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16 March 2012

Divorce and finances: what I cover at my first meeting with a client

Mahie Abey
First of all I outline some of the principles.

I explain that I will talk a lot about the Court when talking about money. That is not because the couple need to go to Court to sort out their finances, but because the best a divorce lawyer can do is to try to second guess what a Court might do in the circumstances.

This is because the agreement reached should be in the range of possible answers the Court might impose on the couple at the Final Hearing (see below).

How can Intelligent Divorce help?
We will provide you with an opinion from an experienced, specialist family barrister, who will know what the Court is likely to conclude given your circumstances, without the costs of employing a solicitor.

This level of legal opinion and experienced know-how sets us apart from other online divorce services. You can then use this opinion to help you resolve your finances.

The discretionary Court system
I explain that there is a discretionary system in this country. This means that Judges have a great deal of flexibility in deciding the outcome, which will depend on the circumstances. There is no single right answer but a range of possible outcomes, with numerous factors taken into account and which may carry different weight.

As a result, if the couple went to six different Judges they would get six different answers. Hopefully the good Judges will give an answer in the middle of the range, the less good at the edges of the range and the downright poor ones (of which there are some) outside
the range entirely. Only experience can tell where the range lies.

I explain that everything they have, their ex-partner has or they have jointly is put into one pot. It does not matter who owns it. How that pot is divided will depend on a number of factors including where the assets come from. I show them Section 25 of the Matrimonial Causes Act 1973 and ask them to read it (you can read the section online at legislation.gov.uk). I explain that divorce lawyers are lucky because there is only one section of that statute that deals with how money on divorce is divided, though what the words mean can only be understood properly by looking at the cases that have been decided since the law came into force. (This is because particular cases have interpreted the meaning of this section of law, and Judges take account of these interpretations too – “case law”.)

I then explain that the Court looks at all the circumstances. However not all the factors set out in Section 25 are equally important or as a judge would say, “carry equal weight”.
The first consideration is the needs of any children of the family who are minors. The children's needs could include, among other things, somewhere to live, access to settled suitable schooling and income to feed and clothe them.

The Court then looks at the needs of the parties. Most cases do not get beyond this stage as there will not be enough money to justify thinking about any other considerations.

However I then explain that if there is something left after needs have been satisfied, the Court will look at all the other factors.

In long marriage cases (no definition is provided although 15 years is a long marriage but 10 years not so and in between a grey area) the Court’s starting point is equality of division of capital although that too will be trumped by the needs of the couple.

The need for disclosure
I explain that before any negotiation or properly considered advice about finances can be given, both parties must provide “full and frank financial disclosure”: that is that each party must let the other party know about all their assets and income. This is usually done by completing and exchanging a long form known as Form E.

Form E must be used if Court proceedings are issued, it is also often used by
solicitors for disclosure on a voluntary basis (ie even if the Court won’t be involved). I show them the form (you can have look yourself by downloading the Form from the Court Service website). It is a detailed document almost 30 A4 pages long which aims to provide, if completed correctly and with all the necessary attached documents, a snap shot of the financial position at a particular point in time. I go through the form and the accompanying documents needed with the client.

I repeatedly emphasise that disclosure is so fundamental to the process that if they do not fully disclose their assets, they can be penalised in costs and in the award made.

Settling by agreement
I then explain that the vast majority of finance cases settle by agreement and that should be the aim of the client. It is in the process of providing disclosure and reaching  agreement that solicitors make their money from divorcing couples.

How can Intelligent Divorce help?
Intelligent Divorce allows you to complete the disclosure exercise yourself, and then provides an expert’s opinion to guide you as you negotiate a settlement yourselves.

I explain that once an agreement has been reached, the solicitors will use it as the basis for the legal version of the agreement know as a Consent Order. This will be sent (or “lodged”) with the Court for approval by a Judge. It is only when a Consent Order is
approved that they have an enforceable document I let my client know that not all cases can be resolved by agreement, but the majority are, and that broadly speaking there are five ways to achieve this:

Talk to each other: This is by far the cheapest and often best way. The problem is that it is not always possible and where it is, the solution is not always clear.

Use mediation: A great idea for some. Mediation is a voluntary process that involves both parties visiting a trained mediator whose job is not to give advice, but to assist in the parties reaching their own conclusion. Whilst mediators can give information, they are
strictly forbidden from giving advice, or indeed their opinion, to the clients. This can be a disadvantage although generally speaking mediation is a very good option, as it is relatively cheap and allows people to come to their own agreement. It is suitable for most
people who are prepared to give it a try.

How can Intelligent Divorce help?
Intelligent Divorce offers an alternative to mediation as we help you reach an agreement that is backed by legal opinion. Mediators cannot provide any advice so if you choose that route you still have to work out for yourself whether the agreement is one that you
would have achieved in court.

Use solicitor-led negotiation: This is the most widely used method. Solicitors will assist with disclosure and negotiate on a client’s behalf.

Use Collaborative Law: This is an alternative to conventional solicitor negotiation. All the negotiations take place around a table with the parties and their solicitors present. This is no cheaper than a solicitor- led negotiation, but for some the outcome is a better
relationship with their ex partner.

Go to Court: There is no need to be afraid of going to Court as the process is geared towards settlement. However it can be very expensive. I then set out the steps involved in going to Court. First is to complete a Form E and exchange it, that is sent to the other party, who will send their Form E to me at the same time. There is then a Court hearing
called a First Directions Appointment at which the Judge will give instructions (known as “directions”) about any additional questions needed to establish the financial position of the parties, and about arrangements for getting any valuations and other reports.

How can Intelligent Divorce help?
We can help you satisfy yourself that you know the detail of your family’s finances without using a Form E and without the need to use a solicitor. We have removed the confusing legal language and made it as easy as possible to list clearly all your assets and income so you know what you have jointly and in your sole names.

By using Intelligent Divorce, it will be easier to gather this financial information than if you were simply given a Form E by your solicitor to complete by hand. Our process is not only more cost-effective than the traditional routes but also less frustrating.

The Court will then set a date for (or “list”) a Financial Dispute Resolution hearing which will normally take place some months later (normally 3-6 months). At this hearing, the Judge will give a non-binding, without prejudice view on the likely outcome, to help
the parties agree a settlement. The vast majority of cases do settle at this point.

If an agreement is not reached
If an agreement is not reached outside of the Court process, or at the initial stages of the Court process, then the latter parts of the Court process come into play.

If the parties do not settle at the FDR, (and as I’ve said above the vast majority of cases do), then the Court will list a Final Hearing (normally in 4-12 months time), after which the Judge hearing the trial will impose an outcome on the parties. Again I stress that if the parties are unable to agree, then ultimately it is the Court that will decide.

Likely outcome
After this run through of the process and the options available, I will then ask my client to give me a summary of their current financial position, so I can advise them.

I will always try to give the client an idea of likely outcome based on the information they have provided to me. My advice will only ever be as good as the information they provide. Not all solicitors will advise at the first meeting, preferring to wait until the information is in to give their views. I personally don’t think that is the right approach as clients need an idea of the likely outcome as early as possible.

How can Intelligent Divorce help?
We can provide you the same sort of view as would be provided by the Judge at this FDR Court hearing but without spending thousands out of your total pot of money on appointing solicitors and barristers for you and your partner and in a much, much
quicker timescale that you – not the lawyers – can control

The last thing I talk about at this initial meeting is the likely cost. You will recall this was also the first thing mentioned in the meeting (see my earlier post).

Divorce: The costs for handling the divorce itself are relatively predictable. If it is undefended, the cost of acting for the Applicant will be roughly £750 plus VAT and Court fees of £385. The costs will be less if I am acting for the Respondent, around £200 plus VAT.

Finances: I always tell my clients that it is the cost of settling the finances that will really hurt them. These will vary according to the assets involved. I will often allocate the work to a member of my team with a cheaper charge out rate than me. The cheapest solicitor-led negotiation, including full disclosure, is likely to cost £2,000 to £2,500 plus VAT (plus the cost of the divorce set out above). More usually the cost will be between £5,000 and £10,000 but can be more if the case becomes more complex. Note these costs are for one half of the couple only – the other person will have similar costs to pay. If negotiations fail and Court proceedings are necessary, I usually estimate a further £5,000 to £10,000 to the First Directions Appointment, a further £5,000 to £10,000 to the Financial Dispute Resolution and a further £10,000 to £20,000 to the final hearing. That’s £20,000 to £40,000, and again for just one half of the couple. The other will have fees of a similar level. All of these fees are plus VAT. There will also be disbursements which include Court fees and, more particularly, the cost of a barrister, who would present the case in Court. These costs can be significant. They will depend upon the barrister’s seniority, but range from £500 to £2,000 for a preliminary meeting and from £500 to £4,000 for a day’s hearing at Court. If one of the couple has a barrister it is likely the other person will do, so these costs will be doubled.

These are the costs for an average case. The more assets there are, or the more contentious the case, the higher the costs will be.

How can Intelligent Divorce help?
On our co-operative service you can work together to achieve disclosure, receive an opinion from a specialist family law barrister, use the tools on the site to come to agreement, and then have a solicitor-drafted Consent Order prepared for you for £1,630 inc VAT between you. (If a Divorce Petition has not yet been filed, we will manage that process for you for free too.)

Alternatively use our solo service to list the assets and liabilities involved in your case and thenrecieve  receive an opinion from a specialist family law barrister, which you can use to help you negotiate with your ex-partner, or a starting point for mediation.

This extract has been taken from The Divorce Process & Meeting a solicitor section of our guide Divorce, Courts & Costs (& How We Can Help). Read the full version here.