Divorce can be costly in many ways and not least of the burdens are the legal fees. What options should couples whose relationships are breaking down consider?

Deborah Jeff, head of family practice at Seddons writes about a recent case where there were high legal costs associated with a divorce case and the issues surrounding those costs. Divorce, unhappy subject that is often is, is a subject relevant to wealth management because of the sums involved and its role in affecting estate planning and structuring of wealth. (For other articles touching on apsects of divorce, see here, here and here.) As always, the editors here are pleased to share such views with readers but don’t necessarily endorse all the views expressed and invite readers to respond. 

It was reported recently that a couple divorcing have run up legal costs of £1.3 million in what should have been a relatively straightforward case.  Their identities have not been revealed but they are understood to have stopped living together only seven months after marriage. Since then a long running dispute over the division of their finances and disclosure has incurred huge legal costs and attracted criticism from the judge and commentators in the profession.  

These cases, unfortunately, are not unusual. Naturally, during divorce proceedings, emotions are running high and the two parties often have very different views on what each “deserves”. However those advising divorcees and the couple themselves, must have a commercial eye and be wary of how their case is conducted. Protracted and combative proceedings will seriously diminish the asset pool to be distributed, often failing to preserve sufficient wealth for the two individuals (and children) to start again as they would have hoped. Seddons has undertaken research with the general public on divorce and the results indicated that it is efficiency and cost control that are the most important considerations for individuals facing divorce.
 
Specialist family lawyers are governed by a code of practice and are trained to work through the issues involved in a relationship breakdown - essentially helping to keep the temperature down. Litigators may be appropriate for non-family work and tough battles in court, but they lack the other ‘soft skills’ family lawyers need to apply in such cases. 

It’s not that we can’t be bullish when necessary and appropriate but this can escalate an already tense situation and sometimes lead the case in a more antagonistic direction.  This can be disastrous where the couple have children and will be in each other’s lives indefinitely co-parenting whereas the lawyers will back out of the situation of course once the proceedings are over.

To reduce the likelihood of protracted court proceedings, and as a legal requirement, mediation is the first route to take in divorce proceedings and the most recognised form of alternative dispute resolution. Exceptions apply of course for inappropriate situations such as where there has been domestic violence. The case should be referred to trusted mediators - usually lawyers - so that it is a completely neutral third party working with the couple. The mediator is there to oversee negotiations, but does not act in an advisory capacity. Their role is to steer parties through a more efficient and less emotional process to the best legal outcome. If successful, the decision is made into a court order, its binding and the couple will have avoided contested court proceedings.

A lesser reported option is that of ‘collaborative law’ which is a relatively new way to approach divorce, receiving some recognition and support although still not very commonly used in the UK.  It originated in the US and was first trialled in Cambridge. However, it is not fool-proof and many clients are disheartened by the strict rules. It is a four way process, both solicitors and both clients will attend the meetings and will sign up to an agreement at the outset which states that if the negotiations fail, new solicitors must be found for the court process. 

This is a big factor as to why many do not choose this path. Clients form close bonds with their advisors and trust them to represent their best interests and secure the best outcome. To go through an often draining and traumatic process with their lawyer it can be difficult to then start again with a brand new representative. 

A third option for divorcing couples is arbitration. In family arbitration the clients will appoint an independent arbitrator who will manage the case and then make a decision regarding the financial settlement in the divorce. It’s effectively a private court system and the decision is final and binding; the parties can’t decide for example to reject the decision and return the matter to the family courts.   Where undertaken for a fixed fee, arbitration addresses and the two key concerns of divorcing couples - cost and speedy resolution.

Emotions can often, understandably, be fraught during the process, however when all is said and done parties will not want to see their wealth diminished by the process of separating when it is so integral to their new start after the marriage and the welfare of any minor children.

Arbitration and the other alternative forms of dispute resolution should always be front of mind for those going through a divorce and these advising them to contain costs, preserve assets for the parties and achieve the soonest resolution.