Small Money Cases: Managing Financial Remedies Cases Where There Is Not Enough to Go Round

From possible insolvency to arguments about add-back, small money cases raise many of the same issues as big money cases yet are often the hardest fought and difficult to settle at the Financial Dispute Resolution (FDR) appointment. The difference is simply that there is not enough to go round. The cost of litigating issues weighs far more heavily on the outcome and they need constant and robust case management.

Small money cases are often the most difficult to manage. Issues such as housing needs, debts, and disclosure (or the lack of it) leave clients feeling a deep sense of injustice and wanting to litigate every point. Unfortunately, fewer assets do not mean that the law becomes simpler or easier, nor do the emotions of the parties become less intense. The stakes are higher, especially when the outcome could affect clients’ ability to meet their housing needs, meet their outgoings and maintain some financial independence.

Whilst the legal and procedural demands can look similar to those in cases involving substantial wealth, the difficulty for practitioners is simply that the resources available to meet those demands are considerably limited. There may be little equity in the family home, and significant liabilities may have been built up during the relationship or by one spouse after separation. Yet the court must ensure that both parties’ needs are met, so far as possible, from what is available. It is not just about identifying the correct outcome but also about achieving what is fair and workable for all involved without incurring significant costs getting there.

Below, I set out some practical steps practitioners can take to keep small money cases proportionate, manage clients’ expectations and avoid the all too familiar trap of spending money that neither party can afford to lose or, as they say in the North East, ‘throwing good money after bad’.

Be realistic about the asset pool

Do not be tempted to approach a small money case in the same way as any other financial remedy case. The steps are familiar to us all: collate disclosure, identify the assets and liabilities, consider the statutory framework and then consider settlement, or a final hearing if the case does not settle. However, when we focus on the process, we may lose sight of the fact that the cost of that process may be disproportionate to the parties’ available resources.

The first task should be to identify, as early and as accurately as possible, what there is to share. What is the real equity? What is the outstanding mortgage? Which debts are secured and which are unsecured? What are the pensions, the parties’ incomes and earning capacities, and the costs of sale or transfer? Can one party buy out the other’s interest? Practitioners should resist allowing the case to become preoccupied with individual assets in isolation. The question to ask is not who should receive a particular asset, but what the overall financial position will be once any order is implemented.

Prepare a schedule of assets and liabilities early on, start using it from the voluntary disclosure stage, as this is an essential tool. Identify what is agreed, what remains in dispute and whether any disputed issues require further investigation. If the parties are apart by a small sum, ask whether it will make a material difference to the outcome and what it will cost to resolve. Is that cost proportionate to the size of the asset pool?

I am not suggesting that practitioners cut corners with disclosure or abandon a thorough and proper analysis of the case. However, it is even more important to identify early the issues that matter and concentrate resources on them. There is no logical reason for clients to spend £20,000–£30,000 on costs when the asset pool is, for example, £60,000.

Managing expectations

This is perhaps one of the most difficult things to do when emotions are high; however, as practitioners, it is important that we have frank conversations with clients from the outset about what is realistic.

Every client we serve has their own idea of fairness. These ideas are often influenced by what they brought to the marriage, who was the homemaker, who was the breadwinner, who has the pension and why the marriage broke down. It is easier to start these conversations at the outset than after significant costs have been incurred. Clients should understand the strengths and weaknesses of their case, the powers of the court, the range of possible outcomes and the consequences of maintaining a particular stance.

If a client wishes to remain in the former matrimonial home and that is an unrealistic prospect, be clear about it and explore all the alternatives with them. It is not about persuading clients to accept an unfavourable settlement, but about ensuring that they can make an informed and proportionate decision with an understanding of all the alternatives and what is at stake.

Keep legal costs under review

Costs can be erosive in small money cases. Arguments can lead to extensive correspondence, requests for information, possible valuations and expert involvement, followed by lengthy negotiations. Both parties then having spent far more money than they should have done on resolving those issues.

One of the key skills I learned as a trainee solicitor was to keep costs under constant review. It was a lesson well learned. Costs should be treated as a live issue throughout the case, with us asking ourselves at every stage:

1. What is the issue in dispute?
2. How much will it cost the parties to resolve it?
3. Is the benefit proportionate to the costs to be expended?

The answers should inform the case management decision.

Costs estimates should be realistic and updated as circumstances change. A further point is to ensure that clients are aware, and regularly reminded, that the costs incurred are not necessarily recoverable even if they succeed on a particular point.

NCDR

Make NCDR part of the conversation and strategy of the case. Ensure clients engage properly in the MIAM process. It should not be seen merely as a procedural hurdle to be cleared before litigation. It has an important role to play in all financial remedy cases, however small or large the asset pool. There are many advantages to this: it is not only cost-effective for clients, but it also gives them more control over their own case and its outcome.

The process the parties choose should be one that suits their particular circumstances. They must have sufficient information for the process to work and to be in a position to negotiate sensibly. Keep under review any power imbalance, domestic abuse and other circumstances that could affect safe and meaningful participation.

A reminder that unreasonable behaviour is not necessarily costs-free

We all have clients who are determined to fight every point. You request disclosure and they do not provide it, or it is incomplete; offers are received but they will not accept them and cannot explain their objection to you; correspondence becomes hostile and their position becomes unreasonable. It is in this kind of case that costs may become relevant, but not all poor conduct will lead automatically to a costs order.

Whilst the starting point under FPR 28.3 is that the court will not generally make an order requiring one party to pay the costs of the other, the court has the power to depart from this where a party’s conduct in relation to the proceedings justifies it.

Offers, and how they are treated, are important. Consider the costs implications of making clear and properly considered proposals for settlement at the appropriate stage. If one party refuses a reasonable offer and does not achieve a better outcome than that offered, they may face questions about the reasonableness of their conduct and the costs generated by their decision.

Practitioners must ensure that clients understand that the court is not simply punishing a party for behaving badly or taking an unreasonable stance; rather, the focus is on conduct relevant to the proceedings and the application of costs principles. In small money cases, this is very important advice: clients must understand that proceedings are not a route to vindication.

Small money cases require realistic advice and a clear focus on what can be argued and what is not worth arguing. The emotional burden on the parties and the complexity of the issues may be no less than in a case involving significant wealth, but the consequences of disproportionate litigation can be more damaging for all involved.

The aim is not to secure the best outcome for one party, but to achieve a fair outcome that is workable and proportionate and leaves both parties in the best financial position available to them in the circumstances of the case.