Is an FDR hearing a replacement for mediation?

Whilst long established in the context of family law, financial dispute resolution hearings (known as a “FDR”) is relatively new to commercial practitioners.

What is an FDR?

An FDR is a hearing before a judge where the judge may express a view on the merits of the case, in an attempt to encourage the parties to engage in productive settlement discussions. It is therefore a process that is intended to assist the parties in resolving their disputes.

Uniquely in the context of court hearings, an FDR is conducted on a without prejudice basis, meaning that the judges’ comments, the submissions made by the parties and the papers submitted in support of the FDR application would never be put before the trial judge. Evidently, the FDR judge would not be able to conduct the trial, and so a recusal notice is also placed on the court file, so that the FDR judge plays no further role in the management and ultimate determination of the case.

Typically, an FDR would last a day, and the structure would involve the parties making oral submissions to the judge, who may then give a view on the case. The parties would then break into their own rooms to negotiate but in the context of the judges comments. In theory, the parties can then return to the judge during the day to give updates, seek guidance and, hopefully, have their settlement approved.

In advance, the parties would submit such papers as they believed would be relevant for the judge and might also submit written submissions (perhaps more like a mediation statement than a skeleton argument).

What are the differences with mediation?

The key difference is that a mediation is purely facilitative, whereas an FDR is both facilitative and evaluative. Therefore, whilst a mediator acting properly should only ever try and encourage the parties to settle on their own terms, an FDR judge can do that but also can express a view on the merits of the claim, in the hope that that assists the parties in determining a sensible outcome. To that extent it is rather like a hybrid between an early neutral evaluation and a mediation.

The fact that that view is coming from a judge (who will be a commercial specialist) will mean that that evaluative element of the process could have a real impact on the parties position and might therefore lead to a different outcome than one that might be achieved in a negotiated settlement.

Can an FDR be imposed on the parties?

Historically, it was thought that the engagement in an FDR (or indeed, any form of non-court based dispute resolution) would be wholly voluntary. However, Churchill v Merthyr Tydfil Borough Council and others [2023] EWCA Civ 1416  gave short shrift to that concept. In that case, the Master of the Rolls held that the court had the power to stay proceedings and order the parties to engage in non court based dispute resolution (which would include an FDR). Certainly, we have had recent instances where, at the case management stage, the parties have been directed towards FDR as a possible means of resolving the dispute.

In addition, the court has an express power to order an FDR, as a part of its discretionary case management powers. Therefore, the court can order for an FDR to take place on a parties application, or can make it mandatory on an order of its own motion.

Given the current position of the courts on non court based dispute resolution generally, one would imagine that any application for an FDR would be met with some considerable judicial sympathy; it is likely that an order would be granted.

When might an FDR work?

FDR might be effective in the following circumstances:-

1. Where one of the parties is a lay litigant, and therefore the authority of a judge might be influential;
2. Where there has been a failed mediation – an FDR might be more effective than trying a second mediation;
3. Where one party is refusing to engage with the merits of their case, your case or are simply being unrealistic or even unreasonable. The FDR judges ability to give a view on the merits of the case might unblock that impasse;
4. Where costs are an issue. Currently, at least, HMCTS is not charging a fee for the judges time, and also appears willing to give the parties court facilities (such as meeting rooms) for the duration of the process at no further cost. Be warned though that those facilities will become unavailable when the court building closes and are unlikely to be as comfortable as those that would be available at a law firms office, or at the IDRC in Central London.

What are the disadvantages of FDR when compared to mediation?

The processes are in many ways similar – both are without prejudice and involve elements of facilitation by the mediator or FDR judge. However, choice of the process will have to be taken with care, for the following reasons:-

1. You have no choice over the judge allocated to your FDR (the court office chooses for you) whereas the parties have some choice over the mediator that they use;
2. You lose a degree of control – in a mediation the parties have absolute control over the direction of travel, whereas an FDR will be led by the judge;
3. Be careful of what you wish for – the judges evaluation of the case might not be what you want to hear and once it has been delivered it cannot be unheard (despite the without prejudice nature of the process);
4. The judge might get it wrong, particularly bearing in mind the limited papers/evidence/submissions that will be available to the court when compared to that available at trial. Because of the without prejudice nature of the process, there would be no way of challenging a judicial view that was not correct;
5. A judge might not be willing to give a view on the merits, particularly where the case is heavily fact sensitive. Therefore, the process would have been no better than a mediation;
6. An FDR might lead to a more limited outcome (one bound up in legal remedies) than would be possible at a mediation, where the parties can talk about and agree anything that makes commercial sense.

Conclusion

FDR certainly has its place, and we can see it being deployed more frequently in the context of commercial work in the light of Churchill and on the basis of judges dealing with case management issues being encouraging of it.

The choice of whether to go down the route of an FDR over a mediation will be one that has to be taken with great care, and the flexibility of the mediation process may sway many parties towards that as their preference. Therefore, it is unlikely that FDR’s are a replacement for mediations; however they are undoubtedly a powerful device to be deployed as a part of an overall negotiating strategy.

For more information, please contact Peter Brewer, Partner in our commercial litigation team.

Posted: 25 July 2024