Resolving Financial Disputes

Money is the root of all evil, or so they say. Certainly, it’s one of the biggest causes of animosity in divorce. Peter Watson-Lee outlines the legal process that may help you sort things out.

Peter Watson-Lee is a past Chairman of the Law Society of England & Wales’ Family Law Committee, and a practising solicitor with Messrs Williams Thompson, a specialist family law practice in Christchurch, Dorset.

There is just no way that we are going to be able to sort out the finances. I don’t even know what he’s got, we can’t talk and, frankly, I don’t trust him. What can I do?

Even if you can’t talk direct, sometimes your solicitors may be able to get negotiations going. But yes, in some cases it is clear from the start that negotiation is not going to work – and in other cases the negotiations break down. Once it becomes clear there is no reasonable prospect of settling matters, it is sensible to think about asking the court to look at deciding what should happen to your finances.

But I cannot bear the thought of having to be involved in a court case. The whole idea terrifies me!

Just because you ask the court to look at the finances, it does not mean you are going to end up in a fully disputed court case. Making an application to court on the finances should not be regarded as a hostile step or a last resort, rather, it is a way of starting the court timetable. Under the new procedure, the court’s aim is to encourage parties to agree matters and avoid disputed court hearings wherever possible.

What’s this about a ‘new procedure’?

Since June 2000, the courts have been running a new procedure for sorting out the finances on divorce. It is intended to enable the courts to deal with cases justly, while ensuring that they are dealt with speedily via a court timetable.

That sounds like a good idea. So what do I do if I want to get the courts to look at our finances?

Once a divorce petition is issued, either a husband or a wife can start the procedure by sending a form to the court, together with an £210 court fee. The form (known as a Form A) has to outline in broad details what financial applications you want to make. These are generally going to be one or more of maintenance payments (sometimes called periodical payments), a lump sum, or an order relating to a property – such as the sale or transfer of the matrimonial home. You can also ask the court to look at sharing out any pension fund.

So what happens then?

Once the court receives the Form A, it sets a timetable. First, both you and your spouse will need to fill in a statement giving full details of all your finances (known as Form E). Once completed, a copy is sent to your spouse and another copy to the court. The court will tell you when this needs to be done, but you will have about seven weeks to do this.

And how much detail do I have to give?

Quite a lot – Form E is over 20 pages long! You have to give some background details about dates of the marriage and the children, details of any property that is owned with values and the amount of any mortgages outstanding, and details of all your bank accounts together with bank statements for the last 12 months. You need to give details of all your other investments, details of any debts, pensions and other policies you may have. You also need to give details of your income and include recent payslips if you are employed or your trading accounts if you are self-employed. You then need to give details of what you say you need by way of income and capital and there is space for other comments as well.

It sounds as if you need to give a lot of information!

Yes, it is not the easiest form to fill in. You will probably need to spend some weeks information gathering. For example, you might need to write off to your pension company for the necessary details. However, the idea is that if you both do it properly, you will have full information about each other’s finances, which will save a lot of misunderstandings later.

So does my other half have to give all these details?

Yes. There is no way that you can properly settle the finances unless the other party has given full details of their finances. If you are not happy with the answers given, you are entitled to raise a questionnaire asking for further details. The court has the power to order your spouse to answer those questions, if it thinks they are relevant.

So what next?

When the court sets the timetable, it will also give a first hearing date. This is not a full court hearing but an occasion when both of you and your solicitors go along to court to see a district judge who will have an initial look at the case. He can then either give directions as to what further information needs to be produced or actually give an overview as to what he thinks the outcome of the case might be.

Do I have to go to this court hearing? Even the thought of it makes me nervous!

Yes, you will need to attend – unless you are able to agree a financial settlement before the hearing. That is not as unusual as you may think. Quite often, the exchange of the financial details and the involvement of solicitors in filling in the forms may have helped you agree terms.

But if we have not been able to agree something, do I still have to go to court?

Yes, but the hearings are in private rooms where only the judge, your solicitors and yourselves can attend. Furthermore, the solicitors will do all the talking and it is very unlikely that you will have to say anything. The court just needs you there so that you can see what is going on and you are available in case you are able to discuss matters. Again, quite often the fact that you are all at court together results in matters being agreed.

So do we have to do anything else to prepare for this first hearing?

Two weeks before the hearing your solicitor will need to file some statements at court. The first is the questionnaire listing any further questions you want to ask your spouse. The second is a concise statement of what the issues between you are (e.g. are you arguing over what should happen to the house or just the levels of maintenance payments that should be made?) Finally, the solicitor has to file a chronology giving the main dates, so that the judge can understand the history of your marriage. The solicitor also needs to prepare a schedule of his or her fees so far, so that all parties can understand the sort of costs that are being incurred.

And what happens at this first hearing?

There are two possibilities. It can be a relatively short ‘Directions Hearing’ when the judge makes orders about the further information that needs to be provided by one or both parties. If that is the case, the judge will then fix the ‘Financial Dispute Resolution Appointment’. Alternatively, if both parties agree, the judge can deal with this first hearing as the Financial Dispute Resolution Appointment to save having a second hearing.

And what on earth is a ‘Financial Dispute Resolution Appointment’?

Good question. This is one of the main features of the new system. The appointment is a meeting with the judge held for the purposes of discussion and negotiation. You have to attend with your solicitor and there is strong encouragement by the judge for you both to put forward proposals to see whether a negotiated settlement can be reached. You go before a district judge who will have no further involvement in the case. The judge will have read the papers and will listen to an outline of the facts from the solicitors. The judge will then give some indications as to how he thinks the court might deal with the matter. This can be helpful if, for example, your spouse is not taking a realistic view of the case. In particular, the judge will want to know what offers have been made to settle the case so far and whether there are any aspects that can be agreed.

So if we can agree matters at this stage, what happens then?

If you both agree, the judge can actually make a court order there and then to settle matters and conclude the case.

And if we can’t agree?

If you are still unable to agree a settlement, the judge will fix a full hearing. This will often be a month or two later and you will probably be given a full day – maybe more if your case is complex. You will need to attend that hearing and may well be asked to give evidence and be asked questions by your spouse’s solicitor or barrister. Likewise, your solicitor or barrister will be able to cross-examine your spouse. A different judge will hear the case and at the end of the hearing, he or she will make a decision as to what the financial settlement should be. That decision will be a binding court order that you will both have to accept. Judges have a wide discretion in matrimonial cases and he or she will not be bound by any indications given by the earlier judge – in fact they will not even be aware of what that earlier judge may have said at the Financial Dispute Resolution Appointment.

So if we cannot settle the case at the Financial Dispute Resolution Appointment, there is no alternative but a full court hearing?

Not necessarily. The courts are always encouraging parties to negotiate and settle matters. Even if you have not settled the matter at the Financial Dispute Resolution, sometimes that will have at least narrowed the issues and you might find a settlement can take place by agreement before the full hearing takes place. A full court hearing needs a lot of preparation and this increases the costs – so you do need to think carefully about trying to settle matters by agreement even at this stage.

What happens if we can actually settle our case?

No settlement is final and binding until a court order has been made. So if a settlement takes place, your solicitors will draw up the terms of settlement, recording, for example, what has been agreed about the house and what any maintenance payments should be. This is then either given to the judge if it is at a hearing or sent in by post for a judge to approve. Once the judge has read the order and approved it, the court will stamp it as a court order and you then have a binding settlement which you both have to comply with.

And who has to pay the costs of all these hearings?

The only court fee to be paid is the initial £210. However, it is certainly wise to have a solicitor to help you and represent you. His or her costs will usually depend on the time involved – and will therefore increase as the matter proceeds. This is another reason for settling earlier rather than later. You will be responsible for your own solicitor’s costs.

However, courts do have power to order your spouse to pay towards your costs, or indeed order you to pay his or her costs. In particular, the court expects both parties to make realistic offers of settlement as the case proceeds. If one of you does not, there is a real chance that the court might order that person to pay towards the other’s costs. The rules of how this works are complex and your solicitor will be able to explain them. However, the rules are there to encourage all parties to be realistic from the start and to make a genuine attempt to settle matters by negotiation.

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