The Court of Appeal was concerned with the question as to the test to be applied by the court in those cases where the parties have agreed to arbitration but are dissatisfied with the award.
Courts had previously stated that the ability to challenge was limited to those matters in the Arbitration Act 1996, save where there had been a supervening event or mistake (see e.g. Mostyn J in J v B (Family Law Arbitration: Award) [2016] EWHC 324 (Fam) and Munby J in S v S (Arbitral Award: Approval) [2014] EWHC 7 (Fam)).
The Court of Appeal decided that the Family Court could refuse to make an arbitral award into an order on wider grounds than those set out in AA 1996. Lady Justice King noted 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. The agreement to arbitrate is an agreement that a third party will determine the terms, rather than an agreement as to any particular terms.
A court can decline to make an order in the terms of an agreement negotiated by the parties where there are "good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement"; or where "it would not be fair to hold them to their agreement". It must follow that where the agreement, albeit contractual, is for a third party to decide the terms that are in dispute, the court can decline to make the order where there are good and substantial grounds for concluding that an injustice will be done if an order is made in the terms of the arbitral award.
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. 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 Matrimonial Causes Act 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, The court will, thereafter, only substitute its own order if the judge decides that the arbitrator's award was wrong (as per an appeal).
Kate Clark says:
"Arbitration in family cases is a form of private dispute resolution in which the parties enter into an agreement under which they appoint a qualified arbitrator to adjudicate a dispute and make an award. However, there has been a reluctance by many to engage in arbitration in financial remedy cases since the scheme was launched in 2012, on the basis that there is no appeal process should an unfair award be made.
"The decision in Haley aligns the test for a successful challenge to an award made in arbitration, with that in court proceedings. It therefore puts parties who have received an arbitral award in a similar position as parties who have received a decision from a Judge – they can challenge the decision on the basis that it was "wrong", albeit, as with an appeal, a challenge will not necessarily be easy.
"This judgment simplifies the law in relation to arbitration and it is expected that this will make arbitration significantly more attractive for parties, given the ability to deal with matters more quickly and in a more bespoke fashion. In the judgment, King LJ also anticipated an increase in parties looking to use arbitration to resolve family matters concerning financial relief on divorce or children disputes, particularly in the aftermath of the COVID-19 crisis, as the courts struggle to cope with a backlog of cases."