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The case of Haley: a welcome antidote to family arbitration?

News / / The case of Haley: a welcome antidote to family arbitration?

The recent case of Haley v Haley [2020] EWCA Civ 1369 has changed the legal landscape in respect of family arbitration. In this article, Yael Selig and Lara Myers from our Family department consider what this means for the future of alternative dispute resolution and beyond in family proceedings.

It is sadly common knowledge that the Family Justice System has suffered from decades of neglect and underfunding. The Covid-19 pandemic has amplified existing, serious problems inherent within the court system, resulting in a significant backlog of private family law cases. Since the 23 March, an overwhelming number of Court Hearings, including Final Hearings, have been cancelled. Now, more than ever, parties are turning to private forms of dispute resolution including arbitration, in the hope of securing an earlier final result. 

Following the introduction of the family arbitration scheme in February 2012, arbitration has offered parties the only adversarial alternative to the Court process. Crucially, arbitration has provided parties with an assurance that their case will remain completely confidential unlike the court process (although following Haley this is now questionable). 

What happened in the Haley v Haley case?

The facts in the Haley case are unfortunately a typical example of recent events; where one week before the Final Hearing, the parties were told that there was no Judge available to hear their case and that it would be relisted at an unspecified date in the future. To avoid any further delay, the parties proceeded with arbitration before a specialist financial remedy barrister.

Mr Haley was unhappy with the arbitrator’s award and believed it was unfair. He therefore made an application to the High Court seeking either to appeal the arbitral award or, alternatively, for the court to exercise its discretion and order a revised award.

Mr Haley’s application ended up at the Court of Appeal whereby the Court examined the test that should be applied where one party challenges an arbitral award.

How has the Haley case changed family arbitration law?

Previously before Haley, arbitral awards could only be challenged under extremely limited grounds where an obvious error had been made. Previous case law stated that the court should only intervene and refuse to make orders implementing an arbitral award when something had gone so seriously wrong that it “leaps off the page”.

The Court of Appeal in Haley moved away from the above approach. They ruled that the correct test to apply is the ‘appeal test’ i.e. whether the applicant would have a ‘real prospect’ of succeeding in an appeal court against the award made. In Haley, the Court confirmed that Mr Haley had satisfied this test and that the matter should go before another Judge for reconsideration.

The future of family arbitration – the ability to appeal

The outcome of Haley brings with it the most welcome development, the ability to appeal an unfair award. It has removed the biggest stumbling block for family arbitration. Prior to this decision, family law practitioners have been inevitably reluctant to refer cases to arbitration because arbitral awards have until now been practically impossible to appeal. This has also no doubt discouraged parties to enter into arbitration for fear of receiving an award that they would be stuck with.

The Haley Judgment provides a fundamental shift in the approach to be taken in challenging financial remedy arbitration awards. Now, it will be open for a dissatisfied party to appeal the result. While this removes finality and conclusiveness from the arbitration process, there is now a reassurance for family lawyers and litigants alike, that if the arbitrator gets it wrong, there is an appropriate remedy to seek to rectify this. 

That being said, whilst parties can now challenge awards made by arbitrators, they should still enter into the process mindful that the award made will provide them with a certain outcome, and in all but a minority of cases will be made into a consent order thereafter. 

Arbitration appeals – a second bite of the cherry?

Despite the bar now being lower to appeal awards, it by no means provides litigants with a free pass to dispute an outcome they simply do not like. The Court of Appeal has confirmed that arbitral awards should be subject to a parallel procedural process as judicial decisions made at first instance. All this means is that the arbitration process has been brought into line with the family court approach. Just like in the Court of Appeal process, permission to appeal must still be sought by the applicant. The appeal of an arbitral award should not be considered in the words of the judiciary an opportunity for a litigant to have “a second bite of the cherry.”

For many the change in approach is a very positive step. However for some, notably those in the public eye who wish to keep their case strictly confidential, this could prove problematic. An arbitral award made in private, if appealed, could end up back in the court system and even worse is the possibility that the case could end up without any reporting restrictions.

The future of arbitration

It will be interesting to see the effect that this change has on the future private family law landscape. It was said Haley that arbitration is no longer the recourse of the rich and famous who wish to stay anonymous. It was also acknowledged that following the Covid-19 pandemic, those with modest assets and even litigants in person will increasingly turn to the arbitration process. 

The President of the Family Division recently highlighted that the need has never been greater for alternative means of dispute resolution, including arbitration. This reflects the fact that arbitration has the support of the family courts and that the service should be given careful consideration by the parties and their legal representatives.

It may increasingly become the case that anyone who can afford a Private Tribunal will automatically avoid the court system altogether, preventing the risk of their case going before a District Judge in a broken public system.

And what about the arbitrator whose award is successfully appealed? It will be interesting to see whether the arbitrator is then sued by the parties because they were paid to do a job right and failed. The question is whether they should they bear the financial consequences of doing the opposite of what they were paid to do.

Long term, this may open the doors to immense change. 

We may see a future rule change whereby if only one party desires a private process, that provided they pay the cost in full and the other party chooses the list of candidates, that the court will be able to compel a transfer to private arbitration. Perhaps we may even see the Treasury recognising that because the Law has decided that the private route is entirely just and acceptable, they will start to means-test those who are entitled to use the publically funded system and deny it to those who can afford to pay ‘to go private’. Watch this space.

Yael Selig

Yael Selig Consultant

Lara Myers

Lara Myers Senior Associate

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