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Suzanne Kingston, consultant at Mills & Reeve LLP, and Alexis Campbell QC of 29 Bedford Row, suggest that following the Court of Appeal decision in Haley v Haley, family arbitration can be as closely aligned to the court system as the parties choose, now with the added assurance that even if it goes wrong, it can be put right.
As we face the global coronavirus (COVID-19) pandemic, the court system has changed beyond recognition. Many of the courts were closed and even now, as they slowly re-open, many are still operating with limited caseloads with much work is being conducted remotely. There seems to be a consensus that litigators must seriously consider alternative dispute resolution, to avoid the log-jam in courts across the country. And it is no surprise that arbitration—bespoke, private, quick to set up and able to be conducted remotely on a variety of digital platforms—is becoming increasingly popular.
The recent unanimous decision from the Court of Appeal in Haley v Haley  EWCA Civ 1369,  All ER (D) 110 (Oct) may well encourage practitioners and parties alike to look to arbitration much more seriously as a viable means of resolving their disputes.
What has changed? Under the Arbitration Act 1996 (AA 1996), which governs all English arbitral disputes, appeals are few and far between; the mystical white leopard. Now, the Court of Appeal has given the green light for an appeal process in financial remedy cases, which looks to transform the legal landscape for financial arbitration in family cases.
Under AA 1996, appeals are only permitted where there is lack of jurisdiction (AA 1996, s 67), there has been a serious procedural irregularity (AA 1996, s 68) (which is very narrowly interpreted), or where the arbitrator has erred in law (AA 1996, s 69). The last test also sets a very high threshold. The decision must be one which no reasonable arbitrator could have reached when applying the law properly. There is also a preliminary filter under AA 1996, ss 57 and 70, which requires the parties to apply first to the arbitrator for clarification or to correct an award (akin to the slip rule procedure) before pursuing an appeal under AA 1996.
In an impressive line of first instance authorities, starting with Munby P in S v S (financial remedies: arbitral award)  EWHC 7 (Fam),  1 FLR 1257, including Mostyn J in J v B (Family Law Arbitration Award)  EWHC 324 (Fam),  2 FLR 1308, and Clare Ambrose, sitting as a deputy High Court judge, in BC v BG  EWFC 7,  2 FLR 337, the High Court has consistently reinforced the narrow scope of the appeal process within the family arbitration structure. In an about turn, the Court of Appeal have now said that those decisions were wrong.
What was the background?
The couple had had their two-day final financial hearing adjourned by the court at short notice due to judicial unavailability. Quickly entering into an arbitration agreement, they identified a number of issues for determination covering both capital and income division. Having heard the arbitration, the arbitrator circulated a draft award. The husband’s counsel sought under AA 1996, s 57, clarification and/or explanation of 14 ‘substantial’ points. Declining to provide clarification on the basis that the requests went beyond what was permissible, the arbitrator produced his final award. Dissatisfied, the husband sought to challenge the award and applied to the court for an order that the award not be made into a court order on a number of grounds including that the arbitrator had erred in law, had failed to give reasons for his decision, and had ignored or overlooked facts.
What did the court decide at first instance?
Clare Ambrose, sitting as a deputy High Court judge, found in favour of the wife (R v K  EWHC 841 (Fam),  All ER (D) 193 (Feb)), applying the hitherto accepted approach under AA 1996, that grounds for appeal from arbitral awards are extremely limited and this award was not so wrong that it should not be made into an order. She approved the award and made an order which reflected its terms. The husband appealed.
What did the Court of Appeal decide?
In a typically clear judgment, King LJ gave a full analysis of the interplay between AA 1996 and the courts, both in general civil litigation and specifically in the family arena. The civil courts, she noted, strive for certainty, an essential ingredient for successful commerce. Appeals detract from certainty and are discouraged even at the cost of fairness, ie ‘when parties agree arbitration, they buy the right to get the wrong answer’ (per Sir Bernard Eder on 15 December 2014, as quoted by Mostyn J in J v B  EWHC 324 (Fam),  2 FLR 1308). The family courts, by contrast, have fairness at their heart. It is not a concept that can be contracted out of. So, within the arbitration scheme and AA 1996, how does the strict civil interpretation fit in with the ethos of the family courts?
King LJ provided the answer to this ‘conundrum’ (para ): the family court must allow appeals from an arbitral award where a party can show a real prospect of success in appealing. The high threshold as applied in civil proceedings (that the decision is plainly wrong and will usually fail) does not apply. The family court will consider a complaint against an arbiter, in the same way that it would consider a complaint against a judge: where there is ‘a real prospect of success’ which is realistic, not fanciful (per CR v SR (Financial Remedies: Permission to Appeal)  EWHC 1155 (Fam),  1 FLR 186).
In civil litigation, the parties agree to arbitrate. That contract is enforceable. In family proceedings, irrespective of the parties’ agreement, whether recorded in a contract (such as a pre-nuptial agreement) or a consent order, it is unenforceable without the approval of the court applying the criteria provided by section 25 of the Matrimonial Causes Act 1973 (MCA 1973). The family court retains an inquisitorial role in approving agreements and contracts. It is required to so do to ensure those agreements and contracts are fair. If they are considered unfair, the court must decline to convert them into court orders. This remains the case when the parties sign a contract for a third party to resolve the disputes between them. Just as the parties’ direct agreement is subject to assessment under the MCA 1973, so too is the arbitrator’s assessment.
Permission to challenge an order based on Barder principles (mistake or supervening events) will continue to be available.
Process to challenge an arbitral award
The decision in Haley provided guidance on process for appeals from an arbitral award. A party unhappy with the outcome can apply under the notice to show cause procedure. It is not now necessary to apply under the AA 1996 routes (AA 1996, ss 67, 68 and 69) first. The application does not need to be made in the High Court. It should be made to the specialist circuit judges who hear financial remedy appeals, from district judges, or to the High Court if appropriate on the facts of the case.
On the application, the court will carry out a ‘triage’ process to assess what needs to be done. If the complaints do not pass the permission to appeal test, of a real prospect of success, the court should convert the award into an order, and penalise the reluctant party in costs. If the permission to appeal test is passed, the case should be remitted before a suitable judge for review (as with appeals – this is not ordinarily a re-hearing and a re-hearing is only permissible if the interests of justice require one (Family Procedure Rules 2010, SI 2010/2955, 30.12(1)(b)), with such directions as considered appropriate. The ‘form and extent’ of further hearings will be tailored for each case. It may be appropriate to give limited directions or list for more detailed case management, such as further updating evidence.
Is this good for arbitration?
The great fear of many practitioners, in submitting to arbitration, has been that a wrong decision from an arbitrator, unless very wrong or so wrong that it ‘leaps off the page’, cannot be corrected. Clients are forced to accept and live with a bad decision. Many will immediately turn to the practitioner for advising the specific arbitrator or the process in general. As an elective process it is easy to be blamed for the election. Now, a decision by the arbitrator which would be unacceptable from a judge can be properly challenged. Clients can expect arbitral awards to be policed just as judgments are capable of scrutiny. Financial remedy arbitration now stands on an equivalent footing with financial remedy litigation; whether before a public or private judge.
It may be argued that the one feature of arbitration that has attracted many supporters, the finality and the certainty, is now lost. As with commercial litigation, some cases cry out for a binary decision, which will be almost impervious to challenge and therefore offer finality. Whatever the outcome, the cost and anguish or ongoing litigation will be over. The right to pay for a wrong answer has now gone. While some may lament that loss, it is likely that more will now be prepared to embrace the possibility of arbitration, to avoid lengthy and expensive delays, knowing that even a wrong decision can be remedied.
It is hoped that arbitration will be seen as a realistic means of resolving all types of financial remedy cases, not just the for the rich and famous hoping to avoid the spotlight of the court process. Quick, simple and tailored for the needs of all cases, arbitration offers an affordable solution, which is now subject to limited, but careful review.
When considering arbitration, it is important to bear in mind a few practical points:
As a process, arbitration in financial remedy processes can be as closely aligned to the court system as the parties choose. It can also be short circuited, to limit the length and scope of disclosure. It can offer a service with great costs savings. Now with the added assurance that even if it goes wrong, it can be put right. Time will tell if there is an appetite for this level of privatisation of the court process, under the ongoing surveillance of the judicial eye.
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