from the opposing barrister’s questioning; this process is known as “re-examination”. Finally, the judge may ask the witness questions.

• The above process of questioning is repeated for the other party.

• Finally, the barristers will make speeches (also known as legal submissions) to the judge, detailing why the distribution of assets should be as proposed by their client.

• Judges often make a decision on the last day of the Final Hearing, however, this is sometimes not possible because of time constraints, in which case the hearing is adjourned to a different date for judgment to be given.

6. Why work with a Specialist Barrister?

• Cost effectiveness (the no.1 reason): Many clients benefit from working with a family law solicitor and instructing a family law barrister only for the court hearing. However, in our experience many clients find that the costs of working with a solicitor quickly pile up because the solicitor will manage (and therefore charge for) every aspect of the case.
• By contrast, as direct access barristers, we usually charge fixed fees for hearings, and hourly rates for flexible “pay as you use” or “bolt-on” work. It is up to the client how much “bolt-on” work they ask us to do. Given this choice, clients often think that they can handle the more basic aspects of the case (such as communicating with the court) themselves, alongside flexible support from a barrister whenever they need it. In this way, working with a direct access barrister can be very cost-effective. Many of our financial remedies clients spend a small fraction of what they would spend with a solicitor.
• Flexibility/accessibility: At Demstone Chambers, our approach is to offer clients practical flexibility. For this reason, we often offer consultations in the evenings and sometimes at the weekend.
• “Personal touch”: working with a direct access barrister is a much more personal experience than working with a solicitor. Solicitors often work in teams, within their firm. By contrast, a direct access agreement is between the client and the barrister directly, which means that all the legal work is done by the barrister. This often results in a much closer working relationship.
• Local knowledge: legal proceedings are in many ways very technical and complicated. Ultimately, however, decisions are made by judges, i.e., by human beings. No two judges approach cases in exactly the same way, and each judge has their own outlook on legal issues. At Demstone Chambers, we have a strong focus on London and areas to the North of London, i.e., Watford, Milton Keynes, Birmingham, Northampton, Coventry, Bedford, etc.  We are therefore familiar with many of the judges in these regions and can use this knowledge to support our clients’ cases.

7. Ready to get help? Contact Demstone Chambers

• Demstone Chambers are direct access barristers specialising in financial remedies. If you are going through divorce and need help with a financial remedies case in the family court, then you can instruct us to help with any or all parts of the process, without the need for a solicitor. We can advise you generally, complete court documentation and – of course – appear in court to represent you.

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