mediation

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Another (austerity) budget

Tax policy to incentivise mediation

I have often wondered, when sending my clients their legal bills, how on earth they can afford my services?  In short, how can they afford access to justice?  The cost charged for the work  carried out will look imposing enough.  But the killer touch is when VAT at 20% is added to the bill.  A stiff bill becomes a….really large bill.  This is important because most legal aid for family work has now been kicked into touch.  “Access to justice” is no longer a slightly dry form of words bandied around by academics or politicians.  It is real and it affects us all because it you can’t afford to pay for it, you ain’t getting it.

When providing costs estimates to clients at a first consultation the figure arrived at will be discussed and agreed.  A client will be encouraged to help themselves as much as possible, or use my online platform for document production: anything to keep the cost down.  So an estimate is arrived at and the client thinks: OK, I’d rather not be using my money to pay legal bills but I need the help and I can live with that likely cost.  Then comes the point when you have to add in VAT at 20%.  The client’s face always drops.  (Mine would in their position).  Adding in VAT at 20% has just broken the bank.  There is access to justice – you just have to clear the VAT hurdle first.

This post was first created as a draft over a year ago and then put in mothballs.  I’ve brushed off the cobwebs and published it now,  prompted by an article in The Law Society Gazette about Belgian lawyers resisting the imposition of VAT on their bills.  Not the sexiest of links I’ve stuck in a post but try to bear with me.

The problem with VAT

The imposition of VAT on legal services does not create a level playing field.  Because:

  • If a VAT registered company needs legal services (and think of the millions spent by large corporates every year on their legal needs) they can reclaim the VAT they have paid out so it is cost neutral for them.  Sweet.  So spend all you like, lads, on that latest merger.
  • If you are an individual you pay 20% VAT on top of your legal bills and can’t reclaim it from anyone.  Harsh.  So you can’t afford to get legal advice on access to your kids or financial agreements to keep a roof over your head, after all.
  • Some of my clients are individuals and don’t pay a penny of VAT on their bills.  (No way!)  Yes way.   Because they live abroad in non-EU member states and therefore don’t have to pay VAT on legal services even though the legal services are being conducted in the UK.  Fortunate for some.

I mean, I understand there has been (still is) a recession: the government needs these tax receipts. But access to justice should mean something: the government has taken the axe to civil legal aid and promoted mediation.  Unfortunately, the government’s championing of mediation was a fig leaf to distract from the legal aid cuts.  The catastrophic fall in mediation referrals is testament to the fact that the presentation of mediation as a panacea in family law work was political window-dressing rather than well-considered, appropriately resourced social policy.

If the government is serious about the promotion of mediation, and is equally serious about preserving access to justice, then I have a suggestion by which it can redeem itself, ever so slightly. My suggestion focuses on family law.

The solution

We all know that a blanket tax, like VAT, penalises the less well-off.  We also know that the government keeps banging on about mediation whilst doing nothing (in resource or policy terms) to promote its take-up.  Talking of policy, they really need to catch up with the fact that there are other options available to keep people out of the courts as well, such as collaborative law and family arbitration.  We know, despite the political window dressing, that the withdrawal  of civil legal aid has directly and adversely impacted upon  many individuals’ rights of access to justice – they can’t afford it – full stop.

So, here is my suggestion to help the government climb halfway out of the hole of its own making.

  1. Spend a few quid telling the public that legal aid is still available for mediation (on a means tested basis);
  2. Permit mediators and lawyer/mediators to reduce the rate of VAT on their services to 5%;
  3. Permit collaborative lawyers to reduce the rate of VAT on their services to 10%.  Family consultants and financial neutrals assisting the parties in the collaborative process be allowed to do the same.
  4. Impose a reduced rate of VAT at 15% on legal advice offered outside mediation or collaborative law.  This would apply to family arbitration, and work conducted under the pre-action protocol (attempting via solicitor-led negotiation to resolve matters without recourse to court proceedings).
  5. Impose 20% VAT on legal services from the moment one of the parties issues contested legal proceedings.  An application for a consent order (so not really contested) would attract VAT at the rate of 5% if it follows on from mediation and 10% if it arises following the collaborative process.

In my humble opinion, I think this is a win/win scenario.  The lawyers don’t get a penny extra, so the Daily Mail won’t get its knickers in a twist.  It will make legal services  (access to justice) more affordable.  It will incentivise individuals to choose dispute resolution models such as mediation and collaborative law that objectively produce better outcomes at lower cost.  The reduction in VAT receipts will be offset (I’m guessing) by the drop in numbers using the (expensive to maintain) family court system and perhaps even reverse the increase in litigants in person that is now threatening the bring the courts grinding to a halt.  Timely legal advice can prevent a host of problems later on and I don’t know how you even begin to count the cost in developmental and emotional terms for those kids whose parents cannot stop warring without legal intervention, or who don’t receive maintenance or the opportunity to develop a relationship with a parent who has been excluded from their lives.

Worth a punt?

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I put up a post recently about Dispute Resolution Week: please read it here.   This takes place, as I type, in various forms and guises across the country all this week.  The aim: to promote alternatives to the adversarial court process for people with family law disputes.

Resolution is the organisation behind the initiative, driven in many different ways by the members of Resolution: lawyers, mediators, collaborative practitioners and other professionals who are committed to keeping families out of court.

I’ve posted a video from Resolution below telling you all about the Dispute Resolution Week initiative.

I’ve got my hands on some great video content dealing with collaborative law  courtesy of my local collaborative group called Brightpod and I’ll post that just as soon as I can.

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Family dispute resolution week divorce finance toolkit

BECAUSE ONE SIZE DOESN’T FIT ALL

I want to say a few words about Family Dispute Resolution Week.  I was in Nottingham a few weeks ago to attend Resolution’s Dispute Resolution Conference.  It’s the third annual conference in a row and I keep going back because I meet lawyers, mediators and collaborative practitioners who are utterly committed to pushing the boundaries of their own practices to provide better outcomes for families.  This usually means keeping families out of the court process. So I learn a lot and I come away feeling inspired.  Which is just as well when having to deal with the obstacles that get in the way of real change.  Let me refer to the usual suspects.

The usual suspects

It is not easy to push boundaries in any professional practice.  Here are a few of the obstacles in the way of pushing family dispute resolution:

  • Public ignorance.  People simply don’t know enough about the dispute resolution options that are available.  Resolution has been pushing the options for many years and any reader who is unaware of the rich resources on the Resolution website needs to hop over there pretty quickly and bookmark it for future, constant reference.
  • Professional indifference. In a sense, lawyers are the gatekeepers to the dispute resolution options as far as the public are concerned.  This is one of the reasons that the loss of 1,000 high street legal firms in the last 12 months caused the take-up of mediation to be sliced in half.  But I still think the lawyers who are left could do a better job of ‘selling’ the merits of mediation, collaborative law or (the new kid on the block) arbitration. Perhaps some lawyers are worried about turning away business if they cannot offer mediation or the collaborative discipline.  Well, call me old-fashioned but lawyers should put the interests of their clients first.  So, if a family breakdown is crying out for dispute resolution instead of the family court trial by combat then the lawyers need to pack their clients off to a mediator or a collaborative practitioner.  Better still, they should get trained up themselves to be able to offer this resource to their clients.
  • Political ideology.  The UK government ‘discovered’ mediation relatively recently, in the same way that European settlers, wading out of the  American surf 450 years ago, ‘discovered’ the New World.  It had always been there.  But this new-found zeal for mediation unfortunately coincided with the financial meltdown: the perfect backdrop against which to attack legal aid, a pillar of the post-war welfare settlement between state and citizens.  Even better, this astonishing piece of vandalism against the body politic would serve to stick it hard and fast to two despised constituencies: the ‘undeserving’ poor and the fat cat lawyers.  In short: get rid of as much family legal aid as possible and force the low income  punters to run from the lawyers and into the welcoming arms of the army of mediators ready to take their place.  Yeah, that worked really well.  Hands up, Mr Grayling, didn’t you foresee that all the punters would run off to the courts as litigants in person putting a strain upon the court services whose budgets had already been slashed?

Better news: Family Dispute Resolution Week

Well, I like mediation anyway: always happy to get my clients off to see a mediator.  But mediation is not the only gig in town. You should check out collaborative law and family arbitration on the Resolution website.  How can you find out more?  Resolution, the national organisation of family lawyers is promoting the second …

Family Dispute Resolution Week

from the 25th to the 29th November 2013

 

Did you get that?   This means Resolution members throughout the country will be hosting events and trying to gain publicity for the alternatives to the court process.  In the main this means promoting the benefits of Mediation, the collaborative law process and Arbitration.  You may hear features on the radio, see articles in the local press or even bump into smiling faces at your local court handing out flyers and lending a sympathetic ear.

My bag is collaborative law where the parties sign an agreement not to go to court and the lawyers work with each other (instead of against each other) in the interest of the whole family.  Collaborative lawyers form local groups to share experience and improve practice.  I belong to two pods in the Brighton area: Sussex Family Solutions and Brightpod.  We will be promoting the benefits of family dispute resolution to the wider public.  Twitter users should be able to search for local developments using #keepitoutofcourt closer to the time.  And why not follow @ResFamilyLaw why you’re at it

Divorce Finance Toolkit

Mr Grayling – our man at the Ministry

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you can still get legal aid for mediation

You can still get legal aid for mediation

 

I reminded my readers not so long back that you can still get legal aid for mediation in family law cases.  Legal aid in family law has been cut to the bone.

The government took a big axe to civil legal aid in April this year so you might think they would at least provide some publicity for those areas of legal aid still left, battered and bruised though they may be.  Well, I’m sure the Ministry of Justice is doing a grand job.  So grand it has completely passed me by (and I am the sort of person looking out for these crumbs of comfort from the caring sharing coalition government.

Fortunate then that I came across the truly grand poster prepared by the Legal Aid Practitioners Group (LAPG).  My interest is in legal aid in family law and the poster covers that. But fair do’s to the CPAG for listing every last circumstance in which civil legal aid might still be available.  Good on yer.

 

Click on the link below to see the poster.

 

LAPG Legal Aid poster

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you can still get legal aid for mediation

The government has been pushing mediation as the cure-all answer to its decision to end 60 years of legal aid for most family law work.  Everyone can mediate; who needs family lawyers, seemed to be the rationale.  Get rid of expensive legal aid, put lots of  money grabbing family lawyers out of work and mediation will deliver peace, love and understanding.

Right…

Well, the perfect storm in the world of legal services has continued unabated.  Locally, I am aware of dozens of family law solicitors and legal executives who have lost their jobs as a direct result of the withdrawal of legal aid.  I hear that close to 1,000 high street solicitors firms have closed over the last year alone.  In this respect, the government has succeeded: better still, there are no votes lost in casting lawyers onto the scrapheap.

So, with everything going to plan and all those annoying lawyers out of the picture, the mediation take-up will have rocketed, right?  Completely off the chart, right?  Right…?

Oh dear.  Ministry of Justice figures, as reported in The Guardian and other papers, show that the number of couples accessing mediation to sort out their family law problems has dropped by 47% since April – precisely the time when the legal aid cuts were introduced.  That’s nearly a 50% drop-off in 6 months.  How embarrassing for Mr Grayling, the big cheese at the Ministry of Justice.  This is the sort of policy car-crash that should have a resignation letter winging its way to the Prime Minister:

Dear Dave,

I just want to say how proud I am to have served in your cabinet.  We are responsible for some wonderful achievements and I am sure that history will judge us kindly.  However, it seems that I have made a bit of a hash with the meditation mediation wotsit.  In all fairness, I was only doing what you and George told me to do.  You said it would be all right to get rid of legal aid for family work.  Get rid of the lawyers and pack everyone off to mediation.  Bing, bang bosh, all sorted.  That’s what we told all the nay-sayers.

Well, the silly sods haven’t been going to mediation, have they?  They’ve been clogging up the bloody courts as litigants in person.  Then, some trouble maker only went and put in a freedom of information request.  (For God’s sake, can’t Theresa kick these requests into touch when she kills off the Human Rights Act?)  Anyway,  the ministry suits had to admit that mediation has dropped by half in less than a year.  I know, I know, I was blushing like a nun in a knocking shop.

Funny thing is, it turns out that it was the lawyers we have just kicked out who were making the referrals to mediation in the first place!  Who knew…?   Well, the Law Society and Bar Council did warn us that the sky would fall in but they would say that wouldn’t they?  How was I supposed to know this would happen?  I mean, I’m not a lawyer am I?  In fact, I’m the first non-lawyer in charge of lawyer-type things for nearly 400 years, which I have to say, was a master stroke of yours.  Bloody genius.

To be absolutely straight with you, I’ve never really got my melon around this Rule of Law thing.  Apparently, it’s like, really, really important.  All those lawyers, bigwigs and busybodies keep saying me and Theresa are taking the piss.  We show ‘scant regard’, or ‘contempt’ for constitutional checks and balances.  I don’t even understand what they’re getting their undercrackers in a twist about.  Why can’t they use simple language I’d understand?

So, I’ll be off then.  Spend some time with the family and all that.  Give it 6 months to blow over and then give me a shout.  Quite fancy Health.  Just sayin’…  See you at the next country sup.

Back in the real world, I just want to end by reminding any visitors to this blog that family mediation is still available on Legal Aid for those people adjudged financially eligible.  Good luck.

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Funding options in the absence of legal aid for family law

The forecast is dark clouds but it may become clearer

Funding options in the absence of legal aid for family law will be one of the more common concerns in my virtual postbag.  Legal Aid has largely disappeared for those wanting help from solicitors, legal executives or barristers who specialise in family law.  I consider the removal of legal aid for family law to be a terrible mistake.  The costs savings that will be trumpeted about by various ministers will be offset by the increased costs of other government departments such as the Ministry of Justice who will see further increases in Litigants in Person (LIPS).  A number of judges are now sounding the alarm bells about the delays (which means costs) in the court case lists attributed to LIPS turning up unprepared or unable to progress the case.

My purpose here is to list what limited provision remains for legal aid for family law matters and the funding options or alternatives there may be out there.

Legal Aid (remains of the day)

You can still obtain legal aid (provided you qualify on capital and income) in the following scenarios:

  1. If you are a victim of domestic violence.  You must be able to produce evidence of the domestic violence to your solicitor.
  2. If you have a child who is at risk of abuse from a partner.  Again, you must be able to give your solicitor evidence of the abuse.  Guidance has been published on the type of evidence at the Ministry of Justice website.
  3. If you and your partner agree to go to mediation.  You can also get some limited help from a solicitor outside the mediation process such as the drawing up of a consent order if the mediation is successful.  Unfortunately, mediation is not going to work for everyone.

Funding options in the absence of legal aid for family law

So what if you can’t get legal aid for family law?  What are the options?  In no particular order:

  1. Are you a member of a union?  Funding assistance may be available for members.
  2. Are you covered for legal assistance under your domestic household insurance?  Check the policy terms.
  3. Litigation loan funding.  There are specialist providers and your family lawyer should have the contacts to assess whether you can use such a facility.  However, you will pay interest on the loan and, ultimately, you will need some capital assets (such as property) in order to pay off the loan at the end of the case.
  4. Commercial lending from banks.  Unsecured loans generally available on the high street or online.
  5. Credit cards.  Another source of legal fees funding if all other commercial avenues are exhausted.  Fine in the short-term if the borrowing can be cleared in the settlement.
  6. Cashing in any existing investments.  There may be some savings accounts or ISA’s that could be utilised but do discuss with a lawyer first or an independent financial adviser.  Works if you have control over your own assets but not as good if the assets are joint and your partner wants to control your ability to get advice.
  7. Borrowing off family and friends.  More common than you might think. But ensure it is a ‘hard loan’ – one that must be paid back and is evidenced in writing.  If the loan is seen as ‘soft’ by your partner’s lawyers, they may argue it is not to be paid back and therefore you cannot count it in as a liability when deciding finances.
  8. A ‘Sear Tooth’ agreement.  This is a form of deed with your solicitors.  They will carry out the work for you if they believe that your settlement will be a reasonable one but the deed secures the costs of the legal fees against the settlement.  The usual scenario is that if a house is sold your lawyers recover their costs from the sale plus interest.  But the reality is that firms will only carry a handful of such arrangements at any one time.  They are risky for the lawyers because the settlement or court order may not be what was expected.   And there can be huge delays before the solicitors get paid even though they have no choice but to pay significant overheads each month such as staff wages and rent.
  9. A voluntary payment from your spouse or partner towards your legal fees.  Not as daft or improbable as it may sound.  Your lawyer picks up the ‘phone to your partner’s lawyer and says: “let’s be sensible, we don’t want to fight in court, give us some money to cover fees so we can explore a quick resolution.  We will give you a credit for it in the settlement”.  If the lawyers are sensible on both sides this can be quick and cost-effective.
  10. In the case of divorce or civil partnership financial orders: applying to the court for an order that your spouse or civil partner pays your legal fees. This used to be called an A v A application.  If you are married or a civil partner you can apply for interim financial help towards your outgoings called maintenance pending suit.  Part of this application could be for a ‘costs allowance’ to help you with your legal fees.  Various tests have to be satisfied (such as your inability to get commercial funding, legal aid or a Sear Tooth agreement with your solicitors).  A recent law change (which is not yet in force but which is imminent) will abolish the ‘cost allowance’ aspect and replace it with something called a Legal Services Order which will also go to meeting your legal fees.  Additionally, the court can provide an interim order for sale of real or personal property to provide the funds, if necessary, to meet the Legal Services Order.  (For years, matrimonial lawyers have argued that spouses should be able to apply for interim lump sum orders and interim orders for sale instead of having to wait until the end of a case. The power appears to have arrived at last, but strictly defined to only provide assistance with legal fees under the Legal Services Order).
  11. In the case of financial claims against your unmarried ex-partner on behalf of children under Schedule 1 of the Children Act 1989.  It is possible to seek interim lump sums on account of legal costs but certain tests have to be satisfied.

And a word about fixed fees.

I think that about wraps it up.  Remember that you must still ensure that you have a full discussion with your lawyer about how you can fund your case.  Make sure you ask for a written estimate of costs – or bands of costs depending upon likely outcomes.  Ask for fixed fee quotes which may be appropriate in some proceedings.  I keep reading various surveys that tell me the public demands fixed fees for all types of family work.

The public should be careful what it wishes for.  Fixed fees can be a good solution for some clients.  But guess what?  Sticking to an hourly rate with a carefully agreed plan of the work the solicitor will do and the work the client will carry out, can be cheaper. This is fashionably called unbundling nowadays. It is all about having a proper discussion at the start of the case.  I talk through budgeting plans and division of responsibility and work out whether a fixed fee or hourly rate is better for my client in every single case I take on. I fully explore all funding options.  And I put it in writing to them.

I think when people talk about fixed fees they want certainty about cost.  I absolutely understand that.  But I also think that some commentators are talking about fixed fees when they are actually meaning cheap fees.  And I suspect there will be a drive from some of the new entrants to family law – like Co-operative Legal Services – to offer lower fixed fees (like loss leaders) to bring in business.  That approach will only ever work on a commoditised basis.  This means the work may be dealt with by less qualified and less experienced staff.   Like my grandmother (and yours) always said: you get what you pay for.  That’s always been true.  So if you want to fly with Fixed Fee Family Airways, be my guest.  It may be fine for you but only make that decision after weighing up all the options.

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Divorce Finance Toolkit

I received an interesting query from a gentleman who is paying periodical payments to his ex-wife following his divorce but has found the downturn in the economy has really impacted upon his ability to sustain the payments.

Tom (not his real name) had come across my blog and then asked:

I was divorced from my wife following 40 years of marriage. I am a ******** working broadly within the commercial/business industry but these days only for a group of small companies directly or indirectly involved in property. Since the valuation of my assets took place pre – recession in late 2006 I have seen an unrelenting reduction in the value of any business interests I still have. I am currently retained on a contract expiring no later than May next year, following which I will be 66 with no realistic chance of securing appropriate work. My ex secured the vast majority of whatever capital wealth I had as well as very substantial maintenance payments in perpetuity on the assumption the economy would continue to grow, which patently it hasn’t!. My gross income will have dimished to the point where I have my state pension & a small private pension all of which is totally swallowed up by the maintenance, rendering me insolvent. I believe I need to secure a discharge of the maintenance order due to changed circumstances by reference to Section 32 of the Matrimonial Causes Act. Do you agree? Suffice to say there are many other liablities which would also weigh in the balance, I believe.

Tom was clearly in a very difficult position.  My response was as follows:

I sympathise with your situation.  The effects of the recession can fall unfairly on one party after a divorce and final order dealing with finances.  Certain capital assets have fallen significantly in value, sometimes just days after the court have made a capital order.  However, recent cases have shown that the court will not revisit the capital element of an order (in effect allowing an appeal out of time) even in extreme examples of capital values falling off a cliff.

I think, from what you say, that your ex-wife has a joint lives maintenance order.  That can be discharged altogether, varied upwards or downwards, or even capitalised to provide a final clean break, under section 31 of the MCA 1973.  You refer to section 32, which provides that enforcement of arrears of maintenance cannot be pursued without the leave of the court.

If your income situation has worsened to the extent that you are really struggling to pay the spousal maintenance then I would consider contacting your ex-wife to explain the difficulties and suggest that you both attend mediation to address the difficulty and hopefully agree a reduced amount of maintenance.  If you are shortly to be reliant upon pension income alone, depressing your income further, it may be appropriate to seek a complete discharge of the maintenance or even to convert to a nominal maintenance order of 5p per annum (it still remains an order that could be varied upwards if your circumstances changed for the better) but you would not effectively pay any maintnenance under a nominal order.

I do not know what your ex-wife’s pension position is and whether you also dealt with a pension split prior to the divorce.  But it sounds as if this will be a straightforward comparison of your income, your ex-wife’s income, including her maintenance, and a discussion as to whether she can reduce the maintenance and adjust to that new level without undue hardship.  The liabilities situation for both of you will be relevant.  The court’s discretion as to the circumstances it can take into account are virtually unfettered and can include, by way of example, an ex-wife’s cohabitation with a new partner.

I take it that there are no deferred lump sum payments by instalments or pension attachment lump sum orders not due to take effect until after your retirement, as otherwise, the court does have power under section 31 to consider a variation of these deferred capital orders as well as the income orders like maintenance.

A variation of maintenance can be very expensive in legal fees for very little benefit so I really would urge you to attempt mediation with your ex-wife.  If she does not agree then you may have to get initial legal advice but then consider applying to court yourself to try to vary the maintenance order.  Just check to see if your income is such that you may be eligible for legal aid.

Otherwise, check your domestic insurance to see if you are covered for legal advice assistance, or covered through the terms of any professional memberships.

I am grateful to Tom for allowing me to publish his query and my reply.  As I pointed out to Tom, my response could not in any way constitute legal advice – he really needed to obtain his own legal guidance.  But, for others who might find themselves in a similar position to Tom, I can only urge that any attempt to vary spousal periodical payments is tacked by a civilised discussion, aided if necessary by the assistance of a mediator. Unless the amount of the spousal periodical payments is very significant, the costs of the legal fees fighting a variation through the courts is very likely to be disproportionate.

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Many people are unsure what type of process would best suit them when considering divorce or separation.  The days of running off to the court to issue a divorce application before your spouse are long gone (well, mostly).  Many clients would prefer to keep the process out of court unless it can be helped and, sometimes, involving the court is the only option.

Terms like ‘mediation’ or ‘collaborative law’ are chucked at prospective clients by lawyers in an information blizzard at a first meeting.

Divorce Finance Toolkit thinks a picture (or a diagram) paints a thousand words and therefore offers the following excellent example from Resolution which can be found here.  It is worthwhile considering each of the options open to you carefully.  Most family lawyers will send you a comprehensive letter following a first consultation which should set out the options for you and perhaps discuss the pros and cons of each model in view of your own particular family circumstances.

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