Negotiate Financial Remedy Without Going to Court

I. Financial Remedy Out of Court

• Avoiding Court: When a couple divorce there will usually be financial matters to be resolved between them, and this could involve contested court proceedings. However, most divorcing couples will want to avoid having to go to court, if possible. Contested court proceedings are stressful, time-consuming and expensive. Thankfully, in many cases matters can be resolved without having to go to court, and this article will explain how.
• What is ‘Financial Remedy’? In this article we will be using the term ‘Financial Remedy’. But what exactly does that mean? Financial Remedy (or ‘Financial Remedies’) is the legal term referring to the process for sorting out finances on divorce, including dividing assets such as property, pensions, and savings and, if appropriate, making maintenance orders.
• Out of Court: It is absolutely possible, and highly recommended, to settle financial arrangements on divorce outside of the courtroom. The key is using the appropriate method to resolve the matter. This article will provide a comprehensive guide to the methods available, and will also look at related issues, such as disclosure, the legal framework, and ensuring that the settlement is final and enforceable.
• 3-Step Procedure: In simple terms, resolving financial remedy matters out of court involves a 3-step procedure, which we will set out below. But first, we need to look briefly at the legal framework used to sort out financial arrangements on divorce.  

II. The Legal Framework: The Guiding Principles

The legal framework used to sort out financial arrangements on divorce is contained in section 25 of the Matrimonial Causes Act 1973, as amended, which sets out the matters to which the court is to have regard when deciding what, if any, financial remedy orders it should make in any given case.

The Welfare of any Minor Child: Section 25 begins by stating that when deciding what orders to make the court should give first consideration to the welfare while a minor of any child of the family who has not attained the age of eighteen. In other words, the interests of the child come first, and their welfare needs must be satisfied, before the court considers the financial claims of the parents.

The Section 25 Factors: Section 25 then goes on to set out a number of matters to which the court should in particular have regard, as follows:

1. 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;
2. The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future, in particular their income and housing needs;
3. The standard of living enjoyed by the family before the breakdown of the marriage;
4. The age of each party to the marriage and the duration of the marriage;
5. Any physical or mental disability of either of the parties to the marriage;
6. 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;
7. 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 (note that the conduct would have to be particularly serious for it to have a bearing upon the settlement, so conduct is actually quite rarely a factor);
8. The value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring, for example one party’s rights under the other party’s pension.

The Objective: Although not stated in section 25, the courts have made it quite clear that the overall objective when sorting out financial arrangements on divorce is to achieve fairness between the parties. Fairness will usually mean that the matrimonial assets should be divided equally, unless there is a good reason why they should not, for example because the needs of one party are greater than the needs of the other.

Clean Break: The law also states that the court should always favour a “clean break” between the parties (i.e. cutting all financial ties between them, including maintenance), if that is possible.

Having looked at the legal framework behind financial remedies, we now move on to Step One of the 3-step procedure to resolve financial remedy matters out of court.

III. STEP 1: Full and Frank Financial Disclosure

• What is Disclosure? Disclosure means each party providing the other with full details of their means, including their income, assets and pensions. The parties must also provide supporting documentation to back up the disclosure and confirm the value of assets, such as bank statements, pension valuations, pay slips, mortgage details, etc.
• Why Disclosure Matters: Disclosure is essential because achieving a fair settlement, whether in court or out of court, is impossible without both parties knowing the full financial picture. Full and frank disclosure is a non-negotiable requirement, no matter what method is used to resolve matters out of court, and without it any settlement reached out of court risks being overturned by a judge later.
• How Disclosure is made: If there are no court proceedings, there is no set procedure that the parties must follow when making disclosure. However, a good practice is to use the procedure that the court would require. This involves each party completing a detailed Financial Statement (known as a ‘Form E’), setting out their full financial details, attaching the relevant documentation to the statement, and sending it to the other party. Thereafter, each party can request any further details or clarification, until they are satisfied that the disclosure is complete.

IV. STEP 2: Methods of Resolving Matters Out of Court

There are a number of different methods of sorting out Financial Remedies on divorce without going to court, these methods (save for simple negotiation) are often referred to as ‘Alternative Dispute Resolution’, or ‘ADR’ for short. The options include:

A. Direct Negotiation and Solicitor Negotiation

• Direct negotiation: The simplest method of all is for couples to negotiate with each other directly and reach an agreed settlement that way. Obviously, this is not always possible, and even if it is the couple should first take legal advice, so that they know what they are doing.
• Solicitor Negotiation: This is the most common route. Each party will instruct their own lawyer, and the lawyers will then put forward proposals on behalf of their clients, in an effort to reach an agreed settlement. This has the benefits of legal expertise and maintaining distance from the dispute, but it can become adversarial, and result in high legal costs, especially if the process is prolonged.
• Separation Agreement: At this point it should be pointed out that some couples may want to sort out financial arrangements by agreement, but may not yet be ready for divorce proceedings. In such cases any agreement reached can be formalised by drawing up a written document, usually refereed to as a ‘Separation Agreement’, setting out the agreed terms. A Separation Agreement is a legal document, and should therefore be prepared by a lawyer.

B. Family Mediation

• What is it? Family Mediation is a voluntary process whereby both parties agree to refer the matter to a trained mediator. The mediator will help the couple try to resolve matters by agreement. Note that the mediator may not provide legal advice, which should be sought separately.
• Advantages: If successful, Family Mediation can be much quicker and cheaper than going to court. It also enables the couple have control over the outcome, rather than having a judge impose their decision upon them.
• More Information: Walker Family Law offer a Family Mediation service. For more information, see this page.

C. Collaborative Family Law

• What is it? Collaborative Family Law is a voluntary process whereby each party instructs a lawyer who is trained specifically in collaborative law. The parties and their lawyers will then work together in an effort to resolve matters by agreement.
• Advantages: Much like Family Mediation, Collaborative Family Law can, if successful, be much quicker and cheaper than going to court, and it enables the couple have control over the outcome.
• More Information: Walker Family Law offer a Collaborative Family Law service. For more information, see this page.

D. Resolution Together

• What is it? Resolution Together is a new service whereby a separating couple jointly instruct a single lawyer, instead of each instructing separate lawyers. The single lawyer will provide advice to both parties, and will help them try to resolve matters by agreement.
• Advantages: Obviously, Resolution Together reduces the possibility of adversarial conflict that can occur when separate lawyers are instructed, thereby reducing stress and increasing the possibility of matters being resolved amicably. And it can also significantly reduce the legal costs that the couple incur.
• More Information: Walker Family Law offer the Resolution Together service. For more information, see this page.

E. Family Arbitration

• What is it? Family Arbitration is quite different from the other methods of ADR mentioned above, and it does not actually involve the parties negotiating the financial settlement. Instead, they agree to refer their case to a trained Arbitrator, who will then decide the matter, in a similar way to a judge. The Arbitrator’s decision is binding upon the parties. Each party will usually have their own lawyer, to advise them throughout the process.
• Advantages: The main advantages of arbitration are that it is usually much quicker and cheaper than going to court. It also offers increased privacy and confidentiality.
• More Information: Walker Family Law offer the Family Arbitration service. For more information, see this page.

V. STEP 3: Putting the Settlement into a Court Order

The last step in the process of sorting out financial remedy matters out of court involves putting the settlement, whether agreed or decided by an Arbitrator, into a court order, usually referred to as a ‘Consent Order’.

• What is a Consent Order? A Consent Order is a legally binding court order, setting out the terms of the financial settlement.
• Why is it needed? The Consent Order ensures that the settlement is final, binding, and enforceable. Without a Consent Order it is possible that one party could make a further financial claim against the other, possibly many years down the line. The Order also means that if one party fails to abide by the terms of the settlement then the other party can apply to the court to enforce the Order.
• How to Obtain a Consent Order: A Consent Order can be applied for at any time after the granting of the Conditional Divorce Order (although it will not take effect until the Final Divorce Order). The Consent Order will be drafted by a lawyer, agreed, and signed by both parties. It will then be sent to the court, together with a Statement of Information setting out basic information regarding each party’s finances, and the court fee.
• The Role of the Court: The Consent Order will go before a judge. It is important to note that the judge is not obliged to make the Order, simply because its terms are agreed – they will only make the Order if they believe that its terms are broadly reasonable in the circumstances (this is why the Statement of Information is required). In most cases, however, the Consent Order will be made, without the need for the parties to attend court.