A guide to financial remedy proceedings

Financial remedy proceedings are a type of court proceeding that address a couple’s finances as part of a divorce or dissolution of a civil partnership.

When a couple divorce or dissolve their civil partnership, they will usually be able to reach a financial settlement by agreement. It is advisable for that agreement to be made legally binding by having a consent order approved by a financial remedy judge.

Where it is not possible to reach an agreement, one person may decide to start financial remedy proceedings to seek the court’s assistance in determining a financial settlement following divorce or dissolution.

What is a financial remedy order?

A financial remedy order refers to the various types of orders that a judge can make within financial remedy proceedings.

At the conclusion of the proceedings, the judge will make a financial remedy order which sets out the terms of what has either been agreed between the couple during the financial remedy proceedings or ordered by the court in the event that an agreement has not been reached before a final hearing. The court process is very much designed to encourage a couple to settle during the various stages of the proceedings. If this is not possible, at the third and final court hearing, the judge will make a final decision on behalf of the couple.                                                               

The contents of a financial remedy order will depend upon the financial position of the couple in question. Some orders may be very complicated, whereas others may be very straightforward. A financial remedy order will commonly include:

1. Property adjustment order – this is an order in connection with property. For example, a property adjustment order may provide for a sale or transfer of property.
2. Pension orders – this may include a pension sharing order or alternatively, a pension attachment order.
3. Periodical payments orders – this is an order for either spousal or child maintenance.
4. Clean break order – this is an order effectively confirming that there is a clean break, i.e., that the court is not making any order in relation to a particular asset.

The court has extremely wide powers on divorce or dissolution of a civil partnership to make orders in relation to a couple’s finances.

What will the court take into consideration?

In deciding what an appropriate financial remedy order the court should make, the court will take into account all the circumstances of the case. The court’s primary consideration will be the welfare of any children under the age of 18.  In addition to this, the court will consider the factors set out at section 25 of the Matrimonial Causes Act 1973 (in the event of divorce) and Schedule 5, Part 5, paragraph 21 of the Civil Partnership Act 2004 (in the event of dissolution). 

The factors are as follows:

1. the income, earning capacity, property and other financial resources which each of the parties to the marriage/ civil partnership has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage/ civil partnership to take steps to acquire;
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;
3. the standard of living enjoyed by the family before the breakdown of the marriage/ civil partnership;
4. the age of each party to the marriage and the duration of the marriage/ civil partnership;
5. any physical or mental disability of either of the parties to the marriage/ civil partnership;
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;
8. the value to each of the parties to the marriage/ civil partnership of any benefit which, by reason of the dissolution or annulment of the marriage/ civil partnership, that party will lose the chance of acquiring.

Pre-court procedure

Prior to issuing an application for a financial remedy order it is first necessary to consider whether there is any prospect of resolving the matter out of court. There is a requirement for a couple who wish to engage in court proceedings to first attend a Mediation Information and an Assessment Meeting (MIAM). At this meeting one person will meet with a mediator to first determine whether the case is suitable for mediation. Mediation involves an independent third party assisting a couple to try to reach an agreement outside the court process. Some cases aren’t suitable for mediation, perhaps because there has been domestic abuse within the relationship, or because the assets are fairly complicated and it is important that the couple take legal advice upon the terms of any agreement. If the mediator assesses the case as being unsuitable for mediation, the mediator will sign a certificate which can then be given to your solicitor to enable them to issue the application for a financial order.  If, however, the mediator considers that your case is suitable for mediation they will discuss this with you and may encourage you to invite the other person to attend mediation with you.  However, mediation is not appropriate in every case and there is no requirement to attend mediation to seek to come to an agreement regarding a financial remedy order, there is only a requirement to attend the MIAM itself.

Once a MIAM has been attended your solicitor would then prepare Form A which is the application for a financial remedy order.

The first appointment

Once your Form A has been issued a few weeks thereafter, you will receive the Notice of First Appointment.  This document will set out the steps that will need to be taken before the first court hearing which is known as the first appointment. 

In advance of the first appointment, the first step to take will be to complete a Form E which is a document that sets out each person’s assets, liabilities, income, outgoings and other relevant financial considerations.  Those Forms E are then exchanged.

Consequently, each person will then prepare various other documents in readiness for the first court hearing.  This will include a questionnaire of any requests for further information or documentation arising from the other person’s Form E, a chronology of keys dates and a summary of the issues in the case.  

On an increasingly common basis, where both parties have legal representatives, it is common to seek to agree the directions to progress the case and therefore effectively not to proceed with the first appointment hearing itself.

The first appointment is a case management hearing where the judge will review the issues in the case and determine what further evidence is required in order to progress the same.  Common directions made after first appointment include:

1. Replies to questionnaire – the court will review the questionnaires each person has prepared for the other, arising from their Form E and assess whether it is appropriate and proportionate for those questions to be answered. 
2. Valuations of property if the property values are disputed.
3. A pension report if appropriate.
4. Valuations of other assets such as companies.

If it is possible to agree the above directions on paper, it may be that attendance at a first appointment is not necessary and the court can instead deal with the matter on paper.

Financial dispute resolution hearing (FDR)

The FDR is a negotiation hearing which takes place on a without prejudice basis.  The purpose of the FDR is to try to resolve matters by way of agreement.  By the time a couple reach an FDR there should be a very clear picture as to what the assets are (i.e., all valuations and reports will have been received) and therefore it is for the parties to seek to try and reach an agreement if possible.  The FDR can be an extremely effective hearing and many cases are agreed either at an FDR or shortly thereafter.  The real benefit of the FDR is that a judge will provide an indication as to their view upon what an appropriate outcome in the case might be.  For example, in advance of the FDR, usually fourteen days before, each couple will exchange proposals as to what they consider is an appropriate outcome in their case.   In providing their indication, the judge will provide their view on each person’s proposals.  The idea is that that indication will assist the couple in reach an agreement. 

It is also increasingly common for couples to have a private dispute resolution hearing rather than a court led FDR. The benefit of a private FDR is that a couple can choose with “judge” they wish to instruct, the location and the timing, date of the private FDR can all be selected.  It also means that as you have your own private “judge” they will have much more time to assist the couple in coming to an agreement compared with a judge sitting at court who may have five other FDRs that day and will only have a limited amount of time to review the papers.  Therefore, in cases where the assets are of a high value or complex in some way it is increasingly popular to have a private FDR judge who can provide a real meaningful indication and really get to grips with the key issues. A further benefit is that having the hearing away from the court building can offer greater privacy and confidentiality.

Final hearing

Where an application for a financial remedy order is made the majority of cases will not reach a final hearing.  This is good news as it means the majority of couples will have been able to reach an agreement by consent and avoid protracted litigation and the costs involved in a three-stage financial remedy process.

Following an unsuccessful FDR it is common for there to be a short pre-trial review hearing where the court will assess whether any further updated evidence or report is necessary before a final hearing.

Depending upon the facts of the case at a final hearing, the court may hear oral evidence from either person and if there are any other points in dispute may also hear evidence from some of the experts that have been ordered, for example, a pension actuary, a surveyor or perhaps a forensic accountant who has been instructed to value a company.  At a final hearing, the court will take into consideration the factors outlined above with a view to making a determination and ultimately a financial remedy order for the couple.

Whether a financial remedy order is made by consent through negotiation or by a judge at a final hearing, once it has been approved by the court it will be legally binding.  This means that either party will need to stick to the terms of the order otherwise it can be enforced.

Financial remedy proceedings can be complex and it is therefore important to take advice from a specialist family lawyer who specialises in assisting clients with financial remedy proceedings.  It is also important to speak to that lawyer about the other options that might be available to you including mediation and arbitration.

For further advice regarding financial remedy proceedings please do not hesitate to contact Amy Harris or another member of our Family Law Team.