That was the question that was put to me by another lawyer recently after I expressed astonishment that legal costs in the long-running Quan v Bray divorce had reached £7m.
“You know what doesn’t cost £7m?” I asked. “Mediation.”
“I wonder whether it’s possible to mediate without establishing the factual matrix and asset base” he replied.
On the face of it, it’s a very sensible question. When I talk to my clients – whether they are expecting to go to court or use another, less confrontational process – I always explain that there are two stages to getting to a financial settlement. First, you establish what there is, then you work out how to divide it. If you try to shortcut the first stage it won’t work, and you’ll only foster suspicion that you have something to hide.
But implicit within his question was the suggestion that only the court process could establish what the facts and assets were in this divorce, and that is simply not correct.
There are two advantages to using the court in circumstances where asset values are not clear. The first is that the court can compel someone to disclose documentation about the asset in question, or force a third party (such as the bank) to provide it. If you are dealing with someone who is deliberately trying to hide information then court is very often the only route.
But generally, actually, people do not try to hide assets or withhold information about its ownership or value. Often the real difficulty in divorces involving companies or valuable assets is that no-one can agree on the value to be put on that asset. That is not a new problem or an easy one to solve, and any forensic accountant will tell you that for many assets valuation is at least as much an art as it is a science.
Where court proceedings might be thought to help, therefore, is that having listened to both people’s arguments and hearing from an expert accountant or two, a judge will pick a figure for what that asset is worth. It might be right or wrong, it might match the view of one or other party or neither, but once that value has been decided it is set in stone and negotiations can move on.
So turning to the original question – how can you mediate if a judge hasn’t provided you with that one, single figure for the value of an asset so that you can decide how to divide your finances fairly?
The answer is that you do the same as most people when they are in the court process. You gather all the information you can need to understand the asset and value it as accurately as you can. You take advice from accountants or other experts. You acknowledge that there are a range of values that could reasonably be attributed to many assets and that you will never get a precise figure without selling it. You recognise that selling a business could deprive the family of its source of income and that dividing some assets is physically impossible or would destroy their worth. And then you make a commercial decision about the range of reasonable values which allow you to find a settlement that works for you financially, set against the risk of things not going your way if you had to go to court and let a judge decide at trial.
That is not a cop-out. That is not mediation failing where court proceedings would have succeeded. In 2017 less than 10% of financial settlements went to trial – more than 90% of divorcing couples negotiated their settlement without a judge having to determine the value of their assets. That includes the three-quarters of those who had started down the court route, but who agreed a settlement along the way. Many of those couples will have had lawyers who actively encouraged them to take a commercial view of the risks and avoid putting the decision-making power into a judge’s hands.
Mediating does not mean negotiating in the absence of information. There does not need to be any less rigour than going to court or negotiating through solicitors. It is wrong to suggest that you cannot negotiate without cast iron valuations of assets – people do it every day. Mediation is simply a process, but it is one that keeps the decision-making power in the hands of the separating couple. At Family Law Partners we believe that is exactly how it should be.
This article first appeared at Family Law Partners on 4 March 2019.