A short commentary of Haley v Haley [2020] EWCA Civ 1369

Since the outbreak of Covid-19, the pandemic has led to delays in the court system, hearings being adjourned and a substantial backlog of all types of cases but especially family cases. Parties wanting speedy justice are resorting to out of court processes such as mediation and arbitration as a means to resolve disputes efficiently to overcome this time-lag.

Arbitration is now seen as an attractive method to resolve family disputes. The arbitrator can use video-conferencing to organise the hearing at short-notice and give a reasoned award within a very short period of time unlike the traditional court process.   The Court will simply be asked to seal and approve the Award by way of an order.

An interesting question has arisen recently on the issue of what happens when one of the parties is dissatisfied with an award made by the arbitrator.  In the recent  landmark judgment of Haley v Haley [2020] EWCA Civ 1369, Lady Justice King gave judgment along with Lord Justice Moylan and Lord Justice Popplewell on the point.

Facts

Mr Russell Haley and Mrs Kelly Haley had made applications for financial remedies in the Family Court at Chelmsford. A week before the hearing, the parties were told that there was no judge available to hear their case and so they were faced with the choice of waiting for a date to be made available, or to resolve the case in another way and decided to proceed by way of arbitration.  An award was made by Mr Howard Shaw QC on 23 October 2019, which Mr Haley believed was unfair. He made an application to the High Court seeking either to appeal the arbitral award or, alternatively, for an order to be made by which the court would decline to make an order under the Matrimonial Causes Act 1973 (“MCA 1973”) in the terms of the award and would instead exercise its discretion anew.

On 27 February 2020, Deputy High Court Judge Ambrose ("the judge") dismissed the appeal and refused the application to interfere with the award. The judge accordingly made an order in the terms of the arbitral award.

Mr Haley appealed the decision of Deputy High Court Judge Ambrose and permission was given by Moylan LJ who identified an important point of principle as to "the proper approach which the family court should take to arbitral awards when making a financial remedy order."

Issues to be determined by the Court of Appeal

Lady Justice King stated; 

“It goes without saying that it is of the utmost importance that potential users of the arbitration process are not deterred from using this valuable service; either, on the one hand, because the outcome is not seen as sufficiently certain or, on the other, because arbitration is regarded as providing no adequate remedy in circumstances where one of the parties believes there to have been an unjust outcome.”

Lady Justice King in her judgment stated that the appeal was limited to a consideration as to the test to be applied where one party declines to consent to or challenges the making of an order under the MCA 1973 in the terms of the arbitral award following family arbitration under the (‘IFLA’) Scheme. The questions to be determined were as follows:

(i) Did the judge apply the wrong test, namely one which was akin to that applied under the Arbitration Act 1996? 

(ii) If so, is the correct test that which was characterised by Counsel as the 'appeals test' applicable under the MCA 1973?

(iii) If the appeals test is the appropriate test, then if properly applied is there a real prospect that the first instance court would have concluded that the arbitral award was wrong; 

(iv) If so, should the matter be remitted to a first instance court or is this court able to substitute its own order?

Judgment

The court noted at paragraphs 91 to 96 of the judgment:

The wife needs a periodical payments order in her favour, made pursuant to s23 MCA 1973. If the parties submit a consent order that is, in the mind of the district judge, unjust, having taken into account the section 25 criteria and the fact that the parties had agreed to submit themselves to arbitration, then that district judge will not rubber stamp the order, he will decline to make it. Similarly, where one party says, as here, that the proposed order does not meet his or her needs, how can a judge exercising his or her jurisdiction under the MCA 1973 metaphorically shrug his or her shoulders and say that the disgruntled party has "[bought] the right to get the wrong answer", and that (failing mistake, or a supervening event) the potentially unfair order that fails to meet the needs of one of the parties will nevertheless be made? 

In my judgment, such an approach cuts across the fundamental tenet of "fairness", which has informed every decision made by the courts since the landmark case of White v White [2000] UKHL 54. In his opening remarks, Lord Nicholls said:

"Everyone would accept that the outcome on these matters, whether by agreement or court order, should be fair. More realistically, the outcome ought to be as fair as is possible in all the circumstances. But everyone's life is different. Features which are important when assessing fairness differ in each case. And, sometimes, different minds can reach different conclusions on what fairness requires. Then fairness, like beauty, lies in the eye of the beholder."

"Fairness" is the constant reprise of Lord Nicholls; a concept, which he refers to as, "the underlying objective of securing fair financial arrangements". Fairness continues to be the lodestar by which all financial remedy hearings are guided (see H v T (Judicial Change of Mind)[2018] EWHC 3962). 

In my judgment, for the statutory duty found in s25 MCA 1973 to operate effectively, a person has to be able to put before the court the reason(s) why they believe the order is unjust.

The practical effect of the submissions made on behalf of the wife can be demonstrated by reference to the facts of this case; had the court found a deputy district judge who was available to hear the case then, in the event that either of them felt the outcome to be unfair, either the wife or the husband would, subject to leave, have an appeal to the circuit judge on the usual terms (see Piglowska v Piglowski etc). Where, however, no deputy district judge becomes available and the parties turn to arbitration as a last resort, there is no appeal and, in line with the submissions of Mr Walden-Smith and the approach of the judge, whilst the jurisdiction of the Family Court has not been ousted by the making of the arbitration award, the court's inquisitorial jurisdiction is limited to the stringent terms of the AA 1996, designed originally for civil and commercial cases.

Rightly, para [6.5] of the ARB1 FS form (quoted at [16] above) highlights that the parties "understand that the court has a discretion as to whether, and in what terms, to make an order and [we] will take all reasonably necessary steps to see that such an order is made". In my judgment, a party who believes the arbitral award which follows an arbitration hearing is wrong can, through the 'notice to show cause' process put their objections before the court. If the court at the triage/paper stage takes the view that the objection made to the award by one of the parties would not pass the permission to appeal test, it can make an order in the terms of the arbitral award without more ado and penalise the reluctant party in costs. 

It follows that I do not think it necessary for these rare cases to be put before a High Court judge as a matter of course. It seems to me that they will be allocated to either the specialist circuit judges who hear financial remedy appeals from the district judges sitting in the financial remedies court or to the High Court, whichever is appropriate on the facts of the case.

Analysis

In arbitrations a party has to satisfy the strict requirements of the Arbitration Act 1996 in respect to challenging of an award. The requirements being that the arbitrator lacked jurisdiction, there was serious irregularity or that the award was wrong on a question of law.  

In comparison in family appeals, a party has to satisfy the less restrictive test unlike the requirements of the Arbitration Act 1996.  The Court of Appeal in the case of Haley v Haley ruled unanimously that the court can decline to make an order reflecting an arbitration award where the order was wrong and there were substantial reasons for concluding that an injustice would be done were an order to be so made.  The correct test to be applied in such cases was the less restrictive test governing family appeals against a judge’s decision under FPR 30.12(3)(a): the party challenging the award must show that the award was ‘wrong’.

Conclusion

The judgment in Haley v Haley will have potential implications for parties in the future as to whether they decide to arbitrate. The advocates of arbitration have always emphasised that arbitration is private, final and efficient.  The test governing challenging an arbitral award available under the Arbitration Act 1996 have been deterrents to financial arbitration in the past.  

The current approach taken by the Court of Appeal will mean that parties may be reluctant to use arbitration in family cases in the future especially on the loss of privacy point if matters proceed to appeal. Some Lawyers may be deterred from engaging in the scheme on the basis that the hurdle to remedying an unfair decision has been set so high. 

In the majority of cases, the arbitral award will be made into an order and is unlikely to be challenged. The Court of Appeal made observations strongly supporting the IFLA scheme. Family judges are obliged to make an order which is fair, taking into account all the relevant factors. It is likely that this decision will encourage more parties to choose arbitration as a speedier way of resolving their disputes if they cannot reach agreement themselves as supported by Lady Justice King in paragraphs 5 and 6 of the judgment:

There is a common misconception that the use of arbitration, as an alternative to the court process in financial remedy cases, is the purview only of the rich who seek privacy away from the courts and the eyes of the media. If that was ever the position, it is no more. The court was told during the course of argument, that it is widely anticipated that parties in modest asset cases (including litigants in person) will increasingly use the arbitration process in the aftermath of the Covid-19 crisis as the courts cope with the backlog of cases, which is the inevitable consequence of "lockdown". 

It goes without saying that it is of the utmost importance that potential users of the arbitration process are not deterred from using this valuable service; either, on the one hand, because the outcome is not seen as sufficiently certain or, on the other, because arbitration is regarded as providing no adequate remedy in circumstances where one of the parties believes there to have been an unjust outcome.

Time will tell whether the wise words of support by Lady Justice King in the Haley v Haley judgment will have a positive or negative impact upon the number of people that resort to family arbitration.

DR TARIQ MAHMOOD AND ARRAN DOWLING-HUSSEY © 2020

BARRISTERS, ARBITRATORS & MEDIATORS

33 BEDFORD ROW

Dr Tariq Mahmood is a Barrister, Arbitrator and Mediator practising from 33 Bedford Row where he is Head of Arbitration & Alternative Dispute Resolution. He can be contacted at t.mahmood@33bedfordrow.co.uk

Arran Dowling-Hussey is a Barrister, Arbitrator and Mediator working from 33 Bedford Row, London; he can be contacted at a.hussey@33bedfordrow.co.uk.

Members of arbitrators@33BedfordRow have significant experience in a wide range of Alternative Dispute Resolution (‘ADR’) methods including mediation and can offer advise on all processes including mediation. For enquires about the professional availability of members of the group please contact Mark Byrne, Senior Civil & Commercial Clerk at 33 Bedford Row by email: m.byrne@33bedfordrow.co.uk or on + 44 20 7242 6476. 

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.

1. Haley v Haley [2020] EWCA Civ 1369
2. Arbitration Act 1996
3. S.23 Matrimonial Causes Act 1973
4. S.25 Matrimonial Causes Act 1973
5. IFLA Scheme
6. White v White [2001] UKHL 54
7. H v T (Judicial Change of Mind) [2018] EWHC 3962
8. FPR 30.12(3)(a)