Who benefits from greater ‘transparency’ in financial remedy proceedings?

Posted: 04/04/2022

Accusations of a regime of ‘secret justice’ have long marred the family courts. In an area of law where judicial discretion is a key feature, calls for greater accountability and openness have become louder.

It is for this reason that Sir Andrew McFarlane, President of the Family Division, undertook a ‘Transparency Review’. Started in 2019, and interrupted by the pandemic, Sir Andrew wanted to re-consider the current system in relation to the reporting of family law cases. The aim was to increase confidence in the family justice system by making court processes more accessible to the wider public. The review acknowledged that the workings of the family court are 'of significant importance' to society, and should be subject to effective public scrutiny, without journalists and legal bloggers fearing being held in contempt of court  for reporting on private proceedings. “Justice taking place in private, where the press cannot report what has happened and where public information is very limited, is bound to lead to a loss of public confidence and a perception that there is something to hide,” Sir Andrew said.

His report, finally issued on 29 October 2021, set out several proposals. The report mainly focussed on children’s cases, however, the President was clear that similar considerations applied to proceedings to resolve financial issues between parties on divorce. For this reason, on the same day and with the President’s full support , Mr Justice Mostyn and HHJ Hess launched a consultation on a proposal to introduce a Standard Reporting Permission Order (RPO) to enhance transparency and improve public understanding of the basis and rationale for decisions in the financial remedy courts (FRCs). The consultation ran until 26 November 2021 and family law practitioners are awaiting the outcome.

This article focuses on how the proposed changes set out in the RPO apply to the FRCs and the potential impact of this on parties.

The changes to reporting rules

Currently, journalists (as accredited representatives of the press) and eligible legal bloggers^[1] are generally able to attend financial remedy hearings. However, they are only allowed to report on the proceedings if they make a request of the judge and this is approved. They do not have a general right to review confidential financial information disclosed in the case without specific permission from the judge as set out in Clibbery v Allen [2002] EWCA Civ 45. Even if this is granted, they are unable to include details from these documents in publications without permission from the court.

The result of these restrictions is that the media rarely attend these types of hearings unless the case involves celebrities or the ultra-wealthy.

Under the changes proposed by the RPO, journalists and eligible legal bloggers will continue to be permitted to attend financial remedy hearings. The general position will be that they can report on the proceedings unless a judge in an individual case specifically restricts them from doing so. The presumption will therefore be in favour of reporting.

Most significantly, if adopted as per the consultation, a standard RPO will be issued by the court as standard practice in every case that starts at court. It will be reviewed at the first court hearing, the First Appointment. In broad terms the RPO will:

• provide reporters and legal bloggers with a presumed right to access key financial documentation in a case:
• this will include witness statements, replies to questionnaire, position statements and any voluntary disclosure;

• the media and legal bloggers will be able to refer to the facts and legal issues as well as the information in those key financial documents in their article/report in a broad sense. This means they can set out the assets, liabilities, income etc without identifying specific items or confirming who they are held by;

• they can also report on any open proposals made by the parties, quote from court documents filed in the proceedings including the parties’ witness statements and provide a summary of the judgment;

• access to key financial documentation is subject to conditions. For example, the documents are only to be provided to the media representative and their staff/editor and they must be destroyed six months after the conclusion of the case; and

• whilst the media will be able to refer to financial circumstances in a broad-brush way, they are not allowed to go into detail unless that information is already known to the public.
  
  
• permit journalists and eligible legal bloggers to publish the names and photographs of the parties, whilst making sure they do not identify any minor children (in practical terms, the children will be easily identifiable by those who know their parents, so this ‘protective’ measure is likely to be futile). Recent case law has also supported the identification of adult parties to a case (see BT v CU [2021] EWFC 87).

The RPO represents a significant relaxation of the previous position and for some readers it may be a cause for serious alarm. Many parties, particularly those with a high public profile, significant wealth, and/or business interests, may fear the publication of their private financial information (which could be commercially or politically sensitive). This may lead them to avoid the court system altogether and explore out of court methods of dispute resolution, such as collaborative law, mediation, private negotiation hearings (private FDRs), or arbitration. These methods of dispute resolution will ensure that the parties’ identities and financial information remain confidential.

The sort of information that arises in family proceedings in the FRCs is often going to be information in respect of which a party would normally have a reasonable expectation of privacy. We can anticipate that under the new transparency regime there may well be applications at the outset of a hearing for the judge to restrict the access to, and reporting of, certain private information (even in the broad brush form envisaged by the proposed changes).

This will particularly be the case if, for example, the witness statements or other documents include reference to other areas of a party’s private information, perhaps sexual or medical. These applications can be quite complex, and we may find media organisations seeking to intervene to try to persuade the court that freedom of expression and public interest should outweigh the applicant’s privacy rights. This would add to the length and expense of the proceedings and may well act as a further deterrent to parties contesting their litigation in the FRCs. This could, in turn, result in more disputes being determined through the following methods.

A potential increase in private FDRs and arbitration

Private FDRs are already very popular and we act for parties who select this option on a regular basis. The structure and purpose of a private FDR hearing is essentially the same as a court-based negotiation hearing. The parties prepare their negotiating positions, appoint a jointly-instructed private judge who is a specialist in financial remedies and attend the private hearing together with their respective advocates.

The privately-appointed judge, who will have reviewed all relevant information, arguments and proposals in advance of the hearing, provides an ‘indication’ that sets out how they would decide the case if it went to a trial. The aim is to steer the parties to achieve a settlement without the need for a trial.

The distinguishing feature of a private FDR is that the parties must pay for the judge on a private basis. It can also be listed relatively quickly and a private judge is able to devote much more time to the case before them as they will only be dealing with one private FDR in a day (in contrast with the court system, where judges undertake multiple hearings in the same day). If the case does not settle at the private FDR, then the parties may decide to take the case to arbitration to resolve all outstanding issues.

Arbitration is essentially a private trial. Although it is private and does not involve the court, the outcome given by the arbitrator (private judge) at the end of the process is binding on the parties (they both agree to this at the start). The advantage is that the RPO would not apply to these proceedings, so there is no risk that they will be reported on by the press. Many high-profile individuals use arbitration for this reason.

However, problems could still arise if one party decided to appeal an award made by an arbitrator. That would bring the case into the public court system, removing the veil of confidentiality surrounding the private arbitration process. The cases of Haley v Haley [2020] EWCA Civ 1369 and A v A (arbitration: guidance) [2021] EWHC 1889 (Fam) confirm that parties to an arbitration can challenge 'bad decisions' made in arbitrations in the same way that a party to an order made by a court can appeal.

The challenges that could arise

Neither private FDRs nor arbitration will be available to those without the funds to pay for a private judge. It is easy to envisage a situation where wealthy, high-profile individuals do their best to avoid the court system altogether. In this way, the new transparency regime could lead to less public visibility of the basis and decision making in financial remedy cases, not more.

There are many benefits to dealing with matters outside the court system. For more information on this, please refer to Kerry Fretwell’s article on mediation, and Gemma Kemp’s articles which explore the process further and explain hybrid mediation.

In certain situations, however, court involvement is necessary. For example, where there are clear concerns that one party is failing to properly disclose their finances, or complex legal issues are in dispute and the parties cannot move forward with negotiations until these are resolved.

The problem is, if a party knows that their financial information and their identity could be reported in the press, they may feel even less willing to disclose their finances openly and honestly, as required by the court. That could lead to poor outcomes all round.

A further concern with the new transparency regime is the potential for it to be misused by parties who seek to pressure and control their spouse through the family court process. The criminal offence of coercive control has been a major topic of discussion in the family law arena in recent years. This type of domestic abuse often involves one party isolating their victim from sources of support in order to control them.

In many family court cases, there is an imbalance of power between the parties and, in some cases, one party is far more anxious to maintain their privacy. This could be for many reasons – perhaps they are a businessperson who is required to maintain a level of confidentiality around their finances, or they simply do not want details of the issues in their marriage and its breakdown to be publicised in the national or local press for fear of embarrassment to themselves or their wider family. Using the threat of public exposure to isolate their spouse and prevent them from accessing the public justice system (so that they feel they have no choice but to accept a settlement outside of court) is a potentially very serious consequence of the new transparency regime.

The proposed changes versus privacy

In terms of reputation management, it is also relevant to consider the law of privacy in this context. This has developed significantly since the European Convention on Human Rights was incorporated into our legislation through the Human Rights Act 1998. Article 8 of the Convention provides as follows:

• Everyone has the right to respect for his private and family life, his home and his correspondence.
• There shall be no interference by a public authority with the exercise of this right except such as is in accordance with the law and is necessary in a democratic society in the interests of national security, public safety or the economic well-being of the country, for the prevention of disorder or crime, for the protection of health or morals, or for the protection of the rights and freedoms of others.

Since a right to privacy was introduced into our legislation, the law has developed and there is now a clearly established tort of 'misuse of private information'. In a claim for breach of privacy, the court's task is to embark on a two-stage process:

• first, it must identify whether there is a reasonable expectation of privacy such as to engage Article 8 at all, which is known as the 'threshold test'; and
• second, if that hurdle is passed, then the competing Convention rights must be balanced, applying the test of proportionality to each. This is known as the parallel analysis or 'balancing test'.

There are certain other issues that will be considered at both these stages. For example, the degree to which the invasion was trivial or serious and the question of whether the material was in the public domain. The court is required to apply an 'intense focus' on the facts of each case.

Overall, we can see that the RPO consultation proposals, if implemented, certainly add another layer to the already complex balancing exercise for clients when assessing the risks of embarking on litigation.

Impact on future proceedings if the proposals are adopted

It seems highly likely that the RPO will lead to satellite litigation regarding the release of requested documents to the media and/or legal bloggers. It is possible to resist such a request on the grounds that it is exorbitant, unfocussed or disproportionate. It is easy to envisage how uneasy the legal community will feel about complying with such requests, which are contrary to their traditional duty to keep clients’ affairs confidential, and also go against the grain of current data protection laws.

[1] The inclusion of eligible legal bloggers only came about as a result of a pilot scheme that started in October 2018 and became permanent in October 2021. To be an ‘eligible’ legal blogger, the blogger must be a qualified lawyer (either a practising family lawyer or an academic lawyer who works in a higher education institution or educational charity). They also need to confirm to the court that their attendance at a hearing is for journalistic, research or public legal educational purposes and that they have no personal interest in the proceedings and are not attending in the capacity of agent or instructed lawyer for any client.

Return to news headlines