Haley v Haley [2020] EWCA Civ 1369

Case Summary Haley v Haley [2020] EWCA Civ 1369

Facts

1. W made an application for financial relief through the normal court process, with an unsuccessful FDR. The parties were unable to settle and the matter was set down for a final hearing. A week before the date of the final hearing, the parties were told there was no judge available and the matter could only be listed for an unspecified date in the future. The parties instead undertook arbitration.
2. H sought to challenge the award made by Mr Howard Shaw QC in arbitration. He made three applications; under section 68 and 69 of the Arbitration Act 1996 (AA 1996), and one under the MCA 1973 that the order should not be made into a final order by the court.
3. The judge dismissed the two applications under section 68 and 69, and held that the test to be applied in determining whether to refuse to make an order in the terms of the arbitral award was “closely aligned” to the test under s68 and s69 of the AA 1996. Further, she held that if she was wrong as to the test that should be applied, that the award made by the arbitrator was “not wrong”.

Question to be considered

4. What is 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? [12]
5. In relation to this appeal:

   – Did the judge apply the wrong test, namely one which was akin to that applied under the AA 1996?
   – If so, is the correct test that which was characterised by Counsel as the ‘appeals test’ applicable under the MCA 1973?
   – 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;
   – If so, should the matter be remitted to a first instance court or is this court able to substitute its own order?

The two tests

6. An arbitral award can be challenged only on the grounds that:|

   – the tribunal lacked substantive jurisdiction (s67 AA 1996);
   – that there was a “serious irregularity affecting the tribunal, the proceedings or the award” (s68 AA 1996); or
   – “there is a question of law” arising from the award, where leave to appeal shall be given if the court is satisfied that the decision of the tribunal on the question is “obviously wrong” (s69 AA 1996) [19]

7. The appeals test – a review – which Lady Justice King says is “less restrictive”:

   – An appeal will only be allowed where the decision of the lower court was (a) wrong or (b) unjust because of a serious procedural or other irregularity in the proceedings in the lower court (FPR 30.12);
   – The test to be applied on appeal is whether the decision of the lower court is “wrong” as opposed to “plainly wrong” (Re B (A Child) (Care Proceedings: Threshold Criteria)[2013] UKSC 33, [2013] 1 WLR 1911 at [46]; see also Prescott v Potamianos (also known as Re Sprintroom Ltd) [2019] EWCA Civ 932 at [72] – [78]);
   – bearing in mind “the advantage which the first instance judge had in seeing the parties and the other witnesses” (Lord Hoffman in Piglowska v Piglowski[1999] 1 WLR 1360, [1999] 2 FLR 763). [49]

Ratio

8. The proper test is the appeals test.

As at [74]:

The court will only substitute its own order if the judge decides that the arbitrator’s award was wrong; not seriously, or obviously wrong, or so wrong that it leaps off the page, but just wrong.

9. In practical terms:

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 an 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”. [73]

Notable obiter

10. Distinguishing from the previous approaches by Sir James in S v S and Mostyn J in J v B, who limited the challenges that could be made to an arbitrary award to that under the AA 1996, Lady Justice King stated at [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.

11. Following what was highlighted by Baroness Hale in Sharland and Sharland [2015] UKSC 60, [2015] 2 FLR 1367, while 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. The court should therefore be able to “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.” [69]
12. It was highlighted that there was “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.” [71]
13. Note also at [75]:

It follows that, in my judgment, the wording found in the bold box at the foot of the ARB1 FS is itself wrong and goes too far in saying that “it is only in exceptional circumstances that a court will exercise its own discretion in substitution for the award”.

Outcome of the appeal

14. The judge applied the wrong test and the proper test is the appeals test.
15. In relation to the facts of this case, at [97]:

A substantial part of the submissions of Mr Ewins were occupied with his detailed arguments to the effect that on the facts of the case, the arbitrator’s award was wrong. Mr Ewins submitted that the judge was in error in assessing in particular: the housing budget for each of the parties and the realistic ability of the husband to rehouse himself to an acceptable standard, the distribution of the parties’ pensions and the quantum of periodical payments made to the wife by virtue of the award.

16. It was concluded that based on these reasons, applying the appeals test, H would have a real prospect of success in appealing against the award [97]. Appeal allowed.

This case summary on Haley v Haley [2020] EWCA Civ 1369 was written by Laura Tilt. For further information on her practice please contact our clerks via our switchboard or email: clerks@pumpcourtchambers.com