Experts in mediation – a case study

When dealing with the arrangements following separation, sometimes individuals need more than just the advice of a solicitor. Experts are frequently brought in to advise on specialist areas, such as taxation and pensions.  The court process is adversarial in nature, and as such can easily become a breeding ground for polarised views and distrust.   Expert opinions relied on by one party can be viewed with suspicion by the other, leading to lengthy (and costly) questions about, or submissions in respect of, those opinions.  Each person may feel it necessary to seek their own expert advice in the background…double the experts usually means double the costs, reducing the total resources left to be shared.

Part of my role as a mediator is to signpost my mediation clients towards support that will assist them in reaching a resolution. This may include helping them identify where they need expert input to answer their queries on specialist issues. In appropriate cases, experts can greatly assist mediation by participating in the mediation process and attending the meetings to provide projections, adjust figures, and answer questions. 

As a mediator, I frequently work with other professionals, offering a holistic mediation team to my clients to help them explore the options before them.  Julian Whight, a financial planner and pension analyst at Evelyn Partners, is one such expert intermediary - who has seen the benefit his involvement in mediation can offer a separating couple. 

Single Joint Expert reports have their place for appropriate cases, but in some, they can feel like you are using a sledgehammer to crack a nut, particularly where the clients and their advisors are trying to work together in a more collaborative way.

From my experience, providing guidance in the context of mediation has been far more effective than writing traditional SJE reports. I have found providing guidance in the context of mediation to be very effective, and sometimes more so than writing a traditional SJE report. In some cases, much of the detail provided in a traditional SJE pension report adds little value. To ask the SJE the most appropriate questions, the instructing solicitors might need information that will only come to light when they receive the SJE report and opportunities for the SJE to simplify the case, where appropriate, can be missed.

In my experience, being able to tailor the information provided to the parties’ degree of understanding and explain concepts verbally rather than write a long report, is far more helpful for the divorcing parties and drastically reduces the time costs.”

Case study

The below case study demonstrates how the involvement of a suitable expert advisor can save time and reduce costs, and open up new avenues of settlement.

Mr and Mrs P 

Mr and Mrs P were hoping to reach an agreement in respect of their finances following their decision to divorce.  The available pension funds were significant, and they both agreed that the pensions should be shared between them, but were unsure on how to do this.  They wanted to understand how to fairly split the pensions between them, following their divorce.

Rather than each consulting separate experts, they agreed in mediation to jointly instruct a financial planner and pension analyst to provide modelling and expert advice within the mediation process.  They both wanted to be able to speak directly with the expert, and felt it would be helpful to consider and adjust calculations when exploring proposals.

They considered the scope of instructions in mediation, focusing on what they wished to achieve.  

Mr and Mrs P wanted to consider a number of options, so they felt any agreement reached was fully informed, including pension sharing, offsetting and a mixture of the two. They were provided with calculations in advance and were able to ask all of their questions in the mediation sessions.

Within the mediation, the expert was able to talk Mr and Mrs P through the calculations and results, which Mr P in particular wanted to see and understand before agreeing any proposals.  Mr P felt assured that he had a greater understanding and an opportunity to ask questions, in particular about the assumptions used for the calculation and why higher risk investments were not included in the modelling. He gained an understanding as to why certain assumptions had been adopted and the range of opinion.

Mrs P was uninterested in the finer detail, but wanted to understand that the concepts were fair. She also saw that the approach was not changed to be based on Mr P’s assumptions, feeling reassured that it was an objective opinion.

Both Mr and Mrs P had confidence in the modelling and calculations, and were able to take this away from the mediation to consider. Following the meeting, they were provided with a short, simple summary.  The expert addressed the points they each said they would find helpful in bullet point form, offering an easily digestible explanation that they could then consider with their legal advisors.

Mr and Mrs P could have instructed separate experts, to advise them both individually, or instructed one joint expert, raising questions via correspondence.  By instructing one expert to advise in the mediation process, however, they saved a significant amount of time and the discussions felt more transparent.  Calculations were produced within two weeks of the instructions, and questions asked and other assumptions explored in a mediation the following week. Mrs P was able to talk through the level of risk and returns she might expect from her share of the pension and broader funds, from both a financial planning and investment management perspective, giving her confidence in settlement discussions. 

 

Reality testing and exploring outcomes 

Part of a mediator’s role is to reality test proposals with their clients.  With the expert’s input, Mr and Mrs P’s mediator was able to explore what they were aiming to achieve.   

Mr P had a defined benefit pension with a poor Cash Equivalent Value, which had fallen by 50% in the last two years, in addition to Defined Contribution funds.  Both Mr and Mrs P had assumed that they would need to share the Defined Contribution, in addition to Mrs P receiving a large share of the Defined Benefit.

A new avenue of settlement 

Following further exploration with the expert, it transpired that Mr P could (and was happy to) pay an additional £100,000 gross pension contribution, to reduce his income tax. Prior to mediation, he had ruled this out as he had thought it would generate a significant tax charge, which was in fact not the case.  The £100,000 gross pension contribution cost Mr P £55,000 net, once he reclaimed tax relief through self-assessment.

 

Outcome 

Both Mr and Mrs P agreed to apply a 100% Pension Sharing Order on the Defined Contribution element in Mrs P’s favour, after the pension contribution was paid.

Post pension sharing, Mrs P could withdraw 25% tax-free, and either pay it back to Mr P, or use it towards a re-housing fund, and Mr and Mrs P explored this element further in a later mediation before arriving at an overall agreement.

The additional pension funds in the SIPP meant that they could achieve parity of pensions without sharing the Defined Benefit pension, preserving the value.  Essentially, Mr and Mrs P were able to make the pot stretch further than they had first anticipated. 

 

The benefits

Had the expert instruction been explored in solicitor’s correspondence, the back and forth correspondence would have likely taken far longer, with greater associated costs.  By considering the scope of instructions and what they needed the expert to consider together in mediation, Mr and Mrs P were able to share this with their solicitors, streamlining the instruction process.  The expert was instructed within a week of the mediation, and Mr and Mrs P were able to maintain the momentum they had gained in the mediation discussions to date.

Expert reports obtained for the purpose of court proceedings must satisfy the court rules, leading to lengthy reports that clients can find difficult to digest.  In the above case example, the cost overall was lower than if Mr and Mrs P had jointly obtained a Pension on Divorce Expert (PODE) report.  Mr and Mrs P had also discussed the remit of the expert’s initial work and considered what would be helpful to the mediation discussions, narrowing the scope of instruction to focus on the outcomes they wished to achieve, reducing the scope of work and therefore cost.  They felt comfortable with this approach, knowing that they would have the opportunity to ask questions directly to the expert, and that their questions did not need to be limited to clarifications only (as is the case with court appointed experts).

The modelling and calculations provided by the expert were confidential and subject to mediation privilege, as they reflected possible proposals that were being explored.  Both Mr and Mrs P could explore options they perhaps would not have otherwise considered, knowing that this could not be referred to outside of the mediation.  Having this “safety net” of privilege and confidentiality can really open up minds to other avenues of settlement.

Sometimes, clients already have in place trusted expert advisors and, providing everyone agrees, there is no reason why this advisor could not assist the mediation process. 

Experts are not always necessary in mediation. Your mediator will be able to discuss where expert support may be needed, and signpost you to suitable resources.  If you have solicitors advising you in the background, they too will be able to suggest experts who may be able to assist.  Mediation should provide a wholistic approach, such that both clients feel they are fully equipped to explore proposals with a view to reaching an agreement that works for both of them and their family beyond the separation.

 

 

further information

If you have any questions, please contact Stacey Nevin in the Family team.

 

about the author

Stacey is a Partner in the family team. She advises UK and international clients on matters involving all aspects of family law, in particular complex financial issues and private children cases.  Stacey is also a mediator and works with couples to help them resolve practical and legal issues arising from their separation without the need to attend court.