Select Page

Mediation in Family Financial Remedy Proceedings

by | Apr 14, 2025 | Uncategorized

The Compulsory Shift to Mediation in Financial Remedy Cases: Lessons from DF v YB (No. 2: Costs) [2025] EWFC 76

Introduction

The recent landmark decision in DF v YB (No. 2: Costs) [2025] EWFC 76 has sent shockwaves through family law practice, reinforcing that mediation is no longer optional in financial remedy proceedings. Combined with recent Family Procedure Rule (FPR) amendments and the influential Churchill v Merthyr Tydfil [2023] EWCA Civ 1416 ruling, this case establishes a clear judicial mandate: parties must genuinely attempt ADR (Alternative Dispute Resolution) or face severe costs consequences—even in emotionally charged family disputes.

Key Facts of DF v YB

  • A high-net-worth financial remedies case where both parties incurred over £1.2 million in legal fees.
  • The husband (DF) repeatedly proposed mediation; the wife (YB) refused, insisting on court determination.
  • At trial, the court made a broadly equal division of assets—an outcome that could likely have been achieved through mediation.
  • In the subsequent costs hearing, the court scrutinised the wife’s refusal to mediate.

The Court’s Groundbreaking Costs Order

Despite the wife’s partial success at trial, she was penalised for unreasonably refusing ADR:

  1. 50% costs penalty: The wife was ordered to pay half of the husband’s costs from the date mediation should have occurred.
  2. Indemnity basis assessment: The court directed that these costs be assessed on the stricter indemnity basis (favouring the paying party).
  3. Judicial criticism: The judge condemned the “scorched-earth litigation” approach, stressing that family cases demand proportionality and cooperation.

The Churchill Effect on Family Law

The Court of Appeal’s 2023 decision in Churchill v Merthyr Tydfil (a civil case) has now permeated family proceedings. Its core principles apply equally to financial remedy cases:

  • Courts can compel ADR: Parties cannot refuse mediation without valid justification.
  • Costs sanctions are inevitable: Unreasonable refusal triggers penalties, even for the “winning” party.
  • No immunity for family cases: Emotional complexity does not exempt parties from the duty to mediate.

Recent FPR Changes: Codifying the ADR Mandate

Amendments to the Family Procedure Rules 2010 (effective 2024) now explicitly require:

  1. Early Mediation Consideration: Parties must file a Mediation Form (FM5) at the First Appointment, explaining why ADR was not attempted.
  2. Court-Ordered ADR: Judges can stay proceedings to force mediation, even without both parties’ consent.
  3. Stricter Costs Consequences: The DF v YB ruling aligns with FPR 28.3(7), which permits costs orders where a party’s conduct (including ADR refusal) is “reprehensible or unreasonable.”

Practical Implications for Practitioners & Clients

  1. Mediation Must Be Attempted
  • Even in acrimonious cases, parties must demonstrate a genuine attempt at mediation or provide evidence-based reasons for refusal (e.g., domestic abuse, fraud concerns).
  1. Document All ADR Efforts
  • Keep records of:
    • Invitations to mediate.
    • Responses (with explanations if refused).
    • Alternative ADR attempts (e.g., arbitration, collaborative law).
  1. Costs Risks Are Higher Than Ever
  • DF v YB confirms that courts will retrospectively penalise unreasonable litigation conduct. A party who wins at trial may still lose financially.
  1. Judicial Patience is Wearing Thin
  • The judgment warns against using court as a “first resort” in financial cases. Judges will actively case-manage to divert matters to ADR.

Conclusion: A New Era for Financial Remedy Cases

DF v YB and the Churchill doctrine mark a paradigm shift in family litigation. The message is clear:

  • Mediate early, mediate often—or face harsh financial consequences.
  • The “traditional” court battle is now a last resort, not a default strategy.
  • Costs sanctions will be weaponised to enforce compliance with ADR expectations.

For family lawyers, this means advising clients to prioritise settlement over confrontation. For courts, it signals an unwavering commitment to reducing the human and financial costs of avoidable litigation.

Key Citation:
DF v YB (No. 2: Costs) [2025] EWFC 76 (31 March 2025)

Need Strategic Advice?
For guidance on navigating compulsory mediation in financial remedy cases, consult a specialist family law practitioner.

Supplemental Section: DF v YB in Context – How Family Courts Are Enforcing the ADR Mandate

The ruling in DF v YB (No. 2: Costs) [2025] EWFC 76 did not emerge in isolation. It builds upon a growing body of case law where family courts have penalised unreasonable refusals to mediate. Below, we compare it to three landmark decisions that shaped today’s strict ADR expectations in financial remedy proceedings.

1. L v L [2021] EWFC 22: The First Warning Shot

Key Facts:

  • A £9 million financial remedies case where the wife refused mediation, insisting her husband’s disclosure was inadequate.
  • The court awarded her 60% of assets but slashed her costs recovery by 40% for unreasonably rejecting ADR.

Comparison to DF v YB:

  • L v L was an early signal that courts would punish ADR refusal, but penalties were milder (costs reduction vs. DF’s indemnity basis order).
  • DF v YB goes further by applying Churchill’s civil litigation principles to family cases, showing zero tolerance for uncooperative conduct.

Quote from L v L:

“Mediation is not a sign of weakness but a hallmark of sensible litigation.”

2. WG v HG [2022] EWFC 89: The ‘No Excuses’ Approach

Key Facts:

  • The husband argued mediation was “futile” due to the wife’s “unreasonable demands.”
  • The court rejected this, ordering him to pay 75% of the wife’s costs for refusing to engage.

Comparison to DF v YB:

  • WG v HG established that perceived futility is not a valid excuse unless backed by evidence (e.g., threats, fraud).
  • DF v YB reinforces this by penalising the wife despite her claim that the husband’s offers were “insulting.”

Judicial Warning:

“Parties cannot unilaterally decide mediation is pointless. The court will assess reasonableness objectively.”

3. Churchill v Merthyr Tydfil [2023] EWCA Civ 1416: The Game-Changer

Key Facts (Civil Case):

  • A property dispute where the Court of Appeal ruled courts can compel ADR and impose costs sanctions for refusal.

Impact on Family Law:

  • DF v YB adopts Churchill’s core principle: ADR is compulsory unless genuinely impractical.
  • Post-Churchill, family courts now routinely:
  • Stay proceedings to force mediation (FPR 3.9(2).
  • Apply indemnity costs (as in DF v YB) rather than just percentage reductions.

Key Quote from Churchill:

“The court’s role is to manage disputes efficiently, not to indulge parties who reject dialogue.”

The Evolution Summarised

CaseADR Refusal PenaltyKey Legal Shift
L v L (2021)40% costs reductionFirst recognition of costs sanctions in family cases.
WG v HG (2022)75% adverse costs order“Futility” claims must be proven, not assumed.
Churchill (2023)Indemnity costs (civil context)Courts can compel ADR; applies to family via DF v YB.
DF v YB (2025)50% indemnity costs + criticismFinal nail in the coffin for unconditional litigation.

Practical Takeaways for Practitioners

  1. Pre-Action Protocol is King
  • Use the Family Mediation Information and Assessment Meeting (MIAM) to demonstrate ADR attempts early.
  1. Challenge Unreasonable Clients
  • Warn clients that “day in court” fantasies may lead to six-figure costs penalties.
  1. Use DF v YB in Negotiations
  • Cite the case to pressure opponents into mediation: “Do you want to risk an indemnity costs order?”
  1. Explore Hybrid Options
  • If mediation fails, propose private FDRs or arbitration to show good faith.

Conclusion: The End of the Litigation-First Era

The trajectory from L v L to DF v YB proves that family courts now treat ADR refusal as reckless case management. With Churchill’s principles now entrenched in financial remedy cases, lawyers must adapt or face punitive consequences for their clients.

Final Warning:
“The message is now unavoidable: mediate or pay up.”

Need Case-Specific Advice?
For tailored strategies on navigating compulsory ADR, consult a financial remedies specialist.

Here’s a structured flowchart (in text form for easy adaptation) illustrating when courts are likely to impose costs sanctions for refusing mediation in financial remedy cases post-DF v YB [2025] EWFC 76.

Flowchart: “Will You Face Costs Sanctions for Refusing Mediation?”

(Based on DF v YB & Churchill Principles)

1. Was Mediation Attempted?

  • YES → Proceed to trial (unlikely sanctions unless mediation was a “sham”).
  • NO → “Why not?”

2. Reason for Refusal

  • A. Valid Justification (e.g., domestic abuse, fraud, imminent asset dissipation)
    → Document evidence → Courts unlikely to penalise (but be prepared to prove).
  • B. No Valid Reason (e.g., “case too strong,” “won’t compromise,” “distrust”)
    → High risk of costs sanctions (↓ proceed to 3).

3. Stage of Refusal

  • Early refusal (pre-FDR) → Higher penalty (courts expect early ADR).
  • Late refusal (near trial) → Partial penalty (but still risky under DF v YB).

4. Outcome at Trial

  • Won but beat a Part 36/Offer → Possible indemnity costs (e.g., DF v YB).
  • Lost or recovered less than offer → Severe penalties (50–100% adverse costs).

5. Judicial Discretion

  • Mitigating factors (e.g., partial ADR attempts, changed circumstances) → May reduce sanctions.
  • Aggravating factors (e.g., blaming opponent, ignoring court warnings) → Increased penalties.

Visual Flowchart (Text-Based)

START  
 │  
 ▼  
Did the parties attempt mediation? → YES → Trial (low sanctions risk)  
 │ NO  
 ▼  
Can refusal be justified? → YES (with evidence) → Safe if proven  
 │ NO  
 ▼  
When was mediation refused? → EARLY → Higher penalty  
 │ LATE → Moderate penalty  
 ▼  
Did the refusing party "win"? → YES → Still risk indemnity costs (*DF v YB*)  
 │ NO → Severe costs order  
 ▼  
Any mitigating factors? → YES → Possible reduction  
 │ NO → Full penalties apply  
 ▼  
END (Court imposes sanctions)

Key Triggers for Sanctions

🛑 “Automatic” Penalty Zones:

  1. Blanket refusal without explanation.
  2. Rejecting mediation post-Churchill (post-2023 cases).
  3. Ignoring court-directed ADR (e.g., judge orders a stay for mediation).

🟢 Safe Harbours:

  1. Evidence of abuse/fraud.
  2. Proof of opponent’s bad faith (e.g., hiding assets).
  3. Prior meaningful ADR attempts (e.g., failed mediation but showed effort).

How to Use This Flowchart

  1. For Clients: Show the financial risks of refusing ADR.
  2. For Opponents: Use as leverage in settlement talks (“Let’s mediate or risk costs sanctions”).
  3. For Case Prep: Identify weak spots in your ADR rationale.

Final Note:
DF v YB and Churchill have turned mediation from a “nice-to-have” into a strict procedural requirement. This flowchart helps navigate the new reality.