Partner David Hodson OBE looks at a change to the family court rules, the impact it may have on practice, the encouragement to settle but asks if the default timing is too soon?
Changes in the Family Procedure Rules (FPR) were announced in February 2020 including from a consultation in summer 2019 about costs in family law proceedings. One significant change is a requirement for open offers to be made 21 days after the FDR or such other period as the court may direct. In most cases, 21 days will be far too early. What issues arise and what good practice can be put in place by the profession and judiciary?
Background to the rule change
The Family Procedure (Amendment) Rules 2020 amend the FPR and mostly come into effect from 6 April 2020 although, in a few respects including the rule below, on 6 July 2020. A couple of the changes concerning costs will have a significant impact on lawyers; this includes providing the court with an estimate of the costs incurred by a solicitor with their client both before and now beyond the hearing itself.
One element concerns the making of open offers. The new rule at clause 13 says as follows:
13. After rule 9.27 (estimates of costs) insert—
“Duty to make open proposals after a FDR appointment or where there has been no FDR appointment:
(1) 9.27A.— Where at a FDR appointment, the court does not make an appropriate consent order or direct a further FDR appointment, each party must file with the court and serve on each other party an open proposal for settlement —
(a) by such date as the court directs; or
(b) where no direction is given under sub-paragraph (a), within 21 days after the date of the FDR appointment.
(2) Where no FDR appointment takes place, each party must file with the court and serve on each other party an open proposal for settlement—
(a) by such date as the court directs; or
(b) where no direction is given under sub-paragraph (a), not less that 42 days before the date fixed for the final hearing".
This is a new provision and requirement in law. The existing requirement of open offers immediately before the final hearing is in 9.28. This reform follows a consultation last summer. Although the Law Society was one of those taking part in the consultation, it does not seem as if it was either wide or public. This is regrettable. I believe this proposal will cause a number of difficulties.
The Law Society response to the consultation
The Law Society was given a fairly short time to respond to a number of questions put by the Costs Working Group of the Family Procedure Rules Committee. In respect of the proposal to put a requirement of open offers significantly earlier than the present 7 days and 14 days before the final hearing, the Law Society said as follows:
“Do you think that rules 9.17 and 9.28 FPR and paragraph 6 of PD9A should be amended to provide for open proposals to be made earlier than currently required – by not later than 14 days (applicant) and 28 days (respondent in reply) after an unsuccessful FDR (or by such earlier or later date as the court may direct)?”
- We agree that the present timing is too late. However, what is in existence at the FDR is privileged proposals made on each side which have not established a consensus, hence the listing for the final hearing. But parties will not simply convert the FDR position into an open offer. Specifically, there is considerable tactical thought given to the positioning of an open offer. A worthwhile open offer can only be given when disclosure is complete, experts’ reports are in and similar.
- We consider the appropriate time would be 21 days before the final hearing. In many cases, which are short or medium trials, the brief for counsel will be delivered about 7-14 days in advance. The making of open offers in advance of this step may therefore avoid this biggest of disbursements in the financial remedy proceedings.
- We would like consideration to be given to requiring simultaneous open offers. By this late stage when the complete financial information is known, why can it not be exchanged instead of consecutive? This avoids tactical advantages for the one going second.
- Our view is that any timeframe given should be mandatory and the subject of judicial criticism if not followed.
- In conclusion we support slightly earlier offers and quite probably concurrent. But any discussion of much earlier open offers should be in the Calderbank debate.
It will be seen that there has been one key change to the proposal in the questions. As the Law Society recommends, the open offers are simultaneous. This is very commendable. But they have retained the requirement to be fairly soon after the FDR namely 21 days, a compromise between the 14 and the 28 days for each party if consecutive. This 21-day default is too early.
The failure to engage in making open offers
When Calderbank was removed in 2006 for substantive financial remedy claims, it was expected that the family law profession would embrace the making of open offers. Costs orders could be made on the basis of the open offers. It would be open and transparent and known to the judge at the final hearing. It would overcome the tactical elements in the strategic privileged offers. The open offers would hopefully produce a narrowing of issues and a better understanding of each party’s position for the outcome.
The expectation failed. By and large the profession has been nervous of open offers on behalf of their clients. Of course some open offers are made and more than previously. But they are not a significant feature. Indeed their failure has led to the call for the return of Calderbank-type offers having costs consequences. The Law Society said, “that any changes regarding the making of open offers should be in the context of the Calderbank debate”. That debate is still ongoing with no rule changes yet. But this rule has been introduced anyway.
There is a common consensus amongst many family lawyers that the requirement to make open offers a fortnight before the final hearing is too late. By then brief fees have been incurred and the preparation is almost concluded. Relatively small amount of costs are then saved by accepting an open offer made so close to the final hearing. It should be earlier but how much earlier and under what circumstances? I consider a norm of 21 days after the FDR will almost always be far too early. The new rule 9.27A (1)(b) defaults to 21 days in the absence of another date agreed by the parties and inserted into the directions order. This default period is unlikely to be appropriate in the vast majority of cases.
Keep talking post FDR settlements
One primary reason for the 21-day default being far too premature is that many cases settle soon after an FDR. The day of an FDR is a bewildering experience for lay parties. They have spent the day negotiating. They may have moved a huge amount and sometimes more than they may have anticipated before the day of the FDR. They may feel the need to talk to other family members, other professional advisers and similar. They may at 4 PM be simply exhausted and snatch at any settlement just to get it concluded. Curiously lawyers have a significant task towards the end of an intensive day of FDR negotiations to make sure the client is not settling but will then regret later, even overnight. Most lawyers have had the experience of the client who has quickly regretted the settlement reached on the day. Therefore even though a case does not settle on the day, it is good practice to suggest that the parties continue talking and not immediately go into final preparation mode.
In some instances the court may refuse to list for a final hearing given the closeness of the parties. It may adjourn the FDR, and this is provided for in the Rules. If the parties are still some distance apart although keen to continue negotiating, it’s quite usual for the directions for the preparation for the final hearing to be put over, delayed, to give a moratorium for further opportunity to negotiate building on the narrowing which occurred at the FDR.
When the present financial remedy procedure was being piloted, in the very early 1990s, a large accountancy firm was given the task of analysing what happened at the FDR and subsequently. One of their findings was specifically that a number of cases which did not settle on the day then settled within 2 to 3 weeks thereafter. This is a continuing experience of many specialist lawyers.
In these circumstances, practitioners do not want to start immediately getting into final preparation mode which is exactly the making of an open offer. An open offer is quite likely to put in jeopardy further negotiations as it may represent a fairly polarised position for the final trial itself.
So, where there is any reasonable prospect of any ongoing negotiations after an FDR, there should be no requirements for open offers to be made.
Ongoing reports and valuations
In order to save costs, and in the hope and expectation of a settlement at an FDR, some steps of preparation are not undertaken before the FDR itself. There will have been sufficient information for the early neutral evaluation which is the FDR and for the making of consent offers. But if there is no settlement, then there may need to be more refined and perhaps more accurate valuations, certain answers to questions which were perhaps not needed for an FDR but will be needed for a final hearing and perhaps some further reports. It is quite normal at an FDR for there a number of directions to be given.
In these circumstances I consider it is not appropriate for a party to have to make an open offer before that further evidence and disclosure has been received. Having got this far in the process, let these further investigations conclude and then require the open offers. So, the 21-day default should not apply where there are ongoing directions for further disclosure or investigation but instead only apply once they are concluded. Indeed, the 21 days default will perhaps apply as a trap for the unwary.
The nervousness of open offers
Lawyers worry about making open offers in circumstances where there may be changes occurring before the final hearing and which may affect the offer which would otherwise be made openly. This is particularly if any more disclosure including valuations. The High Court has given assurance about this.
In 2015 Moor J in MAP v MFP (2015) EWHC 627 said at para 87: “Before I deal with my conclusions, I propose to deal with two matters raised by Mr Molyneux in relation to add-back that I do not accept. First, it is correct that in October 2014 the Wife did make an open proposal to divide the assets equally without add-back. Mr Molyneux attempted to rely on this as evidence of the injustice of add-back. I reject that submission. Now that we no longer have Calderbank offers, litigants must be encouraged to make open proposals as early as possible that are designed to encourage settlement. If the other party spurns such an offer, the court is entitled to ignore it completely and decide the case entirely on the merits. I will have no hesitation in a suitable case in awarding an applicant more than an open offer he or she has made if that is justified”.
Despite this, lawyers have still not felt comfortable and confident hence they have often held back on the open offers. It would be interesting to have anecdotal evidence from around the country about whether the above decision is actually holding up and that an open offer which was made on one foundation of facts has not been held against a party when clearly the true position was different. I would suggest that until lawyers have this confidence, notwithstanding the High Court, there will remain nervousness in making open offers too early in a case. Perhaps it would have been helpful to have an additional rule to indicate in terms that the court will only take into account open offers in circumstances where there has been no material change in circumstances from the time the offer was made.
An open offer is not the FDR privileged offer
At the conclusion of an unsuccessful FDR, each party often make privileged proposals, usually setting out their final position on the day. But it will be rare for these simply to be converted into an open offer. There will be very many reasons why this may be inappropriate. Open offers are often made in parallel with privileged proposals; sometimes they have a different functionality and purpose. As the privileged offer will not be simply converted into the open offer yet the open offer will be so crucial on costs and position at trial, there will be very important legal work required, very probably in conjunction with the advocate conducting the final hearing i.e. conference with Counsel, to discuss tactically and strategically the content of the open offer. Accordingly if within 21 days of the FDR, it will be a good chunk of costs after the hefty costs of the FDR itself.
Yet this will be in parallel with the parties aware of the privileged proposals of the other party from the end of the FDR and perhaps renewed or increased proposals after the FDR. It’s almost certainly not beneficial so early after the FDR to have this parallel set of offers. Let the open offers come into play when the prospect of settlement from privileged offers have run their course.
There is another, far more mundane aspect which I doubt troubles those drafting the rules. It is the lawyer client dynamic in respect of costs funding. Invariably solicitors ask for money on account especially approaching a significant piece of work such as preparation and then attendance at an FDR. Solicitors don’t like asking for more than is needed and clients don’t like to pay for more than is required. But if very quickly after the FDR the solicitor has to move into preparation of a strategic and crucial open offer including consulting with Counsel this will be a lot of work and therefore costs. The solicitor won’t want to ask for these costs in advance of the FDR because, bar just a few very difficult cases, lawyers start from a position of optimism of a settlement at or soon after an FDR. The client won’t want to pay because they will be equally hopeful of an end to the case through a settlement. But if it doesn’t settle then the solicitor will have to ask for a further and relatively sizeable amount on account of costs to cover the preparation of the open offer. The work on preparation, with a tight timetable, is unlikely to start until that further funding arrives. For these very practical reasons, it is going to be logistically difficult.
In those cases in which a Legal Services Order has been made for costs to be paid by one party to the other, judicial guidance is that this should extend only to the work up to the end of the FDR on the basis another LSO application can then be made if it does not settle. Perhaps with this new rule change there should be an additional provision that if there is no FDR settlement, the paying party should pay a specific amount for the anticipated work in respect of the preparation of the open proposal with the 21 days requirement then to run from the date of that payment. There would certainly not be enough time for another LSO application within the 21-day default.
Timing of these open offers and the section 25 statement
Discussion on social media after these rules were published showed a difference of opinion about timing vis-a-vis the section 25 statement. Some argued that one needed to know the open positions before drafting the section 25 statement in order to respond to them. Indeed, the hope of earlier open offers is that they will lead to a settlement and therefore avoid the need for section 25 statement altogether. Others suggested that the open positions would really only be put forward after the section 25 statements had been filed and considered in that only then would the position of the other side fully be known so that one could respond openly with an offer.
Each argument of course has its merits. Sometimes one is surprised at positions adopted by the other party in their section 25 statement. More generally where lawyers are involved and have had surrounding correspondence, the respective positions are normally well known in advance of the FDR, discussed at the FDR and any negotiations immediately after the FDR. So arguably it is rare for a section 25 statement to reveal new elements in a party’s case. Indeed that is not its purpose. On balance I think there is better argument for the open offers to be before the section 25 statement. Hopefully the case may settle. If not, the statement may then more explicitly deal with the open positions of each side. This may shorten the statements if it is known that particular elements are not now in dispute. It may narrow the areas covered to correspond to the differences in the open proposals. Whilst not a pleading, it will allow some response, referring to particular facts and evidence, to the open proposals of the other side.
What about the existing duty to make open proposals 14 or 7 days before the final hearing?
It might be thought that the making of open offers soon after the FDR, hopefully thereby leading to a chain of open proposals to settle, would be all that was required and that the existing requirement, generally acknowledged as far too late in the process, would be scrapped. Not at all. Rule 9.28 remains with all its many defects. It merely has a new heading: Duty to make open proposals before a final hearing. Obviously, this is to differentiate with the requirement after the FDR.
So again the practitioner is put into the difficulty of tactics and strategy, otherwise known as double guessing the opponent. Does the lawyer simply repeat the open offer made perhaps several months ago? It has the benefit of consistency but there may have been changes in the disclosure. If there was a counter open offer, will the court be expecting some compromise in the open proposals immediately before the final hearing?
In any event, retaining 9.28 perpetuates previous problems which it had been thought the Costs Working Group were seeking to overcome. Unlike the open proposals shortly after the FDR which are given concurrently, these proposals still have to be given consecutively, with the applicant going first although she or he may not actually be the claimant. The retention perpetuates the tactical advantage in being the first to issue a Form A. It remains far too late. In almost all cases where counsel are instructed as often at a final hearing where lawyers are involved, the brief will have been delivered before the seven days of the proposals of the respondent and sometimes well before the 14 days of the initial open proposals of the applicant. So if the intention was to have any last gasp attempt at settlement, this rule fails because the most substantial costs of the hearing have already been incurred.
I believe these very late open proposals now have a different role. The retention of 9.28 should not now be seen as an attempt at settlement or narrowing positions. It is to make it clear for the trial judge what are the up-to-date positions on each side of the parties and where they are openly apart. In this respect it has a significant use and benefit. This is almost certainly why it has been retained with the earlier open offers now being the attempts to settle and narrow the issues.
The importance given to open offers in the context of costs
The making of offers to resolve disputes is fundamental in all dispute resolution systems. Where settling out of court is such a high premium, as in domestic matters, there must be even more encouragements. Then where the costs come from one single pot, the marital resources, which are thereby diminished as the litigation continues, settling must always be absolutely at the top of the tree in any policy considerations and procedural reforms. Therefore this very welcome and commendable proposal is absolutely sensible in its own right in encouraging settlements. Family lawyers are very aware of the personal benefits of settling; helping future parenting, giving self-respect and integrity, establishing future opportunities for better resolution, control of the outcome and the process and so much more.
But sometimes more encouragement is needed. And this is found in costs; hitting the pocket. It is here that these new rules complement and satisfy the changes made on 27 May 2019 in PD28A, especially clause 4.4. In the context of costs in financial proceedings it says: “In considering the conduct of the parties for the purposes of rule 28.3(6) and (7) (including any open offers to settle), the court will have regard to the obligation of the parties to help the court to further the overriding objective (see rules 1.1 and 1.3) and will take into account the nature, importance and complexity of the issues in the case. This may be of particular significance in applications for variation orders and interim variation orders or other cases where there is a risk of the costs becoming disproportionate to the amounts in dispute. The court will take a broad view of conduct for the purposes of this rule and will generally conclude that to refuse openly to negotiate reasonably and responsibly will amount to conduct in respect of which the court will consider making an order for costs”…
Earlier in this article I referred to the practice of open offers as not having established itself post Calderbank. It will now. There have already been several reported decisions where failure to negotiate has resulted in a costs order e.g., MB v EB (2019) EWHC 3676 in which at para 33 Cohen J specifically referred to clause 4.4 of this PD in making a costs order against the spouse who did not negotiate. With it still being uncertain what will happen with Calderbanks, whether they will be introduced and whether they will be distinctly Calderbank lite, it is the practice of open offers which must now play a significantly greater role for lawyers in the conduct of cases which do not settle at FDR. Although I question the timing of the 21-day default, there can be no question about their importance, the need for far greater and much earlier open positions being set out to give far more opportunity for settlement or narrowing issues.
Proposals for good practice
It is perhaps regrettable that there was not more widespread consultation on this rule change. But it comes into effect in July and the profession must be ready. Is it possible to have some good practice indicators of when open offers should be made other than the 21-day default? This is intended to form a conversation including for possible court directions:
- There should be a best endeavour requirement for both parties to make an open offer as early as possible after the FDR but not within the 21-day default; this could be expressed as a declaration in the directions order
- Where there is anticipated post FDR to be ongoing negotiations including perhaps a roundtable meeting put in the diary or an expectation of one party considering making a renewed offer a period of a week or so later and after reflection including in circumstances where the directions themselves are put over for a moratorium for negotiations, the duty of making open offers should be put over until after this moratorium for further privileged negotiations to take place
- Where there are directions for valuations, reports, answers to questionnaires and similar, the post FDR duty to make an open offer should follow their conclusion
- Where at the FDR there are no more directions and the case is in effect ready for trial, then an early timetable for open offers is more appropriate but whether it is 21 days should be reviewed in each case
- It should be made clear, perhaps in a standard order, that the court will only place reliance on an open offer for costs reasons on the basis of the information disclosed at the time the open offer is made, so that if there is any material change the open offer can be treated as withdrawn and having no costs effect
- Probably they should be before rather than after the section 25 statement, perhaps at least 21 days in advance
- Even if sometime after the FDR and nearer the trial, offers should still be exchanged rather than, as now, the applicant going first. By a later stage in the proceedings it is often academic or notional as to which is the applicant. There should be no strategic element in this making of open offers at this stage in the case
Open offers post Calderbank have not worked. Moreover, the requirement of open offers just before the final hearing is too late to be of any real use towards settling or narrowing issues. Open offers are not presently part of conventional strategy and case planning. They should be. The proposal in these new rules to bring them forward is highly commendable. But they create a 21-day default. This will rarely be appropriate. But it is otherwise in the discretion of the court. The profession and judiciary need to reflect on the intention behind this rule change and how it should appropriately work in best practice to encourage more settlements and a better understanding by both parties of the issues for adjudication. My above proposals are suggestions to establish good and appropriate practice for the making of open offers much earlier than at present and when it is best and most effective to do so.
The author is very grateful for the assistance of Mena Ruparel MCIArb (www.menaruparel.com and email@example.com) in respect of this article, who is a member of the Law Society Family Law Committee. He is also very grateful for the contributions of his iFLG partner, Michael Allum.