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10th March, 2021

Arbitration in Family Law after Haley

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The recent decision in the Court of Appeal in the case of Haley v Haley [2020] has confirmed the basis on which an arbitral award may be challenged/appealed.

Whilst the decision has been welcomed by many, for others it represents a shift away from one of the fundamental tenets and principles of the arbitration process.

The parties in Haley had been engaged in financial remedy proceedings. One week before the Final Hearing was due to be heard in Court, they were informed that no judge was available. In an effort to avoid further delay, Mr and Mrs Haley opted to engage an arbitrator and held a final arbitration hearing instead of waiting for another court date, potentially months ahead.

Following the decision of the appointed arbitrator, Mr Haley submitted an application to the High Court seeking to appeal the award. In the alternative, Mr Haley asked the Court to decline to make an order in the terms of the arbitrator’s award and instead substitute their own decision. Mr Haley’s application was dismissed by Deputy High Court Judge Ambrose. The judge refused to amend the arbitrator’s award, instead making an order of the court in mirror terms.

Mr Haley submitted an appeal to the Court of Appeal. The key consideration of the appeal was what is the correct legal test to be applied when a party makes an application to challenge an arbitral award. In making their decision, the High Court had applied the test under section 69 of the Arbitration Act 1996. To challenge an award under section 69, the party must be able to show that the award was ‘obviously wrong’. Whether the award is ‘fair’ is not a consideration for an appeal brought under s69.

In the alternative, the Court of Appeal considered whether the ‘appeals test’ as set out within the Matrimonial Causes Act 1973 (‘MCA 1973’) might be the correct test. Whilst permission is still required to appeal the arbitral decision, the threshold for meeting the grounds for appeal is much lower. The appellant must show that the decision was ‘wrong’, not the higher test of ‘obviously wrong’ or alternatively that the decision was unjust or unfair. The overall fairness is a key consideration for the Court under this part of the appeal test.

Having considered case law and commentary in other decisions relating to arbitration in the family law context, the Court of Appeal concluded that the correct test was that set out in the Family Procedure Rules 2010. Giving their determination, Lady Justice King commented:

“The court will…only substitute its own order if the judge decides that the arbitrator’s award was wrong; not seriously, or obviously wrong, or so wrong that it leaps off the page, but just wrong.” (paragraph 74).

Their decision reflects the Family Court’s approach to sealing and approving other forms of Orders reached through so-called ‘alternative dispute resolution’ procedures such as mediation or collaborative law. The Court does not act as a ‘rubber stamp’ to agreements or processes outside of the court’s ambit and they retain the discretion to amend or refuse Orders submitted by parties for approval under the MCA 1973.

Arbitration in Family Law

Arbitration is a relatively new alternative dispute resolution method, having been introduced to the family law context in 2012. Arbitration had been used successfully in the commercial law arena for many years. Arbitration offers an alternative manner by which parties can resolve their differences outside of the court.

An arbitrator is jointly appointed by the parties and will sit as ‘judge’, considering the facts of the case and any points of dispute between the parties. Following a series of meetings, they will make an arbitral award, which is then embodied in a Consent Order and submitted to the Court for approval. Arbitration is commonly seen as a popular option for ‘big money’ cases, but it can be a helpful tool in a range of matters. Cases can be resolved in a short period of time as they are not dependent on the court’s timetabling which has been under great pressure for many years. Parties retain control, being able to agree on the identity a suitable arbitrator, determine the extent of the matters to be decided by the arbitrator, and setting a timetable and location for the matter which suits them rather than the Court.

Parties entering arbitration must sign an agreement, known as a Form ARB1FS. Signing the form indicates that the parties agree to be bound by the arbitrator’s decision. The form currently includes the following wording: ‘Arbitration is a process whose outcome is generally final. There are very limited bases for raising a challenge or appeal, and it is only in exceptional circumstances that a court will exercise its own discretion in substitution for the award.’  Before the decision in Haley the accepted approach was that arbitral awards could only be challenged in very limited circumstances (obviously wrong). The Court of Appeal commented that the wording on the Form ARB1FS goes too far. The current wording of the form is likely to be updated to reflect the approach taken by the Court of Appeal in Haley.

The decision of the arbitrator must be embodied within a Consent Order, submitted to the Court for approval and sealing before it is binding on the parties. Whilst the Court retains the discretion to amend a Consent Order, they are generally reluctant to refuse to endorse an Order which reflects the terms of an arbitral award, absent any challenge by one of the parties.

Arbitration after Haley

The decision in Haley represents a significant shift in the approach of the Family Court to challenges to financial remedy awards where the parties have been engaged in arbitration. It will, in theory, become easier for a dissatisfied party to challenge such an order. The threshold for challenge is now much lower, with a party simply needing to show that the decision is simply ‘wrong’, unfair, or unjust, rather than ‘obviously wrong’. The ability to challenge an award may make arbitration a more attractive option for some. The restricted grounds on which to challenge an arbitral award may have put off parties who did not wish to take the risk of being presented with an outcome which they perceived to be unfair and which had an exceptionally high threshold for challenge.  For others however, it may represent an increased risk that an arbitral award may not provide the finality it would have done before the Court of Appeal’s decision.

Arbitration offers a relatively cost-effective, time efficient, private, and flexible manner by which to resolve matters in the Family law context. Appointed arbitrators are renowned, specialist practitioners in their fields. The Covid-19 pandemic continues to impact upon the Court’s ability to process and manage matters in a timely way, with a significant backlog being reported. Stressed and busy Judges often are not the best decision-makers.  For parties who wish to resolve their matter outside of the Court context, arbitration may still offer a suitable option for resolution regardless of the limitation imposed by Haley.  Further details relating to arbitration in the family law context can be obtained from the Institute of Family Law Arbitrators (IFLA), or from a specialist family solicitor.

Aaron & Partners LLP have a specialist Family Law department who can offer advice and guidance  on a range of family law matters, including advice and representation in arbitration or financial remedy proceedings. If you require any advice or assistance relating to a family law matter, then contact Richard Barge, Partner and Head of Family Law at Aaron & Partners.

Author of the article: Catrin Morgan-Lee, Trainee Solicitor.

Richard Barge

Family Law

Partner and Head of Team.
Email: [email protected]
Tel: 01244 405443 / 07881 950769

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