When couples separate there is often uncertainty and emotions are running high, making it difficult to focus on strategy, calculations and future needs. This can lead to mistakes being made in the settlement process. In this article, our family partner Terrence Trainor outlines how to avoid mistakes when negotiating a divorce settlement and what to keep in mind during negotiations.
1. Tone The ‘no fault’ divorce legislation passed last year has helped separating couples enormously, giving them time to reflect without casting fault on one party. Communications between couples should be conciliatory and constructive, including any solicitors’ correspondence. There may be circumstances that require a firm and robust approach, however, when correspondence or interactions become ‘heated’; this may lead to either or both parties stance being more combative and adversarial, typically equating to protracted negotiations and higher legal costs to reach a resolution.
2. Listen On numerous occasions issues that seemed insurmountable in correspondence can be better canvassed at a roundtable meeting/mediation to find an agreed way forward. The key to any good negotiation is listening. Clues are often given as to what is important to the other party and, at the very least, often admissions are made that may be helpful when trying to resolve or pick apart the other side’s arguments. It is also very important to understand what is meaningful to the client rather than the lawyer.
3. The first offer may be the best offer At the early stages, valuations may not be finalised and financial disclosure will need to be completed. This can make it difficult for lawyers to advise clients about what may be a favourable or unfavourable settlement, if not impossible. It is easier when both parties have a good understanding of the value of their matrimonial assets, the family income and their needs going forward. A generous offer may be made at the beginning to save legal costs or for other reasons (sometimes guilt). There are inherent risks when considering early offers, for example something can be missed, or values of assets may have not been fully investigated. However, there are times that after these matters are fully tested, the party that made the initial offer realises it is too generous and withdraws it. Ultimately, if an offer looks and feels generous, then it may very well be the best offer you will get. The other upside is that your legal costs will be far less than if negotiations become protracted.
4. Litigation based on principle Minor issues can sometimes be a barrier to a settlement, and so it is important to look at the overall settlement or big picture. Whilst it remains important to have principled negotiations based on how the law applies to the facts, typically when one party refuses to budge or compromise on an issue or issues, this can seriously jeopardise the negotiations. Therefore, it is important at times to take a step back from negotiations, and fully assess whether joint compromises can be reached or if it is simply disproportionate to pursue a matter, because the costs to argue the point outweigh the likely benefit received.
5. Financial disclosure There is an obligation on all parties to be full and frank in their financial disclosure. Whilst it is important for solicitors to ‘reality check’ their client’s instructions, there are occasions when clients ‘forget things’ or do not disclose. When the truth arises, that person will lose credibility before the court or could even be held in contempt of court. It is better to be upfront and honest about your financial affairs, allowing your legal advisors to advise you on the best strategy to deploy that may very well be lost when that party fails to make the required level of disclosure. Do not underestimate what the other side may know!
6. Think five steps ahead During financial negotiations, you need to be thinking ahead about how the other side may present their case or deal with issues in a case. It is important to consider whether it is disproportionate to pursue all avenues in a case given the costs involved to do so. There may be merit in offering a concession in exchange for other concessions from the other side. It is best to be open with your lawyer at all times so that they are informed of your views and preferences. Of course, there are times when it is appropriate to approach a case in a different way; however, if the solicitor is aware of what is important to you, then an offer or counter proposal can be structured in a way to best meet or achieve your goals.
7. Litigation risk Often key issues will turn on the oral evidence to be given at trial. Even when a witness is confident in expressing their views to a judge, they may not perform well. It is therefore important to manage ‘litigation risk’ when making decisions, i.e. you may have a good day in court or a bad day, and this will often not be known until extensive costs are incurred. It is advisable not to risk everything on a perfect day in court, as sometimes the ‘stars do not align’ and a judicial determination may be less favourable than a compromised agreement. Rather than leaving it in the hands of a judge who can be unpredictable or have certain views on a matter, a negotiated settlement or mediation may be a better option.
8. The last offer You often hear in negotiations that this is one parties ‘last offer’. However, often this is not true. There is always room to compromise and risks to consider. Also, it leaves the party who said it was their ‘last offer’ with nowhere to go if the other side makes a counter proposal. The last offer rarely exists, because even if you have your very best outcome in court, by the time you deduct the costs to argue over this point, you may be worse off.