Overruling Family Arbitration awards
A recent decision from the Court of Appeal in October 2020 is expected to help reduce the COVID-related backlog of financial claims by giving couples the confidence that if they refer disputes over money and children to private arbitration, they will be no worse off now than if claims had been decided by a court.
In 2012, arbitrators and lawyers set up the Institute of Family Law Arbitrators (IFLA) to support the process of allowing family cases into arbitration. Within this process the parties can present their case to an arbitrator who is expected to decide the case in the same way as a family judge would/ The arbitrator delivers a binding award that the family courts normally endorse.
Historically if the arbitrator misjudges a case and makes an award which one or both of the parties feel is incorrect or unfair, in principle the courts will not interfere. When parties agree to arbitration they buy the right to get the wrong answer and the only way awards could be challenged is on a point of law. However, the recent case involving Russell Haley, 52, and his wife Kelly, 46 has thrown open a new way of dealing with arbitration awards.
The couple married in 2005 and Kelly sought a divorce in 2018. The parties could not agree on a financial settlement. Russell Haley is a chief financial officer with a net income of £175,000 a year. Before COVID, Kelly Haley could expect to earn £35,000 a year in marketing.
A two-day hearing was fixed for September 2019. With a week to go the parties were informed that no judge was available. Rather than wait months, the couple chose arbitration. Howard Shaw QC, an experienced IFLA arbitrator, was available. The Haleys signed a form acknowledging that ‘arbitration is a process whose outcome is generally final’.
Following the outcome of arbitration Russell Haley believed the award was unfair. He lodged a challenge in the High Court family division, arguing that the arbitrator had got the law wrong. The case came before Clare Ambrose, a deputy High Court judge who also sits as a commercial arbitrator specialising in shipping and international trade. Giving her judgment in February 2020, Ambrose found that there were no errors of law made by the arbitrator. She also felt that the family court would only refuse to approve an arbitrator’s award if an error was ‘so blatant and extreme that it leaps off the page’.
The Court of Appeal thought otherwise and they ruled that the family court could substitute its own order if the judge decided that the arbitrator’s award was wrong and ‘not seriously, or obviously wrong, or so wrong that it leaps off the page, but just wrong’. It is of the utmost importance that potential users of the IFLA scheme were not deterred from using it either because the outcome appeared uncertain or because there was no way of challenging what one of the parties regarded as an unjust outcome.
As the courts try to cope with the backlog caused by the Covid-19 pandemic, separated couples including those with modest assets could increasingly turn to arbitration and this ruling should at least give them some comfort in knowing the award made does not have to be the final say.
Amanda Erskine is a solicitor in the Family department at Barker Gotelee Solicitors in Ipswich.