Blog

When asking the court to decline to make an order under the MCA 1973 in the terms of an arbitral award, the test is the same as an appeal from a court order. The correct test is that under FPR 30.12(3)(a): the party challenging the award must show that the award was ‘wrong’.

Summary:

In Haley v Haley [2020] EWCA Civ 1369, the husband appealed an order made by Deputy High Court Ambrose following arbitration. The couple entered arbitration for financial remedies, but the husband was dissatisfied with the award made by the arbitrator and considered it unfair.

The husband made applications to the court for an order to set aside the arbitral award under s68 Arbitration Act 1996 (challenging the award: serious irregularity); permission to appeal under s69 AA 1996 (appeal on a point of law); and an order that the award should not be made into a final order by the court under MCA 1973. Deputy High Court Ambrose dismissed the appeal and refused the husband’s application to interfere with the award and accordingly made an order in the terms of the arbitral award.

The husband appealed to the Court of Appeal (King LJ, Moylan LJ and Popplewell LJ). In setting out the background and scope of the appeal before the court, King LJ said at paragraph 12:

“[12] This appeal is limited, therefore, 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.

In the judgment, King LJ reflects on the inquisitorial role of the court when making consent orders in relation to financial remedies proceedings. Consent orders derive their authority from the court and not the parties’ agreement. The court is not bound an agreement between parties. At paragraph 41 she says:

 [41] Sharland [2015] UKSC 60, [2015] 2 FLR 1367 makes it abundantly clear that the fact of an agreement cannot oust the jurisdiction of the court and that, although the court is heavily influenced by an agreement (a matter reflected in the words of section 7 of the Matrimonial and Family Proceedings Act 1984), the court conducts an independent assessment to enable it to discharge its statutory function to make such orders as reflect the criteria listed in section 25 MCA 1973.

King LJ considers which test is the appropriate test to be applied by the court where parties have agreed to arbitrate but are dissatisfied with the award. If the appeals test under the MCA 1973 is considered the correct approach, where does the fact that the parties signed a contractual agreement fit in?

King LJ discusses Sir James Munby’s comments in S v S (Arbitral Award: Approval) [2014] EWHC 7 (Fam), [2014] I WLR 2299 (S v S) and Mostyn J’s comments in in J v B (Family Law Arbitration: Award) [2016] EWHC 324 (Fam), [2016] 1 WLR 3319 but disagrees. King LJ concludes that the agreement to arbitrate does not carry weight than an agreement between parties. At paragraph 67 she says:

[67] Both Sir James and Mostyn J were of the view that an agreement to arbitrate carries even more weight than that given by a court to an agreement reached between the parties themselves. With respect, I would disagree. The agreement to arbitrate is an agreement that a third party will determine the terms. It is not, at the time the agreement is reached, an agreement to any particular terms. An agreement as between the parties themselves is, albeit often reached with the assistance of legal advisors, by contrast an agreement to the actual terms; the parties, therefore, know precisely the outcome and have agreed to it. That is not the case in an arbitration, where the parties have agreed to nominate a third party to determine fair terms intended to be final and binding, but subject to the court’s ultimate discretion.

[68] Even if I am wrong about that, the fact remains, as highlighted by Baroness Hale in Sharland, that family cases are different from civil cases.  Court orders embodying the terms of commercial and civil arbitrations awards derive their authority from the arbitration agreement, and the enforcement of that agreement under the mandatory provisions of the AA 1996. The enforceable order following family arbitration ultimately derives its authority from the court and not from the arbitration agreement as is recognised on the face of the ARB1 FS.

King LJconcludes that a discontented party may skip making an application under the remedies set out in AA 1996 and instead go straight to ask the court to decline to make an order under the MCA 1973.

[71] Given that the orders determining the enforceable legal rights of the parties following divorce are made under the MCA 1973 and not under the AA 1996, there is no requirement for the discontented party first to make an application under s.57, s.68 or s.69 AA 1996 before asking the Family Court to decline to make an order under the MCA 1973 in the terms of the arbitral award. 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”.

[72]…

[73] In my view, the logical approach by which to determine whether the court should decline to make an order in the terms of the award, is by reference to the appeal procedure and the approach found in the FPR 2010. In other words, when presented with a refusal on the part of one party to agree to the conversion of an arbitral award into a consent order, the court should, at an initial stage, ‘triage’ the case with the reluctant party having to ‘show cause’ on paper why an order should not be made in the terms of the arbitral award. Such approach would be similar to the permission to appeal filter found at FPR rule 30(7) where the trial has taken place under the MCA 1973. If the judge is of the view that there is a real prospect of the objecting party succeeding in demonstrating that the arbitral award is wrong, then the matter can be set down for a hearing. That hearing will, as with an appeal, be confined to a review and will not be a rehearing, subject to any case management directions which the judge may make in relation to updating or other evidence and subject to, as under FPR 30.12(1)(b), the court considering that “it would be in the interests of justice to hold a re-hearing”.

Both Moylan LJ and Popplewell LJ agreed. The court also implored the couple to try to settle the matter as the capital assets in the case were modest and came to around £400,000. The court expressed concern at the sums that would be left to house them both once proceedings had been concluded.

The Court of Appeal’s conclusion was that the judge had applied the wrong test and that the husband’s appeal had a real prospect of success. Therefore, the application was remitted to a circuit judge and a case management hearing would take place.