The Court of Appeal recently gave its judgment in Haley v Haley [2020] EWCA Civ 1369 led by Lady Justice King making a u-turn to the previously well-established doctrine that awards from family arbitrations could not be appealed unless under very limited circumstances.
The appeal followed the parties’ decision to arbitrate when a two-day final hearing in the local family court was pulled due to judicial unavailability a few days before (an all too common occurrence). Counsels’ fees had already been deemed and so parties elected to arbitrate to keep to the original timetable and have a decision without delay.
H was a good earner and had sizeable interests by way of pensions. W was out of work but had been working as a marketing consultant. The family home had been sold and £319,000 remained on the conveyancer’s client account.
The arbitrator heard evidence from the husband and the wife and made an award to include the following terms:
- W to receive an amount equivalent to 93% of the equity of the matrimonial home
- Interim maintenance at the rate of £3,000 per month
- A pension sharing order as to 35.94% of H’s pension
- H to pay school fees for the child of the family
- H to pay to costs of arbitration
H’s representatives asked a number of questions to the arbitrator following receipt of the draft award. The arbitrator declined to answer them and when submitting the final award, increased W’s periodical maintenance to £3,500 per month.
H subsequently made the following applications to the High Court:
- An order setting aside the award for serious irregularity under s68 Arbitration Act 1996
- Permission to appeal under s69 AA 1996 (appeal on a point of law)
- An order that the award should not be made into a final order by the court under the Matrimonial Causes Act 1973
Deputy High Court Judge Ambrose dismissed the applications under s68 and s69. The judge held that the test to be applied in determining whether to refuse to make an order in the terms of the arbitral award, was akin to the test under s68 and s69. She added that if she was wrong as to the correct test to be applied, the award made by the arbitrator was ‘not wrong’.
H appealed to the Court of Appeal to determine whether the judge applied the wrong test, i.e. the test under the Arbitration Act 1996 and if so, whether the correct test is that also referred to as the appeals test under the MCA 1973.
If so and if applied to this case, would H have a real prospect that the first instance court would have concluded that the arbitral award was wrong?
Under the arbitration rules, the principle routes of challenge to an arbitral award are that the arbitrator ‘lacked substantive jurisdiction’ (s68 AA 1996); or that there was ‘serious irregularity affecting the tribunal, the proceedings or the award’ (s68 AA 1996); or that the award was wrong on a question of law (s69 AA 1996).
Under s69 (the most common route), the party must show that the decision on a question of law was obviously wrong unless the question is of general public importance, in which case it must be shown to be at least open to serious doubt [para 14].
Under the MCA 1973, leave will be required to appeal and permission granted if the judge concludes that there is a real prospect of an appeal court concluding that the order was: (a) wrong; or (b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court. Fairness will play a big part in this decision.
In reaching its decision, the Court of Appeal led by LJ King considered the guidance of Sir James Munby P in S v S (Arbitral Award: Approval) [2014] EWHC 7 (Fam), [2014] 1 WLR 2299 (S v S) and Mostyn J in J v B (Family Law Arbitration: Award) [2016] EWHC 324 (Fam), [2016] 1 WLR 3319 In which great support and weight was given to family arbitrations in holding that fairness has little part to play in any subsequent challenge.
This premise was rejected by LJ King, ‘It follows that in my judgment the judge was in error in saying at [91] that ‘An assertion of unfairness or extreme error is likely to be rejected summarily if a party has, without justification, failed to invoke the remedies under the 1996 Act’.’ [para 71].
LJ King went on to clarify that the court should instead review the terms of the award with the reluctant party having to show cause why an order should not be made in the terms of the arbitral award. Such an approach would be similar to the permission to appeal filter at FPR 30(7) [para 73]. In doing so LJ King compared the arbitral award to a consent order made between the parties. That order would be scrutinised by the judge who is not merely rubber stamping the order but fulfilling its judicial role in being detective to determine whether the order is fair.
The difference with arbitrations is that the parties have appointed a third party to reach the order for them. A key difference in traditional arbitrations and this appeal is that the court was concerned with a family and not a business contract. By its very nature, family arbitrations would be viewed differently.
LJ King determined that there were grounds under the FPR that H would have a real prospect of succeeding in an appeal against the award. The court granted H’s appeal and in doing so directed that the matter be remitted to a circuit judge in the family court for a case management hearing. The judge’s role would be to assess the terms of the arbitral award as it would a consent order. The court of appeal acknowledged that a significant period of time had passed since making the arbitral award and updating disclosure was likely.
The judgment therefore u-turns on previously well adopted beliefs that family arbitrations could not but in very limited circumstances be appealed. This is no longer the case and opens up family arbitral awards to scrutiny from the family court. This will either have the effect of putting those off from arbitration knowing that the decision can be reviewed, or it will give those comfort knowing that they will not be bound by a decision that they may deem as unfair.
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