Maximising the impact of FDRs in financial remedy cases

The recent judgment of Peel J in GH v GH [2024] EWHC 2547 clearly emphasises the importance of the financial dispute resolution hearing (FDR) in the financial remedy process. Rule 9.15(4) of the Financial Procedure Rules 2010 (FPR) provides that the court must direct an FDR unless there are exceptional reasons which would make referral to an FDR inappropriate (FPR 9.15(4)(b)). Practice Direction 9A describes an FDR as a key element of financial remedy procedure by (para 6.1 of PD 9A).

This article explores the purpose of the FDR, its unique role in the financial remedy process and considers some top tips to ensure it is as effective as possible.

The purpose

An FDR is described in the FPR as “a meeting held for the purposes of discussion and negotiation” (FPR, r 9.17(1)).

Peel J expands upon this in GH v GH:

“The purpose of it is to enable the parties to hear (probably for the first time) an independent evaluation of the likely outcome, and the risks (in terms of costs, uncertainty, delay and emotional toll) of continued litigation. The FDR judge is there to tell the parties if their proposals are sound or devoid of merit, or if particular points or arguments are or are not likely to find favour at trial. It is often those hard cases where one or other party appears utterly intransigent that the FDR judge's indication and observations can be of greatest utility.”

The parties are required to use their best endeavours to reach an agreement (FPR, r 9.17(6)) and will therefore be expected to actively engage in negotiation.

What if there are issues of fact still to be resolved?

Again, this point was dealt with by Peel J in GH v GH:

“The FDR judge is well able to deal with factual issues (such as, in this case, W's earning capacity), not by determining them but by expressing a view as to how they appear on the available evidence and how relevant they are. The FDR judge is also well able to give a clear overview even if (as the judge assumed to be the case here) one or other party's position is not fully crystallised.”

FDR privilege

It is important that clients understand the privileged and "without prejudice" nature of an FDR. In particular, any indication given by the FDR judge cannot be referred to openly going forwards and the FDR judge will not be permitted to have any further involvement in the case. Likewise, any offers made during the FDR cannot be referred to or relied on subsequently. The case of LS v PS [2021] EWHC 3508 emphasises the importance of this privilege, repeating the words of Sir James Munby in V v W (Disclosure) [2020] EWFC 84, [2021] 2 FLR 605:

“In order for the FDR to be effective, parties must approach the occasion openly and without reserve. Non-disclosure of the content of such meetings is vital and is an essential prerequisite for fruitful discussion directed to 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), 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.”

The exceptional circumstances in Re D were concerned with child protection.

One possible nuance is demonstrated by the recent case of L v O (Stay of Order; Hadkinson Order; Security for Costs [2024] EWFC 6, ) [2024] 2 FLR 343 (26 January 2024) Cobb J considered whether a judge hearing a Barder (or Thwaite) application could or 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". He determined that some understanding of the factual basis upon which the final order was agreed at the FDR would be helpful and would help the court to determine whether or not the Barder event, as argued by the husband, was foreseeable at the time. The issue was referred back to the judge who heard the FDR and made the final order.

Increased use of private FDRs

The use of private FDRs has undoubtedly increased substantially in recent years, with the encouragement of the court. In AS v CS [2021] EWFC 34, Mostyn J made clear that private FDR's were strongly encouraged, and that his view was shared by McFarlane P. As required by the Efficiency Statement, parties must lodge an order whereby the court FDR process is disapplied and parties are required to attend an FDR on a specified date. That date can then only be changed by a further order (including by consent). One party cannot then unilaterally withdraw from the process. The order will also provide that the matter shall be listed for a mention shortly after the private FDR, with this hearing to be vacated if a consent order is filed and approved by a judge in advance of the hearing.

There are many advantages to a private FDR, not least the time that the "judge" will have both to read the papers and assist the parties on the day. The arrangements can also be made for the convenience of the parties. The obvious disadvantage is that it comes at an additional cost. Unlike court-based FDRs, private FDRs require payment for the services of the private 'judge.' Further, the 'judge' at a private FDR does not have the authority to make legally binding orders. Any agreement reached must therefore be submitted to the court for approval and cannot be dealt with on the day. Neither can they make any case management decisions for the ongoing litigation if settlement is not reached.

Preparation

The FPR and the relevant Efficiency Statement set out the requirements that must be complied with prior to the hearing. The ES1 and ES2 must both be filed 7 days before the FDR and the parties must collaborate on the contents. These documents therefore need to be prepared well in advance, so that there is sufficient time to liaise with the other party or their representative. Both parties will also need to file a Form H setting out the costs incurred to date, and in addition, each party must also file and serve an estimate of the costs they expect to incur up to the final hearing, if a settlement is not reached. The amount of the estimates will then be recorded in a recital to the order made at the FDR. The Efficiency Statement limits position statements for the FDR to 12 pages.

Communicating with your client on the day

Discussions can move quickly. It is crucial to ensure that all offers received are properly recorded in writing and that they, and their net effect, are fully explained to your client before advice is given to either accept or reject the offer, and why. Similarly, offers to be made must be recorded in writing and explained to the client so that it is clear that they understand and consent to that offer being made. Detailed attendance notes must record all offers, advice and discussions.

Likewise, negotiations can take time. Clients should be able to remain engaged for the full day and possibly into evening; if there are children, the client should ensure that arrangements have been made for someone else to care for them for the full day and evening, if possible.

Any risks involved in settling at court must also be explained to the client. This will be particularly relevant where there are issues that remain uncertain on the day of the hearing, for example the tax implications of a particular settlement. In the event that the client wishes to proceed without this information, then this should be recorded in writing and signed by the client.

Reaching an agreement

In some cases, it is possible for agreement to be reached, and a consent order drafted, so that (assuming conditional order has been pronounced in the divorce proceedings) it can be approved by the FDR judge on the day of the hearing.

However, it may not be possible to draft the consent order then and there, either because there is insufficient time or where further information is needed. Instead, "heads of agreement" should be drawn up, which are then signed by the parties and their representatives at the FDR. It is then possible for those heads of agreement to be shown to the judge, who can approve them as an order (subject to drafting) and a mention can then be listed so that the consent order can be approved. This 'heads of terms' order is called a Rose order – even though the order itself has not yet been perfected, it is a binding order. If a dispute arises in the process of turning the agreement into a formal order, the judge can determine the issue. It is the judge's order (rather than an agreement) that is being perfected.

Where heads of agreement are drawn up but not approved by the judge, they are evidence of a binding agreement having been reached, but they have not been approved and made by a judge and therefore they do not have the status of an order. Nevertheless, if one party attempts to resile from the agreement, the other may make a 'show cause' application.

What if agreement is not reached?

If agreement is not reached, the FDR judge can be asked to make directions and set the case down for final hearing. It is important to make clear the point at which the "without prejudice" (and therefore privileged) phase of the FDR concludes and the open phase of directions and/or case management begins.

However, it is not uncommon for cases to settle very shortly after the FDR hearing. Parties have the benefit of the indication from the FDR judge and have had time for reflection and further advice. Negotiations therefore can and should continue after an FDR either via without prejudice correspondence or, if appropriate, at a round table meeting.

FDR hearings offer parties the unique opportunity to hear a judge's view on the merits of their case and the likely outcome. They are designed to enable parties to negotiate without reserve, and as a result can be an extremely effective way to resolve a case.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, March 2025